An interview with Antonio Tejedo, Vice President of Investor Relations at TRAXION
With movement restricted due to the Covid-19 lockdown, the need for efficient logistics services has intensified. Fortunately, the people of Mexico have TRAXION – the nation’s leading distribution, logistics and ground transportation company. The European caught up with Antonio Tejedo, Vice President of Investor Relations, to find out how the company has handled an increased demand for its services.
How has TRAXION performed in what has been a tough year for global industry?
Antonio Tejedo: The company performed well during the first half of 2020. TRAXION operates within an essential sector of the economy and has benefited from increased demand in logistics services, as well as a growth in freight circuits that serve the consumer, retail, food and beverage sectors. On the other hand, social distancing has driven clients of the personnel transportation segment to require increased capacity for staff commuting services, mainly to and from industrial hubs and manufacturing centres located on the outskirts of major Mexican cities and farther away, where public transportation is scarce.
Specifically, on the second quarter of 2020, TRAXION reported a growth of 6.8% in revenues, with an increase of 15.9% in EBITDA, together with an expansion of 180 basis point in margin. This resulted from an aggressive cost and expense savings programme that TRAXION put in place and from a prudent leverage management policy. Furthermore, operating cash flow grew 27.8% and net income reached an impressive increase of 112.5%, on a year on year basis.
Moreover, the leverage metrics decreased as net debt-to-EBITDA ratio decreased 17.8% to reach 1.8x. This performance has been possible mainly due to TRAXION’s business model, built on three main pillars: diversification, discipline and innovation
How is TRAXION supporting its clients during the Covid-19 crisis?
First and foremost, we have been able to provide increased capacity to our clients while avoiding significant price increases. We have granted discounts on a case by case basis, mainly to schools and some corporates, as we want to maintain strong commercial relationships with them.
Furthermore, we have been introducing strict hygiene measures in order to ensure that our service is safe. Such high standards have contributed in some measure to an increase in new clients, while better serving existing ones.
Moreover, on the overall business side, TRAXION has been providing integrated logistics services based on technology and disruptive innovation that have resulted in an increase in business volume with an asset light approach.
Does TRAXION have any new products or applications planned?
TRAXION has always been innovative and disruptive. This is the key differentiator versus our competition. During 2020, TRAXION launched two apps that bolster an asset-light oriented business. One is aimed to improve people’s mobility in large urban areas, and the second is designed to connect clients with cargo companies.
The first application is called TRAXI, which is aimed at commuters, as public transport in major Mexican cities is scarce and inefficient. Users download the app, register, check available routes, reserve their seats and ride safely, comfortably and on time. This platform provides an effective alternative to public transport, while maximising our passenger fleet utilisation, and that of third parties.
The second app is called TRAXPORTA, which is basically a link between certified cargo operators and clients using a 100% digital platform. TRAXION coordinates the whole operation, from matching demand and supply, connecting clients with suppliers, to charging the client and paying the service provider, while keeping a fee (usually a percentage of the total contract) that goes directly to the company’s bottom line. This way TRAXION maximises its fleet utilisation and that of third parties, while promoting an asset light business.
Moreover, and beyond these two apps, TRAXION is currently the only company in Mexico capable of providing a one-stop, door-to-door, integrated solution in logistics across the whole supply chain using mainly its own infrastructure, which allows for better pricing conditions, improved profitability and, most importantly, complete control of the operation. This platform is called TRAXION LOGISTICS and is the fruit of a diligent development process that started two years ago and was launched in 2020.
Innovation has always been a very important component in TRAXION’s DNA. This, together with diversification and financial discipline, are the main pillars on which the company was founded. Innovation has enabled the company to remain one step ahead, to be Mexico’s industry leader, and this provided stability over economic cycles. Specifically, during the Covid-19 contingency, innovation is what enabled the company to react swiftly to demand shifts among sectors and clients, and what made it possible to seize profitable opportunities during the pandemic.
How will these new solutions help to bolster your clients’ security systems?
Most of our clients are not price sensitive, but they care about quality of service. Having understood that many years ago, TRAXION’s management has been focusing on constantly upgrading its safety protocols and systems in order to provide its clients with peace of mind in terms of security. We believe that TRAXION is one step ahead in the industry in Mexico in these matters.
What can you tell us about the upcoming debt issuance that is planned?
Well, the company priced the bond on 10 September 2020. This is indeed one of the most important milestones in the history of TRAXION. We had an oversubscribed demand book and a very reasonable mix of local investors that showed clear interest on our issue. We planned this bond placement to be carried out on the week prior to the Mexican spring holiday, but the contingency started some days before that, so the company decided to keep the transaction on stand-by until we saw a window to execute the deal appropriately and the results of the second quarter came out, so that we could demonstrate the soundness of our business . We continued to work over the summer and were able to match the timing with that of investors.