The impact of “lockdowns” initially hit the manufacturers of product at the beginning of the supply chain, starting in China and then progressively impacting Europe and the Americas. A fall in supply side demand came shortly after, again cycling from Asia to the Americas. This disruption led to erratic volumes and delays in discharging tanks, which in turn lead to tank shortages in some areas.
The manufacturing and usage of chemicals has not been impacted as heavily as some other sectors: demand for some products has increased, while others have remained stable and some have seen significant reductions. We saw an initial surge in demand for industrial alcohols and solvents, both used in cleaning and sanitising products, which were in high demand at the beginning of the outbreak to support with the immediate attempt to keep economies operating and preventing the need to lockdown. This initial rise in demand has abated somewhat, but it is likely that demand for these products will remain higher than normal until a vaccine is available, and may continue permanently with raised awareness of the need for improved hygiene to reduce the spread of other viruses.
Many sectors have seen a continuation of normal levels of demand, for example, chemicals used in the water treatment industry and foodstuffs. Other sectors have seen a severe decrease in volume, many of which are related directly or indirectly with the transport sectors and manufacturing. As the nation adapted to working from home the demand for petrol, diesel and fuel additives fell significantly in both the road and air markets. It is likely that demand will be slow to recover and if working from home and a reduction in long distance business travel continues in the long term, these industries may never return to pre-coronavirus levels.
There was also a near instant shutdown of large scale manufacturing such as car plants, white goods, aircraft, and parts, many of which use chemicals directly, or use plastics which are made from chemicals. Some of these plants have restarted limited production, but again, recovery will be slow against a background of increased unemployment and reduced economic activity, meaning it could take years to recover to former levels of output.
During the outbreak of the pandemic, Suttons’ first priority was the health and safety of our staff, both from a welfare perspective and on business level because without healthy staff we would be unable to meet our customers’ needs. As a global business we had an early test of our business continuity plans with the lockdown in China, which impacted us in late January. This tested our ability to maintain our International operation with remote working and allowed us to iron out any minor issues. As it became clear that COVID-19 was going to spread globally we introduced social distancing and hygiene measures, as well as providing PPE to allow staff to continue to work safely, while providing support for those who needed to shield due to age or for medical reasons.
We quickly adapted our operations to ensure that we could maintain the standards of safety and quality that our customers expect from us and to respond to changing demand patterns for certain products as already discussed. This included pro-actively marketing our capability to sectors where demand was increasing, or where new entrants were supporting the national effort to combat the ever-evolving pandemic. An example of this was our support to William Grant & Sons Distillery who switched from producing whisky to distilling alcohol sanitising applications.
Like many businesses, unsurprisingly, we had to react quickly at a corporate level to ensure that we had access to sufficient cash to support the business and to fund any investment required to meet our changing operational needs. The initial problem was trying to model what the impact on the businesses turnover and cash flow might be, in a situation that no one had ever lived through before. Our two biggest concerns were that we did not know how far demand would fall and whether or not some of our customers would be unable to pay us. We were also initially unaware of the level of support that governments would provide.
We moved quickly to preserve cash. Capital expenditure plans were reviewed and some projects that were deemed non-essential were deferred or re-scheduled to ensure we balanced operational needs with cash management.
As we navigate through the pandemic, we are constantly reviewing the way in which we have managed the business and our operation, as well as how we have supported our employees and customers. Our existing business continuity plans worked well and allowed us to operate safely and maintain an excellent level of customer service, all while managing our cash flow. However, we are noticing areas where we could have done better or where additional investment in equipment, software, and training could improve our reaction to either a second wave of COVID-19 or some similar challenge in the future.
It is crucial for all businesses, including Suttons, to constantly assess the medium to long-term impact of the pandemic on customers and competitors in the post COVID-19 world. It is certain that the economy will take a significant time to recover from the shock of lockdown. Where coronavirus has had a negative impact, companies like ours must respond quickly to reshape their business processes, asset base and workforce to ensure that the are in the best possible shape to survive and prosper in this economy. Equally, where the pandemic generates opportunities businesses must react swiftly to capitalise on them.