Puusaag: KredEx conditions like highway robbery

Owner of construction chemistry manufacturer Krimelte Jaan Puusaag. Photo: Tairo Lutter

Owner of construction chemistry manufacturer Krimelte Jaan Puusaag talks about crisis recovery, why he considers KredEx’s €1.5 billion aid package highway robbery and why he wouldn’t recommend personal surety to anyone.

The entrepreneur says that Krimelte experienced a sharp decline after the first quarter of 2020 that was the best ever for the company: orders disappeared as if they had been cut away with a knife. The international company’s business is growing again today, with last year’s volume restored at least in its Estonian factories.

Are there any differences in terms of the crisis in the countries you are active in?

The United Kingdom and France have strict bans on business activity and the fall has been more abrupt there, while France still managed decent sales.

The Russian market almost seized for a few weeks in April, while we can barely keep up with orders today! May is covered in full. We do not know how long it will last, whether it will be the same a month from now or whether the construction sector will collapse as forecasts suggest.

Does that mean you’re not making long-term plans?

Of course we are making long-term plans, but we’re being cautious about it.

What recovery scenarios you are entertaining?

We drew up a plan in March where we estimated we would lose half our business in April and 30 percent in May, with recovery starting from there. The actual situation today is minus 20 percent year-over-year, which is a relatively safe place for us to be.

How has the coronavirus crisis affected your work organization?

Most activities have been retained. Manufacturing is down, but everyone else has the same amount of work. A salesperson has the same amount of work to do regardless of how much the company has to sell. Bigger challenges have concerned areas where we cannot have people working from a distance, mainly manufacturing.

We have tried to isolate our employees as much as possible, but sales coordinators must meet daily. We were concerned as any of them taking ill would have put us in a very difficult position. We’ve been lucky so far!

The crisis has caused companies to lower salaries, carry out layoffs and turn to the Unemployment Insurance Fund for help. How are things at Krimelte?

We have gone along with it. We do not know how long this marathon will be and must make preparations. Because we lost 30 percent of turnover, we applied for benefits and have received them. I believe it is not something to be ashamed of.

Calls suggesting entrepreneurs should be ashamed to ask for help… First of all, these measures only cover a period of two months. Because none of us knows how long the crisis will last, I believe we cannot say it is inappropriate for some to ask for support.

Have you been forced to lay people off and cut salaries?

We lowered salaries by 30 percent to comply with the fund’s conditions, while we have not been forced to carry out layoffs and still have our full team.

What about KredEx loan assistance and surety – are these instruments of use?

No, I see no need for them, at least not on the conditions offered by KredEx. These are relatively draconian conditions and interest rates. Our subsidiaries in France and Spain were able to secure liquidity loans very quickly and with very little red tape.

We got a €500,000 loan with no security required and an interest rate of 0.25 percent for a year in France and €500,000 for a period of three years, no security and interest of 1.75 percent in Spain. Compared to that, conditions offered by KredEx border on highway robbery – 6 percent interest and personal surety.

Companies that are perhaps worse off than you have said that while they could swallow the interest rate, personal surety is something they cannot go along with. What would need to happen for you to agree to personal surety?

One principle I have as an entrepreneur is to steer clear of personal surety. No matter how unlikely risk materializing might seem. There is always the possibility of Murphy’s Law manifesting. And personal surety risks everything you have: your family and the chance the begin again should one opportunity fail. Limited liability business has been invented for a reason and I would not recommend personal surety to anyone.

Can we compare this crisis to previous ones?

There are differences in terms of how quickly the crisis developed and also the speed of potential recovery. Looking at fields hit hardest by the crisis, one is the hotel business that does not make up enough of GDP to drag everything else down with it. The outlook in terms of combating the virus is also rather optimistic for the time being.

If during the last crisis, economic asphyxiation took place over a very long time, the economy kept shrinking and shrinking for economic reasons, this crisis is caused by an external factor. That said, a crisis is a crisis and unemployment is up, so it has all the same characteristics.

Thinking about the government’s actions, could something have been done faster of better?

At first, it seemed action was prompt and appropriate. However, I was less and less impressed as the weeks rolled by, with the final situation far removed from what companies need. It is good that salary benefits were made available quite quickly. Next, I believe liquidity problems are the most urgent.

But if we look at that KredEx package… It will not be much use in its current form, a much more aggressive and extensive package is required. We should not spend so much time weighing whether someone will get more than they deserve. The state has resources. And even if someone gets more than they deserve, the resources will still go toward the economy and livening it up. We should not worry so much.

Is the fact that traveling to Spain or France is impossible causing any problems?

Not at this time. You need to keep in touch with people and get a feel for moods. Executives in different countries give me an overview of the situation, easing of restrictions and sales tactics every week. It helps keep things positive. I do not feel my presence is needed or that I should run things on location.

You can go over topics in a more systematic fashion and more often compared to going to the office every day.