Market conditions and worldwide trends

The year 2020 started off well, with favorable economic conditions and a favorable outlook. The order book was well filled at the beginning of the year and the first quarter was characterized by a high level of activity in the Energy segment. The deliveries made to the ExxonMobil PII project in the United States and the SPPL project in Canada in particular contributed to this. While our distribution companies in the Benelux, Germany, France and Central Europe had lower volumes than last year, the companies in Scandinavia (Heléns Rör), Switzerland (Kindlimann), Hungary, Poland and the United Kingdom had higher sales volumes. Volumes in the automotive industry were somewhat stagnant, but there was growth in many other sectors. There even was a slight upward price pressure due to various factors, such as a reduction in production capacity and longer delivery times. The order book remained at a high level.

In February, the initial consequences of the coronavirus outbreak became visible. Due to the lockdown in China, activities in our branch in Shanghai came to a standstill. There was a slowdown in the supply of material from China, making it difficult to supply our project customers at various locations throughout the world. We used our global sourcing network to find alternatives. At the beginning of March it became clear that we were facing a pandemic that would seriously disrupt society and the economy. In most countries in which we operate there were lockdowns that seriously impaired work and activities in our companies.

We first and foremost focused our efforts on the health and safety of our employees and their families throughout the world. All necessary measures were implemented at our sites and where possible our people started working from home. However, a large part of the activities in our company and in our warehouses cannot be performed remotely. Appropriate measures were implemented for this purpose so that the work could continue safely with a minimum chance of infection. Travel and customer visits were suspended. By implementing the measures quickly and firmly, the number of infections within our company fortunately stayed very low.

Our attention naturally also was focused on the continuity of our service provision to customers. Storage, treatments and distribution are core activities in our supply chain. We as much as possible maintained our deliveries to customers and, in consultation with customers, we developed various solutions for this purpose. On the basis of our global network, our many contacts with suppliers and the effort and inventiveness of our employees, we were virtually always able to guarantee the flow of products to our customers.

In the second quarter we were confronted with the full scope of the pandemic’s impact and the lockdown measures. In some market segments order intake drastically fell to as low as 40%. As of mid-March, many of our customers were forced to halt production or to temporarily close their company, due to the consequences of the lockdown measures as well as the stagnating demand in their sales markets. This caused a decrease in volume at Van Leeuwen in virtually all of our markets, varying from 20% to 40% in comparison to 2019.

Virtually all of our market segments in the Industry segment experienced a strong decrease in demand. The markets in the direct manufacturing industry, such as Mechanical Engineering, Hydraulics and Automotive, were hit hardest. There was a relatively much smaller decrease in the Civil Engineering sector. A direct consequence of the coronavirus was a significant decline in the Energy market due to the strong decrease in global travel and transport. Investments were abruptly put on hold, as a result of which the number of new requests and projects quickly decreased. We were able to continue to supply a number of ongoing projects. A number of projects were however postponed or cancelled altogether. This caused the results of our project teams in Zwijndrecht (the Netherlands), Paris, France, and Houston to come under significant pressure.

Particularly in the months of April, May and June, the impact of the pandemic on sales and results was enormous. Signs of an initial recovery of activities and demand were evident after the summer. Customers restarted production in various market segments and volumes returned to former levels. In some markets, part of the losses of the second quarter were recovered, but this was by no means sufficient to be able to fully offset lost sales. The overall recovery of demand in the second half of the year however, was sufficient to be able to achieve positive results.

Towards the end of the year, the market had recovered from the major decrease in the second quarter, but was still far from being at pre-corona crisis levels. While there was a recovery in the Industry segment, this was not at all the case in the Energy segment. In the last quarter, demand within the Automotive segment sharply increased and our companies in Scandinavia, Switzerland and Central Europe once again achieved good results. In addition, our companies in Australia, Thailand and Turkey performed above expectations.

For most materials, price levels remained remarkably stable throughout the year. At year-end 2020, the first price increases became visible. As a result of the increases in prices for scrap metal and iron ore and the limited availability of pre-materials, the prices for welded pipes in particular rose and delivery lead times began to increase.

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