As interest rates rise to counter still high inflation, Turkish industrial giants have been struggling with financing expenses for a while, which led to a sharp decline in profits. According to Isanbul Chamber of Industry’s ISO Turkey’s Top 500 Industrial Enterprises Survey, inflation-adjusted production-based sales of Turkey’s 500 largest industrial enterprises decreased by 13.8 percent, and pre-tax profits for the period decreased by 19.3 percent. At the same time, financing expenses increased by 16.8 percent in 2023.
Industry giants struggled during 2023. Their production power was eroded under high inflation and difficult financing conditions. The 2023 results of the 56th “ISO Turkey’s Top 500 Industrial Enterprises Survey” prepared by the Istanbul Chamber of Industry were announced. According to the ISO 500-2023 results, the giants’ sales contracted by 13.8 percent in real terms last year. The increase in profits of the Top 500 was also below the year-end inflation.
According to the results announced by Erdal Bahçıvan, Chairman of the Board of Directors of the Istanbul Chamber of Industry, Tüpraş was the largest organization in terms of production-based sales last year, with sales of TRY 484 billion. Tüpraş was followed by Ford Otomotiv with production-based sales of TRY 238 billion, while Star Refinery ranked third with production-based sales of approximately TRY 227 billion. Production-based sales in the ISO 500 increased by 42.1 percent in 2023, rising from TRY 4.49 trillion to TRY 6.38 trillion. Besides, two new companies entered the top 10 last year.
The survey, which is accepted as a realistic X-ray by economic observers, reveals how high inflation makes it hard for all industrialists. The industry grew only by 0.8 percent, and the manufacturing sector grew only 1,6 percent in 2023. The sales of Top 500 were down by 13.8 percent in real terms in comparison with 2022. Inflation accounting also affected industrialists’ equity capital and net assets in 2023.
The top 500 industrial giants’ exports were down by 2.9 percent to TRY 95.1 billion dollars. With Turkey’s total exports up by 0.5 percent in 2023, the stagnation in export markets hit the top 500 harder.
The number of companies writing profits was down to 404. That reveals that almost one in five of the Top 500 companies wrote losses in 2023.
“Soft landing measures can lead to hard landing”
Evaluating the results of the ISO 500 Survey, ISO President Erdal Bahçıvan stated that 2024 will not be a brighter year than 2023 and said, “There will definitely be a downturn in the economy, even if we do not call it hard landing. The growth target in the Medium Term Plan is realistic. We expect it to be a healthy landing, but there is a risk of a hard landing if we say, let’s make a soft landing.”
ISO President: Don’t change the tax breaks
In response to a question about the new tax package and the minimum corporate tax, Bahçıvan said that the process regarding the corporate tax has not yet materialized to the extent discussed in public opinion. Bahçıvan said, “We have seen in the past years that changing some tax advantages that were given to the industry in the past years with the promise and motivation of certain incentives, regardless of the reason, in the middle of the road and breaking this contract created very serious damage in terms of predictability and confidence in the future. For this reason, no matter how much resources it creates in this regard, the issue of not changing the rights you have obtained from these incentives, which you made 3-4 years ago within a plan and made a contract with the state, in the middle of the road, in the middle of the game, is the most sensitive and the most important issue for us.”
