After a tough 2020, when machine manufacturers reported an overall drop in business, the news of a new large-scale investment in the sector is a good sign. The Austrian owner of tool manufacturer Ceratizit Bulgaria has announced plans to invest 20 million euro (40 million leva) in its plant in Gabrovo over the next few years. The funds will be used for purchase of additional equipment, the construction of a new production building and a logistics center. The new assets will substantially expand the plant's capacity and the list of products, most of which are exported.
There are good reasons for the decision: the company notes market demand is recovering and orders are now growing at a two-digit rate. Being a key unit for some of the group's products, the plant in Gabrovo, in central Bulgaria, seems the logical location for the investment.
In three steps
The entire investment will be provided by the owners, Liechtenstein-registered Ceratizit, where the majority stake is held by Austrian family company Plansee. The project will be carried out in three stages.
The first includes the purchase of new equipment and will be completed by the end of 2021. "We have already invested 5 million levs (2.5 million euro) and the amount will reach 10 million levs by the end of the year," Ceratizit Bulgaria's CEO Georgi Petrov said. In his words, the company currently has 350 machines and the fleet will be increased by 20%. That will add a few thousand new products to the list of metal-cutting tools and their total number will top 70,000.
The plans for next year include the construction of a new logistics center, which will require changes to the infrastructure and truck access roads, Petrov explained.
The construction of a new production building will begin in 2023. It has not been yet decided whether the facility will be located on the existing site or somewhere else in Gabrovo's industrial zone. The roof of the new building will be equipped with solar panels with total capacity of some 1.5 MW. "That will allow us to cover part of our electricity costs but generally we are a big power consumer," Petrov said. The entire 20 million euro investment project is expected to be completed within five years.
Ceratizit Bulgaria is one of the successful privatization examples in the country. The company is practically successor to the former Instrument Manufacturing Plant (once Bolshevik), which used to be the largest metal-cutting tool manufacturer in the Balkans. In 1996 Austria's Plansee Tizit bought 75% of the plant for 6 million Deutsche marks and later on acquired almost all of the remaining shares, with a small part still held by Bulgarian individuals. The company was later renamed to Instrument Tizit and still later received its current name.
Ceratizit Bulgaria has more than 200 customers in Bulgaria but that is just a small part of its market, as it exports most of its output. The company is a Tier 1 supplier of many large manufacturers in the automotive, aviation and medical industries. The products are transported to a central logistics facility in Germany and distributed from there. The group serves customers in more than 80 countries.
Ceratizit Bulgaria has a separate subsidiary in Gabrovo, Plansee MV, specialized in the production of semiconductor base plates, X-ray targets for medical technology, electrodes for discharge lamps and other items. The companies' consolidated sales in 2020 amounted to 32.5 million levs, down 26% year on year because of the crisis. The profit also slid to 7 million levs.
The announced investment shows the drop was only temporary. "Demand has recovered after last year's crisis. Our production is already at the levels of 2019. Orders are constantly growing and currently they are 23% above our budget," Petrov said. "At the same time we are investing in new technology to preserve the place we have gained after so many years in business."
The two companies in Gabrovo employ some 620 people and their number will rise by 100 after the expansion. In Petrov's words, there is still enough workforce in Gabrovo, although labor shortage is a problem throughout Europe. Part of the investment will be used for (the construction of? financing the development of?) an R&D and training center in the town