When Russia invaded Ukraine, the prices of energy, metals and agricultural commodities literally exploded. Eighteen months later, it is self-evident how much this historic event has affected business, resulting in a record-breaking 2022 for many companies in Bulgaria.
Last year, the club of big corporate firms attained unparalleled success: record revenues and profits for companies, especially those in sectors such as electricity, gas, diesel, arms, oil and fertilizers. Machinery and auto parts makers, bicycle and technology companies are also having a good year in the post-Covid revival.
Two words dominate the explanation behind almost all the numbers in the Capital 100 (K100) ranking this year - Ukraine and inflation. Under their dictates, 2023 has also begun, but at least inflation is turning the tide.
The records listed below in the ranking of the 100 largest companies come against the backdrop of much more moderate economic indicators for 2022: real GDP growth of 3.4%, exports of goods and services 30%, and unemployment of only 5.4%, but with an average annual inflation rate of 15.3%, unseen since EU accession.
Here are the highlights of the new Capital 100:
Historic records in numbers and names
- 60% revenue growth for the 100 largest companies in Bulgaria. There has not been a similar growth since the beginning of the century and the only comparable leap, according to the K100 rankings, had been the previous year - 38%, while the next top result (26%) was reported in 2005 in tandem with the expected entry of the country into the EU.
- A 34% increase in earnings for all companies operating in the country, National Revenue Agency (NRA) data shows. Consequently, the giants reported much stronger growth than small and medium-sized companies.
- 132 billion levs are the revenues of the companies in the K100 ranking for 2022. The business of this group of companies has doubled in two years.
- 611 billion levs have been reported by all 375,000 active companies in the country in their tax returns. Thus, almost 22% of the country's business is generated by these barely 100 companies in K100.
- 8 billion levs is the net profit of the 100 largest companies, which is another record in the ranking. Only seven companies in the top 100 are in the red, with a total loss of BGN 1 billion, and four have not reported a financial result. As many as 21 companies made a profit of more than BGN 100 million.
- The state-owned power plant TPP Maritsa-East 2 has reported the biggest profit - nearly BGN 1.2 billion. But Kozloduy NPP steals the show, with revenues exceeding expenses by more than BGN 4 billion. Due to payments to the fund to compensate for high electricity prices for businesses the final figure was reduced to BGN 730 million. So the plant is the third most profitable in the country, while the state-owned National Electric Company (NEK) is second.
- 35 of the 100 giants have revenues topping BGN 1 billion. This brings down last year's record, when the "billionaire firms" numbered 20, but of course a significant factor is inflation, as the value of money is not the same.
- 24 of the companies in the top 100 are in the energy sector, and they report a total of BGN 50 billion in revenues.
- 55 of the K100 companies are based in Sofia, followed by Plovdiv with eight.
- The second most represented sector with 12 companies is machinery and equipment manufacturers, which together reported a turnover of BGN 6.2 billion.
- The energy sector is the fastest growing - revenues of the top 30 companies jumped by 105%, followed by fuel companies with 97%. The only industry with a decline is construction - there in the top 25 the contraction is 5% due to the lack of new large government contracts.
- The key sectors of machinery plants and software companies are also booming: the former is growing by an average of 29%, the latter by 19%.
- Bulgarian ownership dominates the top 100 - 53 out of the 100 giants. The rest are foreign investments, with their group shrinking by one representative compared to the previous year.
- More moderate, but again extremely high, was the growth of revenues of the 300 largest companies - as much as 50%, or a total of 165.8 billion levs. This is as much as Bulgaria's entire GDP for 2022.
Top of the rankings: the two A's, energy and newcomers
For the third year in a row, the largest company in Bulgaria is the copper plant Aurubis Bulgaria. This time, it has record-breaking revenues of BGN 8.2 billion because the plant has worked without interruption and prices globally have been good. For this year, expectations are more modest because of a long planned refurbishment, but the horizon is rosy - production is set to expand and copper output is a hit because of the boom in renewable energy and electric vehicles. With a net profit of almost BGN 500 million, the company broke its own record and posted its strongest result for the year outside the state-owned power sector.
The vice-champion is the Ruse-based producer of biodiesel and oils Astra Bioplant, which climbed to third position in last year's ranking, and now rises to second position with its peak result of BGN 7.7 billion in revenues. The company, founded by Stanko Stankov in 2005, is the leader in the fuels sector ranking, a step ahead of Lukoil Bulgaria. Together with the group's other main company, the propane-butane trader Bulmarket DM, which has revenues of BGN 1.1 billion, the two Ruse firms have better combined results than the leader Aurubis.
Due to high fuel prices and strong diesel exports by Bulgarian traders, Lukoil Bulgaria moves up one position in the ranking. The Russian giant's company achieved a personal best - revenues of BGN 7.4 billion, or double its previous highs. After a long period of losses or modest profits, the dominant player on the Bulgarian fuel market has reported a positive financial result of 150 million levs.
For the first and probably the last time, the next six positions in the top 10 are occupied by energy companies. Five of them are the well-known state-owned companies: the Kozloduy NPP, NEK, Bulgargas and TPP Maritsa-East 2.
More curiously, two foreign traders entered the top ten for the first time - Expo Bulgaria and Met Energy Trading. The former is a subsidiary of the Swiss Axpo Group and is engaged in trading natural gas and electricity in Bulgaria and beyond, while the subsidiary of the Switzerland-based MET Group entered the public domain when it secured the first alternative gas supplies to Bulgaria via Greek LNG terminals following the suspension of gas supplies by Gazprom.
The top ten is closed by the Portuguese manufacturer of glass bottles and jars B&G Glass Bulgaria, which owns the former Druzhba glassworks in Plovdiv and Sofia. Inflation plays a role, but the main reason for the growth of nearly 42% is that a new furnace was commissioned at the site in the capital last year. Portugal's BA Glass chose Bulgaria years ago as the trading hub through which sales from all 12 of the group's plants in Europe pass, so the turnover is not just due to the two Bulgarian plants. Thus, there are at least three companies in the top ten in the country that have chosen to tax other transactions here because of low taxes.
Investment, salaries and outlook for 2023
In terms of investment and business activity, 2022 was not so phenomenal. Mergers and acquisitions continued to grow in number, but the deals were for small or medium-sized companies. Interest from foreign buyers has been almost exclusively in the technology sector for years.
As for salaries, they grew by almost 17% by the end of last year due to an increasing deficit of people and compensation for rising inflation costs. The country has had a shortage of staff in a variety of industries for years - from construction workers to IT specialists. And in a strong year like last year, apparently many businesses have been able to afford these increases.
In this year's survey on the expectations of employers for their results for 2023, Capital weekly received predictions for 2023 from 58 companies. Of these, 56 provided earnings expectations, with 45 planning for growth, and the top ten with a downward bias were mainly energy and fuel firms, which are objectively doing business at lower prices this year. For profits the picture is mixed, while hiring attitudes are positive - expectations are for 7% rise in employee numbers on average.
One thing is certain - the big bang of 2022 is unlikely to happen again soon. There is currently no prospect of a Big Crunch to follow, but cooling seems inevitable. It will affect at least the energy sector, but it will shrink the performance of fuels and agriculture, and if the world goes into recession - almost everyone else.