This article is part of the Special Issue of KInsights dedicated to the K100 rating of Bulgaria's largest firms. You can buy the entire issue here.
For the first time, the fuel sector in Bulgaria has a new leader: vegetable oil and biodiesel producer Astra Bioplant. Set up in 2007, the company nearly doubled its revenue year-on-year in 2021, to 3.34 billion levs (1.17 billion euro), and booked a 227 million levs profit.
The other large fuel producer, Lukoil Neftochim Burgas, however lost 62% of its revenue, falling to fourth position in the ranking of the 25 largest companies in the sector. Nevertheless, the Russian-owned group still holds most of the fuel business in Bulgaria if the results of all its four local companies are added up. On the whole, the sector recovered from the impact of the pandemic, as consumption increased fast. That is evident from the results of the companies, most of which reached or exceeded their 2019 revenues and reported huge growth on 2020. The top 20's average turnover went up by almost 25% - and by more than 50% if Lukoil Neftochim Burgas is excluded from the calculation.
The new leader
Astra Bioplant is part of Ruse-based Bulmarket Group established by Stanko Stankov. In 2021 the group had three companies among the top 20 largest players in the fuel sector. Most of Bulmarket's production facilities are located in one of Ruse's industrial zones on the Danube River, as well as in the nearby town of Slivo Pole.
The group has two main lines of business. One is liquefied petroleum gas (LPG) trade carried out by Bulmarket DM, which is also on the top 20 list with revenue growth of 74% in 2021. The second is grain production and trade, and production of biodiesel, pharmaceutical glycerin and residual products. That includes Astra Bioplant's first plant in Slivo Pole, raw vegetable oil maker Oleo Protein and biodiesel and pharmaceutical glycerin producer Oberosterreichische Biodiesel, which also ranks among the top 20 companies with 200 million levs revenue, as well as the rented facilities of High Protein in the town of Provadia.
Astra Bioplant snaps up huge quantities of sunflower and rape seed for its production of first-generation biodiesel. The group says it is among the top 5 biodiesel traders in the EU. In 2021 Astra Bioplant produced 360,000 tonnes of biodiesel and 20,000 tonnes of glycerin.
The group also makes second-generation biodiesel, which utilizes used frying oils and residual fats. The investment in a new production facility, which has 100,000 tonnes capacity and was under construction in 2021, is some 17 million euro.
The biocomponent in fuels is required to reach 14% by 2030, including 3.5% of second-generation biofuel, i.e. one that does not affect food production and utilizes residual products. Therefore the company plans to raise the share of second-generation biofuels to 65% of its output by next year's end. They will replace part of the biodiesel produced from soy beans, rape and sunflower seeds, which Europe imports mainly from Asia and competition is tight.
Astra Bioplant commercial director Deyan Stankov explains the company's strong revenue growth mainly with higher prices. However the volume of sales also increased, driven partly by the lifted COVID restrictions to travel.
The third reason was the surge in grain and raw vegetable oil sales. The company sold almost its entire raw oil output on foreign markets, where the margins were bigger than those of biodiesel production.
Astra Bioplant has shelved its plans for an IPO until the market normalizes. The company notes that the prices of raw oils have already started to decline after the steep hike at the beginning of the war in Ukraine.
The long-time leader, petroleum refinery Lukoil Neftochim Burgas, registered the biggest drop in 2021. Its revenue slumped to 1.15 billion levs last year compared to 6.3 billion levs in 2019, due to the fact that the refinery now works on a tolling basis. In December 2020 Lukoil Neftochim Burgas became subsidiary of Geneva-based Litasco, which is Lukoil's exclusive trade representative for oil and petrochemical supplies outside Russia. At the beginning of 2021 the Bulgarian refinery started toll production for Lukoil Benelux, which is registered in the Netherlands and is also owned by Litasco.
Litasco is the owner of the crude that Lukoil Neftochim Burgas processes: it buys oil and exports it by tankers from Novorossiysk to Burgas. The refinery receives payment for processing the oil under a tolling arrangement. All the refinery's products are owned by Litasco through its subsidiary Lukoil Benelux, which sells them to wholesale fuel trader Lukoil Bulgaria (owned by Litasco too).
The new way of operation already affected the refinery's performance in 2020, when it reported a 509 million levs loss. In 2021 the company returned to profit (68 million levs), explaining the positive result namely with the new method of work, which eliminates the market risk of price fluctuations.
Lukoil Bulgaria saw a 48.6% rise in sales in 2021, ranking second in the sector. At the end of 2020 the company was transferred from Lukoil Europe Holdings B.V. to Litasco S.A., as was aviation fuel trader Lukoil Aviation Bulgaria. Last summer Lukoil Bulgaria changed its fuel sales contracts, giving a discount to retailers and placing wholesalers at a disadvantage.
With the post-pandemic renewal of flights in 2021, Lukoil Aviation Bulgaria substantially increased its sales, though they still could not reach the 2019 level. The biggest jump in revenue last year was registered by marine fuel trader Lukoil Bulgaria Bunker: 112%.
The war in Ukraine that started in February 2022 has provided new opportunities to the Russian-owned fuel companies in Bulgaria. The price of the Russian Urals crude oil brand plummeted as a result of the conflict, as buyers shunned it over fears of sanctions, reputational damage and problems with the financing of the deals and the transportation of the product. That made the prices of non-Russian crude skyrocket, allowing international oil giants to pocket huge margins.
In Bulgaria, that resulted in almost complete dependence on Russian oil due to its attractive price. Earlier this year the refinery even announced it would process only Russian oil, because the supply of alternative brands to the Bulgarian market was extremely limited.
The crude price dynamics affected the prices of products too. The wide gap between the prices of products made locally from Russian crude and those of other fuels practically made imports economically unfeasible.
Bulgaria was given a derogation by the EU to import Russian crude by sea until the end of 2024, so that the refinery in Burgas can upgrade its facilities to process more non-Russian oil. Until then, fuel imports are expected to remain tight, forcing some players to consider quitting the business. Such plans have been already announced by Veselin Mareshki, whose company Tradenet Varna runs 13 petrol stations under the VM Petroleum brand. The company reported a 0.2% drop in sales last year and a loss of 1.8 million levs.
By the middle of 2022 there was actually only one company importing fuels: Insa Oil of Georgi Samuilov. The company's sales surged 62% last year, exceeding the 2019 result. Another company of Samuilov, Insa Port in Ruse, saw its revenue climb 142% to 662 million levs.
Exports to Ukraine remain one of the few opportunities for profit from sales, as the country is experiencing a severe fuel shortage.