ISO 500 & HOW THE PANDEMIC CHALLENGED OUR INDUSTRY... The 2020 results of the "Turkey's Top 500 Industrial Enterprises" survey (ISO 500), which has provided a detailed account of a large part of our history of industrialization and turned 53 this year, is of particular importance, in that it reflects how our industry was challenged in the face of the COVID-19 shock. CHAIRMAN'S MESSAGEAUGUST 2021 3 Istanbul Chamber of Industry - Chairman ERDAL BAHÇIVAN 020 was marked by an unprecedented and the most widespread crisis hitting the world economy and global trade. Production, trade, and everyday life came to a standstill perhaps for the very first time to such an extent other than in times of war. However, as restrictions were relaxed, economies adapted themselves to the “new normal” and vaccines were developed towards the end of the year, the growth trend started to pick up earlier than expected. Although the world was co- vered by dark clouds of pessimism and despair during the first wave of the pandemic, things started to look up as the year came to an end and we saw the light at the end of the tunnel. Notwithstanding the glo- bal optimism, the subsequent waves of the pandemic, disruptions in global supply chains and bottlenecks in raw material supply passed serious problems on to 2021. The initial impact of the pandemic on the Turkish economy was the 10% contraction in 2Q20. However, the second half of the year saw a swift recovery as Turkey was able to shake off the first shock in the following months, the economic life partially returned to normal and supportive policies were introduced. Thus, in 2020, when the global economy suffered a 3.3 percent contraction, our country grew by 1.8 percent, making it one of the few countries that could remain in the growth territory. Our industrial sector was once again the driving force of our economy, boasting a growth performance of 2%. When we look at the overall performance of the ISO 500 during the pandemic year, one of the findings that stand out is the downward trend in the sales momentum due to the pandemic. The ISO 500, which is mostly made up of exporters, was able to increase its production-ba- sed sales only slightly in real terms in 2020, which was especially ca- used by a nearly 13 percent loss in exports. Moreover, due to a global atmosphere of uncertainty throughout the year, companies switched from fixed investments to protecting their cash assets. In this very challenging year, we see that our ISO 500 enterprises ma- naged to increase their total profitability. The factors at play in this im- provement were the raw material and financing costs that remained favorable for most of the year, as well as the enterprises’ success in managing financial risks. On the other hand, it is worth noting that the main driving force behind this increase in profitability was the impro- vement in operating profitability. In addition, thanks to the 23 percent increase in equity capital in 2020, the debt/equity capital balance, whi- ch had weakened significantly in previous years, seemed to have been maintained without further deterioration despite the effects of the pan- demic. Looking at R&D and technological activities, critical indicators that we carefully analyze every year, we see them rise above the conditions of the period, delivering positive results. Despite the pandemic, the num- ber of enterprises engaged in R&D increased by 9 to 271, and the dec- rease in the ratio of R&D expenses to production-based sales was only limited. The share of mid-to-high-tech and high-tech sectors in the total value-added also continued to increase. While we are well-aware that we have a long way to go in this regard, I am pleased to see that the steps taken in recent years for technology-driven growth have star- ted to bear fruit. The survey collection and reporting processes of our 2020 research co- incided with the "full lockdown" measures implemented in Turkey from the end of April until mid-May and a long Eid holiday. Nevertheless, we are able to share our research results with the public without delay, even at a slightly earlier date than the years before the pandemic. On that note, I would like to extend my thanks to our industrial enterprises for submitting the survey data to us as quickly as possible, our Depart- ment of Economic Research and Corporate Finance for conducting the 2020 ISO 500 survey, to valuable academics and consultants for their immense contributions, and to everyone who has helped prepare this year’s edition. 24 AUGUST 2021 Chairman's Message Executive Summary Developments in the World and Turkish Economy Main Indicators Main Financial Indicators Profitability Indicators Value Added, Efficiency and Productivity Technological Activities Turkey's Top 500 Industrial Enterprises - Ranking Sectoral Data Methodology, Definitions and Explanations Economic Activity Codes and Capital Distribution Sectoral Ranking Alphabetical Ranking I 2 I 7 I 9 I 20 I 42 I 51 I 64 I 72 I 79 I 111 I 118 I 122 I 125 I 143 INDEXCREDITS THE JOURNAL OF THE ISTANBUL CHAMBER OF INDUSTRY August 2021 Special Issue AUTHORIZED BY CHAIRMAN OF THE BOARD OF DIRECTORS ON BEHALF OF THE ISTANBUL CHAMBER OF INDUSTRY Erdal Bahçıvan EDITORIAL BOARD Sultan Tepe – Ayşegül Çapan – Ramazan Güven Sadettin Kaşıkırık – Sabahattin Şen DIRECTOR OF PUBLICATIONS Haktan Akın CHIEF PUBLISHING COORDINATOR Asım Aslan STUDY BY Economic Research and Corporate Finance Department of Istanbul Chamber of Industry EDITED BY Corporate Communications Department of Istanbul Chamber of Industry ADDRESS FOR ADVERTISING Odakule, Meşrutiyet Cad. No: 63 34430 Beyoğlu /Istanbul Phone: +90 212 252 29 00 Ext 131-132-133-134 E-mail: kurumsaliletisim@iso.org.tr PUBLISHING İlbey Matbaa Kağıt Reklam Org. Mücellit San. ve Tic. Ltd. Şti. Litrosyolu 2. Matbaacılar Sitesi 3NB3 Topkapı Zeytinburnu / İST. 0212 513 83 63 www.ilbeymatbaa.com Certificate No: 51632 Date of Publication: August 2021 A special issue of the Monthly Journal of the Istanbul Chamber of Industry ISO 500® / ©2021 Istanbul Chamber of Industry/ All rights reserved according to Law no. 5846 on Intellectual and Artistic Works. Cannot be copied, reproduced or published without permission in any circumstances. Istanbul Chamber of Industry has no liability for errors or mistakes that may occur due to copy or reproduction of the information and analyses in this publication.AUGUST 2021 7 EXECUTIVE SUMMARY The main factor shaping the world economy in 2020 was the COVID-19 outbreak and the conditions it entailed. The pandemic, which broke out in China and spread all around the globe, caused a shock contraction in the world economy in 2Q20. Governments, central banks and international institutions took important steps to shield themselves from the economic effects of the epidemic. Gov- ernments provided large grants to a broad spectrum of companies and employees, and central banks implemented expansionary monetary policies to support increased government spending and loan facilities for companies. In 2020, the world economy faced the sharpest contraction of the last decades with 3.3 percent, and the contraction was felt in almost all regions and countries. In the same year, the world commodity trade shrank by 7.4 percent and regressed to USD 17 trillion. Al- though the global industry dropped to bottom levels in April 2020, it closed the year with growth, and the industrial sector followed suit in the economies of the U.S., the EU and China. Despite all these positive developments, world manufacturing industry’s production suffered a 4.1 percent fall in 2020. The global pandemic was also a determining factor for the per- formance of Turkey’s economy in 2020. The initial shock of the pandemic and the measures taken in response to this health crisis culminated in an economic contraction in 2Q20. With the support that followed and the recovery in foreign demand, the second half of the year marked a return to the growth path. Thus, the overall economic growth was 1.8 percent and Turkey became one of the few countries that achieved growth in 2020. The industrial sector also grew by 2 percent, making a significant contribution to eco- nomic growth. The results of Turkey's Top Industrial Enterprises (ISO 500) survey in 2020 reveal the global impact of the COVID-19 pandemic and the performance the industry was able to achieve even in the face of such an adversity. The highlights of the ISO 500 2020 survey are summarized below: While the number of private enterprises in the ISO 500 was 491, the number of publicly traded enterprises increased by 1 to 9. In 2020, the number of enterprises listed for the first time in the ISO 500 was 11 and 39 enterprises from the previous year’s Second Top 500 rose to the ISO 500 list. 450 companies were listed in the ISO 500 in both years. Tüpraş maintained its long-standing position as the leader in pro- duction-based sales in 2020 as well. The enterprise that generated the highest value-added at producers’ prices changed year-over- year (YoY), however, the top-ranking enterprise preferred to remain anonymous. İskenderun Demir ve Çelik was the most profitable company and Ford Otomotiv maintained its leadership position in exports. The ISO 500’s share in industrial value-added and GDP displayed a trend of increase despite the conditions of the pandemic. In 2020, the share of the ISO 500 in the industry’s value-added climbed from 18.3 percent to 19.4 percent and their share in GDP from 6.5 per- cent to 6.9 percent. In 2020, the number of foreign-invested enterprises dropped by 7 to its lowest in recent years with 110. With the decline in their num- bers, the share of foreign-invested enterprise in basic indicators shrank as well. The number of ICI-member enterprises fell by 8 to 161 in 2020. This drop is attributed to the fact that Istanbul was affected by the pandemic the most. The number of publicly traded enterprises, which was 69 in 2017, 67 in 2018, and 66 in 2019, rose back to 67 in 2020. While the num- ber of enterprises did not show a significant change, the shares of publicly traded enterprises showed different trends. While the shares of these enterprises in sales, exports, total profit and loss for the period fell, their share in other indicators increased. In 2020, both production-based sales and net sales recorded growth, with 15.3 percent and 15.9 percent, respectively. These rates remained below those of 2018 and 2019 and sales perfor- mance was adversely affected by the pandemic. Exports of the ISO 500 (according to GTS) saw a 12.8 percent de- crease in 2020, reaching USD 64.1 billion. Exports of the ISO 500 shrank at a higher rate than the 6.6 percent decline in Turkey's industrial exports. Despite the contraction, the ISO 500 accounted for 37.8 percent of Turkey’s overall exports, and 39.2 percent of in- dustry exports. In 2020, the profits of industrial enterprises increased significantly despite the conditions of the pandemic. Their total pre-tax profit and loss increased by 50.1 percent, and earnings before interest tax depreciation and amortization (EBITDA) climbed by 43.1 percent. The private enterprises within the ISO 500 increased the number of their employees by 2.9 percent in 2020, and the wages and salaries paid rose by 14.5 percent. While the borrowing trend showed stagnation, the maturity struc- ture of debts continued to improve. The ISO 500’s total debt grew by 23 percent; the growth in short-term and long-term debts was relatively close, with 22.7 percent and 23.5 percent, respectively. The same trend was also observed in financial debt. Financial debts showed a similar rising trajectory as total debt with 23 per- cent; the increase in short-term and long-term financial debts was 22.4 percent and 23.3 percent, respectively. In addition to these developments in debt, equity capital rose by 23.2 percent. This increase indicates a real growth in equity capital and the total balance sheet growth was almost at the same level with 23 percent.8 AUGUST 2021 Debt/equity capital distribution within the resource structure re- mained unchanged YoY. The shares of total debts and equity capital remained the same with 68.4 and 31.6 percent, respectively. Thus, while the share of debts remained at its highest level, the share of equity capital remained at its lowest level. The financial debt/other debt ratio remained the same. The share of financial debts in total debts remained unchanged with 56.7 per- cent and the share of other debts with 43.3 percent. Showing an upward trend in 2017 and 2018, the share of short- term financial debts in total financial debts dropped from 41.4 per- cent to 41.2 percent in 2020. The total debt/equity capital ratio, which exceeded twice the equity capital for the first time in 2018, recorded a slight decrease from 216.6 percent to 216.4 percent in 2020. Considering the share of current and fixed assets in total assets, the share of current assets rose from 60.9 percent to 63.7 percent in 2020, while the share of fixed assets fell from 39.1 percent to 36.3 percent. The extraordinary conditions of 2020 forced the hands of enterprises to turn to liquid assets and limited their fixed asset investments. In 2020, the number of ISO 500 enterprises that recorded a profit in terms of their pre-tax profit/loss for the period jumped from 411 to 423, and the number of enterprises that recorded a loss dropped from 89 to 77. In 2020, the number of enterprises that recorded a profit before interest, tax, depreciation and amortization increased by nine YoY to 492. Profitability rates also showed a rising trajectory in 2020. Return on sales climbed by 1.6 points to 7 percent, return on assets increased by 1.3 points to 7.2 percent, and return on equity rose by 4.1 points to 22.7 percent. EBITDA, which had increased continuously since 2013 – except for 2019 – when it started to be calculated, surged by 43.1 percent in 2020 to TL 184.4 billion. The EBITDA profitability ratio also in- creased by 2.6 points to 13.9 percent. Total operating profit grew by 55 percent in 2020, reaching TL 142.8 billion. Operating profitability also increased by 2.7 points to 10.8 percent. The fluctuations in financing conditions in 2020 also affected the fi- nancial expenses of the enterprises. With the impact of the consid- erable rate of depreciation in the Turkish lira, financial expenses in- creased by 39.2 percent to TL 88.8 billion and the share of financial expenses in operating profit fell from 69.3 percent to 62.2 percent. Non-operating revenues followed suit as net foreign exchange rev- enues went up. In 2020, the ISO 500’s net non-operating revenues grew by 16.7 percent to TL 43.4 billion. In 2020, the distribution of factor income within net value-added saw significant developments under the conditions of the pan- demic. In the distribution of net value-added by factor incomes, the share of profit as national income increased from 21.3 percent to 30.3 percent, while the share of interest expenses fell from 27.1 percent to 25.3 percent, and the share of wages and salaries paid declined from 51.5 percent to 44.5 percent. The slowdown in sales due to fluctuations in domestic and foreign sales in 2020 negatively affected the asset turnover. The asset turnover, which was 1.09 in 2019, dropped to 1.03 in 2020. In 2020, net production-based sales per employee grew by 12.1 percent to hit TL 1,643,882. The fluctuations in domestic and for- eign demand culminated in a weakened sales performance and there was decline in labor productivity in real terms. The survey data for 2020 reveal an R&D expenditure of TL 6.2 bil- lion, with a 4.9 percent YoY increase. In the same period, the ratio of R&D expenses to production-based sales fell from 0.58 percent to 0.53 percent. Automotive, manufacture of electronic products and manufacture of electrical equipment stood out among the sectors with the highest R&D expenses. After reaching its peak in 2018 at 276, the number of enterprises with R&D expenses declined to 262 in 2019, but recuperated to 271 in 2020. Industrial enterprises continued to focus on technology, digitalization and R&D expenses. In 2020, low-tech industries within the ISO 500 accounted for the highest share of value-added generated at 37.3 percent. The share of mid-to-low-tech industries rose to 31.5 percent follow- ing a 1.9-point increase. The share of mid-to-high-tech industries climbed to 24.8 percent following a 1.3-point increase. The share of high-tech industries was realized as 6.4 percent, down from 6.9 percent. For the first time in 2019, the share of mid-to-high-tech and high- tech industries exceeded 30 percent. This trend of increase carried over to 2020, with the share hitting 31.2 percent.Next >