LM Legal Services Blog

The turnover of the largest Bulgarian construction companies in 2007 was 2.7 billion levs according to the Builders’ Chamber in Bulgaria (KSB) which announced the annual statistics on the eve of the day of the builders, St Dimitre’s Day. More than 2400 Bulgarian construction companies have provided information for these statistics.

The largest construction company in Bulgaria is Glavbolgarstroy AD with a turnover reaching 228.9 million levs. Roads Holding is in the second place with 151.7 million levs. It seems unlikely a company building roads to take the first place, as there are no infrastructure projects for the time being.

The growth of the construction industry according to its chamber demonstrated a growth of 16% per annum but this year there will be a slow down. This recession has been expressed in the halting of investment projects and of planning permissions. If the European funding has not been stopped, the construction industry would have maintained its growth.

Bulgaria’s economic development depends heavily on the ability of the country’s production to compete on the European market.  From 2000 until 2006 the industry has experienced a speedy development. The invested capital has increased three times. The original capital has increased 3.4 times and the floating capital – 2.9 times. At the same time the effectiveness of expenses is low and the increase is insignificant. For this period one lev of expenses has resulted in 1.06 levs of income. The profitability of the invested capital is 6% – rather disappointing in comparison to the level of the interest rates of the bank credits. The increase of the production is mainly due to the increase of the number of producers, rather than good organisation. The reason for this is the structure of the industry which is still to a great extent ineffective. As result there is a necessity to develop a new strategy for the Bulgarian industry and to underline priorities. The emphasis should be on highly effective projects. Another significant problem related to this one is the decrease of the profitability of the long-term assets and the inadequate qualification of the workforce.

The situation is much better in relation to the use of the current assets. The improvement is obvious and it is expressed in the decreased time for the turn over of the material reserves and the decreased need for materials. One lev of goods has been serviced by 0.16 levs of material reserves, which is an increase of about two levs.

The short term debt to suppliers has increased and also both the number of days for the collection of the short term debts and for paying the short term debts. The ratio observed is that for one lev of receipts from clients, there are 0,83 levs of short-term debts to suppliers.

Generally, there is a tendency for the short term improvement of the financial situation of the companies and their liquidity has increased which mainly due to the good work of the management.