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Weakening Lira Is a Risk for Debt-Loving Turkish Industrials

  • Non-financial companies have doubled short-term foreign debt
  • Sparkling returns accompanied by climbing leverage levels
Updated on

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.