Launching a major investment in new production facilities at a time of economic slowdown in Europe and declining sales certainly sounds unusual. However, the management of Kazanlak-based M+S Hydraulics does not think so. The hydraulic system manufacturer recently announced that over the next three years it will invest 45 million levs (22.5 million euro) in a second plant in the town of Kazanlak, which will increase its capacity for hydraulic motors by 30%.
Preparing for a rebound
The new plant will be located about 300 meters from the current manufacturing facility in the town in central Bulgaria, where the company purchased 3.5 ha of land and buildings in early 2022.
"Our idea was to gradually work towards expansion because there was no longer free physical space to accommodate the volumes, especially those we had until last year, within the current plant," the company's procurator, Vladimir Spasov, told the Capital Weekly.

The project envisions the construction of a production building with 17,700 sq. m of built-up area, as well as administrative and other buildings with over 1,000 sq. m of space. A contract for construction works has been signed with local Barrage Group to the amount of 23 million levs.
The total investment in the project is estimated at 45 million levs, which includes machines and equipment, as well as the planned installation of a photovoltaic system on the rooftops. Spasov estimates that with a plant area of about 18,000 sq. m the installed solar photovoltaic capacity will amount to about 3.5 MW. At the same time, calculations show that the machines will require 3.1 MW of power. "In reality, with normal operation, we would have a fully green plant," he said.
The expansion will allow the company to increase its capacity by more than 30%, with production processes largely automated and robotized. "Our concept is to introduce slightly more high-performance technologies and to move the mass-produced items, which we manufacture in larger quantities, to the new plant. In this way, in addition to increasing capacity, we will also improve operational efficiency," Spasov explained.
At the 2021 levels
Over the past two years production grew rapidly with M+S Hydraulic reporting a turnover of 239.4 million levs and a profit of 36.2 million levs for 2023. However, by the end of last year volumes began to decline and for the first half of 2024 sales dropped by 42% year-on-year to 77.5 million levs.
"This year we are actually operating at about 50% lower volumes compared to last year but this isn't critical because we doubled production in the past two years. Right now we are working at 2021 levels," commented Spasov. In addition to the decrease in economic activity he pointed to the significant overstocking of machines and parts worldwide as a problem. However, according to information from M+S Hydraulic's customers and distributors, inventory levels have been gradually decreasing and are expected to return to normal levels by the third or fourth quarter of this year, which will boost demand.

Overall, Spasov believes that the worst is already behind. "If we consider that the reduction in activity began in November last year, the bottom was reached around March 2024. In the following months there has been relative stability in demand, with a 10 to 15% increase from the bottom," he said. "The forecast from our major end-customers is that the fourth quarter will bring at least a further 10 to 15% growth". Therefore, in his view, the moment for investing in a new factory is extremely suitable. The construction itself will take about a year and a half with another year needed for equipment installation.
"This is our plan. It's better to do it when we're not overwhelmed with work. That way we will be ready when the recovery comes," Spasov said.
Launching a major investment in new production facilities at a time of economic slowdown in Europe and declining sales certainly sounds unusual. However, the management of Kazanlak-based M+S Hydraulics does not think so. The hydraulic system manufacturer recently announced that over the next three years it will invest 45 million levs (22.5 million euro) in a second plant in the town of Kazanlak, which will increase its capacity for hydraulic motors by 30%.