COVID-19 and significant reduction in fleet size weighs on European full truckload operator’s financial results.
One of Europe’s leading full truckload (FTL) operators, Waberer’s International, saw its revenue shrink by more than one-third in the second quarter of the year.
It said the decline was a result of the effects of COVID-19 and the reduction in the size of the group’s trucking fleet in the International Transportation Segment (ITS), partially offset by the growth through successful client acquisitions in the Regional Contract Logistics segment (RCL).
Revenue decreased by 33.1% to €115.5 million in the three months to end-June 2020 while recurring EBIT (operating profit) was in negative territory at -€5.9 million, a level unchanged on Q2 2019. This produced a loss in recurring net income of €14.6 million.
In a statement, the Hungary-based operator said “progress in returning to pre-crisis volume levels in the European long-haul transportation market is expected to remain slow.”
It added that although the decrease in volume in the domestic logistics market was not as strong as in the case of the European transportation market, demand is expected to remain subdued in the coming quarters.
“In this environment, Waberer’s will continue to focus on profitability, cash generation and deleveraging by changing its business model, reducing its fleet size in ITS and focusing on gaining market share in RCL.”
Commenting on the Q2 performance, Waberer’s International’s CEO, Barna Erdélyi, said: “The second quarter of 2020 was undoubtedly one of the most challenging ones in the history of the Group. As a result of the pandemic-driven restrictive measures throughout Europe, demand for road transportation fell by 30-40% at the end of first quarter of 2020. April and most of May were also characterised by this adverse environment, and although there has been some improvement, volumes are far from pre-crisis levels.
“Management introduced extraordinary measures that involved across-the-board cost cutting initiatives and the halting of more than 1,000 of our trucks, roughly a third of our international fleet.
As a result, Waberer’s managed to not only keep but also improve gross margin and EBITDA margin compared to the same period 2019.”
Re-set business model
Erdélyi also explained that the company is discarding its ‘taxi’ business model in the International Transportation Segment, which focuses on optimising the match between trucks and orders centrally and continuously.
“This model involved uncertainty in terms of revenue streams and truck utilisation and relied heavily on the spot transportation market that had a lower profitability, and thus will be abandoned gradually. Instead, a ‘trade lane’ model has been introduced (from 1 July 2020) which relies on contracted clients and recurring orders, and will concentrate on the main trade routes within the European Union. Management has started executing the change in the business model in June and it has been progressing in line with initial expectations.”
Erdélyi added: “A full business model shift, however, requires time and we now expect that it will be completed by the end of the year. I am confident that the change in business model will change the International Transportation Segment into a more client-focused, more concentrated, more stable, and higher margin business.”
He concluded: “Challenges remain for the rest of the year: the demand for transportation and logistics still remains well below pre-crisis levels and the chances of a second wave of a pandemic-driven economic crisis have increased in past weeks. I am confident that we are well prepared to tackle these challenges and find the right solution for our clients, colleagues and investors even in the most adverse market environment.”