If there is a healthy sector in the Bulgarian economy that keeps growing like a teenager, it's machines and equipment manufacturing. After the leading 40 companies in the industry increased their revenues by 12% in 2017, they added a further 13% or so last year. Their total sales reached 8.2 billion levs and their average turnover passed the 200 million levs mark.
Many companies expanded their production capacity but some also enhanced their productivity and grew purely organically. Besides the manufacturers of automotive components, which make up nearly half of the leading companies in machine building, bicycle factories were last year's big winner. With the tightening of anti-dumping duties on Chinese imports they managed to find markets for their more expensive electric versions, boosting revenues at a two-digit rate.
For seating cover producer ALC Bulgaria, however, 2018 marked its last year in the ranking. Earlier this year the Canadian owner, Exco Technologies, decided to shut down its three plants in Bulgaria due to unprofitability. That is probably a signal that the price of low-skilled labor has reached its limit and the future is in high-tech production.
Leaders from Botevgrad
With its 26% growth in revenue, sensor producer Sensata Technologies Bulgaria rocketed up four positions and took the lead in the sector ranking for 2018. The company has a manufacturing plant in the town of Botevgrad and a second in Plovdiv, and it recently started construction of another production facility at its first location. "The rapid jump last year was the result of new capacity and new product groups, as there was increased demand for our products, mainly for the automotive industry," the company said. Data from Sensata Technologies show that the volume of products manufactured and sold in 2018 surged by nearly 50%.
In 2019, the company expects its output and sales to grow by some 15%, which means turnover will top half a billion levs. The expansion in Botevgrad has to be completed by this year's end and its effect will be felt as early as 2020.
The runner-up in the sector, Integrated Micro-Electronics Bulgaria, also continued increasing its revenue in 2018, though at a slower pace: 9% compared to 12% in 2017. The growth was entirely organic and the slow-down was no surprise, as two years ago the company completed a 25 million levs five-year investment program, reaching its maximum capacity for expansion in Bulgaria.
Besides a common location, the two largest companies in machine building have a common past too. Until a few years ago Integrated Micro-Electronics (then EPIQ Electronic Assembly) was part of Elex Holding, and so was Sensata Technologies Bulgaria (then Sensor-Nite Industrial). In 2011, their direct owners, Belgium-based EPIQ and Sensor-Nite, were sold to the Philippines-based Integrated Micro-Electronics (IMI) and US-based Sensata Technologies, respectively. Elex's third company, Melexis, remained part of the Belgian group. It also has a local subsidiary, Melexis Bulgaria, which grew substantially in 2018 and for the first time made it into the Top 40 in machine building (see below).
Sevlievo-based bathroom fixtures manufacturer Ideal Standard Vidima, once an unrivalled leader in the sector, preserved its third position in 2018. The company continued growing (5%), though at a slower rate than in 2017, when it reported a nearly 13% rise in revenue. Nevertheless, that shows a trend of stabilizing sales after a drop in the previous few years. The main reason is the increased capacity and productivity as a result of a 70 million euro three-year investment program which will be completed this year. The investment is expected to raise production volumes by 30%.
After three years at the head of the sector ranking, Liebherr-Hausgeraete Marica lost its leadership last year and descended to fourth place with a 5.6% drop in revenue. The other enterprise of Liebherr group, Liebherr Transportation Systems Marica, which manufactures heating, ventilation and climate systems for use in rail cars, dropped out of the Top 40 in 2018.
The Bulgarian subsidiaries of automotive component manufacturers Teklas and Yazaki climbed the ranking as their revenues rose by about a fifth. Bulgaria is the largest production location of Turkey's Teklas group, which already has four plants in Kardzhali and one in Krumovgrad and Momchilgrad each. The company recently launched the construction of a seventh plant, in Vratsa, which will start production next year. The investment amounts to some 30 million levs. In 2019, Teklas Bulgaria expects to add 100 million levs or so to its sales and to reach a turnover of 1 billion levs in five years.
Despite the slight drop in profit in 2018, Teklas remained the most profitable company in the automotive sector in Bulgaria with a net result of 52.5 million levs and a profit margin of almost 14%.Yazaki Bulgaria, which is owned by Japan's Yazaki and produces wire harnesses, continued growing last year after opening its third plant in Bulgaria, in the town of Dimitrovgrad, in 2017. Its two other plants are located in Sliven and Yambol. The introduction of new products and strong demand are the reasons for the rising sales, the company said. The opening of the new plant had a negative effect on the financial results and the company posted a small loss.
A rise of more than 13% in revenue was reported by another automotive component manufacturer, Hanon Systems Plovdiv. That is the new name of Magna Powertrain Plovdiv, since the acquisition a few months ago of Canada's Magna by South Korea's Hanon Systems.
The revenue of another automotive component manufacturer, Germany's Behr-Hella Thermocontrol (BHTC), rose by more than a fourth. The company has a plant for climate control systems in Bozhurishte industrial zone near Sofia. "We reported strong growth in 2018 and plan further expansion of operations between 2019 and 2021," CEO Martin Nyland said. The company recently installed a new production line in a project worth nearly 32 million levs.
Another year of strong growth (28%) pushed the revenue of Ruse-based automotive locking system manufacturer Witte Automotive Bulgaria to more than 200 million levs. The company, part of Germany's Witte group, has never stopped growing since it started production in 2010. It has recently opened a second plant on its site in Ruse, doubling its production capacity. In 2019, Witte Automotive Bulgaria expects its sales to rise to 126 million euro and reach 200 million euro by 2022.
German-owned automotive component maker, Kostal Bulgaria, which has two factories in Smolyan, reported a slight decrease in revenue. However, Kostal's other local subsidiary, Kostal Automotive Bulgaria, quadrupled its revenue. The company started production in Pazardzhik two years ago, which explains the jump in revenue, as the plant did not operate for a full year in 2017.
Making a debut
With a rise of nearly 35% in revenue sensor and driver manufacturer Melexis Bulgaria, part of Belgium's Melexis, joined the list of sector leaders in 2018. "The group booked sales growth of 11% in 2018 and Melexis Bulgaria was a key contributor to that success story," the company said. In 2019 the Belgian holding expects sales volumes to remain below the level of last year as a result of a more uncertain economic and geopolitical situation caused by global trade tensions.
Nevertheless, Melexis is doubling its manufacturing space and test capacity in Sofia. "We are significantly extending our R&D and warehousing facilities and recruited more than 150 R&D and production staff in 2018 alone. To facilitate this, Melexis is investing 75 million euro over the course of five years," the company said. The investment program will be completed in 2022.
Another company making a debut in Top 40 is climbing wall manufacturer Walltopia, which grew by more than 21% last year. The company was the most profitable enterprise (a margin of 22.5%) except for gambling machine and software producer Euro Games Technology. Besides its main plant in the town of Letnitsa, Walltopia also has production facilities in Bozhurishte industrial zone and the village of Lozen near Sofia. It is the world's largest climbing wall manufacturer and its products sell in 76 countries.
The good news is that new companies continue investing in the sector in Bulgaria - mainly German automotive component manufacturers. Leoni is currently building a wiring system plant in Pleven, which will start operating this fall. Another German company, MD Elektronik, is investing in a plant in Vratsa and VOSS Automotive has recently started production of CSR lines for diesel vehicles near Lovech. Bader has plans to produce automotive leather covers in Ruse. A breakthrough in the industry, however, will happen if Volkswagen selects Bulgaria to build its next mega plant. The final decision is expected later this year.