„EMERGING FROM THE CRISIS EVEN STRONGER.“
Worldwide, business in 2020 was affected by the COVID-19 pandemic crisis. CEO Andreas Klauser, CFO Felix Strohbichler and COO Martin Zehnder explain just how PALFINGER coped with the crisis and how strategies are being put in place for post-COVID times.
What was the most important lesson learned from 2020?
Andreas Klauser: PALFINGER had already begun a process of transformation prior to 2020. This is most apparent in our GLOBAL PALFINGER ORGANIZATION (GPO). It enabled PALFINGER to maintain communication at all times, under all conditions, and across all segments. Especially with our employees, customers and partners. At the peak of the crisis, PALFINGER itself proved it was a dependable and stable partner. Therefore, the most important lesson learned was that together, we can master all challenges.
Martin Zehnder: I totally agree! In March and April 2020, we faced the difficult task of maintaining the supply chain in a very unsteady environment. Because of the differing lockdowns and border shutdowns across Europe, this was no simple matter. That we reacted and interacted so quickly is a strength that we are proud of, and one we can continue to build on.
Felix Strohbichler: Especially in this confusing situation, it was necessary, and we succeeded in taking all essential aspects into account, setting priorities and taking the right actions in a targeted, coordinated and rapid manner.
Andreas Klauser: As a manufacturing company, we immediately initiated all possible steps to achieve three main goals: protecting the health of our employees, short-term liquidity optimization - Felix can say more about that - and the long-term safeguarding of our company, and thus jobs. On top of that was the responsibility to our customers and partners. In order to achieve that, we introduced a 3-step plan that enabled us to operate efficiently and flexibly during and beyond the crisis.
Felix Strohbichler: As Andreas already mentioned, the liquidity optimization got top priority from the start. We were able to secure additional lines of credit at relatively short notice, optimize working capital and reduce fixed costs as well by deferring taxes and implementing short-time work models when and wherever possible. In addition to that, we took on project prioritization - by that I mean every project and every planned investment was reviewed carefully. At no time did we run the risk of getting into financial trouble. Even at the height of the crisis, we always remained a very stable company with high liquidity and we were fully capable of meeting our commitments at all times.
Martin Zehnder: What Felix has just described applies to production as well. Along with liquidity optimization and health, it too was top priority. Our target was to uphold our commitments to our customers and partners. Given the supply shortages, market demand and short-time work, plant capacities were aligned. Our big advantage is our footprint; when shortages occurred, regions jumped in and supplied one another so that PALFINGER could always deliver. We got PALFINGER through extremely short shutdown periods for only a few plants and through a coordinated effort ramped production back up by the end of April. This was also possible thanks to our excellent hygiene concepts in production, which ranged from mandatory mask wearing and keeping distance on the job and regular taking of employee temperatures, to awareness training and communication. This also helped in preventing employees from cross-infecting one another. All this was the basis for being able to benefit from the overall economic recovery that began in the third quarter.
Andreas Klauser: We set up our Task Force as we realized, through our plants in China, that COVID-19 was going to become a problem that we needed to actively manage. We have already mentioned the three very important tasks. The main connective mission was to keep PALFINGER operational, at all times and under all circumstances. The #1 priority was to react quickly and comprehensively. Crucial was that the focus on the common task, close cooperation and proactive management of the Group worked from the very start. By the end of May, the Task Force had developed over 220 actions addressing „Health and Safety“, „Production and Operations“, as well as „Liquidity Optimization“ which were implemented by management. Another important point: every person in the company knew what had to be done, when it had to be done, and how it had to be done. The flow of information worked, as well as the coordination between one another and the work with one another. On all levels, and that is important to me. We always communicated our actions openly and asked ourselves all the questions. Openness is an important element in every company. Given how COVID-19 was brought about, it is essential to survival. Only when everyone pulls together as a team, can enormous and di_ cult challenges be overcome.
Martin Zehnder: What especially paid off here was our worldwide „Double and Multiple Sourcing“; it enables us to detect bottlenecks quickly and react flexibly. In future, we‘ll be relying on it more and more. Crucial is the closeness we share and live with our suppliers, with whom we‘ve shared these very tricky times. Specifically during the crisis, they were confronted with major fluctuations and had to be absolutely flexible. We‘ve had longstanding business relationships with most of them. Successfully emerging together from difficulty is much more important than reaping benefits in the short term.
Felix Strohbichler: Our net debt has reached its lowest level since 2013 after taking the effect of IFRS 16 into account. That‘s something we can be proud of. By taking such actions we fundamentally strengthened PALFINGER‘s balance sheet. After the crisis year 2020, we are now in the position to start the biggest investment in PALFINGER history through our own strength. We also used 2020 to optimize processes. For example, the Sales and Operations planning process provides us with full transparency globally and facilitates future-orientated corporate management. Additionally, with our partner SANY HEAVY INDUSTRIES, we are currently in the process of unbundling our complex business collaboration. By planning the reversal of the cross-holding and concentrating on the essential aspects of our partnership, we are working towards our target of generating additional financial resources and significantly expanding our scope.
Andreas Klauser: What Felix and Martin have touched on here communicates a very important message. In all of our actions taken, we were always thinking about the time post crisis. It is not just about mastering the immediate situation; it comes down to shaping the future. That is the claim on which we measure ourselves. In that respect, COVID-19 accelerated change and we are using it in a targeted way. Only one example: with the PALFINGER World Tour we established a highly successful digital platform for direct communication with our partners worldwide, in October 2020. For three days, attendees in Europe, Russia and China were able to take part in discussions and view product presentations interactively. With the tagline „Challenge Accepted“, we showed that we used our close-knit ties with our customers and partners, to develop future-orientated, innovative solutions together. In 2021, we will continue using this platform. Together with our customers and partners, we‘ll use our technological competencies to develop the best solutions for their challenges.
Andreas Klauser: We are adding to and further developing our competencies. We are utilizing our strengths and passing them on to our partners. With them, we create value every day, and together we shape the future.
Martin Zehnder: That means we are developing holistic solutions. Our customers want to be successful with their business models. PALFINGER supports them optimally. We can because we know them; we have looked at their needs and their sectors carefully, and in depth; we‘ve put ourselves in their shoes. And, we offer them much more than just a product. We offer comprehensive solutions. If a customer needs a crane on a truck, the total package needs to be tailored optimally towards their specific needs. In other words: I don‘t succeed with just a crane, but an entire crane-vehicle system. A holistic solution also includes all aspects of the sustainability mega trend, which we are integrating into all of our solutions and offers.
Andreas Klauser: Our investment program plays a major role here. With our PALFINGER Campus in Lengau, we are further expanding training and continuing education. And our new research and development center strengthens our innovative capacity. This way we are in the position to offer our customers and partners the best individual solutions.
Felix Strohbichler: In 2021 we are putting our focus back on track for growth. The important core markets of Europe, North America and Russia are going to bounce back quickly. With due caution, I think our sales and profitability will approach 2019‘s record year. PALFINGER is fully on course to reaching its financial targets - two billion euros in revenues from organic growth, a 10 percent average EBIT margin and a 10 percent average ROCE over the business cycle - by 2024.
Martin Zehnder: In 2021 we are actively moving forward with transformation and are also addressing upcoming major topics such as sustainability with even more intensity. Among other things, we are looking into how sustainability and the 1.5 degree pathway influence our products, solutions and our business models to formulate targets and answers.
Andreas Klauser: 2021 is going to be characterized by the far-reaching impacts of the health and economic crises. We are going to face these challenges head-on. We are well prepared, highly motivated and we have every chance to shape 2021 proactively. We are going to do that – together with our employees, investors, partners and customers. Challenge Accepted.
Thank you very much for the interview.