January 5, 2021
By Scott T. Becker, CEO
To say 2020 was a challenge is a complete understatement. We were faced with some unusual issues as we traveled throughout the year. Some were common to other companies and some were not. But to have these occur in one year and work our way through is a testament to the quality of our employees, the collaborative environment, the passion and energy, and resourcefulness of our team. The two issues below combined would have caused many individuals to feel helpless, but not at Chromaflo.
In mid-Q1, we started to hear about the Coronavirus situation in China and not long after that we started to see this virus infecting people in Europe, and eventually in every part of the globe. It proved to rapidly spread across populations and posed a major threat to the elderly and those with compromised immune systems. What was completely unexpected was the lockdowns we saw in every part of the world. In our business, North America, Europe, and Australia we were considered “essential” and operations kept running. Unfortunately, we saw entire industries shutdown by the governments of China, Malaysia, India, and South Africa, which caused our facilities in each of those countries to be closed as well.
The impact on global economic activity in Q2 was drastically reduced, but what was equally unexpected was the resurgence of business that followed in Q3. Since June, strong demand in Europe, North America, Australia, and South Africa has been beyond any time in history. This appears to be due to a refill of inventory along the global supply chain as well as continued demand primarily in architectural coatings as people continue to renovate their homes while unable to travel. Our operational teams have been working diligently to meet this demand and restore supply chain inventory to more normal levels.
If Covid-19 were not enough to deal with, we had a ransomware attack on Sunday, November 1st. A variant of the Wasted Locker virus (Evil Corp) had entered our network through an employee computer despite having all the safety and security systems in place. This variant of ransomware was new and undetectable by anti-virus software. We immediately shutdown the entire “Chromaflo network” upon detection to ensure infected devices could not communicate with each other. Although the network, PCs, printers, and scanners were down, all manufacturing facilities were able to maintain production.
While Chromaflo has cyber insurance, Evil Corp is on the Treasury’s department’s Office of Foreign Assets Control sanction list, and we were legally prohibited from paying them for an encryption key. Consequently, we had to stand up the network on our own. In a period of six weeks, we cleansed all PCs globally, decrypted and restored all servers, and stood up all SAP sites back up on our restored network, moving us back to a more normal operating process.
Along the way in 2020, we had almost all our administrative staff working from home, we experienced a limited number of Covid-19 infections due to the strong protocols we put in place. The team in South Africa had to conduct the integration of two acquired business and move to a larger location with no outside help because of the COVID-19 restrictions, and the startup of our new plant in Uruguay has been slowed because most government agencies were not operating from their offices or at the normal rate of efficiency. Add Brexit, the China/USA trade issues, ocean going container shortages, and more, and 2020 has been unusual in many ways.
As the famous baseball player Yogi Berra said, “Forecasting is very difficult, especially when it involves the future.”
While Covid-19 remains in 2021, there are vaccines being distributed which appear to be effective against the various variants of this virus. This provides hope for a return to a new normal for many across the globe.
What is not clear in 2021 is how the markets and all their sub-segments will recover. We have spoken to customers, trade associations, and used our own views to evaluate what type of recovery we expect. We do not expect massive shutdowns like we experienced in 2020. Additionally, we believe the supply chain had significantly reduced inventories which need replenishing. Consequently, we see positive improvements across almost every market segment. The notable exception is DIY architectural coatings. The strength of the DIY architectural coatings demand is not likely to repeat, especially if people return to traveling, and then there is a question of just how much home improvement is left.
In any case, we welcome 2021 and we look forward to remembering 2020 as a year where we overcame tremendous obstacles.