Close
2020

Annual report

Letter to Stakeholders

Despite the tumultuous year, we were able to navigate our way through successfully.

 


Dear Stakeholders,

Wallenius Wilhelmsen entered 2020 with a positive outlook on the market development and a strong momentum from our performance improvement program that was progressing according to plan. Several digital initiatives had been launched to drive both further internal efficiency and product improvement towards our customers, as well as work on initiatives in support of our long-term strategy with a clear purpose of Sustainable Logistics for a World in Motion – driving sustainability across vehicle value chains. In short, the company was poised for an ambitious and rewarding year. All of that was to change rapidly within the first few months of the year, when the onset of the global pandemic marked a turning point in sentiment and outlook.

Shipping volumes and processing centre throughput was strong throughout Q1, and whilst any impact was not really felt until well into Q2, the company responded with early decisions by the end of March. First and foremost was the establishment of key principles to guide us through and enable leaders at all levels to act quickly and decisively. These principles included:

  • Taking social responsibility for our employees and the community
  • Being financially prudent for our shareholders
  • Maintaining operational stability for our customers
  • Protecting long-term operational capabilities for when business returns, and to be ready to meet the future needs of our customers

Several decisions were then made in succession; to recycle four vessels, commence cold lay-up of up to twenty vessels, with immediate action for ten and re-delivery of short-term charter vessels upon expiry. Preparations and contingency plans were also initiated in case of eventual slowdown of throughput across land-based processing sites and terminals. All non-business critical expenditure was halted, a complete travel ban was put in place and running projects were either accelerated to completion, paused, or in some cases disbanded until further notice. All in all, the company developed an enterprise-wide plan of 32 cash saving initiatives that were tracked weekly initially, and thereafter monthly. Actions by various authorities around the world resulted in temporary office closures across most of the group and along with most industries, working from home became the norm. Fortunately, the company had completed the roll-out of the latest suite of MS office across the enterprise during 2019, because of which the transition to working remotely and virtually was seamless and without disruption.

With all these actions underway, volumes showed signs of falling in April and by May we had seen an aggregate 50% drop in volumes and throughput. Regrettably, the company needed to furlough thousands of workers across the land-based processing facilities and office-based workers were impacted either through furloughs, voluntary salary reductions or reduced working hours and relative pay. Social responsibility and the wellbeing of our employees was at the forefront of our minds and where government support schemes were either not sufficient or non-existent, concessions were made to support employees and their families with health care benefits, amongst others. The sacrifices and contributions made by all our employees throughout this pandemic has been nothing short of outstanding.

Very low and erratic volumes brought us even closer to our customers. The company was able to ensure sufficient vessel capacity to move volumes as required, and at the same time optimise the sailings provided by consolidating port calls and routes. Strong cooperation and understanding from our customers were paramount to ensure the operated voyages achieved historically low emissions per tonne mile and provided good returns to bolster the cost of significant idle capacity and cold layups. The same cooperation was experienced across all land-based processing sites with regular adjustments and joint decision making. Market conditions remained challenging throughout the year, with each phase of slow down, bottom, and volume recovery having their own challenges for logistics providers, placing incredible demands on the entire organisation. This resulted in an impressive effort across our group brands, where we truly operated as one, successfully adjusting throughout the year together with our customers.

Revised Long-Term Strategy

By the middle of 2020 the company had settled into well drilled crisis mode and line leadership were well equipped in handling daily operations. The management’s attention moved to post-crisis planning. We re-affirmed the same foundational set of beliefs we established upon the creation of Wallenius Wilhelmsen; A continuous shift from vehicle ownership, to vehicle usership – whether automotive, construction, agricultural or mining. The world will keep surprising us, there will exist new customers we have not yet met, competitors we have never seen before, vehicle value chains that will be disrupted, and new revenue stream opportunities beyond our existing scope. Our core purpose remained as valid as it ever did – Sustainable Logistics for a World in Motion.

We re-affirmed our four strategic pathways established in 2019:

  • Expand to full life cycle logistics
  • Drive operational effectiveness
  • Lead the journey to zero emissions
  • Digitalise the supply chain

With a clear perspective on which trends we believe will accelerate and those that will decelerate, emerge and recover from the serious impacts of the pandemic – we saw the need to prepare and mobilise the organisation to seize the opportunities we see in the marketplace more rapidly. An adjusted structure was required and a new approach to how we could accelerate strategic initiatives across the company and increase employee engagement became key focus areas for the management towards the latter part of the year.

Adjusting to the Market

Throughout the pandemic the spirit of how we came together as one company, together with our customers, was evident. The message from the market was clear: our customers see us as one, irrespective of brand or operating entity – they expected, and received, a seamless solution to their outbound logistics needs. Decision making was faster than before, internal alignment was smooth, external engagement was strong and increasing. These were attributes we needed to retain and hone as we saw opportunities to help solve customer pain points which are only increasing, and new market entrants and business models in vehicle value chains arise.

Integrated logistics solutions and leveraging data will enable our ability to combine our array of services to our customers and allow for growth into new revenue streams throughout the full life cycle of a vehicle. Individual company brands are less important to our customers – our ability to combine our capability and their data is.

To better consolidate our interface with our customers across all brands and operating units –the new Customer Growth unit was established, combining business development, sales, and marketing activities of all brands and operating units into one team. Working and delivering using agile methodologies across the enterprise, the Customer Growth unit combines our logistics expertise on vehicle value chains, bringing the voice and needs of our customers across all operating units.

Our shipping and logistics services were also adjusted to be more in tune with the different operating modes of the two. The main shipping brands of EUKOR, Wallenius Wilhelmsen Ocean and Armacup were consolidated into one leadership team and a single division to operate all entities – Shipping Services. All our land-based operations, including port & terminal services for those main brands of Keen, PACRO, PIRT, Syngin, VSA, and Wallenius Wilhelmsen Solutions were consolidated into Logistics Services. The activities of ARC will be reported under the segment Government Services.

These changes represent a natural evolution of Wallenius Wilhelmsen, and we firmly believe they will enable us to increase opportunities with our customers, continue to be agile and responsive to a dynamic market, bringing our teams and capabilities closer – all to better serve our customers, help address their needs and keep us firmly on the track to drive sustainability in vehicle value chains.

Sustainability

Market and operating disruption in 2020 naturally influenced some of our sustainability initiatives during the year. However, we retained an unwavering commitment and focused our efforts on how and where we could continue to have a positive impact. Our work, together with our partner Wallenius Marine, to develop the first technically and operationally viable wind powered PCTC continued in earnest and culminated in Wallenius Marine launching the “OceanBird” concept in September. Wallenius Wilhelmsen was the first operator to secure the rights to utilise the design and the concept adopted by us is “Orcelle Wind” – a natural progression from our original “Orcelle” concept show cased in 2005 to develop a zero-emission vessel. We are incredibly proud of this development and thankful to Wallenius Marine for maintaining the imagination and tenacity to develop the technical viability. We will further assess and test the commercial and operating viability during 2021, based on which the ambition is to be yard order ready in 2022.

We continued the digitalisation of our fleet, with now 55 vessels streaming real-time performance data that we actively use to optimise energy efficiency to further reduce emissions using the same assets and fuel types as before. The digitalisation program continued throughout the year, despite our cash saving initiatives, as we saw this project and development as business critical. Our track record in emission reduction since 2008 has been solid and we are currently well ahead of the IMO targets – but more must be done with both existing and new technologies. Tannhauser entered the fleet in November and is the latest delivery of our series of eight High Efficiency Ro/Ro vessels that combine current technology with new thinking to further reduce our carbon footprint.

Lastly, we took advantage of the slower periods experienced during the year due to lower activity, to engage our organisation in a voluntary Lean:Green Works program. The program was established to develop a series of climate change action projects that looked at our business holistically both on land and sea – very much aligned with the experience we had during the year of truly coming together to solve a common problem – across brands, sites and activities. The portfolio consists of three main activities taking place across the company, led, and staffed by our teams of volunteers around the world and driven by our sustainability team.

1. Reducing electricity consumption at our offices across the world
2. Switching to renewable energy sources to power terminals and processing centres
3. Carbon compass 2.0: assessing the CO2 footprint and defining a baseline per individual customer. New version more granular and precise

Each of these initiatives focus what we can do to make changes in our business and areas we can influence and control, that will benefit the climate, making the entire supply chain more sustainable and resilient.

Despite the tumultuous year, we were able to navigate our way through successfully. Together with the incredible efforts and resilience of our employees, and strong support from our customers, we were able to provide a seamless delivery of our services in a rapidly changing environment. Early and firm decisions resulted in significant cash saving initiatives that showed through on our cash balance and consolidated the organisations’ focus around doing what we need, question what we want – and pull together as one to find solutions. The steps taken have strengthened our liquidity situation, which will help pave the way for future dividends and continued investment in our business. We are also proud that throughout the year we could continue focusing our efforts on Sustainability, maintaining our environmental programs; digitising the fleet, participating in the development of a new energy vessel, and engaging our employees in Lean:Green Works.

Exercising our social responsibility, we chose to avoid mass permanent lay-offs and instead worked with our employees to put temporary employment conditions in place alongside ensuring safe working environments in what was a challenging and constantly changing global environment. All with our clear purpose in mind – Sustainable Logistics for a World in Motion.

In March 2021, Craig Jasienski stepped down as the company’s CEO following an agreement with the board. I would like to thank him for his long service to the group and wish him the best of luck in his future endeavours.

On behalf of the executive management team and employees of Wallenius Wilhelmsen ASA,


Torbjørn M. Wist

Acting CEO