The consequences of the war on HORSCH
The war in the Ukraine caught HORSCH – like all of us - completely off guard and changed everything. In the interview with terraHORSCH Philipp Horsch summarises what happened in the first weeks after the outbreak of the war, how the employees and the company are and which consequences the war has on sales, production and costs.
terraHORSCH: HORSCH has a branch in the Ukraine. What was the situation like before the war started?
Philipp Horsch: HORSCH Ukraine was founded in 2009. Our new site we built and inaugurated last year, is located in Velyka Soltanivka near Kiev at the motorway to Odessa. Among others, there is a training centre where practical and theoretical trainings are held for our partners and dealers in the sales and service sector as well as the central spare parts warehouse. Moreover, there are demonstration fields, a marketing hall, conference and meeting rooms. The spare parts warehouse guarantees the spare parts supply for our customers and also allows for providing appropriate technical support. In the Ukraine, we employ approx. 28 people. But the war changed everything.
terraHORSCH: What has been changing since February? What was the situation like for HORSCH as a company and as a family?
Philipp Horsch: All of us were caught completely off guard. We did not expect at all that something like things would happen and thus, we were completely unprepared for this situation. The suffering of the people distresses us, it is a terrible situation. We are shocked and initially, we felt helpless. When I think back to the first half of March, it was one of the most difficult situations in the history of our company from an emotional point of view. During the first days we quickly had to take different decisions and we were under enormous strain. We mainly concerned ourselves with the question how we can accompany the HORSCH employees and their families in the Ukraine as well as in Russia through this difficult time, how we can help the families and the people. But we also had to take economic decisions. It was almost impossible to make the right decision in such a situation. And it was not easy to balance the emotions that were involved. It was and still is a difficult and challenging time, especially as there often is no immediate answer to all the questions. From an organisational point of view, we very quickly took action to help in any possible ways.
terraHORSCH: How did you support the employees of HORSCH Ukraine and the people in the Ukraine in general?
Philipp Horsch: Already in the first week of the war, we decided to make it possible for our female employees and their children and for the wives and children of our male employees to come to Germany if they wanted to. And most of them wanted to. Quite recently it seems that some of them want to return home as the situation in the Ukraine has calmed down a little bit, people feel more secure and want to take an active part in the reconstruction.
In addition, right in the first week after the outbreak of the war we organised the first aid supply deliveries for the Ukraine. But we would not have managed without the active support of all our employees, their families, friends, acquaintances, and our dealers on site. They all contributed ideas, accommodated people, organised further aid transports, donated money and launched an appeal for money.
The aid supplies were then distributed on site also with the help of our dealers. Moreover, we loaded the Ukrainian trucks that were in Schwandorf to load machines with aid supplies. So even though we were caught completely off guard, we were able to react and help very quickly. Since then, we have continuously been sending trucks with aid supplies to the Ukraine.
Our Polish employees for example went to the border and picked up people. The Hungarian colleagues, too, organised busses to pick up the people at the border. Everyone contributed and closed ranks to make sure that together we were able to provide quick assistance.
We also helped on site, and we also provided financial support. In the past three months, we spent high six-figure amounts. And we will continue. At the moment, we are sending supplies to the Ukraine every week.
terraHORSCH: The site of HORSCH Ukraine is near Kiev. What is the situation like? What about the employees and the machines?
Philipp Horsch: As I have already said, we were unprepared. And our site, too, was caught off guard – literally overnight. As we are located so close to Kiev, we started to empty the site and to take our material to a safe place. Also because we saw that the war was coming closer quickly. I.e. we took the machines to the west of the Ukraine, cleared the spare parts warehouse and stored the parts at our dealers. But it was already too late, and we had to stop to not jeopardise the safety of our employees on site. In the first weeks of the war, the site with quite a lot of material was sort of deserted.
In the first weeks, all our employees stayed at home and partly and if possible worked from home. A lot of them came to Schwandorf. Some were involved in all kinds of measures to do with the war. A few weeks ago, the service, the spare part supply, farming etc. started to work on a kind of “normal” level – whatever normal means in the current situation. This also means that we deliver machines and spare parts to the Ukraine, but on a reduced level.
terraHORSCH: Does this mean that the farmers in the Ukraine continue to work in the fields?
Philipp Horsch: The farmers in the Ukraine tried to work through the war. Of course, depending on what was possible and depending on how close or how far they were from the acts of war. And we tried our best to accompany them. In this tense time, it is very important to keep up the production of food for we are heading towards a food crisis. We are becoming more than ever aware of this fact. But I see it as an opportunity to create a better awareness for agricultural topics in society and politics. It is important to see what food security means, how we come to grips with it, what we have to do for it or what we mustn’t do. We support the farmers with regard to sowing as this is where the main focus is on in spring.
Moreover, our service is working. From this point of view the agricultural activities are in progress to some extent – according to the situation. And, of course, not directly in the war zone.
terraHORSCH: Which economic challenges caused by the war does HORSCH have to cope with?
Philipp Horsch: Among others, we had to decide how we deal with the sales that were planned for the Ukraine. The Ukraine is our second largest market after Germany. This is why the turnover is rather high. This was a dramatic change for us. We then decided to remove a substantial part of the planned Ukrainian sales that were scheduled for 2022 from our planning. The next challenge was to fill this gap. For the machines for the individual regions are quite specific – it is our DNA to develop and build region-specific machines.
We were only able to place part of the machines in our production program somewhere else. We had to remove the majority from the production plan and replace them by other products. Fortunately, the situation in the global agricultural markets is extremely positive. Farmers are buying everything the agricultural machinery industry worldwide is able to manufacture. Thus, we were able to compensate for the Ukrainian sales with other markets. If we consider the business year as a whole there will presumably be little negative impact with regard to sales. Always provided that we will get the material.
terraHORSCH: Does this mean that the delivery chain situation is still tense?
Philipp Horsch: Yes! This is the other big international consequence and challenge. The delivery capacity suffers. We are grateful that our customers and dealers understand this situation, stand behind us and support us at the best.
The situation has already been very difficult because of the pandemic and with the war it all became even more difficult. Everyday parts purchasing is a big issue, we built up inventory as machines cannot be finished and the production costs go through the roof and are no longer calculable. It is very difficult to look into the future and to see what the cost and margin situation will do to us. We try to keep up our margins to some degree. The only thing we can do is to co-operate with the suppliers and find out what we can do to keep the cost increases in check. And to increase the prices for the customers as moderately as possible. Thus, we can somewhat keep up the margins we need but we do not want to overact it. It really is a balancing act.
In this context, it is difficult to say how such a year will end for it does not seem that the supply situation and the parts availability will improve. You cannot tell in advance how it will go on – everything is insecure. The workload in all departments is extremely high, the situation is very tense and very stressful for our employees and partners. But finally, we will cope with it together. We will finally find a way.
terraHORSCH: What are your hopes for the future?
Philipp Horsch: First of all, of course, that the war will end. And that we will get more stability in Europe again, that we have a peace guarantee in the Ukraine and in Europe. Then that all this will help that the costs for energy, raw materials etc. become normal again. It currently is very difficult to plan the costs as we cannot predict what will happen.
I really hope that the intense inflation which we today notice in all sectors will return to a normal level like we once knew it. Immediately before the war the steel price for example stagnated and decreased slightly. Because of the war it went through the roof again. I do not know how long it will take but I hope that perhaps it will be faster than we believe. I also hope that the energy prices as well as the raw material prices will soon get back to normal again. In this case, we could take back the price increases. This is my respectively our big hope. Unfortunately, it is not yet foreseeable if and when this will happen.
And it is important to us to prepare for the time after the war and actively support the reconstruction especially with our HORSCH Foundation as well as to campaign for reconciliation among the people.