Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. This is Bloomberg Intelligence
Speaker 1: with Alex steel and Paul Sweeney.
Speaker 2: The real app performance has been the US corporate high yield.
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Speaker 2: These are two big time blue chip companies.
Speaker 3: The window between the peak and cut changing super fast.
Speaker 1: Bloomberg Intelligence with Alex Steinel and Paul Sweeney on Bloomberg Radio.
Speaker 2: On Today's Bloomberg Intelligence Show, we dig inside the big
Speaker 2: business stories impacting Wall Street and the global markets.
Speaker 3: Each and every week we provide you in depth research
Speaker 3: and data on some of the two thousand companies and
Speaker 3: one hundred and thirty industries our analysts cover worldwide.
Speaker 2: Today, we'll look at how Boing seven three seven Max
Speaker 2: crisis is weighing on deliveries.
Speaker 3: Plus we'll talk about how many countries are building their
Speaker 3: own killer technology based on Iranian designs.
Speaker 2: But first we dive into big tech and Apple. We
Speaker 2: heard that Apple assembled fourteen billion dollars of iPhones in
Speaker 2: India for the last fiscal year, doubling its production.
Speaker 3: It's a sign that Apple is accelerating a push to
Speaker 3: diversify beyond China. So for more we were drawn by
Speaker 3: anirag Rana Bloomberg Intelligence technology analyst, and we asked Aniraq
Speaker 3: why Apple has been cutting its reliance on China.
Speaker 4: One of the things we have seen that over the
Speaker 4: last two and a half three years, Apple has been
Speaker 4: assembling its phone outside and you know, for us, the
Speaker 4: real reason for that is a couple of years ago,
Speaker 4: there was a COVID big issue in China. It had
Speaker 4: an impact on some of the phones coming out, that
Speaker 4: had an impact on sales and so forth. Now having
Speaker 4: said that, that was one reason. Second Apple, prior to
Speaker 4: the you know, you could say the COVID issue was
Speaker 4: completely dependent on China for all the assembly and their pots.
Speaker 4: Now what we are seeing is they are moving out
Speaker 4: of the assembly from China into other eights, mostly India.
Speaker 4: But one of the things I tell everybody at the
Speaker 4: same time, they still make most of the parts, so
Speaker 4: it's you know, if we ever get into a problem
Speaker 4: with China in terms of geopolitical issues, we still lean
Speaker 4: those parts to assemble the phone. It's not as if
Speaker 4: you know, those parts are available all over the world,
Speaker 4: an rag.
Speaker 2: I just wonder how you know investors in Apple view
Speaker 2: this China risk? Are they of the opinion I assume
Speaker 2: that if they own stock in the company there they
Speaker 2: have some level of comfort with the China risk here?
Speaker 2: Did they just believe it's hey, you know, it's kind
Speaker 2: of a mutually beneficial relationship Apple and China that at
Speaker 2: the end of the day, that's what's going to keep
Speaker 2: everything moving.
Speaker 4: Well, I've seen two people, I mean two different buckets.
Speaker 4: One is, people are extremely concerned about the US China
Speaker 4: relationship in the long run. They obviously have you know,
Speaker 4: they don't want to deal with Apple or any other
Speaker 4: companies that you know, fall into that bucket. But the
Speaker 4: others said, listen, this is spart and parcel of the
Speaker 4: global world chain, supply chains, and most manufacturing companies are
Speaker 4: dependent on China. Like it or not. They seem to
Speaker 4: be okay with it, you know from our side, you know, yes, absolutely.
Speaker 4: The biggest risk that Apple faces from a stock point
Speaker 4: of view, from a revenue point of view, from a
Speaker 4: supply chain point of view, is if something happens between
Speaker 4: the US and China, and we've talked about that quite
Speaker 4: a bit, but from a sales point of view, I
Speaker 4: think it is to me that's a bigger issue right
Speaker 4: now in the medium term, because China accounts for eighteen
Speaker 4: to twenty percent of total of Apple sale and frankly speaking,
Speaker 4: that is the big growth engine, and we have seen
Speaker 4: over the last twelve months of problems in that growth
Speaker 4: engine because of huahweh.
Speaker 3: How much do they make these phones for in India
Speaker 3: versus China versus other areas, and trying to get a
Speaker 3: sense of where the margins are and what they look like.
Speaker 4: That's a very good question. And frankly speaking, we thought
Speaker 4: when they started making more phones in India or we
Speaker 4: started seeing new phones coming out of that, that would
Speaker 4: have an impact on their gross margins. But they have
Speaker 4: managed it very well. And remember one of these things,
Speaker 4: it's the fact increase that they outsourced their stuff to
Speaker 4: and you know, it's kind of somebody else's headache. But
Speaker 4: in the end, you know, Apple will have to make
Speaker 4: some you could say, concessions. But at the same time,
Speaker 4: so far we have not seen any impact on Apple's
Speaker 4: gross margins. I mean surprisingly we have seen them you know,
Speaker 4: hold up very nicely over the last two years.
Speaker 2: Can you just kind of characterize a competitive landscape for
Speaker 2: Apple in China visa the Huawei and other phones here
Speaker 2: are they maintaining share, losing share, gaining share? How's Apple doing?
Speaker 3: So?
Speaker 4: Apple has not done the same number of sales as
Speaker 4: Wawe over the last twelve months. Now, there are two
Speaker 4: elements of it. One is the competitive landscape. People are
Speaker 4: choosing Chinese phone so over a foreign brand, So that's
Speaker 4: one aspect. The second aspect, which I'm hoping is probably
Speaker 4: you know correct in the long run for Apple's sake,
Speaker 4: is that Wahwei didn't have a very you know, brand
Speaker 4: new phone for several years, and this is their first
Speaker 4: big new refresh, which is why people who have been
Speaker 4: using Quawei phones in the past are going out and
Speaker 4: refreshing their phone at a much faster clip. So that
Speaker 4: could be the second reason Apple is it doesn't have
Speaker 4: that same you know I would say, I mean, the
Speaker 4: cache is still there. But typically what I would do
Speaker 4: is if I have an Apple phone, you know, I'm
Speaker 4: doing everything on it, you know, chat and the pictures.
Speaker 4: But in China, what happens is you do a whole
Speaker 4: lot of your transactions using the apps that you have
Speaker 4: or the super apps, and for that you can download
Speaker 4: those app in any ecosystem. So I would say, on
Speaker 4: a on a you know, competitive basis, you are less
Speaker 4: prone to be an Apple customer than you are in
Speaker 4: the Western world.
Speaker 3: Well that's interesting. So and then to that point, is
Speaker 3: that what the regulation or the penalties in the EU
Speaker 3: and the US is going to force Apple to do
Speaker 3: an essence, so it won't become that ecosystem in the
Speaker 3: same way.
Speaker 4: Well, there is no super app in the US that
Speaker 4: is very much like v chat. I mean you could
Speaker 4: you could say WhatsApp could be one of them. But
Speaker 4: frankly speaking, I mean Apple's done such a good job
Speaker 4: of uh you know, I would say, maintaining their customer
Speaker 4: base in the US and in Europe. That I mean,
Speaker 4: I don't I don't see that happening. That certainly a
Speaker 4: new app comes in and people start using that over
Speaker 4: what's going on with Apple or the habits that they
Speaker 4: have right now.
Speaker 3: So what's the next catalyst now for Apple? What are
Speaker 3: you looking at? Well, any catalyst I guess would.
Speaker 4: Be a big ate the tune I mean that's it's
Speaker 4: Tune's Worldwide Developers conference where they are supposed to talk
Speaker 4: about AI and what's a of Apple's AI strategy. That
Speaker 4: is the only thing that can actually put some fire
Speaker 4: in this because other than that, I mean, we don't
Speaker 4: see China bouncing back this year. We don't see any
Speaker 4: major new product announcement, and obviously Apple Vision pro is
Speaker 4: not going to drive the overall growth rate of the company.
Speaker 4: So it's the iPhone and if there is anything that's
Speaker 4: out there that can force Paul to go out and
Speaker 4: buy a new phone, I think that's going to drive
Speaker 4: the next cycle.
Speaker 2: Our Thanks to anor Ad Rana, Bloomberg Intelligence technology analyst.
Speaker 3: We next look at the Bloomberg Big Take story titled
Speaker 3: Iran's Better Stealthier Drones are remaking global warfare. It's about
Speaker 3: how countries from Central Asia to South America are building
Speaker 3: their own killer technology based on Iranian designs, and the
Speaker 3: tech often has US components.
Speaker 2: For more, we were joined by the story's co author
Speaker 2: Sheridan Prosso. She's a Bloomberg News senior investigations writer. We
Speaker 2: first asked Sheridan what she learned from her investigation process.
Speaker 5: We took a look at how US technology flows are
Speaker 5: going into Iran's drone program, and what we found is
Speaker 5: just an incredible proliferation of Iranian drones now spreading throughout
Speaker 5: the world in ways that surprised even me from when
Speaker 5: I first started looking into this. You know, we obviously
Speaker 5: know about Iran's drone proliferation in the Middle East contexts
Speaker 5: right through Syria, I Rock, including now into Yemen, and
Speaker 5: then in the Middle East, you know, conflict in Gaza
Speaker 5: now as well. We're seeing kind of use of Iranian
Speaker 5: drones in the periphery of that conflict as well. But
Speaker 5: what also was surprising to us we found is that,
Speaker 5: you know, Iranian drones are now being manufactured in Russia.
Speaker 5: There's a program for six thousand Iranian drones there that
Speaker 5: are starting to turn up now in the battlefields of Ukraine.
Speaker 5: They're increasing proliferation in places like Central Asia and in
Speaker 5: South America as well, So it really is quite an
Speaker 5: enormous spread around the world.
Speaker 2: How is the technology, How advanced is the technology is
Speaker 2: just a model airplane with a lawnmower engine on the
Speaker 2: back or are they going something further?
Speaker 5: It essentially is, and really it's fairly low tech. But
Speaker 5: what's been really successful about these programs is that they
Speaker 5: are increasingly developing them and learning from experiences on the battlefield,
Speaker 5: for example in Ukraine. So what is now believed to
Speaker 5: be the case is that Iran learned from the way
Speaker 5: that Iranian drones were now being able to get into
Speaker 5: Ukraine had increased their effectiveness in the Middle East context.
Speaker 5: So it's increasingly battlefield experience and more and more use
Speaker 5: of these drones that are allowing them to make more
Speaker 5: deadly str actually and in these conflicts we're seeing them,
Speaker 5: especially in the Red Sea. And also there was the
Speaker 5: particular case of the three servicemen who were killed in
Speaker 5: Jordan earlier this year. It was a fairly low tech
Speaker 5: small drone, but what it was able to do is
Speaker 5: we learned in the course of this reporting that it
Speaker 5: was kind of drafting in behind a US drone that
Speaker 5: was attempting to land at the same time. And those
Speaker 5: drafting techniques are something that they've been working on improving
Speaker 5: in the Russian and Ukrainian context. So this kind of
Speaker 5: learning growing, proliferating using low tech technology but actually improving
Speaker 5: its effectiveness is actually proving very deadly.
Speaker 3: What can we do about this.
Speaker 5: So the US has export controls where we try to
Speaker 5: stop US technology from going into these drones and into
Speaker 5: the manufacturing of these drones. The issue though, is that
Speaker 5: Iran in particular has become a master of circumventing over
Speaker 5: forty years of sanctions, there are very developed network where
Speaker 5: front companies from all over the world are able to
Speaker 5: acquire this low tech technology. A lot of our export
Speaker 5: controls are aimed at stopping sort of the higher end
Speaker 5: you know, chips now going to China for example, for
Speaker 5: their AI, but in fact the proliferation of kind of
Speaker 5: lower tech you know, you need like maybe a few
Speaker 5: hundred low tech chips, the kind that go into your
Speaker 5: you know, lawnmower or blender, any kind of regular household equipment.
Speaker 5: That low tech stuff is actually what's powering the drones
Speaker 5: as well. And a lot of that is just available.
Speaker 5: It's recycled from old products, it's available from suppliers in Asia.
Speaker 5: China in particular has not been willing to enforce our
Speaker 5: US export controls against Russia, for example, so there's actually
Speaker 5: a very big loophole, particularly in Asia, for US tech
Speaker 5: flowing now into Russia into I runs drone program in Russia.
Speaker 5: So there are a bunch of concerted efforts now to
Speaker 5: try to make that stop.
Speaker 2: Sheridan, do we know how effective these drones are.
Speaker 5: So they've been very deadly in particular instances. What we've
Speaker 5: seen is a halt to I forget the percentage, maybe
Speaker 5: more than fifty percent of shipping in the Red Sea
Speaker 5: has been halted by some drone attacks. In the past
Speaker 5: few months. We've saw the deadly attack in Lebanon and
Speaker 5: several other very effective drone strikes as well, and so
Speaker 5: it's really cause for alarm in Washington. You know, we're
Speaker 5: wondering how far this is going to go, how effective
Speaker 5: our efforts at stopping it are going to be. You know,
Speaker 5: we're considering kind of how do you actually get US
Speaker 5: companies to stop allowing their technology to go there. And
Speaker 5: the companies that we talk to, for example, Texas Instruments,
Speaker 5: Analog Devices, a lot of their staff at least eighty
Speaker 5: percent of the drones that are turning up in Ukraine
Speaker 5: or containing this US technology from in particularly these companies
Speaker 5: and a few others as well, how do you get
Speaker 5: that to stop and therefore decrease Iran's ability to proliferate
Speaker 5: and that's the biggest question.
Speaker 3: Right now, what did those companies say.
Speaker 5: The companies say that we buy by US export controls,
Speaker 5: we have our insisted our suppliers do so as well.
Speaker 5: The issue is that there's so many loopholes, and in
Speaker 5: particular Hong Kong is proving to be a very difficult place.
Speaker 5: It used to be maybe ten, twelve or fifteen years ago,
Speaker 5: we had much better relations with Hong Kong. They would
Speaker 5: have been a lot closer to Western interests. And now
Speaker 5: with the changes that have happened in Hong Kong in
Speaker 5: the last three four years, we have seen less willingness
Speaker 5: on the part of Hong Kong officials to actually enforce
Speaker 5: US export controls, particularly going towards Russia, and so we've
Speaker 5: seen a big uptick in proliferation from equipment going via
Speaker 5: Hong Kong into Russia, for example. It is much better
Speaker 5: though at enforcing UN sanctions against Iran, and so it
Speaker 5: has successfully stopped a lot of technology going to run.
Speaker 5: But still there are quite a few kind of leaks
Speaker 5: in the dam basically, so it's happening all around.
Speaker 2: Our Thanks to Sheridan Prosso Bloomberg News senior investigations writer.
Speaker 3: Coming up, we're going to break down my Boeing seven
Speaker 3: thirty seven Max crisis is weighing on deliveries.
Speaker 2: You're listening to Bloomberg Intelligence on Bloomberg Radio, providing in
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Speaker 3: I'm Paul Sweeney and am Alex Steel, and this is Bloomberg.
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Speaker 3: We move next to the aerospace industry and Boeing. This week,
Speaker 3: Boeing log the lowest deliveries in the first quarter since
Speaker 3: mid twenty twenty one, and it shows just how far
Speaker 3: the planemaker has to go on its road to recovery
Speaker 3: from a near catastrophic accident early in January.
Speaker 2: For more, we were joined by George ferguson Bloomberg Intelligence,
Speaker 2: senior Aerospace, Defense and Airlines analyst. We first asked George
Speaker 2: what the latest quarter means in terms of deliveries for
Speaker 2: Boeing going forward.
Speaker 6: For the year, I think this is going to be
Speaker 6: the bottom. So i'd expect this was the worst quarter.
Speaker 6: You know, the fa was in there doing their review
Speaker 6: of Boeing's manufacturing. Boeing's got to come up for a
Speaker 6: plan for the FAA. Imagine that takes some hands as well,
Speaker 6: and manufacturing probably isn't moving very fast while they're in
Speaker 6: the middle of this process of figuring out how to stabilize,
Speaker 6: you know, the production of the airplanes. And so I
Speaker 6: think for the year, this will be the worst quarter,
Speaker 6: and I would expect that things would get better second, third,
Speaker 6: and fourth into the end.
Speaker 1: Of the year.
Speaker 3: There's a couple of ways to break it down, so
Speaker 3: let's just take it maybe piece by piece. First of all,
Speaker 3: supply chain stuff that like Boeing will be a part
Speaker 3: of and Airbus will be a part of too, Like,
Speaker 3: how are the supply chain impacting their deliveries?
Speaker 6: Well, I mean, right now, I think the biggest problem
Speaker 6: is up at Boeing and not in the supply chain.
Speaker 3: So the supply chain stuff is fixed, No, not at all.
Speaker 6: So I meant for the number of deliveries we've seen
Speaker 6: this quarter and the constriction in that number of deliveries.
Speaker 6: This is all Boeing issue, right, This is all Boeing's
Speaker 6: FAA review, their manufacturing review. Their supply chain, I think
Speaker 6: is producing at at a higher rate than they are
Speaker 6: right now. So Spirit Aero Systems would be an important
Speaker 6: part of their supply chain. They're building somewhere around thirty
Speaker 6: eight or they were building around thirty eight seven thirty
Speaker 6: seven Maxes a month when we heard from them at
Speaker 6: the end of the year, you know, for their four
Speaker 6: Q earnings call. We understand from Spirit that their suppliers
Speaker 6: were even building at higher rates than them in some
Speaker 6: cases maybe even up at sort of forty two numbers.
Speaker 6: And they're already thinking about Spirit moving to a forty
Speaker 6: two number for the Max. Again we're talking Max, which
Speaker 6: is the highest volume airplane. They were talking about Spirit
Speaker 6: moving to a forty two number just prior to the
Speaker 6: Alaska door panel incident, and that's when everything sort of
Speaker 6: hit the skids. But I think most of it hit
Speaker 6: the skids up at Boeing, which has to do manage
Speaker 6: all the FAA, you know, inquiries and their manufacturing review.
Speaker 2: George, if I guess from the company I don't want
Speaker 2: to go too fast. I think, you know, I can't
Speaker 2: have any more mishaps here. Almost like if I'm an investor,
Speaker 2: I'm not sure I'm knocking on the door saying, hey,
Speaker 2: you guys can't get back to thirty eight or forty
Speaker 2: kind of do it when you can kind of thing.
Speaker 6: Yeah, I mean, do it when you can. But I
Speaker 6: mean in the long term interest of Boeing, they have
Speaker 6: to increase build rates here and that's going to drive
Speaker 6: better cash flow and better products. Okay, I mean, look,
Speaker 6: their competitor across the Atlantic, right, which has, by the way,
Speaker 6: has you know, final assembly facilities all around the world,
Speaker 6: including one in Mobile, Alabamas.
Speaker 2: Really Airbus has a thing in Mobile.
Speaker 6: Absolutely, wow, absolutely, I don't know so. But their competitor
Speaker 6: is operating up in the forty five range per month
Speaker 6: for their A three twenty, the major competitor. If Boeing
Speaker 6: wants to be in this business long term, they have
Speaker 6: to stabilize production. You're right, but they've got to stabilize
Speaker 6: it at much higher levels. Prior to the pandemic, they
Speaker 6: were going close to sixty a month for the seven
Speaker 6: thirty seven max. It can be done. Their job is
Speaker 6: to make sure it happens.
Speaker 2: So what's the timeline here? When do you think, like
Speaker 2: year end, where would you like to see them?
Speaker 6: So year end, what we've model the Bloomberg intelligence is
Speaker 6: we think Boeing will be building thirty eight seven thirty
Speaker 6: sevens a month by four Q, which should have been
Speaker 6: where they started this year out at thirty eight. We
Speaker 6: think they were looking to break to forty two by
Speaker 6: the end of the year.
Speaker 2: So do we ever get back to the sixty? Should
Speaker 2: they ever get back to the sixty?
Speaker 6: Well, I mean, if you again, if you look at
Speaker 6: their competitor, their competitor says they're shooting for seventy five
Speaker 6: a month on the A three twenty. So if their
Speaker 6: competitor is breaking to those kind of rates, when you
Speaker 6: break to higher rates on your primary narrow body, you
Speaker 6: have the opportunity to go out to your customers and
Speaker 6: non customers, people that might be upset at Boeing and
Speaker 6: sell more airplanes. Right So, right now, what we're seeing is,
Speaker 6: you know, United has expressed an interest in A three
Speaker 6: twenty One's airbus is sort of constricted again, They've got
Speaker 6: you know, the backlog is full. There's airlines that want
Speaker 6: all those deliveries for the next number of years. We've
Speaker 6: seen Jet Blue pop up and Spear Airlines pop up
Speaker 6: and say, hey, we might be willing to give up
Speaker 6: some of our airplanes. We think that's a function of
Speaker 6: Airbus going out to those customers saying we have another
Speaker 6: potential customer that would like a three twenty one's do
Speaker 6: you definitely want everything you've got in the books for
Speaker 6: the next couple of years.
Speaker 3: This might be a very silly question, but how do
Speaker 3: we get to the point where we got two airplane makers?
Speaker 3: And how does that make sense?
Speaker 6: This is not volume like automobiles, right, you sell right?
Speaker 6: I mean a good year in this business is what
Speaker 6: a little bit over one thousand airplanes a year? Right,
Speaker 6: So it's not necessarily an industry that would support five
Speaker 6: or six manufacturers with the right pricing and you know,
Speaker 6: in the right margins. And then you've got to put
Speaker 6: money into R and D and into development while you're
Speaker 6: you know, so you've got to earn a decent return
Speaker 6: so you can invest for the future. We did have
Speaker 6: more right in the US. We had Boeing, we had
Speaker 6: McDonald Douglas, Lockeed used to build a commercial aircraft, but
Speaker 6: you know, I think over time it's slimmed down to
Speaker 6: where you could make them profitable. And at the same time,
Speaker 6: airbus was growing in Europe because the Europeans wanted to
Speaker 6: be in this business. Right, This is a is a
Speaker 6: good margin, strong manufacturing kind of industry which really supports
Speaker 6: great jobs. They were rising and that meant some of
Speaker 6: the US manufacturers had to go away to create room
Speaker 6: for a European competitor. And what we have in the
Speaker 6: horizon someday, I think it's probably five or six years
Speaker 6: away at least, is the Chinese that want to be
Speaker 6: in the business. So either the pie has to grow
Speaker 6: even maybe fifty percent larger, or someone's got a dwindle
Speaker 6: in that whole thing, right.
Speaker 2: Our thanks to George ferguson Bloomberg Intelligence, Senior Aerospace, Defense
Speaker 2: and Airlines analyst on Bloomberg Intelligence Radio, we bring you
Speaker 2: all of the top analysts providing in depth research and
Speaker 2: data on two thousand companies and one hundred and thirty industries.
Speaker 3: We also have something here at Bloomberg called Bloomberg New
Speaker 3: Energy Finance, and the idea behind it is to provide
Speaker 3: data on commodities, power, transport, industries, buildings, agriculture, and new tech.
Speaker 3: You name it.
Speaker 4: Now.
Speaker 3: This week we looked into the topic of electric vehicle
Speaker 3: charging and how EV charging companies have struggled to make
Speaker 3: a profit.
Speaker 2: We talked with Ryan Fisher, Bloomberg BNFEV Charging team leader.
Speaker 2: We first asked Ryan, who the big players are in
Speaker 2: EV charging?
Speaker 7: Yeah, so some of them maybe not quite household names yet,
Speaker 7: but you've got charge Point in the US certainly people
Speaker 7: may have heard of, and the sentiment was pretty positive
Speaker 7: a few years ago, stock prices up and.
Speaker 8: Then everything has kind of crashed down.
Speaker 7: Sentiment not so great, as some of these companies have
Speaker 7: not met the targets that they might have done. But
Speaker 7: what we're starting to see the few companies that you
Speaker 7: definitely won't have heard of actually have started to post
Speaker 7: some positive profit margins. So there's like fast charging manufacturers
Speaker 7: in Europe call Ken Power, making the kind of units
Speaker 7: that concern big power to evs and charge it fast.
Speaker 7: And then you've got some of the ones who do
Speaker 7: the slower power units as well. And then also you've
Speaker 7: got a couple of these companies that you may have
Speaker 7: heard of, like ABB, producing chargers as part of a
Speaker 7: portfolio so they're selling transformers and they're sort of using
Speaker 7: that as somewhat of a way to get into companies
Speaker 7: and sell some of their other products that they've got
Speaker 7: and add it on as an additional So lot's going
Speaker 7: on on the high were side.
Speaker 8: And then you've got operators.
Speaker 7: So these are like the companies who basically will sell
Speaker 7: the electricity to charge a vehicle. You kind of think
Speaker 7: of it like filling up with petrol. And none of
Speaker 7: those so far are profitable, but we have seen some
Speaker 7: good signs so some of those being a bit dar
Speaker 7: positive now fast Ned posted that which is a Dutch
Speaker 7: one the other day in the US. Unprofitable so far,
Speaker 7: but there's a company called EVgo you may have heard of,
Speaker 7: who has these fast charges and they actually basically delivered
Speaker 7: one hundred and ninety one percent more energy in twenty
Speaker 7: twenty three than they had in twenty twenty two, So
Speaker 7: good progress there.
Speaker 2: So Ryan, where are we kind of, I guess on
Speaker 2: a timeline of kind of getting enough charging capabilities into
Speaker 2: the system that can really support, you know, a wide
Speaker 2: adoption of evs. It feels like we've hit a speed
Speaker 2: bump here. What's the timeline? Do you think when you
Speaker 2: talk to folks in the industry.
Speaker 7: Yeah, it's an interesting one because we cover the global market.
Speaker 7: So you look at China and they installed about a
Speaker 7: million of these public charges last year, and the US
Speaker 7: did sort of low tens of thousands. So there's a
Speaker 7: big difference depending on where you are in the world.
Speaker 7: I think the US and Europe are more similar in
Speaker 7: how they'll play out, and Europe is maybe just five
Speaker 7: years ahead. So Europe has got actually loads of competition
Speaker 7: at the moment, and the story a little bit when
Speaker 7: we look at this is some of the companies looking
Speaker 7: like competition is starting to weigh on the demand that
Speaker 7: they're delivering because it's a bit monopolistic. So I want
Speaker 7: the best land as a company, and I want the
Speaker 7: best grid connection, and I want that to be somewhere
Speaker 7: that people are going and somewhere where people can buy things.
Speaker 7: And they're realizing that, well, the demand isn't quite there yet.
Speaker 7: But if we believe in the long term trajectory of vvs,
Speaker 7: let's get in this business, let's get those spots. So
Speaker 7: we've seen that in Europe, and I think the US
Speaker 7: is just starting to tick over. The US has been
Speaker 7: hugely dominated by Tesla. So if you look at Tesla
Speaker 7: on the vehicle side, kind of eighty percent of these
Speaker 7: pure battery electric vehicles five years ago kind of Tesla's
Speaker 7: and then they also provide the supercharging, and that's kind
Speaker 7: of pushed all the competition out. But what we saw
Speaker 7: last year was some of these other automakers really producing
Speaker 7: the evs and therefore providing a market for other people
Speaker 7: to come into.
Speaker 3: This is a super dumb question. Where does a charging
Speaker 3: operator get the power to then enable me to put
Speaker 3: a Tesla into that network.
Speaker 7: There has been a lot of these companies that are
Speaker 7: going out and they're saying, you know what, instead of
Speaker 7: putting two charges in at my petrol station where the
Speaker 7: power exists, I actually now need kind of twelve chargers.
Speaker 7: And in some cases, when you look at, for example,
Speaker 7: the Tesla stations, they've got like one hundred chargers in
Speaker 7: one spot. Now that becomes a big grid connection. The
Speaker 7: next thing is charging the trucks. So this could be
Speaker 7: like the same amount of power as a town, and
Speaker 7: a lot of the utilities are taking too long to
Speaker 7: do it. So it's like that how long does it
Speaker 7: take to get a permit? How long does it take
Speaker 7: to actually get energized. Can you make the agreements with
Speaker 7: the land, Lisa, All of this has kind of slowed
Speaker 7: it down, but clearly industries trying to work together, and
Speaker 7: this has become a big topic for the automakers and
Speaker 7: the utilities as well.
Speaker 8: Some of them trying to sign contracts on sites.
Speaker 7: So if you imagine these companies small fry like several
Speaker 7: small meters across multiple places, the utility is maybe not
Speaker 7: so interested in that, But now they're actually delivering a
Speaker 7: lot of demand. So as I say, looking to other
Speaker 7: markets in the US and China being a good example,
Speaker 7: the public chargers in China now deliver more energy than
Speaker 7: the whole of Ireland.
Speaker 8: So a lot of energy.
Speaker 7: And therefore that becomes interesting because if you're an energy
Speaker 7: developer and you're doing like solar on site next to
Speaker 7: it with a battery, and we've seen what EV, which
Speaker 7: is one of these truck charging companies, basically build a
Speaker 7: station that's not connected to the grid at all. It's
Speaker 7: just got straight to the solar and a battery. So
Speaker 7: cool innovations going on there.
Speaker 2: Hey, Ryan, Here in the US, EV sales have slowed
Speaker 2: materially and a lot of people are trying to think
Speaker 2: there's a combination of reasons, price being a big, big one,
Speaker 2: but one of those drivers is the lack of a
Speaker 2: fully ubiquitous charging infrastructure. When you talk to your EV companies,
Speaker 2: how did they think about it? Are they concerned about
Speaker 2: the long term demand of EV's in general, and if so,
Speaker 2: do they feel like they could be part of the
Speaker 2: solution there?
Speaker 7: Yeah, and there's definitely kind of differences in opinions. The
Speaker 7: US hionde CEO saying something along the lines of today,
Speaker 7: why buy an EV from an automaker who's lobbying against EV's,
Speaker 7: And obviously he's talking about the US there. But you
Speaker 7: do see a difference in those that are kind of
Speaker 7: in on it and those that aren't. And I think
Speaker 7: some who aren't have previously been so they've they've committed billions,
Speaker 7: they talked about targets, and then they're starting to row
Speaker 7: it back. And some of that is maybe because the
Speaker 7: technology is behind they can't do it as cheap as
Speaker 7: everyone else. So there's different reasons. And I think when
Speaker 7: you look at liabilities, I don't think that's talked about enough. Actually,
Speaker 7: some of these companies have put cars out there and
Speaker 7: then the batteries had a problem and they've got to
Speaker 7: recall it.
Speaker 8: And that could be multi billions.
Speaker 7: So I think there's some caution as well in saying
Speaker 7: why don't we put a few less casts out because
Speaker 7: because then we can learn from them and we can
Speaker 7: do it later. Some of the narrative has been they're
Speaker 7: not putting the cars out because quite physibly, like the battery.
Speaker 8: Operations are up and running. But I think there was
Speaker 8: other reasons.
Speaker 2: Our thanks to Ryan Fisher, Bloomberg BNF EV Charging team leader.
Speaker 3: All right, coming up on the program, we're going to
Speaker 3: break down how beer sales did last quarter at Constellation Brands.
Speaker 2: You're listening to Bloomberg Intelligence on Bloomberg Radio, providing in
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Speaker 3: I'm Paul Sweeney and am Alex Steele. This is Bloomberg.
Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
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Speaker 3: We move now to the beverage companies Constellation Brands. So
Speaker 3: the company reported fourth quarter earnings per share of the
Speaker 3: beat analysts expectations, and this was the result of better
Speaker 3: than expected beer segment sales and a wider operating margin.
Speaker 2: For more. We were joined by Kennis Sha, Bloomberg Intelligence
Speaker 2: Senior Consumer products analyst. We first asked Ken for his
Speaker 2: take on the company's earnings.
Speaker 9: So the quarter, you know, I think the backdrop, first
Speaker 9: of all, was for a slow quarter, you know, for
Speaker 9: most wine and beer companies right now and spirits. We've
Speaker 9: been given some recent results from Brown Foreman and a
Speaker 9: duck Corn portfolio. They're a producer of wines. Well, they're
Speaker 9: all saying, you know, trade inventory reductions stemming from cooling
Speaker 9: demand across all alcoholic beverages was kind of the backdrop
Speaker 9: to this earnings report. So when it came out, it
Speaker 9: beat expectations. Beer sales were up eleven percent, white and
Speaker 9: spirits were weak. But again, this is mostly a beer company,
Speaker 9: and so that's why it was perceived very positively because
Speaker 9: you know, this was a dose of good news and
Speaker 9: otherwise very cautious market. So the company is doing basically
Speaker 9: what it said it would do. You know, it had
Speaker 9: good results for beer, a reduced debt some more, it's
Speaker 9: committed to expanding its big brewery operations down in Mexico,
Speaker 9: increased the dividend thirteen percent. So from a shareholder point
Speaker 9: of view, they're doing the things they said they would do,
Speaker 9: and the beer results beat expectations and that gave the
Speaker 9: market a dosa good news.
Speaker 2: What's Constellation saying about the consumer in general? Because you know,
Speaker 2: there's a lot of concern out there as we look
Speaker 2: at some of the big data coming out of Washington,
Speaker 2: DC about the consumers is inflation and all that type
Speaker 2: of stuff. What are they seeing?
Speaker 9: They look at the paper also, they understand, you know,
Speaker 9: the environment that they're in that the consumer has definitely
Speaker 9: turned a little cautious here towards purchases that they can differ.
Speaker 9: I guess that's the best way to put it. You know,
Speaker 9: beer is, you know, a relatively low price point product
Speaker 9: visa the wine and spirits. You know, a high end
Speaker 9: bottle of wine or high end bottle of bourbon you
Speaker 9: can maybe put off for a while, but you know,
Speaker 9: a bottle of beer or even a six pack whatever.
Speaker 9: You're not as prone to do that. Even though Corona Medelic,
Speaker 9: you know, command a very premium price. It's a premium product.
Speaker 9: So they're aware that they can't just keep you know,
Speaker 9: tacking on big price increases. They're aware of what's going on,
Speaker 9: but they see the consumer is resilient, particularly for beer
Speaker 9: right now.
Speaker 3: So Ken, when we get you on, we like to
Speaker 3: talk about all the things, and one of the things
Speaker 3: we like talk about is we because you walk on
Speaker 3: the street in New York City, you get the wafting.
Speaker 3: I mean, I think it smells good.
Speaker 2: Well, clarify this that Ken covers the cannabis. It's not
Speaker 2: that he is.
Speaker 3: Maybe I did not frame this correctly. Ken, you're an
Speaker 3: analyst that also covers the cannabis stocks. When I walk
Speaker 3: around in New York City, I smell a lot of
Speaker 3: cannabis products. How are these companies actually doing well?
Speaker 9: Alex are doing pretty well from a sales point of view,
Speaker 9: from an EBITDA point of view, but you know that
Speaker 9: the taxation on cannabis companies is so onerous and a
Speaker 9: lot of not very many are profitable from a gap
Speaker 9: account point of view, if you're an investor in this market,
Speaker 9: you certainly have to be patient, and that's because you
Speaker 9: need some help from regulators from Washington, whether it's a
Speaker 9: reclassification from you know, a prohibited drug like marijuana is
Speaker 9: considered today, or it's outright legalization in some states and
Speaker 9: so on, So you need some help from regulators to
Speaker 9: keep this thing going. So it's going in a saleser
Speaker 9: from an industry point of view, are moving positively as
Speaker 9: more states legalized, you know, Florida, it's going to be
Speaker 9: on the bal Florida as it could be a you know,
Speaker 9: a six billion dollars legal market or about three times
Speaker 9: the size that it is now in a very short
Speaker 9: order if in November voters approve a legalization for adult
Speaker 9: use in November. So it's moving positively, but again from
Speaker 9: an accounting point of view, you know, it's not looking
Speaker 9: as rosy all right.
Speaker 3: Thanks to Ken Shay, Bloomberg Intelligence and your Consumer Products Analyst.
Speaker 3: Also this week, we were joined by Jason Kelly, chief
Speaker 3: correspondent for Bloomberg Originals, and former baseball star Alex Rodriguez.
Speaker 3: They host a new podcast on Bloomberg called The Deal
Speaker 3: with Alex Rodriguez and Jason Kelly. In our interview, Jason
Speaker 3: and Alex discussed how sports are consumed live, the state
Speaker 3: of New York, Yankees and playing in New York, and
Speaker 3: what is happening in the ranks of college sports. But
Speaker 3: first we asked Jason about some of the deal making
Speaker 3: in sports that really stands out.
Speaker 10: Dial made some money on the Phoenix Suns when they
Speaker 10: were sold for four billion dollars a couple of years ago,
Speaker 10: so that's been one exit. I mean what's interesting is
Speaker 10: so Sixth Street. Just speaking specifically about Sixth Street, and
Speaker 10: you know this is started by Alan Waxman, former special
Speaker 10: situation said for Goldman Sachs was in a partnership with TPG.
Speaker 10: You know, so they've invested one hundred and twenty five million.
Speaker 10: They let an investment for one hundred and twenty five
Speaker 10: million dollars into BAFC. I mean that's real money, paid
Speaker 10: a record franchise fee fifty three million dollars just to
Speaker 10: buy the team. I mean they're looking at a scenario
Speaker 10: where they can get a five x ten X. I mean,
Speaker 10: this is a long hold. So the franchise values, as
Speaker 10: Alex just demonstrated, think about I mean, Jerry Jones bought
Speaker 10: the Dallas Cowboys for less than two hundred million dollars
Speaker 10: in the late eighties early nineties, which, by the way,
Speaker 10: they said he was insane, that that was a crazy amount.
Speaker 10: This is a franchise now worth nine or ten billion dollars. Alex,
Speaker 10: let's talk about ownership.
Speaker 2: You're part of ownership group for the Minnesota Timberwolves, right
Speaker 2: talk to us about that experience, and I love you
Speaker 2: to talk to about My personal opinion is I'm concerned
Speaker 2: about the evaluation of franchises. I'm concerned about salaries because
Speaker 2: it's all predicated in large part on broadcast rights. Yeah,
Speaker 2: and with cord cutting, I'm not sure ESPN's going to
Speaker 2: continue to write these crazy checks. So talk to us
Speaker 2: about kind of had what you've learned about as being
Speaker 2: an owner there.
Speaker 11: It's funny because one of my good friends and mentors
Speaker 11: of Magic Johnson, and of course he played basketball for
Speaker 11: a long time and he owns a baseball team, yep.
Speaker 11: And I played baseball for a long time and I'm
Speaker 11: part of the ownership group of the Minnesota Timberwolves and
Speaker 11: the Lynx. You know what I think is there's no
Speaker 11: question that the giant in sports in America's NFL, right,
Speaker 11: and to think that, you know, almost twenty million people
Speaker 11: watch Kaylin Clark. Those are NFL numbers on Sundays. I
Speaker 11: mean that's the number one driver for all sports and
Speaker 11: which creates a lot of people to be very bullish
Speaker 11: in women's sports. But going back to well, we have
Speaker 11: the links as well. But I do think that the
Speaker 11: NFL and the NBA are global sports. Especially the NBA.
Speaker 11: It's growing year over year. If you look at social
Speaker 11: media as an example. As a metrics, we're almost ten
Speaker 11: to one to the NFL. We're almost fifteen to one
Speaker 11: to Major League Baseball. So Lebron, James, Michael Jordan, Steph Curry,
Speaker 11: these are global names. I think that is going to
Speaker 11: be a different landscape. But you'll have more contributors. Maybe
Speaker 11: you have NBC pop in Amazon, Apple, there's a lot
Speaker 11: of suitors. It's not going to be the traditional So
Speaker 11: ESPN may not write as big as check, but is there.
Speaker 11: I'm not speaking for the NBA. I'm just giving you
Speaker 11: my opinion that you may have a world where NBC
Speaker 11: may split the finals with ESPN and ABC. So I
Speaker 11: think you'll get to a similar result just a different way.
Speaker 3: So you said those words, and I knew those people,
Speaker 3: So I feel like I'm not qualified ask this question.
Speaker 3: But then for someone like me who's a newbie who
Speaker 3: maybe wants to watch some stuff like I'm I don't know,
Speaker 3: I would I need like a spreadsheet to like find
Speaker 3: out like what's playing where or when what time, like
Speaker 3: Amazon Prime, Netflix, something like that. And I wonder if
Speaker 3: that's going to be a hurdle. Jason, what do you
Speaker 3: think to like? I mean, it could be.
Speaker 10: I mean, and Paul knows this space better than anyone.
Speaker 10: You know, there's been sort of a fracturing, but now
Speaker 10: sort of a reconsolidation. It feels like of how we're
Speaker 10: going to consume sports. I mean, you've followed this for years.
Speaker 10: You know that live sports. Alex knows it from being
Speaker 10: on television and being broadcast himself. People love live sports
Speaker 10: and that it's one of the only things that actually
Speaker 10: keeps people coming back to live content. I do think, though,
Speaker 10: we are in this weird world where sometimes you don't
Speaker 10: know where to find it, and yet when you do,
Speaker 10: it attracts the eyeballs.
Speaker 2: New York Yankees off to a great start this year. Yes,
Speaker 2: what's your scouting You could say, yeah in this room,
Speaker 2: also a great start this year, and now what's your
Speaker 2: scouting report of them?
Speaker 11: Well, I think the Yankees have done a bunch of
Speaker 11: good things this year, excuse me. One of them is
Speaker 11: they've introduced baseball people back. If you think about the
Speaker 11: powerhouse of the Yankees, they've been built by great baseball
Speaker 11: people like Geene Michael's Stick Michael as they call them,
Speaker 11: you know, Luke Panela, Billy Martin. They've gone away from
Speaker 11: that the last four or five years, and they've suffered tremendously.
Speaker 11: The fact they brought baseball people back in, they brought
Speaker 11: a much more balanced lineup, meaning Alex there's more lefties
Speaker 11: than righty's. Historically, Yankee Stadium is better for lefties. Last
Speaker 11: year they had like nine righties in the lineup, which
Speaker 11: just way too much. They've gone back to a much
Speaker 11: balanced lineup and now they have the best one two
Speaker 11: punch in the sport with Aaron Judge and Juan Soto.
Speaker 11: The challenge is do they have enough pitching is one
Speaker 11: and two? They have. They cornered themselves by bringing in
Speaker 11: Juan Soto and not have a long term contract. Now
Speaker 11: now is he gonna want no tiny contract for seven
Speaker 11: hundred million dollars and is he just a one year
Speaker 11: wonder here in New York. I think he's gonna have
Speaker 11: a massive year.
Speaker 1: Yep.
Speaker 11: The question is can they keep them? Second question is
Speaker 11: do they have enough pitching to win the title?
Speaker 2: Well, let me ask you that question. We like to
Speaker 2: think New York fans that New York is a selling
Speaker 2: point everybody would love to be. If you can be
Speaker 2: a star here, you can be a star anywhere, and there's
Speaker 2: nothing better to be a star than New York City.
Speaker 2: A lot of players, it's that I think they find
Speaker 2: it hard to play in New York. What was your
Speaker 2: experience coming to New York. I know you're a New Yorker,
Speaker 2: so you kind of know this, But some of the
Speaker 2: people you saw during your career.
Speaker 11: No, Paul, You're exactly right. I mean some people. You know,
Speaker 11: the kitchens may be a little bit too hot for
Speaker 11: some players, and you know right away if they're uncomfortable.
Speaker 11: It's a different place. It's the biggest media market in
Speaker 11: the world. As they say, the pinstripes are very very
Speaker 11: heavy and not everyone can carry them. Juan SODA's obviously
Speaker 11: one that is going to play and play really well,
Speaker 11: Aaron Judge, the Jeters of the world. They're icons for
Speaker 11: life because they won here in New York. But some
Speaker 11: I mean they melt into the sun. I mean, you've
Speaker 11: seen a couple over the last four or five years
Speaker 11: that were a shell of themselves and you quickly have
Speaker 11: to pivot and get them out of here.
Speaker 3: So this is this is really cool. Like what you
Speaker 3: guys do is super fun. Jason comes in and he
Speaker 3: talks about it, and you can tell he's like totally
Speaker 3: digging this. What's it like to work with Jason Kelly?
Speaker 3: How do you manage that guy? Like?
Speaker 11: What is Alex? We already made a deal because we
Speaker 11: are you know, he's covered private equity. He's a great writer,
Speaker 11: so I say, he writes and I used to bat,
Speaker 11: so I hit, he writes, and he made a good team.
Speaker 11: But no, Alex, in all seriousness, is really the intersection
Speaker 11: of Jason's career, mostly here at Bloomberg, in my career,
Speaker 11: mostly with the Yankees. And the fact is what we're
Speaker 11: talking about is exactly both. And we live in a
Speaker 11: world where it used to be sports and media and culture.
Speaker 11: Now all three have come together and that's what we
Speaker 11: try to take away and then also a lot of
Speaker 11: lessons learned in this world of Shark Tank where young
Speaker 11: people want to be more entrepreneurs than athletes, right, And
Speaker 11: that's I think we're serving up and teaching and hoping
Speaker 11: inspiring through storytelling a lot of greats.
Speaker 2: And I like, so you guys do kind of bringing
Speaker 2: sports entertainment, you know, all that together, and we're seeing
Speaker 2: it actually now in college sports with it the nil
Speaker 2: the transfer portals, a lot of these kids are able
Speaker 2: to monetize their value totally. But there's some downside to that.
Speaker 2: It seems like if you talk to you know, coach
Speaker 2: j Right at Villanova or some others, they're saying, boy, I'm.
Speaker 11: Not sure, maybe we've gone too far.
Speaker 2: What do you think, Alex about what's happening in the
Speaker 2: college ranks about paying some of these athletes.
Speaker 11: It's a very dangerous road. It's a very dangerous and
Speaker 11: very slippery And the reason why I love that players
Speaker 11: are getting you know, the finances and all of that,
Speaker 11: but maybe there's a structure where there's more parity. Maybe
Speaker 11: there's a structure where kids don't get the money when
Speaker 11: they're not ready for it. And they get in trouble
Speaker 11: by not knowing how to pay taxes, And is this
Speaker 11: more of a liability than an asset. I'm all for
Speaker 11: somebody getting market value, but is there a world that
Speaker 11: we can, you know, hold unto their thirty or thirty
Speaker 11: five until they get the majority of that where that
Speaker 11: money is compounding for them, So gifting the curse. And
Speaker 11: the other part is that I'm concerned is we want
Speaker 11: to teach Coach k is one of my great friends
Speaker 11: and one of the great great personalities in all of sports.
Speaker 11: You want athletes to be around coach k for three
Speaker 11: or four years, not just one great point so and
Speaker 11: same thing with Kyle Parry and all of that. So
Speaker 11: we want to teach these kids that you know, the
Speaker 11: power of restriction and to be able to wait a
Speaker 11: little bit before they get you know, the marshmallow as
Speaker 11: they say, all right.
Speaker 3: Thanks to former baseball star Alex Rodriguez and Jason Kelly,
Speaker 3: chief correspondent for Bloomberg Originals and executive producer of the
Speaker 3: Deal with Alex Rodriguez and Jason Kelly, this is.
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