ICI (Istanbul Chamber of Industry) Announces the Results of Turkey’s Second Top 500 Industrial Enterprises Survey
ICI (Istanbul Chamber of Industry) announced the results of Turkey's Second Top 500 Industrial Enterprises Survey, annually released after Turkey's Top 500 Industrial Enterprises Survey. In 2014, the Second Top 500 Industrial Enterprises increased their production-based sales by 12.9% to TL 71.8 billion, yielding TL 81.9 billion out of net sales at a growth rate of 11.3%.
Hekimoğlu Flour Factory topped the list in terms of production-based sales in 2014, generating TL 212.6 million. The company was at number 492 among Top 500 companies in 2013. ORMA Forest Products earned second place with TL 211.9 billion in production-based sales, soaring from number 184 the previous year. BAŞTAŞ Başkent Çimento (Cement) ranked third on the Second Top 500 list for 2014 with a TL 211.8 million in production-based sales. The company was at number 21 on the same list in 2013.
Turkish industrial companies make use of borrowing options as widely as equity to finance their operations. The results of ICI Top 500 and Second Top 500 surveys demonstrate the imbalance in the debt/ equity rates of Turkish companies, which is a major, long-standing problem.
As evidenced by Top 500 and Second Top 500 survey figures, industrial companies of Turkey carry out their operations at higher debt levels compared to their counterparts in other countries.
Higher Financial Leverage Rate in Second Top 500 Companies
Among ICI Second Top 500 companies, the rate of equity in total assets has been on a decline since 2007. The rate was 47.6% in 2007, falling as low as to 38.8% in 2013. Throughout the same period, the rate of total debt in total assets rose from 52.4% to 61.2%. In 2014, the rate of equity in total assets showed a minor upswing to 39.8%, a figure still a far cry from a sustainable debt/ equity relationship.
Total assets of Second Top 500 Industrial Enterprises rose at a current rate of 14.5% in 2014, while equity grew by 17.4% and total debt by 12.7%. The growth of ICI Second Top 500 Enterprises in 2014 was largely based on equity, which indicates an improvement in the financial leverage rates of the said enterprises.
One of the factors behind the improvement is that second top 500 companies expanded their production-based sales by 12.9% in 2014 and total profit and loss before tax by 106.2%. Their total debt, meanwhile, rose only at a marginal rate of 12.7%.
These indicators reveal that the Second Top 500 Industrial Enterprises managed financial fluctuations of 2014 better and demonstrated a healthy development in their financial structure. Consequently, the rising income of industrial enterprises in 2014 enabled equity growth and a relatively sufficient creation of internal resources, which in turn led to a slight decrease in reliance on debt in the companies.
Basic Indicators of Second Top 500 Industrial Enterprises
According to the survey, the production-based sales of Second Top 500 Industrial Enterprises grew by 12.9% in 2014, amounting to TL 71.8 billion. In 2013, the operating profitability of companies rose by almost 50% compared to the previous year, amounting to TL 5.3 million. In 2014, meanwhile, the figure rose to TL 6.2 billion with a 15% growth rate compared to 2013. ICI Second Top 500 Enterprises reaped 7% operating profits in 2014, in contrast with 6.4% of Top 500 companies.
Another financial indicator of the Second Top was the growth in non-operating income. In recent years, the rate of non-operating income in total profits and loss for the given period has been fluctuating in the Second Top companies. The net non-operating income dropped by 153.2% in 2013, soaring to TL 736.5 million at a rate of 219.3% in 2014. The figures in 2014 point out to a positive trend in the generation of non-operating income, albeit in significantly lower amount compared to the TL 1.2 billion non-operating income earned in 2012.
The absolute EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) figure of the Second Top 500 was TL 8.9 billion in 2014. The EBITDA/ net sales rate of the companies was 9.4% in 2013, rising to 10.9% in 2014. The same rate was 10.7% in the Top 500 enterprises.
Sales profitability was another positive figure revealed by the ICI Second Top 500 list, rising to 5.6% in 2014, the highest in a decade. Second Top 500 Enterprises yielded a 5.5% return on assets, calculated by dividing profit and loss for the period to total assets, and a 13.9% growth in return on equity, both of which were also highest in a decade.
However, the relatively improved ratios in the financial sheets of the Second Top 500 do not override the fact that a large majority of their operating income is spent on financial expenses.
Debt/ Equity Ratio of the Second Top 500 Industrial Enterprises
The total debt/ equity ratio of the Second Top 500 performed to the detriment of equity for the last decade, showing a slight improvement as of 2014. The total debt/ equity ratio of the ICI Second Top 500 was 133.5 in 2012, rising at a rate of nearly 25% to 157.8% in 2013, and eventually dropping to 151.6% in 2014.
The debt/ equity ratio hit a record high at 157.8% in 2013. The decline in 2014 was largely due to an improvement in the profitability and equity creation methods of the companies. The drop in the rate is also partly due to the limited growth of foreign currency debt in 2014.
Meanwhile, the rate of short-term debt in total debt remained almost unchanged in 2014. The rate of short term debt in total debt among ICI Second Top 500 Enterprises was 70.9% in 2010, dropping to as low as 65.6% in 2014, a welcome development.
Debt/ Equity Relationship of the Second Top 500 Industrial Enterprises
The rate of equity in the total assets of the Second Top 500 was up 1% in 2014, following the same trend since 2007.
The rate of total debt in total assets is as high as 60.2% today, which indicates a financial structure that operates to the detriment of equity among the Second top 500 enterprises. These data indicate that our companies still rely on debt and are in need of equity.
Current and Fixed Assets Relationship in the Second Top 500 Industrial Enterprises
The relationship between fixed and current assets is one of the most important pieces of data revealed by ICI surveys covering 1000 enterprises with a general overview of the industry.
Fixed assets are considered as an indicator that funds necessary investment for the development, manufacturing, product development and creation of added value in a company. Especially manufacturing companies need to have a higher rate of fixed assets in total assets in order to boost their production, increase their added value with innovative and advanced technology and expand their market share.
This ratio displays a more negative picture among second top 500 companies compared to the top 500. The rate of fixed assets in total assets was around 45% in the top 500 whereas that of the Second Top is as low as 41%.
The increase in this rate refers to higher investment in a company which indirectly leads to a positive development in the manufacturing industry and the economy at large.
The rate of fixed assets in total assets in the Second Top 500 declined from around 50% to 41% in the last decade.
Number of Profit-Makers/ Unprofitable Enterprises Among Second Top 500 Enterprises
Just as was the case with the Top 500, the number of profit-makers among Second Top 500 companies showed a decline in 2013. In 2014 however, a clear improvement reveals itself in the profit-makers on both Top 500 and Second Top 500 lists.
The profit-makers of the Second Top 500 Industrial Enterprises in 2014 was 426 while there were a total of 74 unprofitable companies. The number of profit-makers in 2013 was 377 and that of unprofitable companies was 123. The number of unprofitable companies significantly dropped in 2014. A similar trend was observed in the Top 500 Industrial Enterprises declaring 417 profit-makers.
The Distribution of Value Added Creation According to Technology Intensity of Second Top 500 Industrial Enterprises (%)
The examination of value added creation according to the technology intensity of Second Top 500 companies portrays a distribution similar to that of the Top 500. Unfortunately, the figures reveal that the value added we can create with technology is far from a desired level. The highest share in value added was in low-technology intensive industries at a rate of 45%. The same group had a 45.8% share in 2013. The second highest share in value added creation was in medium-low technology intensive industries at 26.1%. The group had a 26.2% share in 2013. The medium-high technology intensive industries group had a 23.4% share in 2013, rising to 24.6% in 2014. The high technology intensive industries group had a 4.6% rate in 2013, dropping to 4.3% in 2014. The rate of medium-high and high technology intensive industries was no higher than 22.6% among the Top 500, which is a significant contrast with the 28.9% rate of the Second Top 500.
R&D Spending Among the Second Top 500 Industrial Enterprises
The rate of R&D spending allocated in the profits of the Second Top 500 Enterprises shows a scant increase compared to the previous year, still far below desired levels. The R&D spending of the second Top 500 rose by 29.3%, amounting to TL 223.435.174 in 2014. The rate of allocation for R&D spending in the production-based sales of companies is only a minor 0.3%. Meanwhile in developed countries, around 6 to 8% of the production-based sales of companies goes to R&D spending.
Number of Employees in the Second Top 500 Industrial Enterprises
Industrialists continue to support employment in Turkey despite economic stagnation and stiff competition. ICI Second Top 500 companies grew the number of their employees by approximately 2000 in 2014.
Number of Foreign-Invested Companies Among the Second Top 500 Industrial Enterprises
The number of foreign-invested companies among the ICI Second Top 500 has been fluctuating over the years. The number of such companies changed between 65 to 75 for the last decade, amounting to 71 in 2014. Foreign-invested companies had higher rates compared to the rest of Second Top 500 Enterprises in all indicators except value added and profit and loss for the period.
The rate of foreign-invested companies in total production-based sales of Second Top 500 rose at 1.2% to 14.7% in 2014. These companies made 19.1% of all exports within ICI Second Top 500 companies in 2014, an upswing from the 17.8% of 2013. This figure corresponds to 1.15% of total exports in Turkey.
None of the top 10 companies in 2014 could make it to top ten in 2013, another interesting data revealed by the survey.
Top10 Industrial Enterprises Among the ICI Second Top 500 Industrial Enterprises
The top 10 companies among the ICI Second Top 500 according to production-based sales was as follows: Hekimoğlu Flour Factory topped the list with TL 212 million 578 thousand in production-based sales, followed by ORMA Forest Products with TL 211 million 927 thousand. BAŞTAŞ Başkent Çimento (Cement) came third place with TL 211 million 817 thousand. Frimpeks Kimya (Chemical Products) ranked four on the list with TL 211 million 813 thousand, followed by Uğurdemir Halı (Carpet) with TL 211 million 327 thousand at number five and SCA Yıldız Paper with TL 210 million 908 thousand at number six.
The list continued with BPO B-PLas Plastic with a production-based sales figure of TL 210 million 851 thousand, followed by Kaplan Kardeşler Halı (Carpet) with TL 208 million 518 thousand, Abdioğlullari Plastik (Plastic) with TL 207 million 933 thousand and finally Karadere Tarım (Agricultural Products) with a TL 207 million 693 thousand. Interestingly, none of the top 10 companies in 2014 could make it to top ten in 2013.
The biggest exporter in 2014 was Prekons Construction Co. Inc. with an export volume of $105 million. The company was followed by ATK Textile with $103 million and Cevher Aluminum Foundry with $97 million in exports.
95 New Companies Make it to the List
95 new companies joined the Second Top 500 Industrial Enterprises in 2014, 27 of which was among the Top 500 Industrial Enterprises in 2013, dropping to the Second Top list in 2014. Meanwhile, 68 companies without previous entry to ICI top 1000 managed to make it to the list.
Just as was the case with the Top 500 survey, the tendency to ask for anonymity was observed among the Second Top 500 companies as well. The number of enterprises which asked for anonymity rose from 30 to 41 in 2014. The number of companies that refused to disclose their profits amounted to more than half of the total number (275), with 187 companies not disclosing their export figures. There were 206 companies that refused to reveal the number of employees.