Soaring funding costs mar Turkish industry

ISTANBUL

Refinery TÜPRAŞ has been once again named as the top industry company of Turkey.

Turkey’s largest industrialists’ falling profitability and mounting financing pressure on companies last year marked the top 500 industrial company study released by the Istanbul Chamber of Industry (ISO).

“If truth be told, our industrialists look defeated by financing pressure from currency rates and interest rates,” ISO Chairman Erdal Bahçıvan said, speaking at a press meeting to share the results of the study, which showed Turkey’s sole refinery TÜPRAŞ has kept its place at the top of the 500 largest list.

He said the higher interest rates and increasing foreign exchange rates had taken a toll on the companies’ financing costs, thwarting profitability and equity assets.

Underlining the total foreign debt on the shoulders of Turkish companies is around $270 billion, Bahçıvan said this is a very delicate weakness of the Turkish economy and needs to be taken care of.

According to the ISO’s 2013 industry study, the worst debt/equity ratio of the past 10 years was recorded in 2013, as the companies could not manage to finance soaring debts, even by raising their total sales by 7.4 percent to increase their operational profit by 43.9 percent.

Rising financing costs caused the number of companies that recorded profit to plunge to 371 from 437 of previous year, while loss-making firms rose to 129 from 63, Bahçıvan said.

While financing expenditures paid by the ISO’s 500 companies was 34 percent of their operation profit in 2012, this ratio soared to 53 percent in 2013, according to figures provided by the ISO.

The chairman said this shows companies pay more than half of their profit as financing expenditures, arguing one of the most important reasons for this is due to the companies only borrowing through bank loans, rather than using alternatives, such as bonds, public offering, long-term loans or hedging.

“It’s saddening that our successful industrial companies don’t perform that well in procuring and using financing,” Bahçıvan said.

TÜPRAŞ remains at top spot

Turkey’s sole refinery TÜPRAŞ has kept its place at the top of Turkey’s 500 Largest Industrial Company list in 2013, one of five Koç Holding companies taking in the top 10.

According to the annual Istanbul Chamber of Industry’s (ISO) study, the refiner, a majority stake of which is owned by Turkey’s largest conglomerate Koç, one again became a champion of industry companies with a net production worth 39.7 billion Turkish Liras.

The top ranks of the list are once again dominated by Koç Holding, with a total of five companies from the group leading the frontrunners of Turkey’s industrial sector.

Ford Otosan, Koç’s joint venture with the American auto giant Ford, ranked second with manufacturing worth 9.7 billion liras, while Turkish state power company EÜAŞ followed in third place, at 9.2 billion liras.

Koç’s household appliances maker, Arçelik, and its venture with Italian automaker Fiat, Tofaş, ranked fifth and sixth in the list with production worth 7.7 and 5.8 billion liras respectively. Aygaz, Koç Holding’s gas company, also managed to make the ISO list, in 10th place.

Meanwhile, another car maker, Oyak Renault, a joint venture of Renault and Turkey’s Oyak, dropped from third in 2012 to fourth in 2013, recording annual production worth 8.6 billion liras.

Steelmaker İçdaş Çelik became one of the rising stars by leaping two places to rank seventh in the 2013 list, while its sector fellow Ereğli Demir Çelik kept its place in eighth spot.

In contrast with the production index, the ISO ranking based on profitability slightly changed.

While there were only two public companies among the “most profitable” companies list in 2012, this rose to three last year with Eti mining company joining EÜAŞ and Turkish Petroleum in the top 10.