Barna Erdélyi was chosen to lead the Hungarian transport and logistics giant Waberer’s International Nyrt when the coronavirus epidemic broke out in Hungary. The company’s shares have been falling since 2017, with the executives taking turns at the head of the company ever since, so the epidemic couldn’t have come at a worse time. In addition to the European border locks and factory closures, Waberer’s also had to accept the state’s defence team delegated into the management board. The purpose of the Hungarian Military’s Defense Steering Group is to provide the optimal conditions for physical security, to protect the operations of the company, and to ensure the effective communication to the government during the pandemic.Trans.INFO was talking with the new director not only about the Hungarian and international transportation problems during the coronavirus pandemic but also about the company’s financial situation.
The price of Waberer’s shares is falling and falling. What’s going on at the company?
Trans.INFO: Since 2017, when the company was listed on the stock exchange, Waberer’s indicators have been deteriorating – as for one, take a look at the value of shares. What is happening?
Barna Erdélyi: Apart from international transport, the indicators of our other segments (regional contract logistics, insurance) are improving. One of our most important successes was winning the tender of AUDI HUNGÁRIA (one of the largest automotive engine manufacturing plants in the world), for various logistics services.
In the international transportation segment, due to the changing labour market and cost structure, Waberer’s has lost a lot of its competitive advantage over the past two years. Increased costs and consequent increases in prices, reduced demand for the company’s services and, as a result, truck utilization declined. External circumstances contributed to this (uncertainty over Brexit, the slowdown in the European economy, etc.).
The company has embarked on a major transformation program, the main step of which was to reduce the number of trucks and restructure its design, trade and operation processes to improve capacity utilization.
In the Regional Contract Logistics segment, we restructured our customer mix to improve the margin of total activity, while taking advantage of market opportunities inherent in growing domestic demand. From the fourth quarter of 2019, the beneficial effect of the transformation program has already been seen, but currently, the epidemic situation is having a significant negative impact on the freight market as a whole, including on Waberer’s.
-You are currently interim CEO. Can you plan for the long run as a “temporary leader”?
I have been working for the company for 7 years and during this time I have had to face many different challenges, through which I gained diverse and valuable experience, and learned to adapt to different situations. I feel this is exactly the experience and adaptability that the company needs right now. And if I didn’t believe in the company, I wouldn’t have taken on this task. With the onset of the epidemic, much has become uncertain, the processes so far have been called into question, but that does not mean that we are not planning for the longer term. It is essential for the operation of the company that we have a precisely defined vision.
-What are your plans?
First of all, to steer the company through the storms of the epidemic, which is no small task considering the decline of the freight market. During this period, however, we must also create the conditions to continue to work with full force after the epidemic and complete the transformation process we began earlier, which is essential for Waberer’s to become a well-prosperous and profitable company again.
-You stated in the 2019 Q4 financial statement that the fleet reduction will be continued. How long?
As stated in our 2019 Q4 financial report, the size of the fleet is fundamentally a function of market conditions, we are working to restructure the company until it becomes profitable. Of course, now that the coronavirus epidemic is overriding many things (both in terms of fleet size and manpower), we need to adapt to the transition situation as well. Vehicles that stopped due to reduced demand due to the epidemic will be restarted in the event of a favourable market change.
-Do they have any special plans with Link?
In line with our announcement on February 28, 2020, we have initiated a strategic review of one or more of our businesses. We aim to strengthen our European Full Freight (FTL) business and focus on further improving our balance sheet. In addition to Link, the interests affected by the review include the Regional Contract Logistics segment (RCL) and the Hungarian non-life insurance business (WHB), which has been under strategic review since September 2019. However, it is also true that the conclusions and consequences of this strategic review will be drawn up later, also as a result of the situation created by the epidemic.
Coronavirus in Hungary – panic consuming and the distribution of PPE
– How did the panic consumption caused by the coronavirus and then the delivery of protective equipment affect day-to-day operations of the Regional Contract Logistics?
In the recent period, we have found that different segments of regional logistics have been affected differently by the epidemic and, as a result, daily operations are different in different areas. Apart from the strong fluctuations caused by the shopping fever, the FMCG sector is less affected by the crisis in the short term. In contrast, for example, in the automotive sector, where after a complete shutdown, we expect a very slow rise and a significant decline in the short to medium term compared to the pre-virus period. Also, I must say that we are extremely proud that WSZL Kft. Waberer’s Szemerey Logisztika KFT,( the regional logistics segment of the company – editor) as a strategic company, performs warehousing and distribution tasks in connection with the state defence against Covid-19.
-How many trucks does the company have parked up? How many workers were temporarily unemployed? And how many of them were permanently redeemed?
After the pandemic, we were able to react quickly to changes in market needs, so we temporarily parked up 30% of our fleet. As a responsible company, we tried to create an optimal fleet size in the current situation, thus with a functioning fleet, which still means a significant fleet of 2400 vehicles! Taking into account the difficulties of the current situation (border locks, factory closures), we serve the needs of our customers to the maximum. We have adjusted the working hours and wages of some of our employees to the current situation and agreed on unpaid leave with some of them. During the coming period, we will constantly review these decisions and change them in light of the situation.
-What kind of emergency book are they operating with now?
In this situation, the most important thing is flexibility and how quickly we can meet the changing market needs. This was true at the beginning of the epidemic and will be true during the period of recovery. We do our best to meet the needs of our customers to the maximum and to provide them with the right service despite the difficulties!
Coronavirus abroad: was it possible to prepare for it?
-In the field of international shipping, which are the countries and territories most affected by the coronavirus situation? Was the company prepared for this?
Mostly the automotive and metallurgical companies and their suppliers have stopped production. At first, of course, the situation was most critical in Italy, and the border closures made continuous transport more difficult. Now, however, we are seeing an improving trend, with a recovery in recent weeks, as have several manufacturing companies – albeit with reduced capacity, but have resumed production and there is no longer any extreme congestion at the borders.
The Mobility Package: the mandatory return of trucks and carbon emissions. Is there still hope?
– What do you think about the expected effects of the recently adopted Mobility Package? Will the new regulation create serious barriers to international shipping?
Some elements of the Mobility Package require significant adaptation from companies interested in long-distance transportation, including Waberer’s. The two elements of the proposed regulation (that (i) lorries must be returned to the country where the business is located no more than every 4 weeks, and (ii) the lorry driver must spend a minimum of 45 hours of rest per week outside his cab ) more frequent repatriation of drivers, in the latter case with additional accommodation costs, which would make intra-European transport more expensive, or in many cases would make it impossible. The effects of this and its incorporation into our business model are still being examined, but we remain confident of a possible amendment and effective action by advocacy organizations, as the former rule is fundamentally at odds with the EU’s previous carbon quota rules, while in the case of the latter, there is no properly developed infrastructure to accommodate drivers.
Since the publication of the first drafts of the Mobility Package, Waberer has aimed to draw the attention of European decision-makers to the fact that these elements of the proposed regulation are unreasonable and do not serve the goals of improving truck safety and working conditions as a starting point.
However, if the Package is adopted, Waberer’s will immediately begin to adapt to comply with the new rules by the date of entry into force and to ensure a smooth transition for the most affected players, ie its customers and employees.