Potash at Scotiabank Conference

Jochen Tilk – President and CEO, Potash Corporation

Merging with Agrium

“Agrium and Potash have embarked on a vision to be the new company to merge as a merger vehicle and we’ve been discussing this for a while. We started on ideas and concepts of operation synergies approximately a year ago, and as we talked about various products phosphate and then nitrogen evolved in the concept of what would be if we put these companies together. And what we present to you is really an exciting new company that would be the world’s largest crop nutrient company, and the third largest natural resource company in Canada.”

We have to create value

” It’s A, my firm belief and I’m very glad Chuck shares that. We take the future of our companies and our shareholders in a way that we have just some positive control over that. We have to create value. I mean sitting back and waiting and waiting the markets to change around you is not about creating value, its essentially just beings somewhat passive. I think Chuck and I said, can we create value by creating synergies, can we create strategic value, can we grow the company, and everything is a yes, yes, yes.”

Chuck Magro – President and CEO, Agrium

Market conditions have been tough

“So if you look at the market conditions today, and if you start with fertilizer, all there are below their historical average. And if you look at crop pricing there’s a similar trend, right. Corn, soybeans, you name your crop and most of them are at least at or below historical pricing levels. In crop chemistry, there’s been an increase in competition and you can see the consolidation happening in that pace and pricing are falling this year as well in crop chemistry. Just to given an example, glyphosate is down about 10% so far this year alone. And farmers are pulling back. So you can see the profitability of farmers, they are pulling back on, for example, some fungicide applications because it doesn’t spend well.”

Early harvest good for fertilizer

“The harvest is going to be early this year, which is helpful for fertilizer applications and we actually have some fertilizer going down in the south right now. We’ve had good moisture, which is very important, so we expect a very strong ammonia run this year. And speaking with our customers, we fully expect that the application rates for NP&K will be at normal rates for the fall season and certainly moving in to the spring.”

The new company will be third largest nitrogen producer in the world

“The new company, second largest nitrogen producer in North America, third largest in the world, and even at today’s market conditions, the new nitrogen business will generate a $100 a ton of cash. And then access to the best potash assets in the world. And again that’s a business that’s generating somewhere between $75 and $100 a ton of cash right now.”

Potash (POT) CEO Jochen Tilk at Goldman Sachs Materials Conference

Potash (POT) CEO Jochen Tilk thinks the market for the fertilizer has finally bottomed

“We’ve made some comments few weeks ago at our call and we communicated some cautious but supported optimism that we see the markets in a more positive light and we ought to translate that. We think that things have bottomed, if that’s the right term in terms of sentiment, in terms of potash prices.  Now 75% of the corn plus is planted in the U.S. So a lot of it was done, but we flushed our inventory out and we’re now looking forward to the some of it and the fall season. And the third one, probably somewhat more surprising, when farmers’ economics in the U.S. good, they’re certainly better than they were last year and they’re better than they were a year before. If you look at the affordability fertilizer versus the farmers’ economics, they’re quite attractive. You know that corn has come back $4 and soybeans are $11. A lot of acreage plant at $93 million acres in U.S. So they’re good basics and that all is attractive.”

He said farmer economics in Brazil are more important than political stability in Brazil

“We look at Brazil, we had good engagements there. Brazil is a huge producer of soybeans, a very attractive market. Political stability is welcome but is not the biggest reason there. Farmer economics are much bigger driver. They export in U.S. dollars — 70% of resilient crop is exported. So we see good engagement.”

Not trying to go after market share in the current environment

“People say well that would give you the opportunity perhaps to go for market share. Our approach to market is to balance supply and demand. And we have to be very clear, when you choose that right, we think it’s a better business model, it’s one that provides better margins. It provides better returns on all assets, it’s one that’s sustainable in that market that we are in, not just for historic experience but just looking forward. And the biggest driver in making that decision and looking at the market is really how we see supply and demand evolving in the next few years.”

Potash (POT) CEO Jochen Tilk said their was euphoria in the potash market about 8 years ago

“And keep one thing in mind, in the last 10 years a lot of money had been spent for expansions. Clearly there was a sense, if not euphoria, certainly enthusiasm, 7-8 years ago when those decisions were made. They were all made more than five years ago, more than half the decade ago. They’re now coming to completion. There’s really very little left. But give or take maybe I don’t know $50 billion may have been spent in incremental expansions, brownfields and greenfields in the next decade. So the same period going forward. I would doubt very much that much will be invested. I think everyone will draw from their expansion, so that the incremental investments or the new investment in capacity will be very little for a number of reasons so that in the next 10 years we will certainly see a very different environment in terms of building new capacity than we have in the past.”

 

 

Source: http://seekingalpha.com/article/3976065-potash-corporation-saskatchewans-pot-ceo-jochen-tilk-presents-goldman-sachs-basic-materials

Corporate Annual Reports And CEO Interviews 3.24.16

Source: John Deere Annual Report

John Deere (DE) CEO Sam Allen said the farm equipment recession of the last few years has been the worst in nearly a century

“In relation to the farm economy’s robust years earlier in the decade, the current downturn has been quite dramatic. Since peaking in 2013, industry sales of large agricultural equipment in the United States have fallen more than 60 percent. Deere’s total equipment sales have declined more than 25 percent from their high. Last year’s sales decline was the company’s largest in percentage terms since the 1930’s.”


Source: Richemont (owner of luxury jewelry brands such as Cartier, Van Cleef & Arpels) CEO Youtube Interview= https://www.youtube.com/watch?v=-MvyTHPueKI

Richemont CEO Johann Rupert said the true price of capital is obscured in today’s economic environment

“We have a lot more competition, especially from ridiculously mispriced capital. When people misprice something, it is abused. In England, water is free, it rains all the time yet there is a drought. Now, if you misprice capital, people will abuse it and will regret it, unfortunately in our business as well.”


Richemont CEO Johann Rupert stated you should always be improving your business whether we are in an economic expansion or economic recession

“Never waste a good recession. Never waste an opportunity to fine tune your business.


Source: Schlumberger Annual Report

Schlumberger (SLB) CEO Paal Kibsgaard remains constructive on both the supply and demand of the oil markets ultimately coming into equilibrium in the medium term

“We remain constructive in our view of the market outlook in the medium term and continue to believe that the underlying balance of supply and demand will tighten. This will be driven by growth in demand, weakening supply as the massive E&P investment cuts take effect, and the size of the annual supply replacement challenge. In continuing to accelerate the benefits of our transformation program across both our Technologies and GeoMarket regions in 2016, we believe that we will emerge as a stronger company once the price of oil and the market conditions in our industry improve.”


Source: Autozone Annual Report

Autozone (AZO) CEO William Rhodes said the company is prioritizing their E-commerce auto parts websites in order to get their products to consumers quicker

“We are expanding our fast-growing internet offerings. Utilizing our autozone.com, autozonepro.com and autoanything.com websites, we believe we are well positioned to serve our customers however they elect to interact with us. In 2016, we will continue our focus on both expanding our online product offerings and improving the shopping experience. While this business is growing at a faster pace than our “brick and mortar” business, it remains small in absolute terms. However, over time, as mobile shopping intensifies, it will only expand. We have to stay out in front in this sector of our industry. Our customers expect us to offer this shopping convenience and additional avenues for trustworthy advice to maintain, enhance or repair their vehicle.”


Source: Leucadia Annual Report

Leucadia (LUK) CEO Richard Handler said his company is undervalued and prepared to weather the stormy economic environment

“As we write, there is continuing volatility in the fixed income and equity trading markets, as well as in energy prices. Scratches and dents seem inevitable and we won’t dare make predictions for the rest of the year, but based on the actions we have taken to date, our businesses are prepared to weather the storm, and several are doing quite well. We are both aligned long-term investors in Leucadia stock and will continue to work our hardest to deliver good results in the coming years. There remains significant long-term upside in the value of Leucadia, which exists in the intrinsic value of our businesses and is not fully reflected in our current dismal stock price. We will discuss all of our businesses later in this letter.”


Source: Bank of New York Mellon Annual Report

Bank of New York Mellon (BK) CEO Gerald Hassell reiterated the company’s new mission statement

“We play an important role in the financial marketplace and describe ourselves as the Investments Company for the World. Our mission is to help people realize their full potential by leveraging our distinctive expertise to power investment success. In doing so, we seek to improve the lives of countless people globally – a goal that motivates us to be the very best at what we do.”

Bank of New York Mellon (BK) CEO Gerald Hassell said the company remains the dominant vendor for central banks and pension funds

“Our clients include three-quarters of the Fortune 500, central banks that hold approximately 90 percent of all capital and more than two-thirds of the top 1,000 pension funds.”


Source: Moody’s Annual Reports

Moody’s (MCO) CEO Ray McDaniel said the company is benefiting from several tailwinds in the financial markets

“We manage through cyclical conditions, while focusing on and investing around the deeper pull of structural market evolution: phenomena such as the disintermediation of credit, the demand for enhanced risk management techniques, the need to curate increasingly vast quantities of financial information and data and the development of emerging economies. These are powerful dynamics and they reveal an open road beyond the rubbernecking that often surrounds day-to-day market sentiment.”

Moody’s (MCO) CEO Ray McDaniel noted a choppy economic environment is creating uncertain buying patterns across their customer base
“Financial markets continue to be buffeted by volatility stemming from, among other things, uncertain global economic conditions, diverging monetary policies and geopolitical events. These dynamics (and their inter-relationship) create cross-currents and choppiness that unsettle market participants. This in turn impacts both the short- and long-term outlook for Moody’s.”

He elaborated that markets getting harder to interpret

“Markets are becoming more complex, not less, and are moving more quickly and featuring more choices. The need for products and services that illuminate and enhance the understanding of risk is essential to market confidence, and that confidence is essential to the sound management and efficient movement of global capital. Moody’s focus and opportunity involves filling the gaps that complexity, volume and information inefficiencies create.”


Source: Potash Annual Report

Potash (POT) CEO Jochen Tilk said increased global demand for protein will benefit his agricultural nutrient focused company

“By 2050, the world’s population is expected to grow by another 2.3 billion, reaching 9.7 billion. At the same time, diets are improving in many regions. These facts add up to greater demand for food, which will require increased crop production even as the amount of arable land per person is declining. With the world counting on increased yields from farmers, fertilizers will continue to be essential in keeping soils healthy. The role of fertilizers cannot be overestimated: they are responsible for half of all crop yields and without them, we believe the world would be incapable of feeding itself. ”


Source: Wells Fargo Annual Report


Wells Fargo (WFC) CEO John Stumpf said the company is still a relationship oriented business

“The most powerful expression of our heritage isn’t in documents or artifacts or even our stagecoach. It is in any of the millions of relationships we have formed over generations with customers, team members, communities, and shareholders. Relationships define Wells Fargo. Earning lifelong relationships, one customer at a time, is fundamental to achieving our vision.”


Source: Mark Fields Business Insider Interview http://www.businessinsider.com/ford-ceo-mark-fields-interview-2016-3

Ford (F) CEO Mark Fields said cars on the road today are lasting longer than ever, suppressing demand for their products

“We have worked very hard at quality over the last number of years, and our quality is in the top echelons of the industry. So part of it is vehicles are lasting longer. When I was growing up, when you saw a 20-year-old car it was like, Oh my gosh — that thing’s on its last legs. Now you see a 20-year-old vehicle and in many cases it looks pretty good. So part of it is that, but the other part is when we went through the downturn, clearly there were a lot of deferrals of people replacing vehicles.”

Ford (F) CEO Mark Fields noted that economic volatility and currency wars are making the automobile manufacturing business a more competitive landscape

“For us the main policy is making sure that currency is not used as a weapon, if you will, to manipulate the cost of products, whether they’re imported or exported. We can compete with anybody around the world. We can’t compete with central banks.”

JS Earnings Call Notes – Lazard, WR Berkley, Potash, Cimpress, Autonation, Hershey, Mead Johnson, Las Vegas Sands, Visa, Rollins

Lazard (LAZ) CEO Ken Jacobs said the company benefited from a robust Mergers & Acquisitions environment

“In advisory, we had our best year ever with broad-based activity across practices and regions, and record annual M&A operating revenue. Lazard advised or continues to advise on six of the 10 largest M&A transactions announced globally in 2015.”

At the same time, they are seeing increased deal flow in the bankruptcy area particularly in the energy sector

“And while the restructuring market continues to operate at historically low levels, an exception is the energy sector where we have taken a commanding market share representing distressed companies. Lazard was the top advisor in 2015 for completed restructurings globally.”

And that one of their key competitive advantages is their relationships

“Our leadership and the largest transformative transactions across industry sectors worldwide highlights one of Lazard’s key competitive strengths, our unrivalled global network of relationships with key decision makers in businesses, governments, and investment institutions. Almost half of our announced M&A assignments in 2015 were cross border.”

Lazard (LAZ) CEO Ken Jacobs said the sluggish start to the calendar year may affect near-term performance and deal flow

The long-term transfer of business remained favorable. That said, the volatile market conditions at the start of this year could affect our 2016 performance. In asset management, we begin the year with lower AUM. In our M&A business, while we’re off to a good start, it’ll be several months before we know whether volatility has affected deal announcements for the year.”

Lazard (LAZ) CEO Ken Jacobs said corporates are now having a harder time generating revenue growth

An additional catalyst driving the current M&A cycle is the disinflationary/deflationary back drop. This continues unabated. For most companies, achieving sustainable organic growth in a period of low inflation or declining prices is challenging. Since the financial crisis, virtually all companies have undergone a steady pace of restructuring to drive earnings growth, yet additional savings are becoming more difficult to find. M&A remains an important tool for driving top line growth and also for driving additional efficiencies to propel earnings growth.”

Surprisingly, they’ve seen investor emerging market inflows during the month of the year even in this difficult environment

And then with regard to year-to-date, actually overall for Lazard we’ve seen inflows of about $700 million.”

Lazard (LAZ) CEO Ken Jacobs thinks we’re in for a significant restructuring cycle

So first, I think you’re going to see the pickup in revenue and restructuring in 2016 wasn’t much reflected in 2015, and it is concentrated in a couple of sectors. That’s the oil and gas, commodities, natural resources arena. I don’t think you’re going to see the full restructuring cycle unless you start to see a turndown in the economy. Hopefully, what we’re going to see is a constructive M&A environment with some pick up in restructuring, which would be kind of a nice combination for us.”

Lazard (LAZ) CFO Mattieu Bucaille said their investors are primarily institutional which allows for a more stable asset base

And the one other point I would like to sort of get across is our primary business is institutional. That’s why we haven’t sort of dealt with the flow that some of the retail funds have. And for institutions, this is a strategic allocation, runs in the tactical allocation. So what you’re likely to see is as markets stabilize, more money come in than go out because people are underweights their strategic allocation at this point.”

 

 

 

 

WR Berkley (WRB) CEO Robert Berkley said the pace of pricing erosion in the reinsurance market seems to be slowing
 
By and large, market conditions were consistent with what we’ve seen over the past several quarters. The reinsurance marketplace remained seriously competitive, though the pace of the erosion seems to be slowing, particularly on the domestic market. We’re also seeing a slowing in the entry of new alternative capital providers in the reinsurance space. And having said that, we’ll have to see if that trend continues.”
 
WR Berkley (WRB) CEO Robert Berkley said M&A in their sector is creating opportunities 
 
The fact of the matter is, by and large, whenever there is a meaningful merger or acquisition, that creates a degree of overlaps or uncertainty or potential dislocation, that impacts both the people within the organization and it also can honestly impact people outside of the organization such as the distribution system and customers. So we certainly have seen opportunities as a result of the M&A activity. We expect we will see more.”
And they said insurance remains a people business
“From our perspective, as we’ve suggested to some in the past, insurance business is fundamentally two things. It’s capital and it’s people. We believe capital is ever more a commodity and people are what makes the difference. So the opportunity to attract talented people from other organizations is certainly something that we are focused on.”
They’re looking for niche opportunities to underwrite insurance
“We are trying to find niche opportunities in other markets where it makes sense outside of the United States to achieve reasonable risk-adjusted returns. In several markets that we participate in, Latin America would be an example, I think we have achieved that consistently for more than a decade.”
 
 

Potash (POT) CEO Jochen Tilk said the global agricultural nutrient market remained strong yet pricing of the product slumped

“Global shipments of approximately 60 million tonnes were the second highest total on record, a reminder that even with less than ideal economic conditions, food production and soil fertility remain a priority for farmers.  While demand was strong, prices were less resilient. The decline was most visible in granular markets with prices declining more than 30% over the course of the year.”

Yet he cited China as the swing market
 
The market that garners most attention this time of the year is China. While current inventory levels are expected to reduce annual shipments from 2015’s record levels, we continue to see strong consumption trends and the need for contract settlements to meet spring planting requirements.”
Potash (POT) CEO Jochen Tilk said they reduced the company’s dividend yet remain bullish on the long term prospects of agricultural nutrient demand
 
We have decided to reduce our quarterly dividend by 34%. We believe this level, which represents a payout ratio of close to 100% of 2016 earnings remains highly competitive, but also protecting the long-term financial health and financial flexibility of the company.  Looking forward, it can be difficult to look beyond near-term headwinds that may continue in 2016, but our long-term confidence is underpinned by food demand, the quality of our assets and strong market position. This global mandate will largely be met in the coming years by improvements in crop productivity, a challenge to that can’t be achieved without the products we produce. We believe that we’re uniquely positioned to respond in any market conditions.”
Potash (POT) President Stephen Dowdle said demand from Brazil resilient despite the geopolitical turmoil in the region 
 
When you look at what happened in Brazil last year, it was a second best year in terms of just looking at, let’s say from potash imports and if you look at all the turmoil that that country was going through and the agricultural sector was really a bit of a shining light in the country.”
Cimpress (CMPR) reminded the investment community that they focus on growing their business for the long-term
 
 Even as we report results on a quarterly basis it is important for investors to understand that we manage to a much longer-term time horizon and that we explicitly forgo short-term actions and metrics except to the extent those short-term actions and metrics support our long-term goals.”  
 
And the lifetime value of a customer using their services continues to increase
 
This quarter we saw continued traction in gross profit per customer as we continue to acquire higher-value customers and our repeat rates improve. We also saw good year-over-year growth in Net Promoter Score. We draw the conclusion from the combination of these trends that our business continues to strengthen as a result of the many changes and investments we have made over the past several years.”  

Similar to Amazon, the company is willing to forsake near-term profitability of certain transactions in order to create a positive customer experience

In that specific example is that we have begun to test shipping prices within the Vistaprint business unit and we have been very pleased with the early results. Now those results definitely reduced near term revenues and near term profits, but when we look at the change in customer satisfaction and loyalty improvements driven by that, we have a strong hypothesis which we’re continuing to test around that it pays off in a financial sense from a DCF perspective because of the future cash flows or the gross profits from those happier customers.”

Cimpress (CMPR) CEO Robert Keane mentioned their new partnership with Amazon but said he has no idea what it may lead to

Amazon is very much in a small test phase right now. You can see that on the site.  It is not something that is doing anything material this year in revenues. We do think that the opportunity there is material, but we do not plan for that right now. The way Amazon works which is quite impressive, is a very rapid iteration of new ideas. It’s very hard for us to say where that’s going to go.

 

 

 

 

Autonation (AN) CEO Mike Jackson said the firm’s profitability per vehicle sold decreased during the quarter

The fourth quarter industry sales environment was more push than pull resulting in significant new and used vehicle margin declines on a combined basis of $217 per vehicle retail, which is 11% lower than the fourth quarter of 2014. During the quarter we experienced particular weakness in Premium Luxury, which had a significant impact on our fourth quarter financial results.”

The company called out the Texas region as having relatively weak sales

Coupled with the margin pressure in the fourth quarter we also began to see a slowdown in Texas, due to collapsing energy prices which are hurting the local economy. In Texas the new and used unit sales were down compared to the fourth quarter of 2014.  I think Texas is about 24% of our business so that’s a significant overweight.”

Autonation (AN) Executive Vice President Jon Ferrando reviewed the company’s acquisition strategy

As of today our store portfolio number 342 franchises and 254 stores in 15 states, representing 35 manufacturer brands. We are one third domestic, one third Asian and one third Premium Luxury. Looking forward we will continue to actively pursue acquisitions and new store opportunities with a focus on enhancing brand representation within our existing markets and markets that can be supported by our existing management infrastructure.”

Autonation (AN) CEO Mike Jackson cautioned automobile manufacturers from overproducing which could put additional pressure on car prices

Well I think any time the industry moves from a period of exceptional growth secures of it to beginning to plateau and we see significantly higher inventories year-over-year that’s going to put pressure on front end gross. So we’ve taken steps to begin to bring our inventories.  But even after we do that if the industry overproduces and keeps inventory at a high level that means the overall environment is still very difficult.”

Autonation (AN) CEO Mike Jackson remains optimistic about truck sales in 2016 due to lower gas prices

I think domestic [auto manufacturers] are very well positioned to exceed in 2016, almost all the excess inventories is in cars, not in trucks, to the stand that you have strength in trucks and can produce more trucks you want to drive in 2016. I think Sergio’s decision to switch over factories from our production to truck production shows you the sense that the consumer has that they are totally committed to cheap gas and to trucks it’s really become a strategic question not a tactical question. So wherever you stand on trucks is your position of strength in the marketplace.

Autonation (AN) CEO Mike Jackson wants auto manufacturers to remain disciplined on price incentives and not chase market share at the expense of profitability

I really would not want to see incentives go beyond on the manufacture level they are about 10% suggested retail price at the moment. So we’re approaching double digits and I really hope we don’t go beyond that.”

Autonation (AN) CEO Mike Jackson is excited about their digital storefront 

We now generate fully 25% of our business from AutoNation site, which is a spectacular success, the customers like the ability to be able to transact on the site. We still have capabilities that we’re adding step-by-step that continue to roll out I think the most difficult piece remains the documentation that may push into 2017.”

 

 

 

 

Hershey (HSY) CEO John Bilbrey said the company continues to take market share from competitors

Hershey U.S. CMG retail takeaway sequentially improved from Q3 to Q4, and increased plus 2.5%, although market share was up about 0.2 point. Seasonal performance was good and we gained market share in both Halloween and holiday.  Hershey U.S. market share was an industry-leading 31.3%.”

Much like others in the retail food space, the company’s products continued to be impacted by shifting consumer trends

As we previously discussed the category is being impacted by many of the same issues facing other food categories, including changing shopping habits like channel shifting, increased competitive activity and some retailers adjusting their merchandising practices, and a proliferation of broader snack SKUs.”

Their China chocolate business remains challenged

Our China Chocolate fourth quarter net sales results were less than our expectations.  Similar to what we discussed over the last year, category performance is being impacted by macro economic issues and the related impact it’s having on consumer shopping behavior and confidence.”

Transitioning their products to more natural ingredients has increased their expenses

Competition for this space in the store is robust. And we continue to listen to the consumer and invest in simple ingredients, which were currently purchasing at a slight premium to traditional ingredients.”

Hershey (HSY) CFO Patricia Little said some of their chocolate sales are a seasonal business that centers around holidays

We also know chocolate is really a destination for the seasons, during the seasonal periods, and that will continue. So I think, we kind of think about it, that’s a solid foundation and base that consumers are looking for chocolate in particular around those times.”

 

 

 

 

Mead Johnson (MJN) CEO Kasper Jacobsen said the slowing of several international economies hurt volume growth

We were challenged by a strengthening dollar and the general weakness in many economies throughout Asia and Latin America. GDP growth across Asia and Latin America was lower than prior year, and this affected both consumer and retailer confidence.”

And they ran into increased price competition and execution issues 

Additionally, in China, we saw increased price-based competition and channel shifts that adversely impacted sales growth and required us to boost investment to protect our competitiveness. Combined with some company-specific executional issues, this resulted in lower volumes through the year.”

Mead Johnson (MJN) CEO Kasper Jacobsen said they signed partnership agreements with Chinese company Tencent & JD.com to expand distribution 

In a sign of our commitment to strengthening our presence in web and app-based commerce, we recently signed joint business partnership agreement with Jingdong, owner of leading e-commerce like JD.com and Tencent, owner of WeChat, the leading social app in China.

Mead Johnson (MJN) CEO Kasper Jacobsen highlighted the most important factors that will affect company performance in the coming year

Through last year, I repeatedly pointed to four important factors that critically influenced company performance. To remind you all, I’m referring to currency movements, dairy cost evolution, our ability to evolve our strategy and portfolio in China, and our momentum in North America, particularly in the United States. All of these four variables remain as relevant in 2016 as they were to our performance in 2015. But I should add pricing to the list. Our ability to offset partially or in full foreign exchange weakness with price increases will be very important. I’d add that I see some encouraging signs that price increases will become easier as we move through the year.”

Mead Johnson (MJN) CEO Kasper Jacobsen discussed raising prices in Asia

I think the pricing environment will become somewhat more friendly. What we saw in 2015 was that there were still – particularly, I would say, in Asia, there were still governments in Asia that were very resistant to price increases in our sector as they still focused very much on kind of inflationary pressure or perceived inflationary pressure, which I think we all know was really a threat that evaporated some time back in 2014. And they would repeatedly point to the fact that we were seeing significant upside from dairy costs coming down as we discussed price increases.  I think now that dairy prices have stabilized, I believe that as both us and our competitors lap the low-dairy costs, it will become a little bit more straightforward to raise prices. But we obviously have to do that in a responsible manner.”

 

 

 

 

Las Vegas Sands (LVS) CEO Sheldon Adelson said the company increased its market share in certain geographical zones such as Singapore

In Singapore, our share of EBITDA of the duopoly market increased to 68% in the first nine months of 2015, up from 65% in 2014. Because of industry leading investments in Macau and Singapore, we are unique in the absolute scale of our cash flow as well as our dominant share of the industry’s cash flow.

Las Vegas Sands (LVS) CEO Sheldon Adelson mentioned that their employees base is now predominately locals as opposed to hired hands from other countries

 And no less important is the decade-long effort we have made in developing to promoting the local talent that is necessary to operate and grow our business over the long term. In 2004, only 7% of 900 or so managerial staff were locals. Today, 86% of our 2,700 or so managerial staff are locals.  In summary, we regard it as a privilege to contribute to Macau’s success in realizing its objectives of diversifying its economy, supporting the growth of local businesses, providing meaningful career development opportunities for its citizens and reaching its full potential as Asia’s leading business and leisure tourism destination.”

Las Vegas Sands (LVS) Senior Vice President Patrick Dumont says its tough to tell what impact a devalued Chinese yuan currency may have on the company’s performance

I think long term, it’s really hard to call. I think it’s hard for anyone to figure out exactly what the impact will be and how the currency may continue to devalue. The only thing is we’re looking at hedging programs, we’re speaking to economists and doing our best to evaluate the impact to the business. But in terms of long-term impact on our customers, it’s hard to say. A devaluation of currency could impact manufacturing economy there and drive further growth in the economy. Other people have different views. So now we’re just studying it and hopefully we’ll continue to grow our business in the face of any currency changes that may occur.”

 

 

 

 

Visa (V) CEO Charles Scharf said consumer spending patterns are changing

Ecommerce continue to grow at a much higher rate than the spending at physical stores. We saw mid teens eCommerce growth during the holiday period versus mid single digits growth in the physical world. More than 25% of all spending on Visa Cards during November and December was online up from less than 20% just three years ago.”

And people are delaying their shopping until later in the holiday season

Also the pattern of spending during the holidays has changed, while Black Friday and Cyber Monday remain important shopping days, less spending is consolidated on these two days than recent years and more people delay their spending to later in the season this year.”

Visa (V) CEO Charles Scharf said their Visa Checkout product has better online completion rates than some of its competitors 

Visa Checkout customers completed 86% of transactions compared to 73% for PayPal Express Checkout and 57% for the traditional merchant checkout. Visa Checkout customers are more active online shoppers in general, completing 30% more transactions per person than the overall population of online shoppers and 95% of Visa checkout customers say sign up was easy and 96% feel secure making purchases with Visa Checkout.”

Slightly less than one half of all Visa credit cards now have EMV chips which greatly enhance security of the network

43% of all credit cards representing 72% of purchase volume, 21% of all debit cards representing 45% of purchase volume, over 750,000 merchant locations have enabled EMV representing 17% of the total face to face locations in the U.S. Based on our recent client survey we expect 50% of locations to be enabled by the end of this year.”

Visa (V) CFO Vasant Prahbu said they were able to issue low cost debt to fund their Visa Europe acquisition 

In December we issued $16 billion in debt with maturities ranging from 2 to 30 years. The weighted average interest rate was 3.08% with the weighted average maturity of 13.1 years. This is the low end of the 3% to 3.5% interest rate range we indicted last year.”

Visa (V) CEO Charles Scharf discussed the intensifying competitive landscape

Domestically, across the world there are local networks that we compete with. And there are emerging global competitors such as Chinese Union Pay in the traditional space as well as a series of people in the eCom whose names you know that we continue to compete with.  I think when we think about what we have at Visa in the quality of the network, the safety, the security, the global acceptance and now the capabilities that we built in the world of digital commerce and the value-added services, we feel terrific about our ability to continue to compete.”

 

 

 

 

Rollins (ROL) CEO Gary Rollins said the company could see increased sales from a more substantial outbreak in the Zika virus

Although Zika was first diagnosed in Brazil in May, it is been linked to more than 3500 cases of infant deformity. The leading experts predict that the USA needs to be prepared for a similar scenario. This situation is unfortunate. However based on our experience with the West Nile outbreak, publicity concerning mosquitoes risk will accelerate.”

And that they’re using iPhones to make their technicians more efficient

This time last year we discussed that one of the important advantages of BOSS was the feature of issuing iPhones to our technicians to help them better complete their customer administrative requirements.  At the end of this past year, 2600 of our technicians were using our iPhones to provide customer better communication and acknowledgment of their service, while improving our branch administrative productivity.”

Rollins (ROL) CEO Gary Rollins said they are in the “people business”

The service business is first and foremost a people business and our employees are our most important asset. A major priority for us every year is to prove on the retention of our employees. Our employee retention rate again improved in 2015. We continue to work with our employees to ensure that they are receiving the very best training if they need to be successful and to advance their career.”

Rollins (ROL) CEO Gary Rollins said they are using data and an in house analytics team to change pricing dynamically

Well we are learning more about our business, I mean we have the capability now of better utilizing our data. We have the capability now of experimenting more. We have a wonderful laboratory with our call center because virtually we can change the prices just almost instantaneously and look at our closure to see if our closure is improving or not and seeing if we’re selling more units to the extent that to offset the price reduction.”

JS Earnings Call Notes 11.3.2015 – Potash, Varian, AIG, Loews, Discovery Communications, McGraw Hill Financial, AB Inbev, Starbucks, Novo Nordisk, LKQ, Ellie Mae, & DistributionNow

Potash (POT) CEO Jochen Tilk said the agricultural chemicals market remains weak

“Looking ahead, macroeconomic headwinds, including lower GDP growth in emerging markets and the erosion of many currencies relative to the US dollar, contributed to a weaker commodity environment in 2015 that affected our sector as well. In light of these broader factors, we have lowered our expectation for 2015 global potash shipments to approximately 59 million tonnes and our sales volumes to a range of 9 million to 9.2 million tonnes. While potash demand held up relatively well in the face of emerging market uncertainty, prices have been less resilient.”

He said they continue to rebalance the portfolio and take costs out of the business to stay competitive

“First, our focus is on striking the right balance between flexibility and cost. We have some of the best, most efficient potash assets in the world and we continue to take steps to even further improve efficiencies and lower our costs. We began with operation workforce reductions in 2013 when we reduced our potash operating capability by approximately 3.5 million tonnes or 30%. This was central to marrying our capability with expected market conditions.”

Potash (POT) CEO Jochen Tilk said they will continue to maintain the high dividend even though it means they are paying out a significant percentage of their net profit

“our objective is to maintain our dividend. When we raise the dividend over recent years, we did this both thoughtfully and cautiously. The value of the dividend, $1.2 billion annually, was stress tested in a number of downside scenarios and we remain comfortable that even amidst a more challenging macro environment, it is very well-supported and can be sustained at current payout level.”

With new Potash supply coming online soon from mines that were built a few years ago when prices were higher, they continue to believe the supply demand balance remains tight

“So the question on our expectation of supply and demand going forward in next year and the year thereafter, we continue to believe that supply/demand is actually relatively tight and we think we understand new production coming online.

Even though the microeconomic environment is challenging, demand for the end product continues to grow

“The one thing that, even in spite of these difficult conditions, potash demand, globally, has remained pretty resilient. Our estimate for this calendar year on global demand in that 58 million to 60 million tonnes will represent the second best year of potash demand globally and that doesn’t go unnoticed by us.”

Given the recent weakness in the share price of Potash, CEO Jochen Tilk said he is still not comfortable buying back his own stock

“If you contemplate a share repurchase program, it has to be meaningful, it has to be significant. I don’t think leveraging the balance sheet up at this point, at this stage, with those concerns that have been raised would make sense.”

 

 

 

 

Varian (VAR) CEO Dow Wilson said they gained market share against all of the competitors during the year

“We gained share against the competition in all three regions of the world for the year. In North America alone, we estimate that we generated over $150 million in orders during the year to replace hardware and software products from our competitors.”

Varian (VAR) CFO Elisha Finney said currency movement had a massive impact across both reported revenues and how their competitors are behaving

“Before I walk you through the numbers, let me just say that exchange rates wreaked havoc on our 2015 results. Currency driven price erosion had a huge impact on our imaging components
business.”

When asked if he would divest the struggling image component segment of the business, CEO Down Wilson said there is significant synergies with the oncology equipment business thus he is not currently interested in divesting

“The profitability of that business hasn’t changed, but it’s very cyclical. We like the fact that we’re the leader in digital imaging technology. And so, we’ve got both a strong product portfolio as well as scale in the business. And there are synergies with our oncology business. The oncology is the second largest customer of that business. About 10%-12% of the product cost of our oncology business comes from our components business; over 1500 tubes and panels a year. So, there is some vertical integration that we look at.”

Varian (VAR) CEO Dow Wilson said the company’s equipment provides the lowest total cost of ownership

“As we go into an environment that’s uncertain from a reimbursement point of view, total cost to ownership is everything, and Varian’s advantage is there. There is nobody close to us with that. There will be some niche products out there that probably get some play in some segments, but I think people are still going to be looking at value for money and how to stretch their capital dollars.”

 

 

 

 

AIG CEO Peter Hancock responded first thing in the company’s earnings conference call to a public letter from Carl Icahn to split up the company

“But before I do I’d like to comment on the recent letter we received from Carl Icahn. The letter outlines a plan that includes separation of Life and P&C. Management and the board have carefully reviewed such a separation on many occasions including in the recent past and have concluded it did not make financial sense. We of course will meet with him to further share our conclusions and give him an opportunity to elaborate on his views.”

AIG CEO Peter Hancock highlighted some technology trends which are affecting the insurance business

“We’ve been investing, and we’ll continue to make investments that will give us a competitive advantage in an ever changing landscape. The current mega trend that we see in artificial intelligence, digital, the Internet of Things, and Big Data require us to make these investments with a constant eye on innovation in order to be relevant.”

AIG CEO Peter Hancock said their mortgage insurance business is a strong contributor to the company

“So UGC is a business which was for sale for virtually nothing back in the crisis days. And since then we’ve invested in it, modernized it, and taken it from number five to number one in its industry, and it’s performing very well today. We’ve kept it as a very modular unit, so it gives us strategic flexibility. But today it is a core business making a significant contribution to the company.”

AIG CEO Peter Hancock said he sees the company having a lower headcount in the next few years due to increased automation

“I think that there will be fewer people, because a lot of those jobs will eventually be replaced by automation. We also, beyond the head count numbers that you see, have a very substantial number of contractors. And that number will also decline. So between contractors and head count in total we’d expect that number to be substantially lower. And our technology would be a bigger part of the spend and the scalable infrastructure that gives us, will lower our unit costs substantially.”

AIG CFO David Herzog said the S&P rating agency gives them a diversification benefit for being in multiple non-correlated lines of insurance

“I think the S&P – the explicit diversification benefits, I don’t know that we have disclosed publicly, but it is quite substantial. It’s north of $5 billion in diversification benefits.”

 

 

 

 

 

Loews (L) CEO James Tisch began the call by focusing on the recent decline in the company’s stock price and their plans to buyback a significant amount of shares

“Since I’m not in the habit of ignoring the elephant in the room, I want to start today’s discussion by focusing on the stock prices of Loews and our subsidiaries. You certainly don’t need me to tell you that the stock market performed terribly in the third quarter. In general, we believe that the stock market is undervaluing our shares and those of our subsidiaries. Despite being frustrated, rather than complain, we look at this as an opportunity to create value for Loews’ shareholders by buying back our stock, and we did.”

Loews (L) CEO James Tisch discussed his thinking process on buying a hotel outright versus partnering with an operator

“Listen, I like capital light. So, management is always number one, but with management, you don’t control the asset, and in some ways, you don’t control your own fate. A partnership is the next best thing because that’s not capital light, but it’s capital lighter, so that we don’t have to put up all the money for the hotel. And the third alternative is for us to buy a 100% of the hotel, which we have done a number of times. What we look to do when we buy a 100% of our hotel is that over the next one year to two years we look to sell down a percentage interest in that hotel so we don’t have as much as cash invested in the property.”

Loews (L) CEO James Tisch said he sees a lot of value being produced by its hotel subsidiary even though it currently isn’t generating large earnings

“I’d say that with respect to Loews Hotels, it doesn’t have a lot of earnings, but it does have a lot of value. The hotels in our portfolio, many of them are the envy of a lot of people in the hotel business. And the goal of Loews Hotels is to continue building the value of the company. As I said, it may be difficult for you to see in the form of net income. We do show adjusted EBITDA as a measure to help give you some ability to get value of the business. But I’d simply end by saying that – as I’ve said before, I love all my children, I love all our businesses, and I think each one of them is doing well within the context of their industry.”

 

 

 

 

 

 

Discovery (DISCA) CEO David Zaslav says they were able to raise their prices even in a challenged environment for TV content companies

“On the affiliate side, revenues rose 12% in the third quarter. We continue to see the benefits of the strong price increases we have secured through the current renewal cycle, of which we are now 80% complete here in the U.S. The price escalators are locked in for years to come.”

Advertising growth showed particular strength

“Turning now to the operating units, despite all the talk about domestic secular concerns, our U.S. Networks grew revenues an impressive 8% this quarter, as we benefited from another quarter of strong distribution growth of 12% and a significant acceleration in advertising growth to up 6% year-over-year. We are extremely pleased with our third quarter ad sales performance. As David mentioned, our ratings outperformed the industry and this outperformance helped us benefit from robust scatter pricing and volume as well as stronger overall demand.”

And they are seeing increased viewership in international market

“At our Investor Day, I also said that our leading global distribution platform is Discovery’s secret sauce. That’s once again true in the third quarter. International viewership grew mid-single-digit overall with ID, TLC and Eurosport up double-digit or better. Our ability to increase share of viewership internationally helped drive strong organic advertising and affiliate growth. Organic ad sales rose 12% and organic distribution growth also was strong, up 8%. These figures demonstrate our strong international growth profile and best-in-class platform.”

Discovery (DISCA) CFO Andrew Warren said the company is adjusting its view on repurchasing its own shares

“On our last earnings call, we stated that we were unlikely to repurchase additional shares through the end of 2015 in an effort to retain capital allocation flexibility for strategic transactions as well as to pay down debt to lower our leverage ratios. But given our solid and better-than-expected third quarter revenues and bottom-line results, the successful Comcast renewal, our significant higher level of confidence in our ability to drive accelerating free cash flow, our high and growing cash flow-to-total debt yield, the continued favorable interest rate environment, and finally, that we find the return of buying our shares at these levels to be extremely attractive, we have adjusted our view on leverage. After very careful consideration, we are now comfortable with increasing our gross debt to adjusted OIBDA ratio to the 3.25 times to 3.4 times range versus the 2.75 times target we previously outlined, all while being highly committed to remaining an investment-grade debt issuer.”

Discovery (DISCA) CEO David Zaslav says they’re starting to take their content direct to consumer

“The direct-to-consumer business is something we’re just getting started with, but we have invested over the last year and a half primarily through our Eurosport partnership and in Northern Europe with the Eurosport app and with Dplay. We’re learning a lot. Both of those platforms are growing meaningfully. We do have a target in place which we’re calling March to a Million. We have 200,000 subscribers right now. And if we can get to a million at the $6 to $8 a month, we could generate close to $100 million in revenue.”

Discovery (DISCA) CFO Andrew Warren said they are making it a point of emphasis to have the highest debt load in the industry

“To answer your question on the leverage, we expect to kind of accrete our leverage up to the 3.25, 3.4 times by year-end 2016. It’s just so important to highlight that even at that level, our free cash flow to debt yield is still going to be mid teens to high teens, the highest in the industry. Our interest coverage ratio is going to be the highest in the industry. And we feel extremely comfortable given our growth profile of cash flow, that’s the right leverage target and capital structure for us.”

Discovery (DISCA) CFO Andrew Warren said he’s seeing pockets of growth across various geographies

“We still see aggressive growth, meaningful growth in Latin America, particularly Brazil and Mexico, although Brazil has slowed down a little bit with the economy, and India, we’re seeing meaningful growth in Eastern Europe.”

 

 

 

 

 

McGraw Hill Financial (MHFI) CEO Doug Peterson said with the recent intention to divest the J.D. Power business, the company is now focused on global and scalable businesses

“Our portfolio is now increasingly focused on businesses with a common set of attributes. The businesses are scalable; they are global; all have market-leading positions and fantastic brands; and serve growing markets. These businesses are increasingly interrelated and serving the capital and commodities markets. Together, it’s this unique collection of great assets with these world-class brands that distinguishes McGraw Hill Financial.”

McGraw Hill Financial (MHFI) CEO Doug Peterson said ratings services were weak during the quarter as customers turned cautious amid macroeconomic uncertainty

“Now, let me turn to Standard & Poor’s Ratings Services. Issuance outside the U.S. was weak as concerns related to China’s declining growth, falling commodity prices, and the Fed’s impending interest rate hike hindered issuance activity.”

With very specific weakness in global issuance in Asia & Latin America

“Asia and Latin America issuance decreased by 58% and 72%, respectively. This led to a 20% decline in global issuance overall. To put that in perspective, both Asia and Latin America had their lowest quarterly issuance since 2008. Due to the turmoil in the Asian markets and the devaluation of the Chinese yuan, year-over-year quarterly revenue from China experienced a decline for the first time in the last five years. In addition, this was Europe’s lowest issuance quarter since the third quarter of 2013.”

 

 

 

AB Inbev (BUD) CEO Carlos Brito admits they have mismanaged the Bud Light brand and they plan to refresh the image of the brand

“We are going to have what we think is going to be revolution in terms of trying to understand where the brand came from and trying to learn from its amazing 20 plus years history from zero to a market leader in the U.S. and playing that back in a more contemporary way playing back to some of these rituals. There will be also some packaging refresh and visual identity. So, I mean, lots of things that’s only fair for a brand of this size. So we think we have been unfair for the brand, so our fault, not the brand’s fault. We don’t believe in anything about brand having cycle. We believe in brands that are well managed and brands that could be better managed. And Bud Light is one of those that could be better managed and that’s what we have for next year.”

He added that the structure of the beer market is very regionalized

“We believe beer has been a very local brand, local business, different than any other consumer goods you look out there. So I think there is an amazing opportunity for us to drive these three global brands and really capture what consumers in all markets today want in some occasions, which is more of a global citizen type brand.”

Their Chinese operations outperformed their peers during the quarter and gained market share

“Moving now to China, in China economic headwinds and poor weather led to decline in industry volumes in the quarter. We estimate industry volumes were down almost 7% in the quarter and down over 5% year-to-date with most of the impact being felt in the value and core segments. Our own beer volumes declined by 1.3% in the quarter and were up 0.5% year-to-date with our focus on the faster growing core plus and premium segments leading to an estimated market share gain of 104 bps to 18.7% in the quarter.”

And they continue to focus on certain segments of the market such as women drinkers

“In China, we are outperforming the industry and gaining share based on our strategy of focusing on the women’s segments and channels.

AB Inbev (BUD) CEO Carlos Brito said their partnership with the NFL which allows them to put team logos on bottles continues to be beneficial

“We are very happy with NFL’s agreement that we have in the sponsorship. Of course, as consumer change, the media habits and the way they interact with sports and the NFL. We are also changing together with the league on properties and things we can activate. And the NFL has been a very good partner in agreeing with us on changes that we need to do to continue to be relevant with that consumer base. So again, a great partnership, we respect them a lot. They have a great business. And again, the number one sports in the country could all be associated with the number one beer in the country. ”

And he continues to see a lot of room to grow the business in Mexico

“So, I think the other fact in Mexico will be like in any other market of ours, a function of three things, revenue management initiatives, premiumization, and in Mexico specifically like Brazil if we increase our own distribution. I mean, premium in Mexico is only 3% of the industry volume.”

 

 

 

 

 

Starbucks (SBUX) CEO Howard Schulz highlighted the shift away from brick and motor retailing

“We are delivering quarter after quarter of record-breaking financial results despite the accelerating shift in consumer behavior away from traditional bricks-and-mortar retailing and despite difficult macroeconomic retail and consumer headwinds that continue to challenge traditional retailers.”

Starbucks (SBUX) CEO Howard Schulz emphasized that by investing in their employees, via increased salary & benefits, it leads to a better customer experience and lower employee turnover

“And the investments we make in our partners pay tangible dividends in the form of more satisfied and engaged partners, deeper connections among partners, and with customers and improved in-store efficiency, all of which contribute to an elevated in-store Starbucks experience for everyone, partners and customers alike. Noteworthy is that today we are seeing improvements in partner attrition, a direct result of our partner investments at a time when the industry overall is actually moving in the opposite direction. And we are seeing a direct correlation between reduced partner attrition and our business results. Our comp results are strongest where we are having our greatest success in reducing turnover. ”

Starbucks (SBUX) CEO Howard Schulz highlighted their customers loyalty to the brand

“Our customers trust us and reward us with unparalleled frequency and loyalty, as demonstrated by the robustness of our business, the unprecedented increases in global traffic we are seeing, and the amount of currency preloaded on our customers’ mobile devices. We continue to leverage all these assets in ways that are accretive to our business and to the heritage of our company. Never in our 23 years as a public company has the Starbucks brand or our business been more relevant or been stronger.”

Mobile pay accounts for nearly 1/4 of all store transactions

“Mobile payment now accounts for 21% of all transactions in our U.S. company-owned stores, and although we only completed the rollout of Mobile Order & Pay across our system 7500 U.S. company-owned store portfolio in September, we were already operating at a run rate of over five million transactions per month.”

Starbucks (SBUX) COO Kevin Johnsaid 1 out of every 7 Americans received a Starbucks gift certificate last year

“You may recall that last year, one in seven Americans received a Starbucks Gift Card over the holidays, generating over $1.6 billion in card loads in our first quarter of fiscal year 2015.”

Starbucks (SBUX) CEO Howard Schulz said they are in the business of creating experiences

Well, I think the equity of the Starbucks brand throughout our public life has been defined by the culture and values and guiding principles. I said from day one that we are in the experience business, and our brand is defined by the people who wear the green apron. The entire DNA of the company goes back to equity in the form of stock options, comprehensive health insurance, 25 years ahead of the Affordable Care Act, and this year alone groundbreaking benefit of college achievement of providing all of our people with a four-year education.

Starbucks (SBUX) CEO Howard Schulz emphasized the importance of how important mobile is to the business

“I think we also believe very strongly that we had to seamlessly integrate the Starbucks experience with all things mobile. And as I said in my prepared remarks, we are living in a mobile-first global economy and we’re witnessing that kind of change.”

The China business accelerated during the quarter

“we went back to work on that and I think we also believe very strongly that we had to seamlessly integrate the Starbucks experience with all things mobile. And as I said in my prepared remarks, we are living in a mobile-first global economy and we’re witnessing that kind of change. In addition, what we saw during the quarter was that comps actually accelerated month to month. And in China, we see that comps are continuing to accelerate into the month of October, which is great news for us.”

 

 

 

 

 

Novo Nordisk (NVO) CFO Jesper Brandgaard said robust performance of certain drugs are being offset by macroeconomic conditions

“We are seeing intensifying competition within both diabetes and biopharmaceuticals and challenging market access as well as macroeconomic conditions in China and a number of markets in International Operations.”

Novo Nordisk (NVO) CEO Lars Sorensen expects their China business to remain challenged

“In regards to China, we are impacted by increasing local competition. And we are impacted by a segment shift, much like we have historically experienced the same in Japan, where we have a strong position in premix market, China used to be a premix market. The only real solution to this is of course that we get Tresiba into the Chinese market, so that is a couple of years out. So, I think we will be facing relatively tough market conditions in China for a couple of years. We expect China to come back. But here in the immediate future, we expect lower growth.”

 

 

 

 

 

LKQ (LKQ) CEO Robert Wagman said increased vehicle miles driven is providing a tailwind to their business

“New vehicle sales increased the size of the car park, which equates to more insured cars on the road, the likelihood of increased accidents and more repairs. These trends help drive North American organic growth for parts and services.”

The declining prices the company received for various scrap materials hurt their earnings

“While we have been dealing with falling scrap steel prices for a while, during Q3, we also experienced a material decline in the prices received from other metals that are a residual of our recycling activities, including aluminum, copper, platinum, palladium and rhodium, which were down materially compared to the third quarter of last year.”

LKQ (LKQ) CEO Robert Wagman reminded the investor community of the firm’s mission statement and core competency

“We’re laser-focused on our mission statement of being the leading global value-added distributor of vehicle parts and accessories by offering our customers the most comprehensive available and cost-effective selection of parts solutions, while building strong partnerships with our employees and the communities in which we operate. I am encouraged by the trends in miles driven, the continued growth in the average number of parts per claim, the increase in the per unit share of APU, the increased costs of repairs pushing carriers to seek alternative parts to lower their costs and the consistent pipeline of acquisition opportunities we’re witnessing across all of our business lines.”

The average age of cars on the road in Europe is increasing which benefits LKQ

“The average age of the car part in the UK is 7.8 years old, but it’s expanding. And on the continent, it’s 8.6 years old and expanding. So we think as these cars get older, it’s going to provide a nice tailwind.”

 

 

 

 

 

Ellie Mae (ELLI) CEO Jonathan Corr said his company continues to benefit from the increased regulation and compliance associated with mortgages

“Shortly after the close the Respa Tila Integrated Mortgage Disclosure rule became effective. We’ve received positive feedback on the comprehensive solutions support and training our team provided customers as they significantly reengineered their business processes to meet these new requirements. The services and education we provided through our readiness initiatives further distinguished Ellie Mae from our competitors and helped build our pipeline of expected customers. With these new regulations in effect and more expect to become over the next couple of years the need for an all-in-one mortgage solution and a team that excels in compliance is greater than ever, and we’re seeing that reflected in the sustained demand for Encompass.”

And they’ve now partnered with both Fannie Mae & Freddie Mac directly

“We’re excited to announce a strategic partnership with Freddie Mac to further integrate their risk management tools into Encompass. These integrations will allow Ellie Mae customers to more easily originate loans within Freddie Mac guideline. You’ll recall that we also announced the strategic partnership with Fannie Mae in July. By partnering with both GSEs we’re making the entire loan process even easier for our lenders from application to post-closing.”

Ellie Mae (ELLI) CEO Jonathan Corr discussed how he thinks about when to raise prices on his software

“Historically, we have raised prices on base fees and loan fees, over time as we’ve added more and more value to the platform. We don’t take a position, although obviously we have a big position in the market and a big market share. We don’t use that to just raise the prices based on our market pie, we really look to as we’re adding more value to the platform, raise those fees over time and over last four years the base fee has just gone from 50 to 60 to 70 it was up to 75 for new customers as of — earlier in 2015. And we’ll keep doing that and the idea is again adding greater value rather than using our pricing power, is our approach.”

 

 

 

Distribution Now (DNOW) CEO Robert Workman says many of their manufacturers of steel pipe are in distress after steel prices went below their 2009 low

“We have begun to see some bankruptcies from the pipe mills and further shutdowns. I would like to think that we are near the lows regarding steel prices, but the factors previously mentioned make it difficult to predict our manufacturers’ price bottom or their input costs.”

“Regarding the market environment, we are in a decline like no other I have experienced, not only in my 24 years in this business, but also as a kid growing up in the energy industry. I was born and raised in a small town in the Permian Basin where my parents owned an oilfield service company. I never thought the market could decline again as sharply and severely as it did in the 1980s while I watched my parents struggle to make payroll, but I have clearly been proven wrong. We continue to see rig counts being reduced, projects being canceled, budgets being slashed, and inventory being cannibalized.”