At TransRussia 2018, held in Moscow from 17 to 19 April, CEO of AsstrA-Associated Traffic AG Dmitry Lagun fielded several questions on his assessment of the impact of new sanctions on the Russian logistics market and forecast as to what happens next.
- Dmitry, in your opinion, will the introduction of new sanctions against Russia affect the logistics industry and if so, how?
Of course it will. First of all, consumers will be purchasing less goods from abroad. The decrease in consumption will lead to a reduction in freight traffic.
- Has your company itself felt any effect of the sanctions?
AsstrA is not experiencing a decrease in overall freight traffic. Given the situation, we are devoting more efforts to sales and other activities aimed at consolidating and developing our share of the Russian market. This is our antidote.
Regarding the international sanctions, statistics show that cargo flows are growing less dramatically as a result. In January-February, before the sanctions, we observed year-on-year growth of a remarkable 25-30%. After the sanctions were introduced in March growth was at 11%.
- What about exports?
Export levels directly depend on the ruble exchange rate. Accordingly, its fall will cause an increase in exports.
- But the sanctions directly target some exporters…
Yes, like RUSAL, one of the largest Russian exporters. In the current situation they will be forced to look for other markets. It will take time. Other companies, however, will be able to increase exports thanks to the weaker ruble.
- Do you predict any changes in cargo flow routes or logistics chains because of the new sanctions?
Yes, of course, because America is closed off. In fact, markets working in the US dollar will be inaccessible because the payments are blocked. Markets that can work in euros, like in Asia or Indonesia, for example, will remain open.
- Does experience handling previous situations involving sanctions help or is the environment today fundamentally different?
AsstrA’s first key growth strategy in 2009 focused on diversification. At the time, we decided to shift the company’s focus away from Russia to intra-European transportation.
In 2009, more than 90% of our orders were on routes related to the CIS and Russia in particular. Today, these figure are more evenly distributed, with about 35% of transport orders destined for Europe. Once you set traffic management goals, you must stick to them over time.
- Are you updating the strategy now?
The company has adopted a strategic development plan to execute by 2030, with development strategies to be updated every three years. So, this year we began to follow the company’s strategy for 2018-2020. Our analysts track the pace of growth across industries and countries. As a priority, we choose those areas and industries where the growth rate is above average and where logistics plays an interesting and important role in commodity flows.
- Do sanctions create a crisis in and of themselves, or rather an incentive for development?
Sanctions are negative by definition. At the same time, they create new incentives for businesses to develop. They also drive changes in the market, which always favor those who are ready to make quick improvements or adjustments to workflows and business mentalities. At AsstrA, we are instilling a culture of agility and being comfortable with change, so our entire team is ready to grow.
- Speaking of changes, what new projects are you currently implementing or planning to implement?
Every year we try to launch about six projects. Examples might be expansion into a particular geographic area or developing business within a new industry or serving it with a new solution.
Regarding AsstrA’s geographical presence, this year we opened an office in Romania. As the next point on the map, we are planning to launch an office in Spain. We are also continuing the expansion of our representative network in China.
In terms of developing business with Clients in new industries, last year we formed the Pharma Logistics, Chemicals Logistics, and Automotive Logistics projects to focus on serving each respective sector. For several years, Fashion & Beauty Logistics, Hi-Tech Logistics, and Wood & Paper Logistics projectss have been successfully operating. Currently, the company operates 13 such industry-focused divisions. It is important for us to understand customer requests and focus our services on specific tasks.
- What is your short-term forecast?
We were satisfied with the results of the first quarter. We are making every effort to show positive results in the second quarter as well. We are now focused on our main task of increasing performance by 20-25% by year-end.