Source: TRANSPORT STRATEGY CENTRE
It is the fourth month of Russia’s war against Ukraine, and domestic businesses begin to work more systematically and adapt to new realities, restructuring logistics, looking for new markets and at the same time helping the Armed Forces and civilians. CTS conducted a series of interviews with CEOs of companies operating in the transport and logistics market and asked how they were optimising costs, whether they reduced their staff and when it would be possible to talk about the resumption of investment activities.
- Volodymyr Mezentsev, CEO of Lemtrans
How much has the traffic decreased? What measures are you taking to stabilise the situation?
Since the beginning of the Russian invasion, we have lost more cargo than cars. Therefore, at the moment the dynamics of freight traffic growth are much lower than the growth of available rolling stock in the country. Business revenues have decreased several times. Today we are able to use only 50% of our fleet. Part of the fleet is blocked. Many logistics chains between companies have been broken. Despite this, Lemtrans continues to make every effort to ensure the optimal transportation of customers’ cargo. We have to be flexible and fast to survive. We are working on new routes and trying to reach agreements for the future. However, the market needs time to establish new supply chains.
How has the business community changed in general? Was there a reorientation to new markets/customers, etc.?
There has been a global change in logistics since the ‘loss’ of Black Sea ports. Now all shipments head west. At the same time, the western border crossings are not designed for such heavy traffic. Both Ukraine and the EU countries able to receive, process and ship cargo to Europe lack transshipment capacity. To address this issue, we should focus on infrastructure development in bottlenecks. Now we need to assess the real potential for increasing capacity and find solutions that can be implemented as soon as possible, find logistics routes.
We are currently working on a project that will be an alternative to some transport corridors and gates to obtain strategically important resources. It will allow to improve logistics and increase the share of cargo containerisation in Ukraine in the future.
How have the costs been optimised in the conditions of significantly lower revenues?
The war forced us to abandon large-scale long-term investment projects due to the impossibility of their implementation in the current situation. We moved on to short-term planning, focusing on projects that are in their final stages. We have temporarily abandoned the repair of the fleet that does not need to be used in the existing transportation system.
What are the main cost items for the company now?
The first is to fulfil our obligations to customers and the country no matter what. This means that the payment of the railway tariff and for all related services of Ukrzaliznytsia is a priority for us. We also continue to pay taxes. UAH 159 million in taxes — that’s how much Lemtrans transferred to the budgets of all levels only for March-April 2022.
The second goal is to help civilians, the Armed Forces and the Territorial Defence. The third goal is our staff. We will be able to support our country with tax revenues, provide humanitarian aid to civilians and help the army financially only by continuing to work.
Has your company been involved in any humanitarian projects?
Yes, we understood that what we knew best was building logistics by rail. That is how the idea of creating a humanitarian railway corridor was born.
Together with our partners such as Ukrzaliznytsia, European Business Association, PCC Intermodal, MST Group Sp. z o.o and many others, we (represented by Levada-Cargo) actively cooperate with volunteers, European companies and develop a logistics network for the delivery of humanitarian aid from Europe to Ukraine by rail. Our joint project is called Railway Helps Ukraine.
To date, more than 2,100 tonnes of humanitarian aid have been delivered to Ukraine using the Railway Helps Ukraine railway corridor. We deliver medicines, food, hygiene products and equipment. The Kharkiv, Kyiv, Zaporizhia, Dnipro and Luhansk regions have already received aid. The cargo has also been sent to other regions where it was needed.
In addition, Lemtrans transferred over UAH 500,000 of the logistics tariff for the delivery of humanitarian goods from Europe to the civilian population.
How do you help the civilians and the Armed Forces?
All SCM businesses, Shakhtar Football Club, Rinat Akhmetov Foundation are focused on helping Ukraine. And Lemtrans is no exception. More than UAH 20 million has been transferred to support the Armed Forces and the Territorial Defence. In addition, we support the Armed Forces and the Territorial Defence by purchasing and transferring vehicles, fuel and bulletproof vests and making anti-tank ‘hedgehogs’ for the defence of Ukrainian cities.
What are your short- and medium-term plans?
At the moment, the minimum plan is to keep what we have. The maximum plan is to revive the investment projects launched in peacetime, which are currently in the final stages of implementation.