It began like any other day … walking into the office, cup of hot tea in hand. The place was quiet as staff began to roll in. I had checked the news headlines before leaving home, so it looked to be an ordinary day. But then, minutes before market open, my phones lit up and email caught fire.
Dumbfounded, I listened to the first of several messages. One of my company’s major customers had issued a press release announcing its intent to temporarily idle a facility where we were co-located. This customer represented more than 10% of my company’s business and 100% of the co-located plant’s output.
I popped up and peered around the corner, the CEO wasn’t in yet, but I caught a glimpse the COO as he walked in the door. Off I go to download what’s happening to the COO and on my way, I asked my communications manager to call the affected plant to see what he could learn. No one knew – not the CEO, not the COO, not the local plant manager. The customer gave us no advance warning.
I sat in the office with the COO as he called the customer, who reassured they would continue to honor our contract, including inventorying or shipping to alternate facilities all the output our co-located plant produced. But, of course, this information wasn’t in their press release. Investors in my company could only assume the worst. The stock opened down, hard and fast, and investors were calling non-stop. This was not going to be a good day.
In a crisis like this, you realize how important it is to have a history of consistent, transparent communications that provide context around your business and its operating environment. In our case, we regularly discussed the structure and terms of our take-or-pay contracts with investors and the why surrounding them. We even filed redacted copies of these contracts with the SEC to be as transparent as possible. As a result of these practices, investors had a baseline understanding of how we protected and mitigated commodity, operating and customer-risk.
We needed to respond and fast. So, leveraging this existing context, we aligned messaging during a brief executive team meeting and then:
- Issued a public statement indicating our customer’s obligations under our take-or-pay contract remained in effect, regardless of plans to temporarily idle its plant,
- Blasted an email with this key message to everyone on our investor and media distribution lists,
- Confirmed our CFO’s attendance at an investor conference scheduled to be held the next day,
- Painstakingly returned all investor calls over the next several days, initially starting with the sell-side in hopes of amplifying our message faster,
- The following week we reaffirmed annual guidance in a routine press release to further reassure the investing community.
Late the night of the announcement, I contacted the IRO at my customer company to let him know what we were saying. It was a late night for him as well, as he quickly replied telling me he received almost as many calls from my investors as his own.
This experience highlights the importance of ongoing, consistent messaging that provide business context. It also points to the importance of developing relationships with the IROs at customer companies. After this, I found it useful to periodically touch base and align messaging around customer relationships and businesses with them. This served all of us well by reducing confusion and the risk of unpleasant surprises. You may want to consider doing the same if your company depends on a handful of customers or suppliers.
Lead-IR Advisors, Inc.