Currency shocks hit corporate sector hard
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by Evrim Sel
Oluşturulma Tarihi: Nisan 10, 2009 00:00
ISTANBUL - The sharp depreciation of the Turkish Lira against the US dollar in the final quarter of 2008 has had a deep impact on companies’ balance sheets. Some firms post huge losses due to short foreign exchange positions, while others, such as Turkish Airlines, post higher-than-expected profits. First quarter results will provide a better insight, an analyst notes
Months of neglect by the government on the effects of the global crisis has extracted a heavy toll on Turkish companies, as 2008 results by key corporations display the heavy price paid due to delayed stimulus measures.
As the global turmoil deepened in late 2008, it generated a liquidity squeeze that had a major impact on Turkey’s business world, while currency fluctuations also hit hard. The proof is in the declining profits or mounting losses of various Turkish companies.
"Although analysts foresaw many Turkish companies posting declining profits in the last quarter of 2008, the extreme ups and downs in profit figures have also been caused by exchange rate fluctuations and the negative impact of contracting demand, which affected negatively the operations and profitability of many companies," Ayşegül Özgür, an analyst with Fortis Securities, told Hürriyet Daily News & Economic Review yesterday.
"The Turkish Lira lost much of its value against the U.S. dollar during the last quarter of last year," said Özgür. "That change had a deep impact in companies that had short foreign exchange positions, causing them to post high net losses. The same factor helped Turkish companies that had long foreign exchange positions to post profits," she said.
THY rides the wave
State-run Turkish Airlines, or THY, is among the companies that have benefited from the fluctuations in the foreign exchange rate. Managing the crisis extremely well, THY, posted a consolidated net profit of 1.13 billion Turkish Liras ($712 million) in 2008. That figure has more than quadrupled the company’s 265.5 million liras net profit for 2007.
Financial income at THY jumped almost fivefold last year to 1.43 billion liras from 309.1 million liras. Most of the increase stemmed from raising the lira value of the carrier’s planes and other dollar-denominated assets after the Turkish currency dropped 24 percent against its U.S. counterpart, the carrier said.
On the downside, Turkey’s auto industry was hit the hardest by contracting demand worldwide. The auto industry slumped 58.7 percent in February compared with the same month a year ago, according to a report posted on Turkish Statistical Institute, or TÜİK, Web site on Wednesday. Based on a report from Automotive Manufacturers Association, or OSD, the production of the industry declined 43 percent year-on-year in March, down to 37,125 units.
In accordance with the aforementioned data, Doğuş Oto, a distributor of Volkswagen vehicles in Turkey, posted a consolidated net loss of 110.28 million liras in 2008. That showed that the company’s losses had deepened 71.4 percent compared to a consolidated net loss of 64.33 million liras it posted for 2007. Meanwhile, Doğuş GE Real Estate Investment Trust, a joint subsidiary of Doğuş Holding and General Electric Capital Corporation operating in the real estate market, posted a consolidated net profit of 29.05 million in 2008. That was an increase of 52.9 percent from the consolidated net profit of 19.1 the firm had posted in 2007.
Doğuş GEĞREIT sold a property in Istanbul’s Levent district for a consideration of 4.7 million liras (2.2 million euros) to an individual investor, according to a company filing with the Istanbul Stock Exchange on Tuesday.
Hürriyet Gazetecilik & Matbaacılık, the parent company of Hürriyet Daily News, was among the companies that posted losses for 2008. The company said it made a loss of 38.1 million liras ($24 million) last year compared with a profit of 94.2 million liras a year earlier, according to a filing with the Istanbul Stock Exchange Wednesday night.
Tekfen Holding, which is operating in various industries from real estate to construction to banking and investment services, on Wednesday posted a 67 percent fall in 2008 net profits.
Banvit, which started its operations as a feed producer in 1968, announced a consolidated net loss of 42.53 million liras last year. The company had posted a consolidated net profit of 56.83 million liras in 2007. İzmir Demir Çelik, a Turkish steel producer, which has suspended production for a week beginning April 1, posted a consolidated net profit of 131.6 million liras. That was an increase of 149 percent compared to its consolidated net profit of 52.84 million liras in 2007. İzmir Demir had shut down its rolling mill and steel plants due to market conditions.
"The bourse always reacts quicker to the negative impact of the global economic crisis, and it takes a while to get a reaction out of the real industry. So now as the figures in the bourse begin to improve slightly, the country’s real industry is not expected to recover before the last quarter of this year," Özgür said.
"The first quarter results of 2009 will be a good indicator to assess the impact of the crisis in Turkey’s real industry," Özgür said.
As the global turmoil deepened in late 2008, it generated a liquidity squeeze that had a major impact on Turkey’s business world, while currency fluctuations also hit hard. The proof is in the declining profits or mounting losses of various Turkish companies.
"Although analysts foresaw many Turkish companies posting declining profits in the last quarter of 2008, the extreme ups and downs in profit figures have also been caused by exchange rate fluctuations and the negative impact of contracting demand, which affected negatively the operations and profitability of many companies," Ayşegül Özgür, an analyst with Fortis Securities, told Hürriyet Daily News & Economic Review yesterday.
"The Turkish Lira lost much of its value against the U.S. dollar during the last quarter of last year," said Özgür. "That change had a deep impact in companies that had short foreign exchange positions, causing them to post high net losses. The same factor helped Turkish companies that had long foreign exchange positions to post profits," she said.
THY rides the wave
State-run Turkish Airlines, or THY, is among the companies that have benefited from the fluctuations in the foreign exchange rate. Managing the crisis extremely well, THY, posted a consolidated net profit of 1.13 billion Turkish Liras ($712 million) in 2008. That figure has more than quadrupled the company’s 265.5 million liras net profit for 2007.
Financial income at THY jumped almost fivefold last year to 1.43 billion liras from 309.1 million liras. Most of the increase stemmed from raising the lira value of the carrier’s planes and other dollar-denominated assets after the Turkish currency dropped 24 percent against its U.S. counterpart, the carrier said.
On the downside, Turkey’s auto industry was hit the hardest by contracting demand worldwide. The auto industry slumped 58.7 percent in February compared with the same month a year ago, according to a report posted on Turkish Statistical Institute, or TÜİK, Web site on Wednesday. Based on a report from Automotive Manufacturers Association, or OSD, the production of the industry declined 43 percent year-on-year in March, down to 37,125 units.
In accordance with the aforementioned data, Doğuş Oto, a distributor of Volkswagen vehicles in Turkey, posted a consolidated net loss of 110.28 million liras in 2008. That showed that the company’s losses had deepened 71.4 percent compared to a consolidated net loss of 64.33 million liras it posted for 2007. Meanwhile, Doğuş GE Real Estate Investment Trust, a joint subsidiary of Doğuş Holding and General Electric Capital Corporation operating in the real estate market, posted a consolidated net profit of 29.05 million in 2008. That was an increase of 52.9 percent from the consolidated net profit of 19.1 the firm had posted in 2007.
Doğuş GEĞREIT sold a property in Istanbul’s Levent district for a consideration of 4.7 million liras (2.2 million euros) to an individual investor, according to a company filing with the Istanbul Stock Exchange on Tuesday.
Hürriyet Gazetecilik & Matbaacılık, the parent company of Hürriyet Daily News, was among the companies that posted losses for 2008. The company said it made a loss of 38.1 million liras ($24 million) last year compared with a profit of 94.2 million liras a year earlier, according to a filing with the Istanbul Stock Exchange Wednesday night.
Tekfen Holding, which is operating in various industries from real estate to construction to banking and investment services, on Wednesday posted a 67 percent fall in 2008 net profits.
Banvit, which started its operations as a feed producer in 1968, announced a consolidated net loss of 42.53 million liras last year. The company had posted a consolidated net profit of 56.83 million liras in 2007. İzmir Demir Çelik, a Turkish steel producer, which has suspended production for a week beginning April 1, posted a consolidated net profit of 131.6 million liras. That was an increase of 149 percent compared to its consolidated net profit of 52.84 million liras in 2007. İzmir Demir had shut down its rolling mill and steel plants due to market conditions.
"The bourse always reacts quicker to the negative impact of the global economic crisis, and it takes a while to get a reaction out of the real industry. So now as the figures in the bourse begin to improve slightly, the country’s real industry is not expected to recover before the last quarter of this year," Özgür said.
"The first quarter results of 2009 will be a good indicator to assess the impact of the crisis in Turkey’s real industry," Özgür said.