Yum China 4Q16 Earnings Call Notes

Micky Pant

7500 restaurants in China

“Over the past three decades and you can see on slide seven, we have built an unrivaled national presence and today we have over 7,500 restaurants across 1,100 cities in China. There are more KFCs in China than in any country in the world, including the United States.”

Rapid adoption of digital impacting dining experience

“In China today, the rapid adoption of digital technology by consumers is impacting many aspects of the dining experience, from store and menu selection, to payment and feedback. Digital technology is transforming every step of the customer journey and we’re taking steps to make this a competitive advantage to drive sales.”

Not a single country where digital adoption higher than China

“I have not, from the experience around the world, seen a single country where the adoption of digital technology is at a higher level than China. It’s extraordinary how people’s lives revolve around digital technology. And particularly impressive is the transition of almost over two years from zero credit card or anything other than cash to suddenly, in some stores, cashless payment being a majority of our sales. So I think that this rapid increase has been two factors, one is the adoption by technology by customers in general, outstanding technology partnerships like WeChat Pay or AliPay and we have been their lead partners in expanding it. I’m very optimistic that that number will continue to grow. And then of course, it’s being driven on the back of all the great work that Joey and the team have done on digital marketing in general which links the customer experience with the ability to pay. But you go to stores in China now and regularly, you will see people paying with their cell phones in a variety of retail formats. So we expect that to continue to grow and we’re encouraged by it.”

Marks and Spencer 3Q17 Earnings Call Notes

Steve Rowe

Consumers are feeling fine about themselves but down about the economy

“So I will deal with the consumer Brexit. I don’t think I’m going to deal with Brexit. The consumer Brexit I think I’ve said over the last quarter has been sort of fairly stable at the top level. It’s bubbling around, consumers have actually felt quite good about themselves. But what I think is interesting, I think GfK highlighted this, is that what happened during the course of November and December was consumer confidence in the forward-looking economy claim down substantially. And I think that there is this discrepancy in how they feel about themselves versus the economy and we’re not sure how that’s going to mature, but you will expect that much to mature over the next quarter.”

Xinyuan Real Estate 3Q16 Earnings Call Notes

Yuan Zhang

Government announced tightening measures to cool real estate development in several cities

“And now, let’s talk about the government policy changes. In early October, when the Chinese real estate market was experiencing a meaningful development, the local governments in about 20 cities announced the tightening measures designed to cool a market with escalating prices. These measures announced included higher down payments and home purchase restrictions. Despite the restriction policy, the overall underlying home buying demand remains favorable in our local markets. For example, in our Zhengzhou International New City Phase I project nearly 100% of presold units were booked on Alibaba’s house booking system within a few hours. And nearly no buyers withdrew their deposit after the restriction policy was issued. From the beginning of this year, housing prices increased dramatically in certain cities in China. While we’re sharing the benefit of the price upside, we believe the goal of the government’s restriction policy is to maintain healthy and stable development of the market by cooling down escalating prices in certain cities, which we support for the long-term sustainable growth of our business.”

This is the third time that local government has imposed restriction policies

“Actually as far as I can recall, this is the third time that the local government are imposing the restriction policies. According to our prior experience the restriction policies probably could last for six or nine months, less than a year. And also we believe the goal of the policy is to cool down the fast growing prices in some cities and areas, and try to make the market more healthy. And this is what we are looking for. And try to give you some example, from the beginning of the year until the end of September, most – almost all of our project are benefitting from the pricing outside – from well-buy [ph] from 30% to even 50%. So we believe the policy may cool down the prices for a while, but we are confident for the market momentum, because we believe the demand is still there”

Wynn 3Q16 Earnings Call Notes

Wynn Resorts, Limited’s (WYNN) CEO Steve Wynn on Q3 2016 Results

The Beijing government will support employment in Macau

“Well, the central government always supports the financial health, the employment security, and the welfare of the citizens in the special administrative region, and they repeat that, whether it is the Premier or Xi Jinping himself. My visits to Beijing only reinforce that with the people that I have had the privilege of discussing China with. I go there on occasion to broaden my perspective on China because, after all, Macau is part of it.”

Government will always act to protect the job security of the people

“In my conversations with the top level of the Macau government, they definitely want to protect the job security of the people that are engaged, the Macau citizens and everybody else, that are engaged in working at these places. There is a strong preference for protecting the employee base of the industry. When issues that affect them, meaning the employees and the local employees in particular, come up, the government is particularly responsive and on point. When we get to more subtle things that have to do, for example, with smoking, then the matter — the speed of decision slows down.”

Alibaba FY 2Q17 Earnings Call Notes

Alibaba Group Holding (BABA) Q2 2017 Results

Daniel Yong Zhang

Consumer behavior is evolving dramatically

“Consumer behavior is evolving dramatically as the population getting younger and more proactive in upgrading their lifestyles. At the same time, merchant increasing dramatically with latest technologies inspires them to embrace new ways to improve business efficiency and serve customers. We believe the convergence of these factors will bring about a significant disruption of the existing commercial landscape and emergence of a new retail model.”

Not just about growing online in isolation

“The most important opportunity on horizon is helping traditional business to upgrade into a new retail model and not continuing to grow online business in isolation. Online and offline will be a single seamless experience, not just in consumer interaction, but also in the entire business operation and execution. We want to improve efficiencies across the entire value chain of product design, manufacturing, distribution and the services.”

Joseph C. Tsai – Alibaba Group Holding Ltd.

We in a process with the SEC

I’ll address the second question. As you know, we’ve been in the process of – with the SEC, they’ve sent us a letter inquiring as to a number of issues. On this, we’ve been very transparent with you guys about what’s going on. We disclosed all the issues involved and the fact that we’re voluntarily cooperating with the SEC in their inquiry. We don’t think there’s any factual basis to the New York Post story. So on that score, when we have real news we will update everyone.

Tesco’s (TSCDF) Half-Year Results 2016/17

Dave Lewis – CEO  

Lower prices, higher volumes

“Our prices are 6% lower, so the volume based recovery being able to get operational leverage, which lowers cost, which then goes into price is what we’ve been driving. Since we took a basket that we had two years ago, we’ve kept our basket the same. I’ve showed you all the way through as we done to actual prices, to actual people, customers are paying where more than 6% cheaper than we were two years ago.”

They are gaining market share at the expense of the competitors

“So going from the place of two years being a donator of share to the marketplace, to a place where actually we see in the first half of this year some very strong switching from our competitors who are choosing now to shop in Tesco versus where they were shopping before.”

They are thinking about the impact of IFRS 16 on leases

“IFRS 16 has got a lot of complexity, not only in terms of the going forward implication but the actual point of implication. And it will change very significantly the way that all of us look at the balance sheet and the P&£, as a result, no change to cash clearly, because it’s a no economic change…We’re spending a lot of time thinking through it.”

Natural hedge against weaker pound in international business

“But everything we can see, everything I look, exchange rate or other, actually our relative position versus other retailers in the UK is actually quite strong. We have an international hedge against the exchange rate that others don’t have. So, actually we’ve got to get confident, that whatever the weather is, we can actually be one of the best performing businesses in the UK market. And we’ve some confidence that we’ll do it”

Continue to expect deflation

“It’s very important, I get it. But I will borrow what Alan said. We’ve had deflation and we assume that deflation carries one through the course of the plan. Now, what changed in market place, we don’t know. But the way that we’ve built our thinking is that there is a need for us to enhance the competitiveness of the business. So, we stay in a place, which is looking to sharpen our competitiveness. And therefore we assume a level of deflation. We won’t give a number. But you should know that we think that actually there is still more to be done.”

Alan Stewart – CFO

Seeking balance

“So as we try to get that balance between what’s right for the customer and what’s right from an operating profit perspective, we’re seeing some increased costs in that part of the market, and we’re continuing to focus on costs and savings overall.”

Royal Bank of Canada 3Q16 Earnings Call Notes

Royal Bank of Canada’s (RY) CEO David McKay on Q3 2016 Results

Regulatory bodies are responding to the combination of rising house prices and record levels of consumer leverage

“On housing, we continue to closely monitor the greater Vancouver and Toronto areas. A short supply of single family homes in both cities, coupled with strong demand fueled by household formation including net immigration has driven strong price [appreciation] (Ph). We have prudent underwriting practices in place with the necessary technology to closely monitor these markets and quickly react as situations may materialize. Regulatory bodies are also responding to the combination of rising house prices and record levels of consumer leverage. We support the Canadian federal government’s recent action to form a working group to study the housing market and develop appropriate recommendations.”

Mark Hughes

Moderate increase in oil prices provided some relief to clients

“With the moderate increase in oil prices over the last quarter, now in the high 40s has provided some relief to our clients. It remains well below 2014 level and continues to challenge the profitability of the sector. A number of our clients took proactive measures to strengthen their financial position. This included selling assets, reducing expenses, accessing capital markets to raise additional funds and refreshing hedges at higher oil prices. In particular, we saw an increase in asset sales in the drilling and services sector.”

Sustained low oil prices impacting retail portfolio in oil exposed provinces

“The sustained low oil prices and higher unemployment rates continue to impact our retail portfolio in oil exposed provinces and we have seen an increase in provisions in delinquencies in these regions. However, it has been more than offset by improvements in economic conditions in other regions such as Ontario and BC as reflected by reduced delinquencies on a national basis, which demonstrates the benefit of our diversified portfolio.”

We remain comfortable with our exposure to Canadian housing market

” Greater Vancouver and Toronto markets are being closely monitored due to alleviated house prices. However, we consistently have the highest customer credit scores in these markets. We also continue to closely monitor our mortgage portfolios in oil exposed regions. Overall, we remain comfortable with our exposure to the Canadian housing market for the following reasons. We did not participate in the second lien market and do not originate sub-prime mortgages. We utilized proprietary channels for mortgage origination allowing for a centralized credit adjudicating process and enhanced monitoring. We are diligent in income verification, which is a key component of our mortgage approval process.”

Alberta does see continued softness but Ontario and BC are strong

“I would say on the Canadian banking side, it’s a matter of two halves a little bit, we have Alberta, which does see continued softness. The unemployment rate in Alberta is certainly higher, but in the rest of Canada particularly Ontario and BC, we continue to see very strong growth and that is performing well.”

Vancouver has cooled off a bit in recent weeks

” Certainly from our view of Vancouver and/or Toronto is the same, obviously with the house price deprecation that we have seen over the previous quarters. We are monitoring it quite close, Vancouver has actually cooled off a little bit in recent weeks. But I think in our case, it’s just really about continuing to maintain our discipline and risk posture as to how we approve loans and the type of origination that we put on.”

Unlikely that the price of oil goes above 100 any time soon

“The chances of getting back to a 100 in the foreseeable future I think would be fairly slim unless there is a change in some of the producers globally and in their attempts to maintain their production levels. So 40 to 60 level I would have thought would be the range we would expect to see if it goes below 40, it’s a tougher environment, if it goes above 60, it’s maybe a bit more of a positive environment.”

Assorted Quotes from British Companies Post Brexit

Thanks to Stephen Clapham for Compiling these quotes

Bovis Homes trading statement:
We have traded in line with our expectations for the first six months of the year. At this time it is too early to assess the impact of the EU referendum on the UK housing market…….. The housing market fundamentals remain strong with high demand from home buyers, good availability of affordable mortgages, good land supply and cross party political support to build more homes in the UK.

Persimmon (housebuilder) trading statement:
It’s very early as we say to review the position in regard to the EU referendum while early indications to us have been good. It is only a
little over a week since the vote. But last week, we traded well. We did have a slight increase in cancellations immediately following the vote, but that settled down to more normal levels now.

Marks and Spencer (retailer)
Our consumer barometer, we’ve tracked it since November. We saw that down turning consumer confidence in the barometer from about November last year. Some of that was due to the impact of terrorism, some of it was concerns about the economy, and some of it was concerns about the referendum. And it weakened off again in March. I think, in terms of us looking at it since Brexit, we’ve not had any clear results. I can’t see particularly any impact. The noise at the end of the quarter in terms of our promotion stats makes it very difficult to assess. And the only one factor I can tell you is that on the day of the voting itself was down on that day as customers went to vote, and that’s the only thing I can say about it.

Brammer (indebted distributor, down 2/3 since referendum )
Since our last trading update on 13 May 2016, which covered the period to 30 April 2016, we have seen a significant slowdown in sales against our expectations. Sales per working day (“SPWD”) in May were down 3% compared with last year. We saw a weak performance in the UK, which was down 6%, but also more broadly across Continental Europe…weakness has continued into June. The UK started the month positively, but it has experienced a particularly weak performance over the last few days [ie since Brexit]. Underlying margin in May and June month to date was down against the previous year. The Board is now reviewing whether it is appropriate to declare an interim dividend in respect of the half year

YUM! Brands 1Q16 Earnings Call Notes

Yum! Brands (YUM) Greg Creed on Q1 2016 Results

Micky Pant – CEO-Yum! Restaurants China, Yum! Brands, Inc.

Seen a moderation in inflation from wage increases in China

“Well, it’s true that over the last five years labor has inflated in China on account of minimum wage increases by the government. But we’ve seen a moderation of that. I think the authorities recognize that the economy has to be supported, so I think we’re seeing a more reasonable picture there. What we did get in the quarter particularly was some good productivity gains on account of using more part-time and student labor, which is a phenomenon that did not exist in China in the long past, and that is making a difference. So looking forward, it’s always a risk, but I don’t see labor price inflation as being a significant risk.”

The Chinese team is feeling a lot more confident

“Like I said, I think the team and myself are feeling very much more confident. We just this week had all of our store managers, so we had a stadium in the city of Dalian with 8,000 people talking about the theme for the future, which is From Strength to Strength. And in particular, when the KFC section was discussed and we put out plans for the rest of the year and the positioning and the proposed marketing, there was just an unbounded confidence. So I feel that – I really feel the brand is making a lot of progress. It is much stronger. I think the positioning is very clear. ”

I think you always have to be cautious when it comes to China

“I think you always have to be cautious when you come to China, because there is economic volatility, and there is also unexpected twists and turns. So there is nothing hidden; it is not as though we are worried about some specific event or there is something happening that causes us to worry. But you just want to be cautious. We’ve had two years or three years of a lot of volatility.”

Infrastructure growth in China should lead to new store formats

“We are experimenting with multiple store formats to take into account the fact that there is still a very rapid build-out in infrastructure in China. So we’re expecting – very large number of malls are already under construction; the high-speed rail network is being expanded. And then in China, unlike the U.S., there is not the phenomenon at the moment of highways with drive-throughs or the rest stops, and all those are being developed.”

I’m always amazed at how advanced China is digitally

“I’m constantly amazed at how advanced China is digitally. It’s got twice the number of cell phones, smartphones, as the U.S. population. And even in our offices, people go up and down the elevator to go to lunch, they’re looking up where the offers are available and where they can book a table, et cetera. So the action is shifting very rapidly to mobile devices, and both the menu as well as digital marketing is becoming very significant. So we’re working on that. ”

David Eric Russell – Interim CFO, Vice President-Finance & Corporate Controller

China is moving to a more traditional VAT regime

“Okay. So, on the VAT, so currently, China is paying 5% of all their sales in the form of a business tax to the government. What’s happening now is China is moving to a more traditional VAT regime, which is similar to the regime in many other parts of the world, where we will pay 6% of those top-line sales to the government; but we’ll get a credit for some of the inputs that we have into our P&L, commodities, utilities, rent, against that 6% credit”

Xinyuan Real Estate 4Q15 Earnings Call Notes

Xinyuan Real Estate (XIN) Q4 2015 Results

George Liu

Favorable government policies have supported the markets that we serve

“Overall there were several positive developments for Xinyuan in the fourth quarter. Favorable government policies in China’s real-estate sector including easy monetary policies, relaxed home purchase and lower down-payments hence supported the markets we serve.”

China real estate market is getting better, it’s actually getting crazy in recent weeks

“Basically, the same implies in the China real estate market, it’s actually getting better. It’s getting actually crazy in recent weeks but it’s getting better in the last quarter of last year, I mean, 2015. And one of the main reasons, main drivers why the contract sales is up, GFA sales is up. But the property’s fund is mainly because the margin of the projects that we sold is lower as compared of the margin of the projects we sold – we have sold in the quarter before or in the same quarter of the prior year.”

It’s running high in a crazy way

“we intend since the pricing of those good projects, it’s actually getting running high in a crazy way so we are raising our price significantly basically we slow down the sales of our good products while we are trying to push sales of our bad products in such a heated market.””

Shanghai is getting overheated

“And for Shanghai project, we were selling in 22,000 in February of 2016 but as you might know the real estate market in Shanghai is getting overheated so we probably will increase 30% to 40% of our pricing in March or in April.”