CEO INSIGHTS – Week Ending 28 July 2017 BY NAOS Asset Management

“If rates stay low, those markets (Sydney and Melbourne) will continue to be powerful” Brian White, Joint Chairman, Ray White

As part of the NAOS investment process, we pay particular attention to the comments made by company CEO’s and business leaders in order to gain a greater understanding of the current investment environment and key trends that may be emerging. Below are quotes from the week which in our view detail some of the most important and prominent industry trends and economic factors impacting their businesses.

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Commodities

“You’re going to see a period of time where there’s going to be a shortage of copper, and you’re not going to see the price (just) go to $US3. We need to look over our shoulders and we can see at times we had copper at $US4, and we’re heading for a world of where that is, I believe, on the cards”

Richard Adkerson, CEO, Freeport

“If policies and innovation really work well, I can see [gas] liquids peaking in demand in the early 2030s and maybe oil will peak a little bit earlier if there's a lot of biofuels coming into the mix as well”

Van Beurden, CEO, Shell

“There's enough LNG at the moment in the market. [However], in the early 2020s demand will start exceeding the supply. We believe there'll need to be more LNG brought into the market [then]”

Jessica Uhl, CFO, Shell

“Both the zircon and titanium feedstock markets have experienced favourable conditions in 2017 compared to the first half of 2016. Iluka is of the view that, in the absence of a deterioration in global economic conditions, the demand outlook for zircon in 2017 and 2018 is for moderate growth”

Iluka Market Announcement

Alcoholic Beverages

“In our reserve portfolio our total revenue is up 2.7% for 2016-17, and our premium brands are up over 10%. These are brands like Tanqueray Gin, the single malt whisky brands like Lagavulin and Talisker, Don Julio tequila and Ketel One vodka. We are seeing double-digit growth out of those brands because Australian consumers are drinking less, but better”

David Smith, CEO, Diageo Australia

“So (we see) things like the resurgent cocktail culture in bars as well as people doing that at home, together with the fact that scotch whiskey is now the biggest category of spirits in Australia, overtaking bourbon”

David Smith, CEO, Diageo Australia

Tourism & Travel

“The Japanese and Korean markets are growing because of problems in Europe. They get pretty spooked by terror, Australia is seen as stable” 

Jerry Schwartz, Hotelier 

Domestic Economy

“We [Australia] are perfectly situated, slap bang in the middle of the region where 50 plus per cent of the world's infrastructure is going to be created over the next 22 years. But as Asia tools up for this infrastructure growth, Australian companies should be aware that there will be competition”

Chris Heathcote, CEO, GI Hub

Residential Housing

“[On whether the Brisbane apartment market is in over-supply] our judgment at the moment is that it is. There are pockets of oversupply and whenever you have that, it affects the overall market”

Mark Steinert, CEO Stockland

“We are hoping for OK volumes [in Sydney and Melbourne]. What prices do is the big question”

Brian White, Joint Chairman, Ray White

Telecommunications

“We made the decision to do this [build regional infrastructure] primarily on the fact that we believe that, as a credible mobile service provider you have to invest in infrastructure, regardless of whether regional roaming is mandated or not. You need to have a credible mobile network that spans across the vast country that is Australia, and companies that don't will eventually suffer in terms of market share in metropolitan areas, as people want to travel”

Allen Lew, CEO, Optus 

“Now there is choice of two premium, high quality networks that provide consistent coverage across Australia. Today we have put all of our competitors on notice that we are here to deliver the mobile connectivity that Australians want and deserve. It is time for competitors to step up or suffer the consequences”

Allen Lew, CEO, Optus 

Domestic Consumer

“Customers are purchasing a wide variety of water options and as the category continues to increase in popularity we will respond to meet our customers’ demands in the space”

Woolworths Spokesperson

“Changing consumer spending habits and new technologies are driving our location of warehouses and distribution assets. More people are shopping online than ever before, and we expect this trend to continue. This means, being closer to the end consumer to enable fast and efficient delivery is vital”

Gregory Goodman, CEO, Goodman Group

Commercial Property

“It is pleasing to see continued valuation growth across our entire portfolio, driven by solid income growth and strong demand for quality shopping centres”

Angus McNaughton, CEO, Vicinity Centres

“We continue to see strong ongoing demand for prime investment space for quality properties in gateway cities”

Gregory Goodman, CEO, Goodman Group

Retail

“While Q4 is a relatively strong seasonal quarter, we had a great finish to the year with trading exceeding our expectations”

Mark Coulter, CEO, Temple & Webster

Other

“The whole move to electrify the economy, electrify mobility in places like northwest Europe, in the US, even in China, is a good thing”

Van Beurden, CEO, Shell

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