Prolonged lira decline threatens corporate ratings: Fitch

ISTANBUL – Hürriyet Daily News

'A prolonged decline in the currency, combined with other domestic shocks from the country’s political crisis, is a risk for corporate ratings in 2014,' the report said. CİHAN photo

Turkish companies could see their financial profiles weaken under a 30 percent Turkish Lira depreciation scenario, Fitch Ratings has said in a new report.

“A prolonged decline in the currency, combined with other domestic shocks from the country’s political crisis, is a risk for corporate ratings in 2014,” read the report, which evaluates the effects of the lira’s depreciation on 10 publicly rated Turkish corporates.

Doğan Holding, Hürriyet Gazetecilik, Yaşar Holding, Coca-Cola İçecek, Turcas Petrol, Turkey’s refinery Tüpraş and the appliance company Arçelik are among companies whose foreign exchange balances were reviewed in the report.

“As most rated Turkish corporates are importers of raw materials, energy and intermediate goods, margin pressure from rising costs is likely to be seen across the market,” according to Fitch.

The report also notes “historical” lira weakness and the vulnerability of Turkish corporates “because of their currency mismatches and under-hedged positions.”

However, it draws attention to the risks to standalone financial profiles are highest for consumers, retail and Telecom, Media and Technology (TMT) companies, as their foreign exchange denominated revenues are limited.