Waberer’s Seeks Route Back to the Fast Lane

In a company presentation last December, Waberer’s, Hungary’s flagship hauler and logistics provider, set out a long, persuasive list of reasons to justify investor confidence. From a company with just 175 trucks in 2002, via acquisitions and organic growth, the fleet had expanded to nearly 4,500 at the end of 2017, an annual growth rate just shy of 24%.

These trucks, with an average age of just 2.1 years, and supported by cutting-edge IT infrastructure and an “optimized driver management” system, could boast an “industry leading operating efficiency”, with a “loaded ratio” of 91.4%, almost four percentage points above the average in the European Union during the previous four years.

True, the presentation noted rising labor and fuel costs, and a potential slowdown in economic growth, but equally it gave notice of measures implemented to counter these trends.

Moreover, given the company’s annual growth of 12.3% over the previous five years (against a European international road freight average of just 3.5%), the future for Waberer’s looked as bright as the smiling-sun logo on the sides of its trucks.

To bolster this optimism, the presentation named five independent equity analysts who had earlier pinned “buy” recommendations to the stock, putting an average evaluation of the share price at HUF 5,240.

There was just one problem: on March 20, the company posted a net income loss of EUR 11.4 mln for the last quarter of 2018.

This brought Waberer’s full year loss to EUR 13.9 mln, down from a EUR 21.4 mln profit for 2017.

Challenging Year

“Without doubt, 2018 was a challenging year for Waberer’s. On one side, the company faced pressures on key cost elements that deepened throughout the year, and on the other, overcapacity in the second half of the year. The company was thus faced with lower margins and a rapidly changing competitive landscape in the European full truck load market,” Robert Ziegler, chief executive of Waberer’s said in a company press release accompanying the news.

The stock, which had finished 2018 at HUF 2,300, closed at HUF 1,785 on the day.

Ziegler, who only took over in February, following the resignation of his predecessor Ferenc Lajkó, stated that despite short-term measures already initiated to address “some” of the challenges facing the company, he also realized that Waberer’s “is in need of more profound changes that I will be happy to drive”.

Among his first initiatives, Ziegler cancelled orders for more than 300 new trucks. Management had also scrutinized the business portfolio to cut loss-making operations and implemented “a significant reduction” in headcount.

The latter, while attracting negative one-time costs, would contribute positively to results throughout 2019. And yet more change is in the pipeline.

“These short-term measures are by themselves insufficient to guarantee a sustainable and profitable growth path for Waberer’s,” Ziegler said. “We have identified a number of structural concerns that prevent us from being a truly competitive player in these changing markets.”

The company has to become “more agile”, to both client needs and changes in haulage market. And, in a thinly veiled hint that customer service standards had not always lived up to company hype, Ziegler declared: “We want to become easier to do business with and establish ourselves as a reliable partner delivering high quality service.”

Fine words, and the hauler could certainly do with some action to match. Since listing on the Budapest Stock Exchange in June 2017, the share price has slumped from HUF 5,125 to around HUF 1,800 at the time of going to press; an investor-unfriendly decrease of some 65%.

Pincer Effect

Waberer’s management were seemingly caught napping in 2018 when both costs and competition rose, catching the company in a pincer effect.

“There were price rises, fuel prices rose, driver costs rose and also in Hungary, white-collar workers costs rose roughly 10%. [Road] tolls also rose. All this meant a 20-25% rise in the cost base,” József Miró, an equity analyst at Erste Investment, told the Budapest Business Journal.

In response, Waberer’s raised prices, but was constrained by increasing competition from over-capacity in the transport sector in Western Europe, Miro says.

“Waberer’s increased prices by 5%, [but] this caused tension, and [truck] utilization rates declined by between 5-10% each quarter. This decline eliminated the [positive impact] of the price increases,” he said.

Miro, however, is impressed by management moves to cut the fat, noting in particular the drive to shed over-capacity and reduce fixed truck hire fees by putting out less profitable work to sub-contractors.

“The company is in a turn-around phase. They’ve taken the necessary steps to make themselves more flexible, […] and I think they will return to profitability in the first quarter,” he said.

He’s also bullish on the share price. “The stock is cheap now, well below book value of HUF 2,600 per share,” he said, adding that overall, “the future is bright”.

Long suffering shareholders will be hoping Miro has it right. However, his optimism, like the 2018 investor presentation, has been misplaced previously. In that presentation, Miro was one of the analysts recommending a “buy” with a target share price of HUF 5,078 in his October analysis.

Editor’s note: The BBJ approached Waberer’s for comment on this story, sending more than 20 questions in writing. At press time, despite further requests for answers, the company had failed to respond.