The financial situation of BDZ is deteriorating

Bulgarian State Railways (BDZ) continues to experience serious financial difficulties, with all three main companies reporting negative results at the end of May 2025 and even a deterioration compared to the previous year. This is clear from the response of Transport Minister Grozdan Karadzhov to a parliamentary question.

The data provided shows that BDZ - Passenger Transport and BDZ - Freight Transport are at a significant loss, while Holding BDZ EAD, despite making a minimal profit, has seen a deterioration in its financial results. The main reasons for this situation in the passenger and freight companies are the increase in personnel and energy costs, as well as the decline in revenue from passenger and freight transport.

The poor results come against the backdrop of information that the minister responsible has issued an order for BDZ - Freight Transport and BDZ - Passenger Transport to be separated from Holding BDZ, which is to be closed down in August. The news was first reported by the specialized publication Transportal.

Our team sent an inquiry to the relevant ministry, but at the time of publication, we had not received a response.

We would like to remind you that the first signs of an upcoming restructuring appeared back in April. At that time, the minister announced that a major restructuring of BDZ – Freight Transport was underway, which included cost cutting and an analysis of all freight transport tariffs.

It became clear in early June that a new company would take over repairs at BDZ. According to the minister, this step will ensure equal access to maintenance infrastructure, not only for the state operator but also for private companies that are expected to enter the market by the end of 2026.

“BDZ Holding”

As of May 31, 2025, the holding reported a profit of BGN 73,000, but this represents a deterioration compared to the same period in 2024. The main factor is the decline in revenue from the sale of non-operating assets – by over BGN 3.1 million. This, in turn, contributes to an overall decrease in net operating revenue by 51%, or over BGN 3.2 million, compared to the previous year.

Operating expenses decreased by 4%, or BGN 134 thousand. Despite the increase in personnel expenses (due to the increase in the minimum wage from BGN 933 to BGN 1,077) and electricity expenses (by BGN 64 thousand) the company successfully achieved savings in other areas, including from written-off assets and contributions due to the budget, the minister said.

At the end of May, the holding company employed a total of 78 people out of 114 approved positions. There are 45 people working in the central administration and 33 in the recreation division.

The ratio between actual and planned staff shows the implementation of a cautious and disciplined personnel policy,” the minister's response makes clear.

The company's receivables from subsidiaries at the end of May amounted to just over BGN 2 million (long-term), a slight decrease of BGN 30,000 compared to the end of 2024. Short-term receivables increased by over BGN 1.2 million, mainly due to intra-group transactions. There were no changes in long-term secured receivables from foreign railway operators.

Liabilities to the National Railway Infrastructure Company are maintained at a stable level of around BGN 14.9 million and are subject to a valid deferred payment agreement. Short-term liabilities decreased by BGN 399 thousand compared to the end of 2024.

Liabilities to financial institutions amount to more than BGN 8.4 million and continue to be subject to legal proceedings with First Investment Bank AD. A positive trend is the termination of some of the cases due to the withdrawal of claims by the bank, Karadzhov added.

He added that the company is operating under certain systemic challenges, among which the following stand out: the need for a final settlement of legal disputes with financial institutions; the lack of full and timely access to the compensation due under the Humanitarian Aid Program; and the lack of secured financing for the restoration of the material base of the rest stations after the completion of the humanitarian activities.

The management of Holding BDZ EAD is actively seeking opportunities to overcome these challenges, including through communication with the competent state authorities and participation in financing programs.”

The passenger company

As of May 31, 2025, it reported a net financial result of a loss of over BGN 27.5 million. The reported loss for the same period last year amounted to over BGN 21.8 million. This represents a deterioration of over BGN 5.7 million. According to the information provided by Karadzhov, this is mainly due to several factors:

• Increase in personnel costs – by over BGN 8.3 million;
• Electricity costs – by over BGN 6.3 million;
• Increased costs for access to infrastructure and related services from the National Railway Infrastructure Company – by just over BGN 2 million.

Net sales revenue was BGN 70,000 lower than in the same period of the previous year. Reported compensation for tariff reductions amounted to BGN 109,000 and compensation under the mandatory public service contract amounted to over BGN 7 million. State aid received for non-household customers amounted to over BGN 3.3 million, marking an increase compared to the same period in 2024.

Remuneration expenses amounted to over BGN 61.4 million, an increase of 13%. Social security and other benefits increased by over BGN 1.3 million to over BGN 19.7 million.

Expenses for electricity and heat amounted to over BGN 27.6 million. Fuel expenses amounted to over BGN 4.1 million, but decreased by 7%. Expenditure on external services amounted to over BGN 25.8 million, an increase of over BGN 1.7 million, mainly due to higher expenditure on infrastructure charges (over BGN 2 million), technical service and ongoing maintenance of long-term assets (BGN 366,000) and security (BGN 164,000).

The company's receivables include long-term receivables from BDZ - Freight Transport in the amount of over BGN 6.3 million, which remain unchanged compared to the end of 2024. Short-term receivables decreased by BGN 397,000 as of April 30 this year compared to December 31, 2024. The long-term loan to the Holding amounts to BGN 222,000 and has been reduced by BGN 18,000 compared to the end of the previous year.

In the period January-May 2025, the company carried a total of over 8.6 million passengers, which is 128 thousand passengers less than in the same period of 2024. The average distance traveled decreased by 3.60 km, or 5.24% compared to the same period of the previous year.

Freight transport

As of May 31, 2025, the company reported a loss of over BGN 12.1 million, compared to a profit of BGN 91,000 for the same period in 2024. The negative result is due to:

• A 17% decline in freight revenue;
• A 5% increase in operating expenses, mainly due to increased external services and personnel;
• Compared to the business plan for 2025, a deterioration of just over BGN 12.7 million is reported compared to 2024.

Revenues from freight transport amounted to just over BGN 44.7 million, which is BGN 11.1 million less than in the previous year. Revenues from financing amounted to over BGN 1.2 million, most of which was state aid to compensate for the cost of electricity. Profit from the sale of assets and scrap amounted to BGN 207 thousand, down BGN 340 thousand compared to the previous year.

Operating expenses amounted to over BGN 57.2 million, with personnel expenses amounting to over BGN 32.5 million. The increase in personnel expenses is related to the increase in the minimum wage in the company.

Electricity costs amounted to over BGN 9.9 million. External services amounted to over BGN 10.6 million, of which over BGN 6.1 million were for infrastructure fees and services to the National Railway Infrastructure Company.

The company's total receivables amount to over BGN 14.5 million, including trade receivables of BGN 12.3 million, of which over BGN 2.8 million are overdue. Liabilities amount to over BGN 108.9 million, including overdue trade liabilities of over BGN 6.5 million.

The information presented represents an objective view of the current situation of the two companies at the end of May 2025 and serves as a basis for assessing their current financial position. A full assessment of the financial results for the first half of the year will be possible after the preparation of the six-monthly reports at the end of July 2025,” the minister added.

Translated with DeepL.