market wrap-up
The last trading session of the month brought no surprises as the indices made only small moves. Some of the most liquid names received support but the sellers were prepared to act. At the end SOFIX closed at 1027.99 (-0.28%) which was a gain of 1.35% for August. BG40 and BGTR30 moved up, to 251.24 (+0.22%) and 664.45 (+0.25%) respectively. The acquisition of Bulgarian American credit Bank (5BN) by Allied Irish Banks was concluded also on Friday as an OTC trade. The buyer paid a little above 216 mln Euro for 49.99% of the capital of the bank. Among the actively traded were First Investment Bank (5F4, BGN 5.80, -1.53%) with more than 34k , Bulgarian American credit Bank (5BN, BGN 58.58, -0.20%) with 57k shares and Sopharma (3JR), which lost 3.05% to BGN 4.348.
| Sofix | BG 40 | BGREIT | BGTR30 | |
| Value | 1 027.99 | 251.24 | 86.51 | 664.45 |
| 1-day change (%) | -0.28 | 0.22 | 0.06 | 0.25 |
| 7-day change (%) | 0.24 | -0.44 | -1.21 | 0.05 |
| 90-day change (%) | -18.41 | -28.23 | -10.02 | -21.19 |
| 365-day change (%) | -35.50 | -39.52 | -13.49 | -33.56 |
Note: BG REIT and BG TR30 started 31 August 2007
| BSE Daily Volume (shares) | 6 166 812 |
| BSE Daily Volume (BGN) | 15 777 274 |
| Avg Daily Turnover YTD (BGN) | 11 946 755 |
| Avg Daily Turnover 12 mo. (BGN) | 19 846 014 |
| Inflation (HICP, M/M July) | 1.4% |
| Inflation (HICP, cum. 2008) | 7.2% |
| LEONIA Reference Rate | 5.21% |
| SOFIBOR /3 months/ | 7.311% |
| GDP Growth (Y/Y Q2 2008 preliminary) | 6.3% |
| Unemployment (July 2008) | 5.96% |
exchange rates
| Current | Change | |
| BGN/USD | 1.32734 | 0.00288 |
| BGN/EUR | 1.95583 | Fixed |
| EUR/USD | 1.4735 | -0.0032 |
DAILY TRADING (selected stocks)
All figures in BGN (BGN/EUR rate fixed at 1.95583)
Compensatory Instruments (table)
ECONOMY AND POLITICS
Macroeconomic news and statistics
One third of Bulgaria’s working age population is not part of the workforce
Nearly a third of Bulgaria's working age population is not part of the country’s workforce despite the shortage of labor in a number of industries. The unemployment centres do not have on record some 1.6m Bulgarians aged 15 to 64 that are inactive.
One third of that population is in college, on parental/maternal leave or is out of work for some other reason. Another 340k Bulgarians are off the market because of near-retirement age while 225k are unemployed for medical reasons. A further 150k unemployed Bulgarians are not actively looking to get hired. Finally, 107k people are not economically active and are presumed to live off rent or jobs in the gray economy.
The great number of working age Bulgarians that are not part of the workforce is notable in comparison with the jobless rate which has fallen below 6%. Experts say poor educational background is the main reason for the large number of people giving up looking for a job. Another problem is that 90% of the demotivated live in rural areas or small towns where unemployment is higher.
Human resource experts believe that the adoption of laws regulating part-time employment will cut sharply the number of unemployed. Recruitment experts expect that the introduction of more flexible labor market rules could add 1m people to the workforce.
Source: Dnevnik
Energy sector
Gas distributor Bulgargaz wants a 30% price increase
State-controlled gas distributor Bulgargaz has requested a 30% price increase for its services from October 1. On Monday, the company is due to power down the gas supplies to the district heating companies in Sofia, Burgas, Pleven and Vratsa over unpaid bills. The power regulator said it was not likely that it would approve the requested 30% tariff hike unless
Bulgargaz argues a very convincing case. All the gas tariff revisions proposed so far by the gas distributor have been reduced by the regulator before enforcement.
The second largest group of gas consumers in Bulgaria are the heavy industry companies. According to the representatives of the Bulgarian association of the metallurgical industry, an upward revision of gas prices towards the end of the year would have a negative impact on the investment climate in the country.
Source: Dnevnik
Retail trade
German retailer Lidl starts construction of Bulgarian outlets
German retailer Lidl will start building a pilot outletin the city of Lovech, Northern Bulgaria, according to company statement. Work on another five outlets will begin by the end of 2008 to be followed shortly by the launch of construction of as many Lidl stores. The retailer hopes to have 10-12 operational outlets in Bulgaria by 2010.
The company will also invest in a large distribution center. It has bought the site for the center but did not disclose the location. Lidl is part of Schwarz Unternehmensgruppe which already has a retailing Business here through the Kaufland chain. market research outfit Planet Retail recently said the discount retailers are expected to own 4% of the Bulgarian grocery market. The local retail market will soon welcome a further two new entrants, Penny market and Plus.
Source: Dnevnik
CORPORATE news
Industrial Holding Bulgaria AD [4ID]
IHB H1 consolidated net profit grows 25% YoY on hike in net financial income
Industrial Holding Bulgaria (IHB) consolidated revenues dropped 20% YoY in H1 2008 down to BGN 42.4m. The decrease was entirely due to 85% YoY decline in shipbuilding revenues (BGN 2.9m in H1 2008) which offset the growth in other businesses. Shipbuilding revenues are recognized in three stages of completion and thus are highly seasonally. That said, in the process of consolidation IHLBL has eliminated additionally BGN 6m revenues from construction of a ship being built for one of Privat engineering subsidiaries (97%-stake IHLBL subsidiary).
In H1 2008 EBITDA margin improved almost 2pp up to BGN 19.5% on cost efficiency improvements in most of IHB subsidiaries. In nominal terms EBITDA declined 12% YoY over the period to BGN 8.3m.
Despite the drop in EBITDA, consolidated net profit increased 25% YoY to BGN 7.5m strongly supported by 15x YoY growth in net financial income up to BGN 2.5m. In H1 IHB reported BGN 2m dividend income (BGN 0.5m in H1 2007). Due to its large cash position (BGN 77m in H1) the holding also reported positive net interest income (BGN 0.7m) compared to net interest expense of BGN 0.3m in H1 2007.
Source: FFBH
Eurohold Bulgaria AD [4EH]
Eurohold’s revenues up 128% YoY in H1 2008
For H1 2008, Eurohold’s consolidated revenues reach BGN 209m (up 128% YoY). Non-financial revenues (including revenues from the insurance, auto, real estate and manufacturing segments) registered a twofold YoY growth totaling BGN 152.5m. The net income for the period was BGN 41m compared to BGN 5m in H1 of 2007. The Holding’s assets grew to BGN 554m (up 24% YtD).
Source: Eurohold Bulgaria}
Euroins Bulgaria AD [4EH]
Euroins Insurance Group acquires a minority stake in the Serbian general insurance company Takovo Osiguranje
On August 29, 2008 Euroins Insurance Group (EIG) acquired 41.9 shares of Takovo Osiguranje which represents approximately 10% stake in the listed Serbian insurance company. The value of the deal totals EUR 3.65m and was executed on the Belgrade Stock exchange.
There are 18 insurance companiesactive on the Serbian market, 9 of which sell only non-life insurance products and 6 offer both life and non-life products. For 2007, the total market insurance premiums reached EUR 565m, 89% (EUR 503m) of which were generated by general insurance.
Takovo is the sixth largest (based on market share) Serbian non-life insurance company. The company is a dominant player with 9.3% market share in the mandatory Motor Third Party Liability insurance with over 250 000 policies underwritten in 2007. For 2008, the company expects to increase its total collected insurance premiums by 50% YoY, reaching EUR 26m in insurance premiums. akovo is a listed on the Belgrade Stock exchange with current market capitalization of EUR 38m.
The acquisition of a minority stakein Takovo Osiguranje is the first step in the expansion of EuroHold into neighboring Serbia. EIG and Takovo will partner in offering new insurance products, integration of proprietary IT systems, as well as adopt IFRS accounting and reporting policies. Having strong alignment of interests with Takovo’s management and current shareholders, EIG will have a representative in the Board of Directors of the insurance company to better synchronize both companies’ joint development efforts.
As a next step of its expansion in Serbia, EuroHold plans to establish a leasing company in the country which will offer joint leasing-insurance products and packages to Takovo customer. EuroHold owns the largest non-bank affiliated leasing companies in Bulgaria along with fast developing leasing businesses in Romania and Macedonia.
Source: Eurohold Bulgaria
Sopharma AD [3JR]
Weak production sales lead to margins deterioration, despite the improving trade activity Sopharma H1 consolidated revenues were reported at BGN 219m, up 31% YoY. The consolidated sales in the second quarter grew faster YoY than in the first quarter – they reached BGN 114m in Q2, up 36% YoY, while in Q1 they grew 27% YoY to BGN 105m. This was, however, due to increasing trading activity, as the unconsolidated results (the production activity) actually registered a slow-down (-3%) in the last quarter.
71% of total revenues in H1 came from sales of goods (BGN 156m, up 59% YoY) - mostly realized by the trade subsidiary Sopharma Trading, which improved its top-line performance YoY in both quarters. The production revenues (concentrated in the parent company) took 25% of total sales in H1, decreasing by 11% YoY to BGN 55m, after the decline in the second quarter.
As a result of the Q2 drop in production sales (which havemuch higher margins) and the rising operating expenses on all lines (materials, compensation and hired services costs), EBITDA decreased by 20% YoY to BGN 23.1m. EBITDA margin for the six months of 2008 was 11% vs 17% a year ago and 22% on unconsolidated basis.
Below the EBITDA line, higher depreciation costs (BGN6.2m, up 45% YoY), net interest expenses (BGN 3.5m, up 108% YoY) and a foreign exchange loss of BGN 0.9m led to net profit of BGN 11.5m for the first half of the year, down 43% YoY. The net profit margin declined to 5% vs 12% a year ago and vs 11% on unconsolidated basis.
Operating cash flow was negative BGN19.9m vs negative BGN 7.5m for the year-ago period, as working capital increased by BGN 33.5m since the same time last year (and BGN 17m since the beginning of 2008). Significant purchases of investments and capex (for a total of BGN 36m) further depleted the cash position, and necessitated the increase in the debt levels to BGN 172m, up by BGN 24m since January. The interest-bearing debt to assets ratio was 35% at end-June (vs 33% at the end of 2007).
ROaE (TTM) and ROaA (TTM) were 9.7% and 5%, respectively, vs 10.1% and 5.4% at end-2007.
Source: FFBH
Biovet AD [53B]
Biovet increases sales by 8% for H1 year 2008
Bulgarian veterinary drug maker Biovet has increased its sales by 8.3% YoY in H1 2008, the consolidated report of the company shows. The increase is due to the steady growth of the markets where the company sells its products according to Angel Zheliaskov, executive director of the company. sales reached BGN 56.5m in end-June, compared to BGN 52.2m a year ago. Net income improved more than 100% YoY to BGN 56k but net income margin remains extremely low at 0.1%.
Source: Pari
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