Turkey’s top 500 saw 2018 profits wiped out by crisis-triggered financing costs says industry chamber

Turkey’s top 500 saw 2018 profits wiped out by crisis-triggered financing costs says industry chamber
A recession has fallen over Turkish commerce and the big corporates are hurting. Pictured is Istanbul's Istiklal Avenue. / Josep Renalias.
By bne IntelliNews May 28, 2019

Turkey's top 500 industrial companies saw almost all their profits erased by financing costs in 2018 after the eruption of the country’s currency crisis, the Istanbul Chamber of Industry (ISO) said on May 28.

Amid and following the economic turmoil caused by the collapse in value of the Turkish lira (TRY), the debt ratio of the ISO's 500 big industrial firms climbed to 67% in 2018, while their own capital ratio fell to 33%, the report said. The resource structure was thus the "most negative" on record, it added.

The ISO also observed that for Turkish companies access to financing has become a "chronic problem" over the last few years. No improvement was observed last year, it said.

Turkey plunged into a deep recession after the lira crisis. At its nadir, the TRY lost nearly half its value against the USD. When 2018 closed, the weakening stood at 28%, but the currency has lost around another 14% this year to date.

Huge shock
The sudden descent of Turkey’s economy, for years fuelled by cheap credit which pushed GDP growth into ‘warp drive’, came as a huge shock to many corporates which are now struggling to service foreign-currency loans while they continue to earn in the severely depreciated lira.

"Any negative development in financial stability, extreme turbulence or volatility unfortunately damages our companies even if they protect themselves," Erdal Bahcivan, ISO board chairman, told reporters when asked about weakness in the lira, Reuters reported.

He reportedly added that uncertainty related to the controversial rerunning of March’s Istanbul mayoral election—set to take place on June 23—might dash the ISO's hopes that business conditions would improve after July.

The ISO represents some 18,000 industrial companies based in Istanbul, Turkey's largest city and business capital. Some of its top 500, however, are based elsewhere.

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