Банкеръ Weekly


State-Owned Companies with Pathetic Performance but Higher Wages

Is the state a good entrepreneur? Surely a definite answer is difficult as here and there good examples can be found. Otherwise, the objective view of the situation of the companies that are managed by the Bulgarian government was given by the leading financial audit and advisory services Aktiv, provided specially for the Banker weekly. It is made on the grounds of the Commercial Register annual financial statements for 2012 and 2013 and so there could be no doubt in the veracity of the data. It’s all a matter of interpretation.

“We believe that for the first time one has viewed and compared in one place all companies with state ownership. Visitors can see concrete results in comparable parameters creating an idea of the state-owned companies, and what achieves the state in its role as an entrepreneur. We enabled real numbers and comparisons between them to describe the corporate government business as well as determine what exactly it is: a competitor, a partner, a social event, stability, jobs, economic condition of reduced taxes or something else. Various approaches will fall on digital pictures displayed - first, of those who believe that more state-owned companies are needed and this would be better, of others with the opposite way of thinking and of some third ones, who will not care, while s fourth group will wonder how many people are involved in state business. Maybe there will be exclamations: how much room is left for privatization or other visions - of how much scope there is for reindustrialisation. Businessmen will compare their labour productivity, and some would envy their remuneration,” the authors of the list from Activ say.
Closely viewed, in Bulgaria there are 229 state-owned companies, which last year employed 80,319 people. Their aggregate revenues exceed 11 billion levs (at 12.255 billion levs year earlier) and their financial result was a profit of 501.74 million levs (at 624.9 million levs for 2012). What immediately strikes the eye a is that the work efficiency in them decreases. Labour productivity (total revenue divided by the number of insured persons) is 138,000 levs for 2013 provided that the previous year it was 150,000 levs. Profitability (profit per each insured person) is even more worrying - 6,250 levs against 7,660 levs in 2012. And the paradox is that at this background salaries increase - 1.417 billion levs for 2013, against approximately 1.396 billion levs before.

Indicative of the situation in the first ten companies that give 74.96% of the revenue of all 229 state enterprises included in the list for 2013. Eight of them are from the energy system, which shows that no matter how bogged down this sector may be, it still continues to be the “golden well” of the state. On the top in terms of proceeds - with over 3 billion levs worth of revenue is the National Electric Company (NEC), which everybody is now trying to save from bankruptcy by all sorts of financial tricks. It posted a loss of over 137 million levs for 2013 provided that the previous year it was in the red at only about 5 million levs.

Far more interesting is the situation with the second in the ranking - Bulgargas. Its revenue in 2013 was is 1.528 billion levs, or about 350 million levs less than in the previous 12 months. Yet the company made a remarkable turnaround - a loss of over 113.5 million levs for 2012 while it was in the black figures with 62.164 million levs the following year. Thus unique (anti)profitability of Bulgargas from minus 2.317 million levs was reversed to a plus 1.195 million levs per employee.

The “bronze medal” went to NPP Kozloduy. NPP also reported a significant decline in revenues and profits, which is especially troubling because it will have to perform an extensive programme of modernization of V and VI blocks to continue their operations after 2020.

Overall revenues for all other companies in the top 10 fell from 9.309 billion to 8.285 billion levs. But surprisingly, their total profit increased by more than 100 million levs - from 384.14 million levs to 484.2 million levs. Respectively, profit tax jumped from 34 million levs to 41 million.

Realistically, however, this good performance is delivered absolutely statistically and was mainly due to the Bulgarian Energy Holding (BEH) which in 2013 had a profit of 396.918 million levs, or 38.83% more than reported in 2012 when it stood to nearly 285.6 million levs. This structure was created at the time of the tripartite ruling coalition with promises it could get a good credit rating and thus better conditions for borrowing necessary to rehabilitate Bulgaria’s energy capacity, reducing emissions of carbon dioxide, constructing new plants using renewable sources and improving energy efficiency. For these reasons, the profit was achieved with a subtle trick. The mentioned 396.918 million levs are a separate financial result. The consolidated profit, which includes all state energy companies falling under the umbrella of the holding, is far more modest - only 29.29 million levs. It was on this basis that BEH paid dividend to the state budget, which left it with pretty much free liquidity. With some of the funds the state will now raise its capital, probably in order to launch a new bond issue.

In fact, in such moves lies the biggest problem of state-owned companies - they lacked predictability of work, long-term strategy and act primarily in view of the cyclical political interests. There is no interest of the ruling circles to take moves that are in favour of the subordinate structures. Therefore, the financial results of the public companies continue to deteriorate. And if that does not change - the situation will become even worse.

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