EU PHARE PROGRAMME INTRODUCTION OF CLUSTER APPROACH AND ESTABLISHING OF A PILOT

CLUSTER MODEL BG 2003/004-937.0203

ANALYSIS OF SUB-SECTORS

Wood Processing & Furniture Industry

Researcher: Elisaveta Alexandrova

December 2005

Bg/JM/FS/12/01/7

BULGARIA’S WOOD-PROCESSING AND FURNITURE

INDUSTRY

1. TRENDS AND DEVELOPMENT:

The employment in the sector is continuously growing – from some 27,000 people in the

beginning of 2003 (in the wood-processing and furniture production) to 39,438 in mid 2004.

This is 46% growth.

The production of the furniture industry has increased up to 240 978 thousand

USD in 2003, which is 22% more. The best results were achieved by companies producing

beds, The producers in this group have increased their production by 372% for the period

2000 – 2003.

For the period 2000-2003 the export of furniture has grown from 87,522 thousand

USD to 128,471 thousand USD which is 32% increase.

The share of the furniture production within the manufacturing sector was 1.2% and

for three years it has grown to 4.5%. We need to bear in mind that approximately 50% of the

GDP is taken by the Services sector, these figures show the importance of the wood-

processing and furniture production industry for the Bulgarian manufacturing sector.

According to some international surveys Bulgaria takes the second place within

Central and Eastern European counties with 22% growth of production.

However, productivity still remains very low. This indicator gives 10,000 Euro per

employee and the country takes the last but one place. Only Romania has lower indicators –

7,100 Euro per employee. . Slovenia is the country with highest productivity in Central and

Eastern Europe – 59,800 Euro per employee.

According to NSI official information in the period 2000-2003 the sector has marked

more rapid growth than other manufactures by approximately 20%.

The timber production as a raw material for the sector has grown as a whole in

2003. In comparison with 2002 the growth is 1.040,307 m3 or 30%.

The export of brad leaved timber and its products has grown from 81,724 m3 in 2002

to 86,400 in 2003. This is a growth of 5.7%. The average price is 379 BGN per m3. The

increase of the price was nearly 10% compared to that of 2002.

The export of coniferous timber has gone down from 206,360 m3 in 2002 to 195,000

in 2003 which is a decrease of 5.5%. The average price is 183 BGN per m3. This is an

increase of 1.4% compared to prices in 2002.

The export of raw timber has gone down compared to 2002 by nearly 50% (165,000

m3 in 2003).

The export of processed timber has gone up by some 15,000 m3 to 281,940 m3 or

15% compared to the average figures for the period 2000-2002.

The government in power agreed to give the sector a special status of development

after Bulgaria’s accession to the EU. This is highly estimated by the sector representatives

as they have to propose how to develop the reconstruction programmes to the most effective

use of the EU funds for regional development in 2005.

57 companies have participated in a Phare project which has provided consultancy

services to small and medium-sized enterprises. The company managers have been

consulted how to improved efficiency through optimization of the work and the production.

This will remain an important task for the Bulgarian companies in the next years.

The number of companies which have received ISO 9001 certificate has grown

significantly from 10 in the beginning of 2003 to 25 in 2004.

The lack of professional local and international marketing has been identified as one

of the serious weaknesses of the branch. The Branch Chamber continues to improve its

services to perfect the marketing capacity of the sector. The Branch Chamber has organized

a number of training seminars for participation in international fairs and has improved the

services for its members through development of a marketing guide and provision of

international contacts.

An information bulletin has been developed on the opportunities for business and

market trends. It has been published three times so far and will be published on quarterly

basis.

The cooperation with the Executive Agency for Promotion of Small and Medium-

Sized Enterprises has improved.

The internal system of the organization of fairs and exhibitions is varied but fairs of

business-to-business type are still missing. The exhibition “Technomebel” is the first of the

business-to-business type which is mainly targeted to the wood-processing industry. Another

fair will be organized to exhibit also furniture production. These two fairs will improve

significantly the information flow in vertical and horizontal line and will enhance

communication and cooperation with international markets (trade and investments).

2. FOREIGN INVESTMENT IN WOODWORKING AND FURNITURE INDUSTRY 2000-

2003

Investor Bulgarian Company Activity

Kronospan Austria Kronospan Bulgaria Ltd.

Burgas

Production of particleboards

and panels

Kastamonuintegre Turkey Gabrovnitsa JSC Gorno

Sahrane

Saw milling and planning of

wood, impregnation of wood

Welde Austria Lesoplast JSC Troyan Production of plywood

Alfa Wood Greece Alfa Wood Bulgaria JSC

Dolen chiflik

Production of elements and

semifinished products for

furniture industry

Djenex 3 company USA Mebel Djen JSC Shoumen Production of solid timber

furniture

Nicoletti Italy Nicoletti Bulgaria Teteven Production of upholstery

furniture

3. THE COMPETITIVE EDGE OF BULGARIAN WOOD WORKING A ND FURNITURE INDUSTRY 1. Advantages:

• Political and economic stability; • GDP growth prospects of about 5% per year; • NATO membership and forthcoming EU accession; • Strategic geographic location, gate to large markets in CIS, Asia and North

Africa; • Attractive infrastructure projects in transport, telecommunications and energy; • Duty free movement of goods and services within a market of 550 million

consumers – EU, EFTA, CEFTA, Turkey, Macedonia, Croatia, Israel and Estonia with free trade agreements;

• Regional dimension – centre of economic and political stability in Southeast Europe;

• Lower labour cost than the average of Europe; excellent labour/cost ratio; • Competitive tax regime; • Significant potential for hi-tech and R&D related ventures; • Agreements on mutual protection and promotion of foreign investment; • 55 double taxation treaties; • Full national treatment of foreign investment; • Institutional support for priority investment; • Reasonable prices and labour costs;

• Skilled and experienced labour force • Export orientation of the sector • Short delivery period • No quotas for the EU and USA

2. Opportunities: • Opportunity for manufacturing in low competitive and low costs environment; • Opportunities for free access to tariff-free zone • Opportunities for increasing productivity levels with organization improvements;

without substantial investments; • Opportunities for cooperation and investing in existing companies with traditions

in dealing with customers on the Bulgarian and foreign markets; • Strategic geographic position • Opportunity for improvement of production technology and product design in

order to achieve better sales results.

III. Zonal Agglomeration: Sofia, Troyan, Ztara Zagora, Velingrad IV. Structure:

4. BULGARIA FURNITURE INDUSTRY SUMMARY Furniture production Furniture consumption

58 74 83 101 113147

178208

0

50

100

150

200

250

300

1997 1998 1999 2000 2001 2002 2003 2004

38 56 65 72 80 97 115 127

0

50

100

150

200

250

300

1997 1998 1999 2000 2001 2002 2003 2004

EUR million EUR million Furniture exports Furniture imports

29 32 39 55 6286

106132

0

50

100

150

200

250

300

1997 1998 1999 2000 2001 2002 2003 2004

9 13 20 26 29 35 43 52

0

50

100

150

200

250

300

1997 1998 1999 2000 2001 2002 2003 2004

EUR million EUR million

Forestry resources, semi-finished wood products and technology.

Land Area forest cover distribution of and cover/use %

,000 ha ,000 ha forest other wooded land other land Bulgaria 110,912 400,376 35 3 62Europe 2,259,906 1,039,250 46 1.3 52.9World 13,139,618 3,869,453 29.4 11.2 58.6

Source: Fao

The coniferous stock is highly concentrated in few regions, and in particularly 62.3% of alll coniferous trees stand in 4 regional Forestry Directions (RDF-Blagoevgrad, RDF-Pazardjik, RDF-Smoljan and RDF-Sofia). In contrary broad-leaved trees are less concentrated, 46.6% in 6 regions, and dominates the territories of Sofia, Bourgas, Lovech, Veliko Tarnovo and Montana. Average annual logging of round timber is stipulated according to the forestry projects, and in the last years was relatively constant and sustainable, amounting to 5,345,209, or less than the 50% of the forest annual rowing stock. The leading companies in forest management are basically two: State Forestries and the State Game-breed. Both are involved in the logging of beech and oak timber, which represent respectively 30% and 9% of the total broad-leaved logging, and of coniferous timber (especially white pine, spruce and fir). The most important activities are: sawmilling, wood planning and impregnation, veneer sheets, plywood and particle board share for almost two third of the whole gross output of the woodworking sector, while of less importance are other productions such as fibre board & other panels and board, builders’ carpentry and joinery and others wood products.

The wood working production of Bulgaria has a share nearly less of 6% of the total gross output of all manufacturer activities.

Bulgaria. Woodworking sector gross output value, 2000-2004*. Million of Thousand EUR

135.1 137.5

162.2173.9

193.3

2000 2001 2002 2003 2004

*data for 2004

Bulgaria. Productive capacity in woodworking sector, 2002. Cubic meters

Conifer Boards 700,000Broad-leaved board 130,000Plates of wooden articles 400,000Plates of wood fibbers 100,000plywood 50,000

Source: Branch Chamber of Woodworking and Furniture

Industry

Bulgaria. Imports, export and trade balance of the main semi-finished product, 1997-2003. Thousand EUR

1997 1998 1999 2000 2001 2002 2003 Sawnwood Imports 1,795 267 953 2,157 1,791 1,985 1,658 Exports 24,164 24,327 33,694 34,365 33,016 34,051 28,436 Trade balance 22,369 24,060 32,741 32,209 31,225 32,066 26,778

Wood-based panels Imports 5,266 2,749 7,936 12,240 16,109 20,549 17,160 Exports 14,957 8,985 33,756 37,756 35,856 48,422 40,436 Trade balance 9,690 6,236 25,820 25,516 19,746 27,873 23,276

Source: Foastat

Bulgaria Import, export, production and consumption of the main semi-finished product, 1997-2003. Thousand n cubic meters

1997 1998 1999 2000 2001 2002 2003 Sawnwood Production 253 253 325 312 332 332 332 Exports 205 36 275 265 264 273 273 Imports 18 3 8 18 11 7 7 Consumption 66 220 58 65 79 66 66

Wood-based panels Production 233 233 216 470 533 533 533 Exports 38 34 169 182 157 280 280 Imports 20 19 25 42 67 137 137 Consumption 215 218 72 330 443 390 390

Source: Faostat

Over the year the trade balance remained highly positive, showing that Bulgaria is

completely self sufficient in woodworking sector.

Relevant is the increase in Wood-based panels production, driven by exports.

Fiberboard panel production is the most relevant with 282 thousand cum in the 2003 which

means an increase by 327% starting from 1997, but ironically this type of panels did not

have weight in the export because their consumption is even larger than production. Other

plywood that perform well are plywood which doubled from 1997 and particle board

production of which production grew by 57% of exported. Not that incisive on the whole

sector numbers are veneers that are the only panels which production decrease over the

years by 65%.

Certifications

No forest land is FSC certified in Bulgaria, while only one woodworking factory is

certificated for FSC. (HEMUS JSC)

Companies – Wood Processing

According to data of the Bulgarian Woodworking and furniture Branch Chamber, a

great increase in total woodworking company number have been from ’97-’02 period and in

2002 almost 5,550 firms are presenting the sector. Mainly this increase is due to a great

number of small companies establishment and the most present juridical status typology

present is SP (Sole producers/traders which represent the 78% of all enterprises.

Bulgaria. Number of enterprises by specific activity in the woodworking sector, 2002.

37% 3% 34% 3% 24%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Cutting out edging and impregnation of wooden M anufacture o f P lywood and wooden plates

M anufacture o f timber elements, details and construction frames M anufacture o f packing from wooden materials

M anufacture o f other timber products

Source: Bulgarian Branch Chamber of Woodworking and Furniture Industry

KRONOSPAN Bulgaria Ltd . – Kronospan part Bulgaria is part of the

Austrian Group Kronospan which is one of the leading producers of wood materials in

Europe. The Bulgarian Agency was settled in the 1997 in Bourgas that is the second

largest sea port and business center of Bulgaria, and this strategic position was

chosen in order to allows easy access to Eastern Europe, near and medium east

markets. Probably it is the most modern enterprise producing wood materials in the

country and its principal products are laminated flooring, HDF, MDF boards, wall

panels and doors. According with the National Insurance Institute Bulletin published

in February 2005, Kronospan is ranked among the top 50 most correct employers in

Bulgaria, with personnel from 100 to 250 people.

LESOPLAST PLC – Lesoplast is located in Troian and it is the largest

company in the country in term of productive capacity. It was privatized by Welde

Gmbh Austria in 1997. Its main productions are plywood with a yearly capacity of

38,500 sqm. yearly and fiberboard with an annual capacity of nearly 100,000 cum. In

the factory work nearly 850 people and average turnover were of 20 million of EUR,

of which nearly half is through exports. Lesoplast is the main exporter of plywood

within its sub-sector.

DARVOOBRABOTVANE-VT JSC – The company is located in Veliko

Tarnovo, founded in 1961 has a long term traditions in manufacturing of various

wooden products for building, finger-joined solid wood panels, and parquet, beech

sawn timber, beech and poplar rotary veneer and plywood. At the the employees are

more than 350 and more than half of the output is export directed to the Western

Europe, North America, Balkan Peninsula and Far East.

FURNIR JSC–Sofia – is established in 1932 and it is one of the biggest factories in

Bulgaria for production of rotary and sliced veneer, plywood details, chair backs, straight and

concave seats, bed slats, etc., made of beech, pine, oak, cherry, walnut and other wooden

types. The total area of the enterprise is 9000 sq. m., the employees are 180.

SOKOLA JOINT STOCK COMPANY - Peshtera – The firm is active since 1947 and

is a manufacturer and trader of high quality coniferous wood boards, laminated panels and

multi –ply beams. Its facilities spread over a surface of 150000 sqm and its productive

capacity is of 150,000 cum of processed timber per year. The total employed in the factory is

200. The company exports more than 80% of its total production.

IKO - Razlog – The company was created in 1996 and is involved in the manufacture

of boards, beams from pine and beech wood. IKO has a 3,000 sqm of production area

situated on a plod of 12,000 sqm. The used technology is quite modern thanks of a join

projects named SAPARD, jointly carried on with EU. Its production is mainly for exportation.

5. FURNITURE PRODUCTION

Bulgaria. Furniture production, 1997-2004. Million of current EUR

58 74 83 101 113147

178208

0

50

100

150

200

250

300

1997 1998 1999 2000 2001 2002 2003 2004

Eur

Source: CSIL processing

Furniture production is on a growing performance since 1997 even if it is slowing down after having recorded a 30% year on year growth in 2002; 2003 and 2004 are respectively 20% and 16%. Despite the growth in production value and indexes a drop in employment figures affected the sector: workers decreased from 19,174 of 2000 to 15,659 of the 2002, underlining a shift toward capital intensification in the furniture production.

Despite the growth in production value and indexes a drop in employment figures affected the sector: workers decreased from 19,174 of 2000 to 15,659 of the 2002, underlining a shift toward capital intensification in the furniture production.

Fig. 3.4 Bulgaria. Furniture and manufactures n.e.c., industrial production price

indexes 2000-2004. 2000=100

100 109.0130.4

194.4

262.3

2000 2001 2002 2003 2004

Source: Bulgarian Stat office data

According to data of the Branch Chamber of Woodworking and Furniture Industry, there were around 3,000 furniture enterprise in Bulgaria. Predominating is the number of the small sized companies, up to 49 employees, and the medium size ones, with 50 up to 250 workers, while almost the 75% of all the companies have the juridical status typology of SP (Sole producers/traders).

5.1 Furniture Leading Companies Bulgaria has a high degree of openness of the furniture sector showing an increasing percentage in the export/production index; this fact lead to consider as major furniture companies those ones that are most international oriented. Bulgaria. The main companies in the Bulgarian Furniture market. Last available data

Company Employees Capacity (pieces per month) Furniture production Turnover (.000 EUR) Certifications TIMEX INTERNATIONAL LTD 250 10,000 Chairs, tables n.a.

SREDNA GORA JSC 400 40 000 Chairs n.a

NIKROM MEBEL JSK 40 - Office, kitchen and hotel furniture 4,500 ISO 9002

LUDOGORIE-91 JSC 280 28,000 Chairs 4,400

MEBEL JSC 66 600

Dining rooms, kitchen, bedrooms, children and office furniture n.a. ISO 9001:2001

MEBEL GEN PLC 120 2,000 Baby and juvenile furniture 1,500 ISO 9001:2002

STANKOV SP 100 250 Upholstered and solid furniture n.a.

OLIMPIA LTD 71 - Living room and bedrooms 920 ISO 9001

IKZUSTVO TRIAVNA JSC 60 800 Home furniture n.a.

RIKO STYLE 120 - Chairs 1,700

VIZATEL - - Modern furniture, sliding door n.a.

Source: CSIL processing of published data

Companies

TIMEX INTERNATIONAL LTD – Petrich – The company, founded in 1991, produces wooden chairs and tables for the commercial seating industry, veneered table tops with solid edge and custom manufacturing based on specification or sample. Its principal exports markets are USA, Canada and Europe. It has a productive capacity of 10.000 chairs per month and has 250 employees.

NIKROM MEBEL JSK – This firm, established in 1997, produces office, kitchen and hotel furniture, then tubular furniture and plywood components for chairs. Its monthly production is about 1.000.000 EUR but could be increased up to 1.500.000 EUR. It employs 40 people and it exports mainly to Europe countries. Moreover it is ISO 9002 certificated and comply with Italian standards too. It is located in Elin Pelin and Lovech. LUDOGORIE-91 JSC – The firm was established in 1963 and produces exclusively chairs of solid beech wood and has a capacity of 24.000 up to 28.000 chairs per month. It is in process of implementation of a project which will rise the capacity to 40,000 chairs per month by 2007. The company employs 280 people and its main exports markets are Europe and America secured by IKEA Sweden. It is certificated for quality, environment and working conditions, corresponding to IKEA’s requirements. It is located in Ludogorie. MEBEL JSC - Stara Zagora – It was founded in 1966 and produces dining rooms, kitchen, bedrooms, children’s and office furniture and then doors. It can produce 60 articles per month for a total volume of 120 cum of solid wood and has 66 employees. It is an export oriented company especially to Sweden, Israel, England, Ireland, Italy and the USA (in this later country Mebel exports mainly veneer bedroom suits). It is in process for the ISO 9001:2000 certification. MEBEL GEN JSC – The company is based in the town of Shoumen and it has been in the business for over 50 years. It is a baby and juvenile furniture producer and has a capacity of 2.000 units per month and employs 120 persons on a productive area of 28.000 sqm. It exports mainly to USA (New York and California) and Great Britain, and over 60% of the company turnover is sold outside Bulgaria and since 1997 90% of the whole production has been exported to the USA. It is in process for obtaining the ISO 9001:2002 certification. STANKOV SP – Sofia – The firm produces upholstered and solid furniture with a capacity of 3.000 items yearly. It employs 100 people. Its main markets for exports are Switzerland, Israel, Serbia and Montenegro. OLIMPIA LTD – Oreshaka, Troyan region – It was founded in 1993 and produces wood home furniture as table for dining and living room Different kind of buffet and bedrooms seats; it produces veneered plywood too. It has almost 3.000 sqm of producing area and employs 71 workers. It is ISO 9001 certificated and exports to Cyprus and Italy IZKUSTVO TRIAVNA JSC – The company produces home furniture such as living and dining rooms and bedrooms, made of solid wood. Its capacity is of 800 items per month and its working force is of 60 people. It exports to Europe and USA. RIKO STYLE - Troyan – It is a company established in 1992, and which is specialized in chairs production mostly made of wood such as beech and pine. Riko has a working area of 6.000 sqm and employs 120 people. The company has is export oriented and exports 75% of the production mainly to USA, UK, ISRAEL, Cyprus and Greece, while the rest of products is sold in the domestic market.

VIZATEL – Vizatel is a family owned company operating in the field of interior design and production of solid wood furniture since 1996. Its facilities are based in Sofia and the production division is on an area of 3.000 sqm, and it is supported with high technology machine parks. The company which is ISO 9001:2000 certified, is probably one of the most known Bulgarian furniture manufacturer, oriented toward modern lifestyle furniture and in 2005 will take part for the third time at the IMM Cologne fair. The company directly sells its products through its own showrooms.

Other Bulgarian furniture companies are listed belo w.

AUGUSTA MEBEL – It is a joint stock company with entirely private capital and its principal shareholders is “The Industrial Holding Bulgaria AD”. The company was founded on the 5th May 1919 as a wood building company. It is located in Shumen. In 1921 started with the production of veneers and by the 1949, when become state owned, was occupied by the production of doors, window panes, furniture and other wood articles. Soon become also an exporter mainly to the Soviet Union and the near East. Today the company still remain in the same production segments and has recently entered new markets such as UK, Germany, USA where 75% of its production is exported. The company is ISO 9001 certified. BOGDAN FURNITURE - Bogdan Furniture is a growing multi-national furniture manufacturing and distribution corporation. Set up initially as an Anglo-Bulgarian joint venture in 1997, it now has associates and management from Bulgaria, UK, Ireland, Italy and Turkey. Today Bogdan has 250 workers and operate on 5 separate sites throughout Bulgaria. Nowadays the production id divided into 4 key segment: upholstery furniture; for corpus furniture of massive, for the production of wooden package and for the production of semi-finished products and metal details. The sales of upholstered in particularly, are distributed internal and internationally as follow: 40% is exported to Italy, Greece and Cyprus while 60% is designated for the home market. The company has a net of own distributors called “Bogdan Mebel” which are 55 all around the country. In addition Bogdan Furniture, through its associates and shareholders, privately owns forest areas throughout Bulgaria, and plans to invest more in these as it grows, in order to become a fully independent and cost effective organization. It has facilities in Sofia and Klisura. DOFI Ltd – It was established on 1993 in Kardjiali. It manufactures of membrane pressed detail using MDF technologies and of veneer for Kitchens, living rooms, bedrooms and others. It has 32 employees and facilities located on 10,000 sqm. ELMA 13 – Stoeva, Hadjiiska – The company was founded in 1991 and is based in Troyan. It produces chairs and tables and counts 44 employees.

FANTASTICO MEBEL Ltd – The company was established in 1993 as a small-size enterprise but gradually grew until becoming today one of the first in Bulgaria. It has now 110 employees and produces furniture for offices, kitchens, homes, hotels and shops. It is located in Russe. FAVO Ltd – It was founded in 1990 and nowadays has 170 employees. It is based in Svishtov and produces tables and other wooden product. GOSPODINOV & SINOVE (Sons) – It is based in the city of Dobrich. Its production is separated into two plant: one for tubular furniture and the other for frame furniture. 50 persons are employed in the productive facilities. The company is ISO 9001:2000 certified and possesses two own showroom: one in Sofia and the other in Varna. INTERIOR 46” Ltd – It is settled in Rousse on a total area of 20,000 sqm. It employs 60 people. Interior produces home furniture such as bedroom sets and kitchen and operates mainly in the Bulgarian market. It is seeking partners for joint-venture abroad. INTEXT Ltd - is a manufacturer of interior doors but also an importer and distributor of armoured garage and fireproof doors and electric materials from GEWISS and BM-Italy. It is ISO 9001-2000 certified since 2003. It is located in Pazardjik. KARABULEV Ltd – It was founded in Pleven in 1995. Today it has 100 employees and a turnover around 800,000 EUR annually. Its main products are doors, windows and furniture for bedrooms, living-rooms and childrooms. OPTIMA MEBEL - It was founded in 1994 in Sofia and is a private company that produce home and office furniture. PARALLEL Ltd – The company was established in 1995 in the town of Sevlievo. Its main production is upholstery furniture but in effect it has three productive units: one of matresses “NANI”, one of polyurethane foam “KOVAFOAM” and one of office and home furnishings. It has a showroom covering 2,000 sqm of area opened in 1999. PLATAN-ARI COM Ltd – It was founded in 1993 and is a home furniture producer such as: living room, upholstered, dining room, bedroom and kitchen furniture. At present it consists of eleven showrooms and storehouse in Sofia and one in Plovdiv. It works with many companies from Germany, Italy, Poland, Turkey, Spain and Malaysia. RETROUJUT – AKSAGA – The company was established in 1990in Yambol. It is specialized in upholstery furniture production. It has a 5,000 sqm productive area on which 180 employees work. It sell both on the internal as on abroad markets especially Germany and Austria, It holds the ISO 9001:2000 certification. RIVA 21 Ltd – Riva is a producer of chairs, barstools and tables for commercial and home usage. It was founded in 1999 and based in Petrich. It employs nearly 80 persons.

SNEGT Ltd – It is a furniture manufacturer founded in 1996. It produce wooden furniture and do not have a single specialization but produce custom made furniture of any type. Its main products are pine furniture for house, garden, restaurants and hotels. It is located in Bansko. STANKOV FURNITURE Ltd – Stankov was founded in the 1991 and its main activity is production of upholstery furniture. At the present the company is located in Sofia where in its facility are working 108 employees. It has two showrooms in Sofia too. TOTAL-M Ltd – Total is a Bulgarian furniture company founded in 1990. It is based in Shoumen and employs nearly 45 persons. The company produces a wide range of things, such as: chairs, tables, office furniture, beds, wardrobes and children rooms. The company is specialized in furnishing of public areas and buildings.

Nicoletti will further invest in Bulgaria. The Italian furniture producer Nicoletti is one of the biggest investors in Bulgaria. Nicoletti is present in Bulgaria since 2003 when the Bulgarian Agency of Nicoletti was established in Teteven being then the first investment of the firm outside Italy. The Teteven factory employs 127 people and is the most productive agency of the Nicoletti outside Italy. There Nicoletti produce upholstered seats for high end market with prices around 2,000 EUR which are primarily directed toward exports. In 2004 thanks to the 27,851 divans produced, Nicoletti Bulgaria had 5,93 million of sales of which 60% thanks to exports in Great Britain and 20% to USA and the remaining to Israel, France, Belgium and Holland. Nicoletti has opened a new unit in Bulgaria in 2003. The new factory have 25 thousand sqm of surface on an area of 6 or 7 ha and will employ 500 persons, The factory is set in Teteven. The branch of Teteven in 2003, was awarded as “The best employer of the year” of Bulgaria. Source: ICE 2004.

6. INTERNATIONAL TRADE

Bulgaria. Furniture exports, imports and trade bala nce, 1995-2003. EUR million

80

19 18 1929 33

5063

-100

-75

-50

-25

0

25

50

75

100

1997 1998 1999 2000 2001 2002 2003 2004

Exports Imports Balance trade

Bulgaria’s Furniture heads for EU markets Bulgarian furniture sector in 2004 had very positive performance and a major push toward internationalisation of the Bulgarian furniture sector, come from the participation of seven Bulgarian companies to International Furniture Expo in Koeln, Germany were two companies sealed contracts for 300,000 EUR. More contracts are expected to be signed in 2005 for another 270,000 EUR. Source: Sofia News Agency, February 2005

Bulgaria. Furniture imports by country and geograph ical area. Percentage shares 1999, 2001 and 2003 based on value data

0%

20%

40%

60%

80%

100%

Italy Poland Turkey Africa America Asia and

Pacific

Other

Europe

Other Middle

East

World Total

1999 2001 2003

Bulgaria. Furniture exports by country and geograph ical area. Percentage shares 1999, 2001 and 2003 based on value data

0%

25%

50%

75%

100%

United

Kingdom

United States Germany Africa Other

America

Asia and

Pacific

Other Europe Middle East World Total

1999 2001 2003

Italy is among the main Bulgarian commercial partne rs For the year 2003, the three major exporter partners to Bulgaria, were respectively Germany, the Russian Federation and Italy. In relative terms contrary, Turkey is the countries which increase most the value of exports to Bulgaria which grew by 68.5% or 580 million EUR in respect to the 2002. Then comes Germany with a year on year growth by 35.9%, or 1,354 million EUR and third Italy grown by 23% or by 970 million EUR. Contrary Italy is the first importer of Bulgarian products value of which in 2003 increased by 19.1% reaching 919 million EUR. In the Italian-bulgarian trade relations, furniture sector plays an important role both in imports as exports and in 2003, grew respectively by 20.1% and 28.2% in respect to the 2002. Source: ICE, 2004

6.1 Furniture imports

Bulgaria. Furniture imports, 1996-2003. EUR million and annual % changes

5243352926201390

50

100

150

200

250

300

1997 1998 1999 2000 2001 2002 2003 2004

20.9 21.2 21.4

43.9

-17.8

28.7

13.2

50.8

-20

-10

0

10

20

30

40

50

1997 1998 1999 2000 2001 2002 2003 2004

% changes

Furniture imports are today stable 20% growth rate, but before 2001 knew a very nervous moment peaking up and down irregularly. One main point has to be noticed about the 1998-1999 growth, which is in coincidence with the major increase of yearly consumption expenditures of the 1998 when furniture consumption grew by 80% and total consumption by 60%. In 1999 infact imports grew by 50% on the previous year value following the market demand. In the subsequent year, due to a slight contraction in total expenditures and in furniture expenditures, a light slow down on imports values is expected.

Bulgaria. Furniture imports by product, 1998 and 20 03. Percentage breakdown in value

4.6 5.39.7

5.5 5.2

40.5

11.312.318.0

39.3

13.45.47.07.67.77.3

0

10

20

30

40

50

upholsteredfurniture

non-upholstered

seats

parts ofseats

bedroomfurniture

kitchenfurniture

officefurniture

otherfurniture

parts offurniture,excludingparts ofseats

1999 2003

Bulgaria. Furniture imports by product. Annual % changes at current prices 2003 over 2002 and average growth rate, 1998-2003

36.1

23.7

33.936.0

16.3

5.2

35.0

21.0

5.6

33.1

22.2 19.9

12.4

23.528.0

13.7

0

10

20

30

40

50

upholsteredfurniture

non-upholstered

seats

parts ofseats

bedroomfurniture

kitchenfurniture

officefurniture

otherfurniture

parts offurniture,excludingparts ofseats

2003/02 av 99-03

6.2 Furniture exports

Bulgaria. Furniture exports, 1996-2003. EUR million and annual % changes

132

106

86

6255

393229

0

20

40

60

80

100

120

140

1997 1998 1999 2000 2001 2002 2003 2004

12.7

22.2

41.2

13.7

37.8

23.025.3

11.2

0

10

20

30

40

50

1997 1998 1999 2000 2001 2002 2003 2004

% changes

Bulgarian exports are performing well and they seem to be the key factor of furniture production growth in the last years as told by the growth of the export on production ratio which is well above 50% since the year 2000. As in other points was observed a slow down occurs starting from 2002.

Bulgaria. Furniture exports by product, 1998 and 20 03. Percentage breakdown in value

7.5 6.6 8.13.7

10.55.0

9.1

30.8

1.6

31.4

18.2

39.5

7.11.5

8.611.0

05

101520253035404550

upholsteredfurniture

non-upholstered

seats

parts ofseats

bedroomfurniture

kitchenfurniture

officefurniture

otherfurniture

parts offurniture,excludingparts ofseats

1999 2003

Bulgaria. Furniture exports by product. Annual % changes at current prices 2003 over 2002 and average growth rate, 1999-2003

12

31

3

27

4

34

71

2534

151424

37

71

4231

0

20

40

60

80

100

upholsteredfurniture

non-upholstered

seats

parts ofseats

bedroomfurniture

kitchenfurniture

officefurniture

otherfurniture

parts offurniture,excludingparts ofseats

2003/02 av 99-03