Fitch Ratings has downgraded Turkey's Arcelik (ARCLK) by one notch to B+, placing the white goods maker four notches below investment grade, with a negative outlook, the rating agency has informed the market.

Arcelik, also a producer of small home appliances such as vacuum cleaners and coffee makers, is a unit of largest Turkish industrial conglomerate Koc Holding (KCHOL).

Previously, Fitch in November 2024 downgraded Arcelik by one notch to BB-/Negative, three notches below investment grade.

Currently, Arcelik has a B+/Negative rating from Fitch Ratings and a BB-/Stable from Standard & Poor’s.

Turkey’s sovereign ratings, meanwhile, stand at three notches below investment grade, with stable outlooks.

Arcelik’s eurobonds

Fitch, meanwhile, downgraded its rating on Arcelik’s eurobonds by two notches to B, five notches below investment grade.

The company has two outstanding eurobonds. In September 2023, Arcelik sold $400mn of eurobonds (XS2695038401) due 2028 at a coupon rate and yield to investor of 8.50%. In November 2023, it sold an additional $100mn of this paper to JPMorgan via a private placement. Currently, the outstanding amount of the paper stands at $500mn.

In 2021, the company sold €350mn of 5-year green eurobonds (XS2346972263) due May 2026 at a 3% coupon.

The company plans to refinance its 2026 eurobond with bank loans to secure lower rates, according to Fitch.

Chinese pressure

The downgrade reflects persistently weak trading conditions with softer demand particularly on international markets. The negative outlook reflects uncertainty about a recovery in demand and margin improvement. Further downgrades are likely on underperformance.

The benefits to Arcelik’s gross margin from lower raw material costs and a favourable EUR/USD exchange rate are partly offset by pricing pressure and intensified competition from Chinese brands, particularly in Europe and Asia.

Fitch also noted that the adoption of inflation-adjusted accounting in Turkey continues to weigh on reported margins.

Restructuring, optimisation

The company has completed about 90% of planned job redundancies, with the rest to be finalised by end-2026. The programme is expected to deliver about €140mn in savings through optimisation of about 2,000 office roles across global operations.

Production was terminated at three factories in Poland in 2Q25 and one plant in Italy is to close in 4Q25, with operating lines to be transferred to Turkey. Operational reconfiguring and sizing initiatives in Italy will continue in 2026.

As of end-3Q25, Arcelik had substantial short-term debt of about Turkish lira (TRY) 144bn, comprised of about 30% in local currency at an effective annual interest rate of 33%. 

To remain market leader in Europe

Arcelik is the clear market leader in Turkey. It has held more than half the market there since the 2000s. It is also the market leader in Europe, with a Whirlpool partnership.

Arcelik’s Beko brand is one of the fastest-expanding white goods brands in Europe. It also boasts market leading positions in Romania, South Africa, Pakistan and Bangladesh.

Having acquired the EMEA operations of Whirlpool Corporation (New York/WHR), and merging its European operations with the company, Arcelik currently operates 45 production plants in 13 countries, including 13 plants in Turkey.

It has a total of 22 brands, namely Arcelik, Bauknecht, Beko, Blomberg, Altus, Grundig, Arctic, Ariston, ElektraBregenz, Flavel, Defy, Dawlance, Ignis,  Indesit, Hitachi, Polar, Privileg, Singer, Voltas, Whirlpool, Hotpoint and Leisure.

The company has subsidiaries in 58 countries.

Fitch said it expects Arcelik to maintain high market shares domestically and in Europe despite the effect of competition from Chinese manufacturers on the low-to-mid subsector of white goods.

Diverse production base

Arcelik's business profile benefits from geographical diversification and a favourable cost base. Its diverse production base is better than those of Turkey’s Vestel Elektronik and Uzbekistan-based Artel Electronics (B/Negative), which only manufacture on a single low-cost site.

In June, Fitch downgraded Vestel Elektronik (VESTL), a unit of Zorlu Holding, by two notches to six notches below investment grade.

VESTL now has a B-/Negative rating from Fitch Ratings and a Caa1/Negative from Moody’s Investors Service.

For 1H, Arcelik reported a net loss of TRY 4bn. It was the second largest loss, behind Zorlu Enerji’s TRY 8.35bn, reported by Borsa Istanbul-listed companies for the first half.

In October, Fitch and Moody’s simultaneously downgraded their outlooks on the credit ratings of electricity producer Zorlu Enerji (ZOREN), another Zorlu Holding unit.

Currently, Zorlu Enerji has a B+/Negative rating, at four notches below investment grade, from Fitch Ratings and a B3/Stable rating, at six notches below investment grade, from Moody’s Investors Service.