COVID-19: impact on the CFO office – transport and logistics

As one of Europe’s major truck distributors, Turbo’s Hoet Group (TH) focuses on sales, maintenance and financing services for trucks and trailers. In addition, they are a leading turbocharger distributor. Yusen Logistics Europe, which is part of the Japanese company Yusen Logistics, offers air and sea freight forwarding, contract logistics, land transport and supply chain solutions. While their businesses differ, both companies are facing the same challenge: the transport sector is an indicator for the economy – when the economy is hit hard, so are transport and logistics companies.

How different countries take different approaches

How did you respond when the economy shut down?

Tytgadt: “When the authorities announced the lockdown in Belgium and France, we decided to close all our sites. We did, however, continue to do urgent and essential repairs behind closed doors in order to safeguard the global supply chain. As a consequence, our dealerships were run with only 25% of the normal number of employees. 440 of our 600 employees were put on temporary unemployment. A few weeks later, our employees in Romania, Russia and some other countries were also obliged to stay at home, with only slight or no governmental compensation.”

Verbeek: “The impact of COVID-19 and compensation benefits offered indeed differ greatly from country to country. Yusen Logistics is active in most European countries and we experience major differences. Yet, the effects vary even more from sector to sector. Some industry verticals where we are active in, like automotive and aerospace, have been severely ravaged while others like healthcare and food are less impacted. That means that some Yusen branches have been hit much harder than others. Nevertheless, a significant number of our 5,700 European workers are temporarily unemployed – with or without unemployment benefits. Office workers have all started working from home. As soon as the economy shut down, we installed a European crisis team to handle the situation and make decisions.”

When a crisis hits, cash is king

What are the key steps a CFO has to take in a crisis like this?

Verbeek: “When a crisis hits, you need cash to survive. Yusen Logistics Europe immediately took measures to safeguard its liquidity going forward. For instance, we identified which key customers are under enormous pressure – those in automotive, for example – and closely monitor their payments and credit risk. Where needed, we get in touch with customers individually to discuss mitigation strategies – of course, without disrupting commercial relationships as much as possible.”

Tytgadt: “Openness and communication is a key attention point for us. TH also sharpened its focus on credit control: we reviewed payment conditions and credit limits and overdues are now followed up very closely. In all this, it is key to speak to your suppliers and customers to discuss how we can get through this difficult period together. We involve the BU managers and site managers in this, as they know our customers best. Moreover, this openness and transparency is just as important in our communication with our employees. We don’t know when they’ll be able to return, so we don’t want to make any promises. We try to be honest and find ways to keep motivating them. After all, we want to keep them on board so that we are ready for the economic revival.”

Did you take any other measures, like renegotiating loans or postponing investments?

Tytgadt: “TH has always been a very cost-conscious organization, partly due to the low margins inherent to our sector. As such, it was not easy to find ways to cut costs. In line with the support measures decided upon by different governments, I did, however, reschedule the 3,000 leasing contracts we have with different banks and renegotiated payment terms between us and our main suppliers. Some supplier contracts were put on hold, though it is crucial for us to retain continuity in everything we do. In view of the substantial drop in turnover, we’re now trying to reduce our stock as quickly as possible.”