Банкеръ Weekly


Machine Building Experiences Revival

Expectations of Bulgarian machine builders became partly justified and this year they look to the market more confidently. Some companies are already feeling the revival and are slowly picking up. The good thing is that this movement is accompanied by improved financial results. Again, export-oriented companies are leading in the recovery. Reviving of the activities of users of these products in Western Europe and the U.S. and increased exports of engineering products helped hike revenues of local businesses. For those who focus on domestic market, the business climate is still gloom.
Manufacturers of hydraulic cylinders retain the level of sales achieved last year. And their results from the first half of 2011 give reason for optimism for the coming months. But they are still dominated by short-term requests of customers, which in turn is a signal that growth is faltering. Hydraulic Elements and Systems (HES) PLC is export-oriented enterprise - primarily to EU countries. Estimates of its management are that sales will remain strongly influenced by opportunities for improving the economies of European countries and in particular the machine building sector. The two economic giants - Palfinger Group and HS Penta, generate about 80% of its sales. Their successful market presence determines the stability of HES.
In the first half of 2011 HES registered a revenue growth of 45.06% as compared to the corresponding period of 2010. Yet they represent only 80.4 percent of sales for the first half of the pre-crisis 2008.
In that year, 97.22 percent of company revenue was generated by its core activity - production of hydraulic devices. Claims to customers increased to BGN7.005 million against BGN5.886 million at the end of June 2010 and, but they are being repaid within the agreed deadlines for delivery of production, company representatives said.
In the second quarter of 2011, M + S Hydraulic AD from Kazanlak continued to increase sales levels - a process that began last year. Revenue from the cumulative distribution for the second quarter came to BGN44.936 million, up 54.44 percent over its sales for the corresponding period of 2010. This is why management makes optimistic forecasts it may increase revenue by more than 30 in 2011 as compared to 2010.
Hidropnevmotehnika Ltd. of Kazanlak also reports increased number and volume of orders, as well as new customers. Sales volumes for the second quarter of 2011 increased by 20% compared to the first quarter. The revenue of the plant for the six months of this year compared to the first half of 2010 increased by 26.6 per cent. There are signs of sustainable recovery in the markets abroad, which is expected to continue until the end of 2011, the company said.
As a result of the imposed expenditure control within the company during the period, its expenses grew at a lower rate than its revenue, and ultimately it ended the first half of the year with a profit of BGN81,000.
The main risk factors that the enterprise may face in the rest of the year are related to the fact that it is working with customers on monthly contracts and has not yet signed long-term contracts with major customers

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