The 2023 budget, a headache for businesses

How are managers factoring the impact of the price explosion into their 2023 budgets? Internal savings and alternative energy sources in the program.

In the current context ofcost explosion energy, raw materials and wages, how do companies prepare their budget for 2023? Is the expenditure and income forecast proving tenthe most delicate than normal? Have they adjustment variable or other solutions to adapt their copy to these dangers? The Echo has posed the question to a number of companies from different sectors. First observation: despite the current crisis situation, many did not foresee work and has not yet started or finished the exercise. Second: the question bothers many, because they believe it is indoor cooking and that revealing the recipes could inspire competition. Fortunately, there are also brave leaders and spokespersons who do not hesitate to react and take a stand…

Positioned between producers-suppliers and consumers, retail trade is at the center of several questions. A good reason to start with them. At Colruyt, we cannot be answered because the company is holding its annual meeting next week: we are in the period of radio silence required by the articles of association. No “stand still” on the other side at Delhaize: “We are in the process of defining our objectives and our provisions for 2023”, replies communications director Roel Dekelver. “We walk work on two points. One, strengthen our commercial dynamics and adapt our strategy to customer needs. For now, that’s the most their purchasing powert which is concerned and which we seek to maximize through actions at low prices. Second, we appeal to our entire organization internally to reduce our costs wherever possible and to achieve efficiency.”

“At the moment, it is primarily the purchasing power of customers that is concerned, which we seek to maximize through actions at low prices.”

Roel Dekelver

Communications Director, Delhaize

Delhaize had already taken these steps earlier this year, adds Roel Dekelver, but he will continue on this path because inflation should remain at a high level at the end of this year and beginning of 2023 at least.

Upstream of distribution, the agri-food sector is hard hit by the increase in energy and raw material prices. The producer of mineral water and beverages spatula evoking agility and resilience as qualities to meet it. “The strategic guidelines of the Spadel group for the year 2023 have not been defined to date, because the 2023 budget exercise is still ongoing”, replies its spokesperson Bérénice Decherneux. That find a balance between these different variables and retail prices is undoubtedly a big challenge for the group in the coming months.” Price discussions between supermarkets and their suppliers remain tense as we know they previously argue for their clients’ interests to counter intentions to pass on price increases little of the latter.

B plans for energy

Let’s go back a bit further upstream still in the same family of sectors… For the sugar producer Tirlemont Refinery (RT)generating this crisis various influences, not all negative. “That sugar price has grown very strongly in the European market after its boom in the world market”, notes its managing director Guy Paternoster. “We have gone from around 550 euros per ton to a thousand euros.” A development due to the invasion of Ukraine and its effect. on the markets, but not only: “For two years the EU has had a sugar production deficit and, in order to meet consumer demand, must obtain supplies on the world market. This increase obviously comes at a timely moment for European growers such as RT, after years of very low prices in Europe, as well as for beet farmers.

“We are less affected by the scarcity of gas expected this winter than our German counterparts, but we have plans B planned like them.”

Lighthouse Paternoster

CEO, Refinery Tirlemontoise

“But the unknown remains for us also energy prices and the availability of different energies”, continues the managing director of RT. “We are less affected by the scarcity of gas expected this winter than our German colleagues (German Sudzucker is the parent company of RT, editor’s note), but we have planned like them, plans B.“In other words, refiners may have to resort to to sources other than gas to run their lines. A rival producer, Belgium’s Iscal, has already indicated it could replace gas with fuel oil to produce the steam it needs. And RT? “We have alternatives possible, but we do not communicate about it.

These various elements will affect RT’s 2023 budget. “That plus wage indexation, with an increase of 8% expected early next year, which for us will amount to equivalent to 50 new commitments”concludes Guy Paternoster.

Targeted at the most energy efficient niches

In constructionthe impact of rising costs is also very significant. Laurent Riche, CEO of Stabilame, a Walloon SME specializing in the construction of wooden buildings (houses, schools, offices, etc.), sent a press release this week expressing that it was tired of the explosion in the price of wood, energy and their devastating impact on otherwise healthy companies. “Our annual electricity bill has gone from 260,000 to 800,000 euros,” he explains. “We have to rationalize our production to create savings while our order book is full for 6 to 7 months. We had also planned to install solar panels to ensure 45% of our consumption, but due to supply difficulties, the start-up has been delayed and will not take place until next month.

“We have the advantage that our basic product, wood, is bio-sourced and that its transformation requires little energy, compared to generic constructions, which are much more dependent on electricity and oil.”

Lawrence Rich

CEO, Stabilame

What other solutions for Stabilame in 2023? “We plan to produce four days a week instead of five, but also more promote production in the workshop (pre-assembly) rather than on site, as this reduces costs, or to use less energy-intensive products.” And as for the budget, could he touch staff costs? “No, we won’t touch employment. We remain optimistic about the future. We have that advantage our basic product, wood, is bio-sourced and its transformation requires little energycompared with generic constructions, much more dependent on electricity and oil.”

It is paradoxical enough a positive effect of this crisis for a company like Stabilame. Energy-saving production, such as wooden structures, become more interesting than conventional models. “We already see it in the prices: Wood has risen less than for PVC or aluminium.”

Build multiple scenarios

And what about the side public or semi-public enterprises? In the house of bpost, we content ourselves with referring to the management’s remarks during the half-year results: “We continue to monitor our costs, but also to invest.” Same story at Proximus: “We have already started the search for savings exercises before this crisis, in our 2020-22 strategy, because we are investing 5 billion euros in fiber.”

“For us, the real impact of these increases will depend on the funds that the state will make available to us.”

Frederic Sacre

spokesman, Infrabel

In the house of infrared, the rail infrastructure manager, we are waiting for important decisions from the federal government. “We are confronted like everyone else with these price increases”, emphasizes its spokesman Frédéric Sacré. “We do not yet have a view on our budgets for 2023 at the moment: it will be decided at the federal level in October, then we will adapt. For us, the real effect of these increases will depend on the funds, “The state will provide us availability.”

In the meantime, the only possible budget work is to make assumptions and develop different scenarios. But essentially, given the scale of the current uncertainties, isn’t this everyone’s lot?

The summary

  • In the current context of exploding costs for energy, raw materials and wages, how are companies preparing their budget for 2023?
  • Despite the crisis situation, many of them have not anticipated the work and have not yet approached the exercise.
  • Within retail, Delhaize wants to combine price measures for customers with internal savings.
  • Refinery Tirlemontoise is considering a plan B for its gas supply.
  • Stabilame brings its places back to the workshop, while seeing the prospects for bio-sourced wood improve because this niche is energy efficient.

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