Impact of the COVID 19-induced economic crisis on industries

Agri-food

Late payments and cash flow

  • Late payments in the Bulgarian agri-food industry affect nearly 35% of the total value of B2B invoices (double compared to last year’s 18%). Due to the pandemic-triggered economic crisis, 35% of respondents in the industry reported having to wait longer to cash in overdue invoices, on average up to 24 days longer than the due date.
  • Average DSO increases of 10% or more were reported by 91% of respondents. Currently DSO in the industry stands at a 49-day average (well above the 103-day average for the industry in Eastern Europe).
  • 74% of the survey respondents in the Bulgarian agri-food industry told us the pandemic-induced economic crisis has negatively impacted their revenue, while 61% of respondents reported negative impact on cash flow.
  • To avoid liquidity issues due to late B2B payments, most agri-food businesses (53%) delayed payments to suppliers. 48% increased the amount of time and resources spent on chasing unpaid invoices, while 40% undertook hiring freezes to keep costs under control.

Approach to credit quality assessments

  • The onset of the pandemic-led economic crisis has not changed the way businesses in the Bulgarian agri-food industry approach credit checks. This is mainly based on data obtained directly from customers, along with information from customers’ financial statements.
  • Once credit information is collected, priority is given to evaluating a customer’s profitability, financial flexibility and ability to generate cash. Businesses in Bulgaria’s agri-food industry tell us they will continue to focus on these areas over the next six months.

Approach to credit management

  • Following the onset of the COVID-19 economic crisis, survey respondents in the Bulgarian agri-food industry tried to reduce the impact of payment default by using outstanding invoice reminders and collecting on invoices more quickly than before the pandemic, requesting payment guarantees, and using credit insurance. Over the next six months, respondents in the industry plan to make wider use of trade debt securitisation.
  • Over the next six months, more respondents in the industry expect their B2B customers’ creditworthiness to improve (46%) than those expecting deterioration (25%).
  • Bulgaria’s agri-food industry considers the greatest challenges to profitability in 2021 will include maintaining adequate cash flow (49%, compared to 45% in the industry at a regional level), containing costs (46%, regional average: 37%) and collection of outstanding invoices (45%, regional average: 36%).

2021 industry outlook

  • Considerably more respondents in the industry (52%) expect the domestic economy to deteriorate over the next six months than those expecting it to improve (39%). The same goes for the outlook for the global economy (35% optimistic, 50% pessimistic) and international trade (36% optimistic, 54% pessimistic).

Chemicals

Late payments and cash flow

  • Late payments in the Bulgarian chemicals industry affect nearly 32% of the total value of B2B invoices (up from last year’s 14%). Due to the pandemic-triggered economic crisis, 40% of respondents reported having to wait longer to cash in overdue invoices, on average up to 21 days longer than the due date.
  • Average DSO increases of up to 10% were reported by 64% of respondents in the chemicals sector. Increases of DSO above 10% were reported by 33% of businesses. Currently DSO in the industry stands at a 51-day average (well below the 91-day average for the industry in East- ern Europe).
  • 62% of the survey respondents in the industry (compared to 58% at regional level) told us the pandemic-induced economic crisis had a negative impact on their revenue, while 45% of respondents reported negative impact on cash flow (almost in line with the 47% of respondents in the industry at regional level).
  • To contain the costs incurred by late payments, respondents from the Bulgarian chemicals industry most often increased the amount they spent on time, costs and resources to chase unpaid invoices (42% of respondents versus regional average of 30%). In addition 32% of businesses practised hiring freezes and sought finance from external sources (compared to 37% and 21% of respondents in the region respectively).

65%

of businesses in Bulgaria expect the domestic economy to deteriorate over the next six months.

Atradius Payment Practices Barometer – November 2020

Approach to credit quality assessments

  • After the onset of the pandemic recession, respondents from the Bulgarian chemicals industry changed the way they approached credit checks and began to place a stronger emphasis on information provided directly from the customer, adding to the information available in the customer’s financial statements.
  • Once credit information is collected, businesses in the Bulgaria’s chemicals industry give priority to the evaluation of a customer’s payment history. They told us their approach would remain unchanged over the next six months.

Approach to credit management

  • Following the onset of the pandemic-triggered economic crisis, survey respondents in the Bulgarian chemicals industry increased their efforts to reduce the impact of potential payment defaults on the business. The steps they took included: selling on cash terms (85% of respondents), and asking for payment guarantees (75%). Over the next six months, respondents in the industry plan to make wider use of self- insurance.
  • Over the next six months, more respondents in the industry expect their B2B customers’ creditworthiness to improve (41%) than those expecting deterioration (32%).
  • For most of the industry respondents, a fall in demand for their products and services presents the greatest challenge to profitability in 2021 (46% of respondents, compared to 36% in Eastern Europe). Maintaining adequate cash flow is also regarded as a challenge by 45% of respondents, compared to 36% at regional level.

2021 industry outlook

  • A lot more industry respondents (54%) expect the domestic economy to deteriorate over the next six months than those expecting it to get better (38%). The same goes for the future of the global economy (with 30% of sector respondents expressing optimism and 54% being more pessimistic), and for international trade (25% optimistic, 53% pessimistic).

Consumer durables

Late payments and cash flow

  • Due to the pandemic-led economic crisis, late payments in the Bulgarian consumer durables industry increased to 41% of the total value of B2B invoices, up from last year’s 22%. 30% of respondents reported having to wait longer to turn overdue invoices into cash, on average up to 18 days past the invoice due date.
  • Average DSO increases of up to 10% were reported by 62% of respondents. Increases of DSO above 10% were reported by 28% of businesses in the consumer durables sector. Currently the sector DSO stands at a 58-day average (considerably below the 155-day average for the industry in Eastern Europe).
  • 59% of the respondents in the Bulgaria consumer durables industry (compared to 51% at regional level) told us the pandemic-induced economic crisis had a negative impact on their revenue. 50% of respondents reported negative impact on cash flow (48% at regional level).
  • To contain the costs incurred by late payments, just over half of the respondents from the Bulgarian consumer durables industry (51%) most often resorted to hiring freezes (compared to 46% of respondents in the industry at regional level).

Approach to credit quality assessments

  • Respondents in the industry told us they did not change the way they approached assessing their customers’ credit quality after the onset of the pandemic-induced economic crisis and will continue to monitor their customers’ financial statements as they did prior to the onset of the pandemic.
  • Once credit information is collected, respondents in the industry assess their customers’ credit quality starting with an evaluation of their payments history, ability to generate cash and profitability. This approach will remain unchanged over the next six months.

Approach to credit management

  • Following the onset of the economic crisis, Bulgaria’s chemicals industry intensified their efforts to reduce the impact of payment default. The steps they took included: requesting B2B payment guarantees, adjusting credit terms and selling on cash terms. Over the next six months, businesses told us they plan to continue using the same credit management tools, although many also intend to resort to trade debt securitisation.
  • Respondents from the industry are overwhelmingly optimistic about their B2B customers’ creditworthiness over the next six months. 63% expect improvement, while only 28% expect deterioration.
  • According to 47% of the Bulgarian consumer durables industry, the greatest challenge to profitability in 2021 would be the continuation of the pandemic-triggered economic crisis (also stated by 52% of the industry at a regional level). This might trigger a fall in demand negatively impacting business growth (45% of respondents, compared to 41% at regional level).

2021 industry outlook

  • 49% of respondents in the industry expect the domestic economy to get worse over the next six months than those expecting it to improve (44%). The same goes for industry opinions on the future of the global economy (36% optimistic, 56% pessimistic) and of international trade (34% optimistic, 44% pessimistic).

Steel Metals

Late payments and cash flow

  • 65% of businesses polled in Bulgaria’s metals industry reported no change in the average time it takes to cash in overdue invoices after the onset of the pandemic-led economic crisis. The total value of overdue B2B invoices in the industry averages 28%, almost the same level as last year.
  • 72% of the businesses polled in the industry reported no change in the average DSO. 65% of respondents reported DSO averaging between 1 and 30 days and 20% between 30 and 60 days. The average for the industry in Eastern Europe is 62 days.
  • Most of the survey respondents from the industry (65%) told us that their revenue and cash flow have been hit hard due to the pandemic-induced economic crisis.
  • To avoid liquidity issues due to late payments, 79% of the businesses polled in the industry told us they needed to enact hiring freezes. 76% of the respondents also told us they had to lay off members of their staff.

Approach to credit quality assessments

  • After the onset of the pandemic recession, respondents from the Bulgarian metals industry did not change the way they approached credit checks, and continued to rely on bank and trade references, in addition to financial information provided directly from the customer.
  • Once credit information is collected, priority is given to the customer’s payment history and profitability. Industry respondents told us they plan to maintain this approach over the next six months.

Approach to credit management

  • Following the onset of the pandemic-led economic crisis, businesses in the Bulgarian metals industry tried to reduce the impact of payment default by requesting payment in cash or payment guarantees. Over the next six months they plan to send outstanding invoice reminders more regularly than in pre-pandemic times and to protect their business from the risk of customer payment default with trade credit insurance.
  • Over the next six months significantly more respondents in the industry expect their B2B customers’ creditworthiness and payment behaviour to improve (35%) than those expecting deterioration (25%).
  • According to 65% of the Bulgarian metals industry, the greatest challenge to profitability in 2021 would be the continuation of the pandemic-triggered economic crisis. 41% of respondents expressed concern that this might trigger a fall in demand negatively impacting business growth.

2021 industry outlook

  • Considerably more respondents in the industry (81%) expect the domestic economy to deteriorate over the next six months than those expecting it to get better (15%). The same goes for expectations on the future of the global economy (16% optimistic, 70% pessimistic) and of international trade (19% optimistic, 67% pessimistic).

Transport

Late payments and cash flow

  • Late payments in the Bulgarian transport industry affect 45% of the total value of B2B invoices (significantly up from last year’s 29%). As a consequence of the pandemic-triggered economic crisis, 49% of respondents reported having to wait significantly longer to turn overdue invoices into cash, up to 22 days past the due date on average.
  • Average DSO increases of up to 10% were reported by 51% of respondents. Increases of DSO above 10% were reported by 32% of businesses in the transport sector. Currently DSO in the industry stands at a 122-day average (below the 149-day average in Eastern Europe).
  • Most of the survey respondents in the transport industry (63%) reported that the pandemic-induced economic crisis has impacted revenue, along with their sales volume and cash flow.
  • To avoid liquidity concerns caused by late payments, respondents from the Bulgarian transport industry told us they needed to delay payments to their own suppliers (54% of, in line with regional levels). 44% of businesses said they had to enact hiring freezes and the same percentage needed to increase the amount of time, costs and resources spent on chasing unpaid invoices.

Approach to credit quality assessments

  • After the onset of the pandemic recession, respondents from the Bulgarian transport industry reported no change in the way they assess the credit quality of their B2B customers and continued to rely on the customer’s financial statements and bank references.
  • Once credit information is collected, respondents focused on the customer’s ability to meet its financial obligations in the short term, its financial flexibility and profitability. Survey respondents told us that this approach to assessing credit quality will remain unchanged over the next six months.

Approach to credit management

  • Following the onset of the COVID-19 economic crisis, survey respondents in the Bulgarian transport industry intensified their efforts to reduce the impact of potential payment defaults on the business. In addition to sending outstanding payment reminders and requesting payment in cash, they also resorted to trade debt securitisation.
  • Over the next six months significantly more respondents in the industry expect their B2B customers’ creditworthiness to deteriorate (49%) than those expecting improvement (30%).
  • According to 46% of the Bulgarian transport industry, the greatest challenge to profitability in 2021 would be the continuation of the pandemic-triggered economic crisis. 41% of respondents expressed concern that this might trigger a fall in demand negatively impacting business growth.

2021 industry outlook

  • Significantly more respondents in the industry (80%) expect the domestic economy to deteriorate over the next six months than those expecting it to improve (14%). The same goes for expectations on the future of the global economy (20% optimistic, 77% pessimistic) and about the future of international trade (25% optimistic, 72% pessimistic).

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