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"We are able to react to a crisis fast and appropriately"

The effects of the pandemic on the business of the Militzer & Münch Group

Alexei Kovalenko, Guillaume de Laage de Meux and Nikolaus Kohler – as members of the Group Management of M&M Militzer & Münch International Holding AG, they have a close eye on the business of the individual country units. In an interview, they report on how the COVID-19 pandemic has affected the group so far, and how the demand for transport is developing in different industries.

The Militzer & Münch Group is active in 29 countries. The extent of the pandemic varies locally, as do government regulations. How are you dealing with the situation?

Alexei Kovalenko: The safety of our employees has top priority. With the exception of some warehouse space, we count among the asset-light companies. Thus, it was relatively easy for us to have many employees working from home. All things considered, we always act in accordance with local requirements and regulations. But of course, we notice restrictions and decreased transport volumes in international goods traffic. In the West, government support has helped us a lot, including in France and Germany. This has somewhat mitigated the decline in orders. In Germany, for example, we put some employees on short-time working when air traffic came to a virtual standstill and our freight could not be transported on board passenger aircraft.

Nikolaus Kohler: The Militzer & Münch management is struggling with the challenges in all 29 countries and is taking the necessary steps to master the extraordinary situation. Especially in Central Asia, governments have imposed rigorous measures in some cases. In these countries in particular, I assume that not all transport companies will make it through the crisis. However, the Militzer & Münch Group is well positioned – it remains to be seen whether the crisis will lead to a market shakeout from which individual logistics companies will benefit.


How did business develop when more and more countries announced the lockdown?

Guillaume de Laage de Meux: In France, the lockdown was a drastic experience for the entire industry. On March 16, the French government decided that the population should stay at home and restrict their mobility – in April and May our activities fell by 50 percent. At that time, we put our efforts into securing our unit financially. We were able to absorb the losses with the help of loans from French banks. In the meantime, we have managed to somewhat stabilize our turnover again. Since July we have had a good order situation – although not yet back to the level seen before the pandemic. How things will develop over the next few months depends, among other things, on the impact of the second wave of the pandemic.

Nikolaus Kohler: The pandemic has also had a major impact on our business in the Central Asia region. Some countries ignored the situation for a long time, others closed their borders immediately and with all the consequences this entailed. This not only led to an almost total social standstill, but also to a dramatic slump in exports and imports. In Uzbekistan, for example, imports from the Far East continue, but trade with Europe has fallen sharply. The government has halted infrastructure projects and is currently investing more in the healthcare sector. Turkmenistan closed its borders, with the exception of the railroad borders and the Baku-Turkmenbashi ferry. International trade and imports have almost come to a standstill. Due to this total lockdown, the international oil companies have also withdrawn from Turkmenistan – which caused our crane rental business to almost come to a halt. In Georgia and also in Azerbaijan, the buying mood of the population has fallen sharply, which affects domestic transports and thus also our order volumes. In Georgia, there are parliamentary elections this year, but at least the borders have been open again since October – imports and exports are running again. In Azerbaijan, COVID-19 was under control, at least for the time being, but the conflict over the Nagorno-Karabakh region has had a major impact on the country. Our teams in Turkey, however, are coping very well with the crisis. Despite the lockdown, they were able to close these past months with a positive result.


How has the demand of individual industries developed?

Guillaume de Laage de Meux: In the automotive and textile sectors in particular, we experienced a temporarily sharp decline in transports – especially in the South West Europe and Maghreb regions. Business is slowly stabilizing again, but has not yet returned to normal. It remains to be seen how the coming months will develop.

Alexei Kovalenko: China was the first country to "awaken" from the lockdown. Together, the teams in Germany and China carried out several airfreight transports of protective masks etc. Demand from the chemical industry that produces disinfectants, detergents and cleaning agents also increased. These positive developments helped to at least somewhat mitigate the decline in orders from other industries. One thing is quite clear: international goods trade needs to continue to pick up speed. It might well be that some companies rethink their supply chains and go back to more local sourcing again as a result of their experience with the pandemic. But this is not going to happen overnight.


How has the pandemic changed your daily cooperation with customers?

Alexei Kovalenko:
We are a people's business; we live from the intensive contacts with our customers. The fact that personal meetings with customers and potential customers are not possible or only possible to a very limited extent impairs business. We all had to adapt and make use of virtual communication tools to maintain contacts. In this field,  fundamental rethinking is surely required, as obviously this challenge is likely to remain with us for some time yet.

Nikolaus Kohler: In Kazakhstan, however, the limited contact opportunities have not prevented us from expanding our CEP business. The business of our EMEX unit is developing well, and our customers have increasingly requested CEP shipments for e-commerce. One reason is certainly that shopping centers are closed. This is what drives the online B2C business.


Is a cautious outlook on the coming months possible?

Alexei Kovalenko: At the end of the first quarter of 2020, our outlook for the rest of the year was pessimistic. However, this changed from June onwards, and July and August went reasonably well. Demand has recovered, and the volumes transported have increased. We have not yet recorded any significant payment defaults or even bankruptcies among our customers. But we need to remain vigilant. We are currently planning for 2021 – with the first three quarters of 2020 always in mind.

Nikolaus Kohler: The development in some countries confirms that our group is well positioned. Our still relatively young joint venture in Serbia, for example, has been on a growth course since it was founded last year. The opening of the logistics facility in Belarus is a positive signal, too. Dubai is also developing well – thanks in part to the substantial business volume of our main customer from the food and beverage industry.Guillaume de Laage de Meux: All in all, our actions so far during the pandemic have strengthened my belief that Militzer & Münch is a truly agile company. The last few months have shown that we are capable of reacting quickly and appropriately to a crisis. That is why I am very proud of our team and look forward to the future with confidence.