OPINION: The Seven Group boss sees resilience across the economy, but he worries a backwards-looking RBA could take rates too high.
After a string of profit downgrades marred this week’s earnings results, it was left to one of Australia’s best chief executives to right the ship.Booming sales and strong margins in the group’s WesTrac heavy equipment business and Coates industrial hire division lifted earnings before interest and tax by 16 per cent to $595 million. UBS expected $527 million.
Although the former trend will keep WesTrac humming for years to come, and Coates is finally responding to years of careful investment and tweaking, the infrastructure boom is also good for Stokes’ latest project: fixing building materials giant Boral.; demand is good and margins are starting to improve, with new Boral boss Vik Bansal starting to deliver the leaner, owner-operator culture that Seven swears by. Margins rose 0.5 per cent to 5.
But Stokes fears the central banks and indeed the wider business community might be in danger of getting overexcited about inflation, which he argues is a “normal part of life” that needs to be managed. “The fear is that they almost have a current strategy to overshoot, which is concerning. From a business perspective, we need to use what’s happening in the future to run our business. But from a technocratic economist’s perspective, you’re using revisionist information – and that’s a challenge.Fortunately for Seven Group investors, their company is sitting in sectors with a degree of resilience to interest rates.
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