It may be time for Turkish industrial companies to curb their fondness for debt-driven profit growth.
While rising earnings have impressed shareholders, the foreign borrowing relied on to fuel much of the gains has left balance sheets vulnerable to a weaker lira. It was a blowout year in 2017 for Turkey’s non-financial companies, which posted record net-income-to-equity ratios. The flip side is that total debt for members of the Borsa Istanbul Industrials Index relative to assets has seldom been higher, a stress point that won’t be improved by the currency’s slump in the past six months.
