Source: Liga.net
A calendar on the wall of the office of OTP Leasing CEO Andriy Pavlushyn accidentally came into view of his computer’s webcam during a Skype call with LIGA.net journalist. But this little detail at other times is striking now: March has just expired, on the regular office calendar, the second week of April has gone, but these months, like probably May, seem to be gone this year.
In any case, in the understanding of business. The business spring of 2020 was by far the most active year of the year – the pandemic of the coronavirus abolished. Thousands of deals have been stopped, hundreds of borrowers have asked for a vacation, many are preparing for bankruptcy.
What happens next is a mystery. As Pavlushin jokes, managing a portfolio of 1,500 clients and UAH 10 billion, making forecasts for more or less long time horizons is extremely difficult now: the devices show that there is a clear fog around. When it is over is unknown. Who will come out of it alive, too.
But this does not mean that life has stopped completely. Businesses still need financial support, says Pavlushin.
Who needs it more now than others? And who will emerge from the coronation crisis the winner? About this – in a mini sketch of LIGA.net about the spirit of quarantine time based on a conversation with the head of OTP Leasing.
There will be no spring. How the coronavirus rewrote the 2020 calendar.
March and April are a special period for Ukrainian lessors. He even has a separate “name” – often these months are called the “big season”. This is a key time for the business cycle of many entrepreneurs: in the spring they buy agricultural machinery, cars, trucks.
OTP Leasing had big plans for the first quarter and 2020 as a whole – a plus of 22% to last year’s sales level. Only in March, the company planned a 44% increase. In comparison with 2018, OTP’s leasing business was expecting to increase its portfolio of new clients one and a half times.
The reasons for the ambitious goals were: in 2019 the company leased $ 225 million, in 2018 it was $ 177 million, in 2017 – $ 100 million. 2020 and the year for the OTP leasing business began with a sales plan of $ 275 million , says Andrey Pavlushin.
Already in March, it became clear: plans have to be adjusted. Indicators of one of the most promising months of the year for the business firmly asked: due to quarantine March sales fell short of 30% of the planned volume: $ 25 million was actually issued (the same was in March 2019) against $ 36 million in the plan, according to OTP Leasing.
“After the introduction of quarantine, many deals were terminated – either by our clients or by our risk managers,” Pavlushin explains.
About 10% of March payments on leasing accounts of OTP clients were delayed. But on the whole, the month went by without much delay: 450 out of 500 million UAH. was repaid, according to the company with reference to the data as of April 6.
Pavlushin is confident that in March all March debt will be closed. While restructuring has invited about 25 companies from more than 1,500, serviced in OTP Leasing. They are offered a three-month restructuring of the “body” with the proviso that interest is still to be paid.
Despite the not bad situation with the solvency of customers, the chairman of OTP Leasing states that the crisis has come. Moreover, as in any great shock, the collapse of the Ukrainian economy through a pandemic has its symbolic point of reference.
“We are actively working with SCM, although DTEK is not our client. But when he announced a limited default, I personally realized that the original $ 275 million plan would not be fulfilled and the crisis would be certain, ”Pavlushina says.
Now our goal for 2020 is to at least reach the level of 2019. “
Food is the main asset of quarantine times.
OTP Leasing is confident that this year, SCM customers will be all right: Pavlushin expects the company to continue financing large clients. Among her portfolio are Fozzy Group, Epicenter, MHP, TAS Group, and the same SCM.
What happens to other customers is an ambiguous question. OTP Leasing notes that it is already visible in the industry, which more than others will need the support and understanding of financial partners.
“We go to meet those who are most affected: aircraft service, car rental at airports, restaurants, construction companies,” says Pavlushin.
According to him, customers complained about quarantined supply logistics failures, someone could not bring people to work, losing in productivity, some service banks cut off the overdraft.
But these are not critical problems: 99% of clients have to go through difficult times, according to OTP Leasing CEO. We are helped by the fact that the portfolio is diversified and most of it is small and medium-sized businesses. In case of problems, the company has a “plan B”: “For those who do not survive – what you do, we will take away the equipment and sell it at no cost. We have already done this with both the Mri Agro Holding and Agroinvest from Odessa, ”Pavlushin says. It is the agrarian companies that makeup half of OTP’s leasing portfolio. The same proportion is relevant to the entire Ukrainian market. In addition to agrarians, FMCG companies, pharmacists, logistics, metallurgists, telecommunication companies, food retailers, rolling stock freight cars are normally undergoing a crisis, says the chairman of OTP Leasing.
“Most agrarian customers, both small and large, have food on the way out, so everything will be fine with them,” smiles Pavlushin.
– Recently, I actively helped MHP not to be discouraged during a crisis: the whole family ate delicious chicken skewers at home in a country house. So for these industries, I am absolutely calm. “
Gifts from Europe and the Age of Philosophical Shifts in Business.
The old banality about the crisis, as an opportunity for development – is it relevant at the time of the deadly virus pandemic? Pavlushin believes in better things. His ambition is to use the crisis to expand his company’s market share in Ukraine. “Now we have a 40-45% share in the leasing market, a portfolio of about 10 billion hryvnias, NPL – 0.2%, liquidity is off the charts, the last NPL client lost all the courts and returned us the money. Of course, we are not going to stop and see an opportunity to take an even bigger share of the market, as competitors have liquidity issues, ”he says.
The EBRD has provided a lot of support to OTP’s Ukrainian leasing business, which, despite the crisis, launched the fourth OTP Leasing financing program in Ukraine. According to Pavlushin, it is about 15 million euros. OTP expects to realize this sum in 200-250 leasing contracts in the form of leasing of commercial cars, tractors, trucks. An important bonus for a time of crisis: in addition to 4-year financing, media clients will receive a ten percent grant from the leasing amount – free of charge.
“Here is an example: a truck costs UAH 1.2 million: UAH 200,000. the client pays for himself, receives 1 million from us financing, and from him 100 000 UAH it receives as a gift from the EBRD / EU. Isn’t it cool? Especially at this time. The program is covered by representatives of small and medium-sized businesses, it is necessary to have 3 years of experience and a perfect credit history, “- describes Pavlushin.
But despite the big plans and the general positive mood for the difficult 2020 year, the CEO of OTP Leasing does not undertake to predict how and what his company will work with in the summer and autumn. “It is very difficult to plan beyond 3 months: if Ukraine’s GDP really falls by 5-7%, then our sales in 2020 will not grow much, because we are financing capital investments. Says Pavlushin. – In June-July we will make a new plan for the second half of the year. From the former we have been knocked out, and behind the devices we are a bit in the fog. “
After the past crisis that engulfed Ukraine in 2014-15, OTP Leasing learned a technical lesson: the company stopped financing specific equipment, focusing on what works “on wheels”: cars, trucks, tractors, seeders, wagons. Pavlushin believes that the global crisis related to the disease that has struck the whole world is a time for conclusions of the same magnitude. It is about business philosophy.
“I think in this situation the strong will become even stronger,” he said. – And those who did not have a normal CFO, corporate management, where there was one man show owner, will lose their positions and reputation. Strength is in the team. It’s better to be strong! “