Transport sector recovery

Mariusz Golec, CEO and First Vice President of the Wielton Group, talks about transport sector recovery and its impact on the Wielton Group.

The European market for trailers and semi-trailers has experienced a significant recovery in 2021.

This situation favours the rebuilding of the Wielton Group’s results. The key is the sustained high demand for our products. The market revival was already visible in the second half of 2020 and is continuing all the time. As a result, we have gained a large number of orders from our customers. We are working intensively to fulfil them, fully utilising the production capacity of our plants. However, despite this, the lead time for orders has increased slightly, and can now range from three to even six months. We are concentrating our efforts on maintaining the momentum of the recovering trailer and semi-trailer market. This is not an easy task, especially due to the automotive industry’s supply problems and the high prices of raw materials. At the same time, we are aware that it will not be possible for us to maintain the level of market growth in all countries, resulting in a decline in market shares. This situation takes place, for example, in Poland. However, it results from the necessity for the plants in Wieluń to service the growing demand for products in many foreign markets.

The increased demand for trailers and semi-trailers is the result of postponed demand from previous years, as well as accelerated purchasing decisions by customers. It is worth noting that in previous years, transport companies held back on purchasing and replacing their fleets with new ones. Their decisions, even before the outbreak of the pandemic, were influenced by the uncertainty related to Brexit and the planned introduction of the Mobility Package. However, the industry is now coping well with these challenges. It should also be noted that companies operating in the freight transport market have not been strongly affected by the pandemic. Apart from a short period during the first lockdown, they have continued their activities without major obstacles. For this reason, the condition of transport companies is relatively good, which translates into new investments.

We are seeing a significant recovery across Europe, although the pace of market recovery varies from country to country. Some of the markets in which the Wielton Group operates are on track to generate volume sales similar to those achieved in 2019. The Polish market is one example. In the first four months of this year, nearly 10,000 units of new trailers and semi-trailers with a Gross Vehicle Mass (GVM) of more than 3.5-tonne were registered in Poland. We anticipate that the positive market trend will continue in our country in the coming months, but in the medium to long term, further growth in demand will take place in a stable and sustainable manner.

Taking into account the positive market trends, the growing demand for trailers and semi-trailers in Europe and the full order backlog for the second and third quarters of this year, we conclude that the Wielton Group’s sales dynamics should remain at a high level. Moreover, the order backlog for the last quarter of 2021 is also filling up steadily. On this basis, we predict that results for the whole of 2021 should reach high double-digit increases and goal of returning to the sales results of 2019 is realistic to achieve this year. We are gradually and consistently approaching the achievement of our annual targets, feeling relatively comfortable with the assumed levels of sales volume and revenue, as well as the level of the EBITDA margin. However, at the same time, we expect that sales dynamics may slow down somewhat towards the end of the year.

Furthermore, we operate under the pressure of unstable raw material prices, which is a significant difficulty due to their lack of predictability. The biggest challenge for us is the increase in steel and aluminium prices, which translates into higher prices for components necessary for the production of trailers and semi-trailers. For this reason, in recent months, we have struggled with difficulties in the supply of certain components. Maintaining the continuity of the supply chain is still a challenge for us, but one that we are managing efficiently. It is important to emphasise that thanks to our long-standing cooperation with reliable suppliers, we are kept informed about changes so that we can react appropriately if necessary and, for example, look for substitutes. We are more concerned about the lack of stability of prices of raw materials and components, which we also effectively mitigate by securing price levels with long-term supply contracts. Although their clauses allow for certain deviations, it is much easier to manage the purchasing and supply process when we are not negatively surprised by suppliers.

We try to minimise the impact of rising component prices on our margins. For this reason, it is reasonable to increase the prices of our products on a regular basis to be able to pass on at least part of the additional costs incurred to our final customers. So far, these price increases have been met with understanding by our customers, who are well aware of the situation on the raw materials market. In addition, we are benefiting from favourable euro and pound exchange rates, which gives us greater comfort in shaping product prices.

Therefore, on the one hand, we are struggling with the pressure of rising raw material costs, which we are trying to mitigate by increasing product prices. On the other hand, thanks to the modernisation carried out during the downtime during the pandemic, we were able to increase the capacity of the production plant in Wieluń. As a result, in conditions of growing volumes, we are able to take advantage of the operating leverage effect, which ultimately translates positively into the achieved margin.
Among other things, our goal in 2021 is to further improve the efficiency of our production plants. The assumed expenditure for the current year is approximately PLN 50 million (€ 11.2 million). We focus primarily on eliminating bottlenecks and increasing the efficiency of production processes. The largest funds are earmarked for fully equipping the new innovative Langendorf Polska plant in Wieluń, which will ultimately take over full responsibility for the product development of low-loaders throughout the Wielton Group. We plan to complete this project still in 2021.