Distinguished Members of the Press,
We are gathered today to present the 2022 findings from the "ISO-Türkiye's Top 500 Industrial Enterprises Survey," an eagerly anticipated annual event in the world of business. Our Deputy Chairmen İrfan Özhamaratlı and Cemal Keleş and I welcome and greet you on behalf of the Istanbul Chamber of Industry (ICI).
As you are aware, in recent years, we successfully shifted the publishing date of our ISO 500 report to May. This year, we are unveiling our report with some delay. To briefly address the reason behind this delay, our nation endured the devastating Kahramanmaraş earthquake at the start of the year, which inflicted profound wounds. We mourn the loss of tens of thousands of our fellow citizens. The grief still weighs heavily on our hearts. May divine mercy be upon those we lost, and I extend my deepest condolences and support to their bereaved families.
The economic repercussions of this unprecedented disaster, which affected 11 of our provinces, were substantial. Numerous industrial facilities in our region were incapacitated for weeks. In response to this crisis, our government declared a state of force majeure in the affected area and granted extensions for tax obligations to our companies.
As you can appreciate, many industrial enterprises from these 11 provinces make their way into the ISO Top 500 list each year. In our 2021 list, this count stood at 72. We see that this figure decreased to 66 in 2022. With these companies willingly sharing their financial data, we initiated our ISO 500 survey and expedited the process as much as possible.
I wish to underscore this point in particular. A number of industrial facilities from the affected region experienced varying degrees of damage. Despite the adversity, every one of our industrial facilities managed to swiftly resume operations, thanks to the dedication of their employees and the remarkable solidarity of our state and industrialists. I express my gratitude to everyone who played a part in this, especially our industrialists. On this occasion, I want to extend my heartfelt wishes to all our employees, employers, and the entire industrial community in the region.
Dear Members of the Press,
Alongside the current ISO 500, we have been sharing the findings of this valuable research, which dates back to the 1960s, from 50 years ago for the last five years. This year, we have reprinted our August 1973 issue for this purpose. In the materials provided to you, you can delve into the results of our research from 50 years ago, bearing the title of "Top 500 Enterprises" at that time.
Today, we have gathered here to announce a significant milestone in our work through the words you, esteemed members of the press, will pen. Our research, now marking its 55th year, represents a treasure trove of industrial knowledge and coincides with the centenary of our Republic. In essence, we will add just “one more drop” to this invaluable ocean of information, which grows in value and significance with each passing year.
Now, I wish to pay tribute to our esteemed pioneers who initiated the ISO 500 survey, many of whom are no longer with us. I extend my gratitude to those who, with their rigorous scientific approach, have steered this research on its honorable course until today. My appreciation also goes to our Economic Research and Corporate Finance Department and our consultants, who have meticulously conducted this year's ISO 500 survey with the same scientific rigor as in the past.
The fundamental bedrock underpinning our ability to provide a thorough examination of our industry and a partial insight into the Turkish economy through the ISO 500 lies in the willingness of our companies to share their information with us. Therefore, I express my heartfelt thanks to all the industrial enterprises, the key stakeholders in the development of our ISO 500 research, for entrusting us with their company data.
Esteemed Members of the Press,
Before delving into the outcomes of our 2022 ISO 500 Industrial Enterprises survey, it is worth briefly revisiting the backdrop against which these results were achieved. If we recall these developments, one of the pivotal factors was the resurgence of global inflation. The additional price shocks stemming from the Russia-Ukraine conflict, especially in the energy and food sectors, were prominently visible. We have traversed a challenging year in which central banks hastened interest rate hikes in response to mounting inflation and an atmosphere of heightened uncertainty.
Undoubtedly, our economy bore the impact of these developments. Nonetheless, thanks to robust exports in the first half and sustained domestic demand throughout the year, our economy managed to set itself apart from the adverse global trends, achieving a growth rate of 5.5 percent in 2022. Yet, this growth did come with significant costs, most notably high inflation and a burgeoning current account deficit. Within the context of the "New Economy Model," characterized by controversial contributions to financial stability and sustainability due to its departure from rational economic policies, numerous regulations that held exchange rates and interest rates in check, and restricted the flow of credit, influenced the financial conditions of the real sector throughout the year.
Following this brief overview, let us proceed to the findings of our ISO Türkiye's Top 500 Industrial Enterprises-2022 survey.
Production-based sales within the ISO 500 witnessed an astounding surge of 119 percent in 2022, soaring from TL 2.048 trillion to TL 4.485 trillion. This remarkable upswing can be attributed to a combination of factors, including robust export performance, dynamic domestic demand, rising exchange rates and prices, and the growth in Turkish Lira equivalents of export revenues.
When scrutinizing the changes in production-based sales of the ISO 500 in real terms, one specific result stands out: Upon adjusting the 2022 data for end-of-year consumer inflation, it becomes evident that production-based sales increased in real terms, showing a substantial 33.3 percent rise compared to 2021.
To compute these real changes, we have employed the year-end CPI inflation, as has been our practice in recent years. It is noteworthy, however, that by the end of 2022, while CPI inflation stood at 64.27 percent, PPI inflation reached 97.72 percent.
Here, I must underscore that the true reflection of industrialists' economic realities lies in PPI, where it is evident that PPI is surging at a much faster pace, leading to a significant divergence between producer and consumer inflation. In fact, using year-end PPI inflation figures results in a decrease in the real growth of production-based sales to 10.8 percent.
Analyzing the distribution of production-based sales across groups of 50, we observe a slight increase in the share of the top 50 enterprises, which had historically hovered around 50 percent, to 52 percent this year. The share of the top 100 enterprises within the ISO 500 has now reached 65 percent.
While enterprises ranking between 100 and 200 within the ISO 500 hold a 14.4 percent share, the remaining 300 companies account for 20.6 percent. It is worth noting that these findings align with historical trends.
Dear Members of the Press,
When examining the ISO 500's export performance, it becomes evident that their contribution to Türkiye's overall and industrial exports remains profoundly significant.
Despite the challenging global economic landscape, our nation achieved a noteworthy milestone in exports during 2022. Exports surged by 12.9 percent, surpassing $254 billion.
The ISO 500's export figures approached $98 billion, indicating a 14.1 percent increase. Notably, the ISO 500's export growth rate exceeded that of Türkiye in overall by 1.2 percentage points. As a result, this year witnessed the highest export figures in the history of both Türkiye and the ISO 500.
Having a look at the ISO 500's share in Türkiye's industrial exports, we find it consistently at around 40 percent.
The data presented here constitute some of the basic indicators of the ISO 500, meticulously analyzed each year to unveil significant outcomes. This table shows that the ISO 500 not only achieves growth in sales but also drives profits by efficiently leveraging its resources, consistently demonstrating a commendable performance in these areas.
Specifically, the operating profit of the ISO 500 surged by an impressive 96 percent in 2022, leaping from TL 342 billion to TL 671 billion. Conversely, the operating profitability rate witnessed a 2-point decline, shifting from 14.8 percent to 12.8 percent.
Likewise, earnings before interest, tax, depreciation and amortization surged by nearly 100 percent, soaring from TL 405 billion to TL 808 billion. During the same year, the EBITDA profitability rate experienced a 2.1-point decrease, sliding from 17.5 percent to 15.4 percent, mirroring the trend in operating profitability.
Moreover, the overall pre-tax profit and loss demonstrated an impressive 121 percent increase, rising from TL 219 billion to TL 485 billion. Nonetheless, the return on sales rate dipped by 0.2 points, settling at 9.3 percent. These figures reveal a consistent pattern of reduced profitability across all ratios compared to the previous year.
This table provides an overview of the profitability components within the ISO 500. A notable observation when comparing the table with the previous year is that non-operating income exhibited only a modest uptick, primarily due to a loss of momentum in net profit from foreign currency exchange. In essence, the contribution of non-operating income to profitability saw a significant decrease in 2022.
While the ISO 500’s income and profit from other operations amounted to TL 683 billion, their expenses and losses totaled TL 572 billion in 2022. When analyzing the disparity between these two figures, the net non-operating revenues of the ISO 500 increased by TL 111 billion, with the growth rate compared to the previous year standing at a modest 14.6 percent.
While we are on this topic, I would like to draw your attention to the evolving share of non-operating income in the industry's total profit and loss over the past decade. As evident, this percentage has dwindled from 88 percent to about 23 percent within the last five years. This shift clearly highlights the industrialists' increasing emphasis on their core activities in recent years and their focus on generating profits from their core businesses.
Financial expenses have long been a pivotal component of the ISO 500. As we examine this data, it is apparent that the financial expenses of the ISO 500 rose by 32.6 percent in 2022, from TL 209 billion to TL 277 billion.
Consequently, the ratio of financial expenses to operating profit has seen a notable reduction, plummeting from 61.1 percent to 41.3 percent. It is worth noting that this percentage, a subject of our concern for several years, reached as high as 89 percent in 2018 but has now decreased to 40 percent.
As evident, financial expenses imposed a much lighter burden on businesses in 2022. Nevertheless, it is crucial to bear in mind that the favorable interest rate environment in 2022 and the regulations governing stringent conditions for loan utilization have played a significant role.
The substantial contrast between the financial conditions of that period and today's prevailing interest rates and credit accessibility is well-documented. Therefore, the 2023 ISO 500 data, set for release next year, will offer a more comprehensive insight into the sustainability of the relative improvement in the ratio of financial expenses to operating profit.
Distinguished Members of the Press,
This table allows us to delve into the transformations in the asset and resource composition of these companies. The data illustrates that the total assets of the ISO 500 will experience an 83 percent increase in 2022, surging from TL 2.1 trillion to TL 3.9 trillion.
When we examine the main items within the total assets, we see that current assets rose by 78 percent, progressing from TL 1.4 trillion to TL 2.5 trillion, while fixed assets expanded by 95 percent, increasing from TL 706 billion to TL 1.4 trillion.
Examining the changes in the resource structure of the balance sheet, the surge in total assets has been funded primarily through equity capital, diverging from the trends in previous years.
In fact, during 2022, equity capital witnessed a substantial 124 percent rise, growing from TL 624 billion to TL 1.4 trillion, while total debts increased by 67 percent, moving from TL 1.5 trillion to TL 2.5 trillion.
Following the developments in balance sheet indicators, this table reflects the distribution of debt and equity capital in the ISO 500. This table signifies a relative recuperation in the resource structure of enterprises in 2022 after a prolonged period.
The share of debt in ISO 500 companies declined from 70.7 percent to 64.3 percent, attributed to strong profitability and reduced borrowing opportunities and tendencies. Simultaneously, the share of equity capital increased from 29.3 percent to 35.7 percent.
In reviewing this table presenting the sub-items of debts, we observe that financial debts in the ISO 500 grew by 64 percent, rising from TL 796 billion to TL 1.3 trillion. It is apparent that other debts also expanded from TL 711 billion to TL 1.2 trillion, marking an almost 70 percent increase.
Notably, akin to 2021, other debts outpaced financial debts in growth in 2022. In other words, commercial debts were preferred to finance operations.
The increasing utilization of commercial debt suggests that companies are seeking to address their resource requirements by borrowing from each other, instead of opting for financial institutions. Entering this cycle of debt during a period of economic contraction poses one of the most formidable challenges for the real sector. I would like to draw your attention to the potential disruption in inter-sector value chains that may arise from this situation in the days ahead.
When examining debt performance based on their maturities within ISO 500 enterprises, we find that short-term financial debts surged by 99 percent, surpassing the 37 percent growth in long-term financial debts.
The most tangible manifestation of this trend is vividly illustrated in the graph you are seeing on the screen. In fact, it is worth noting that the share of short-term financial debts in the total financial debts will surpass the 50 percent threshold for the first time in 2022, increasing from 42.8 percent to 52.1 percent.
We see that this uptick can be attributed to the prevailing low-interest-rate environment and the fact that new lending practices encourage the use of short-term loans. It is safe to say that companies will face greater adversity in a high-interest-rate environment as a result of this situation.
Dear Members of the Press,
The issue of deferred VAT, which we, at ICI, have consistently raised at every available opportunity, came to the forefront in 2022. The deferred VAT burden accumulating on the ISO 500 increased by 107 percent to reach TL 49 billion.
As we frequently underscore, we define this cycle as our industrial enterprises effectively lending money to the state with zero interest and an infinite maturity, despite the pressing need for resources. Unfortunately, rather than diminishing, this cycle continued to expand throughout 2022. This predicament has acquired greater significance today, given the rapid erosion of the value of money in periods of soaring inflation.
As we have emphasized on many platforms, the most efficacious resolution that would ease the burden on industrialists is the conversion of deferred VAT claims into bank guarantees. Transforming them into collateral instruments, especially for Eximbank loans, would represent the most rational solution to this conundrum.
Examining the table that provides valuable insights into the technological landscape of our industry, it is apparent that medium-to-low-tech industries contributed the most to the value-added generated in 2022, accounting for 37.7 percent. This group's share witnessed a 5.3-point year-on-year (YoY) increase.
Conversely, the share of low-tech industries decreased by 4.4 points to 28.9 percent, and the medium-to-high-tech industries group's share declined by 1.1 points to 27.2 percent.
Although the share of high-tech industries inched up by 0.1 points to 6.2 percent, it does not yet reflect a significant structural change.
When considering the technology intensity of the value-added generated, there is a discernible shift from low-tech to medium-to-low-tech, especially in recent years. However, the transition from medium-to-low-tech to medium-to-high-tech, and from medium-to-high-tech to high-tech, faces challenges.
Today, the path to global competitiveness hinges on R&D and innovation. Consequently, it is imperative for Türkiye to adopt an industrialization perspective that aligns with this direction in the forthcoming period. Now, our industrialists must embrace this perspective and not shy away from the necessary efforts and investments.
From this vantage point, scrutinizing the number of enterprises involved in R&D within the ISO 500 that we see on the screen, it is evident that our industry should exhibit greater enthusiasm in this domain. This is highlighted by the fact that the gradual increase in the number of enterprises engaged in R&D within the ISO 500 since 2013 appears to have plateaued after 2018. The number of enterprises engaged in R&D, which stood at 265 in 2021, declined to 260 in 2022.
We observe that the R&D expenses of these enterprises in 2022 have surpassed TL 16 billion. Although this signifies an increase of over 80 percent in comparison to 2021, as depicted in our table, it prompts contemplation that our industrial entities are dedicating a progressively smaller share of their sales to R&D expenses.
This table reveals that the employment within the ISO 500 grew by 4.1 percent in 2022, reaching approximately 800,000 individuals. Concurrently, the rise in wages and salaries paid during the same year stands at around 86 percent.
For companies, going public is a pivotal avenue for broadening capital access, particularly for industrial enterprises seeking quality financial resources. In recent years, it is evident that enterprises have exhibited a keen interest in this direction. This trend is also mirrored in the ISO 500 dataset.
The number of publicly held companies among the ISO 500 grew by 8, reaching 73 in 2022, following a consistent range of 65-69 during the 2017-2021 period. Consequently, the number of publicly traded companies among the ISO 500 has attained its highest level to date. In 2023, we continue to observe that the enthusiasm of our industrial companies for going public persists, and we view this as a positive development for facilitating the use of capital market instruments.
When we rank the ISO 500 according to their respective chambers, we see that the weight of Anatolia is increasing.
Although there has been a decrease in numbers in recent years, the largest share belongs to the Istanbul Chamber of Industry with 152 companies. Istanbul is followed by the Kocaeli Chamber of Industry with 40 companies.
Right below them we see the Ankara Chamber of Industry with 39 enterprises, which is closely followed by the Aegean Region Chamber of Industry with 38 enterprises. Subsequently, the Gaziantep Chamber of Industry is represented by 28 enterprises, the Kayseri Chamber of Industry with 17 enterprises, and the Bursa Chamber of Commerce and Industry with 15 enterprises.
When examining the sectoral breakdown of the ISO 500, we discern the following distribution based on the 10-sector grouping formulated by our Chamber:
In terms of production-based sales in 2022, the sector with the highest share was the "manufacture of basic metals and machinery," accounting for 23.4 percent.
"Chemicals, plastics, and rubber products" secured the second spot with 23.3 percent, with its share nearly matching that of the leading sector.
“Land and sea vehicles, and related sub-industries” ranked third with a share of 14 percent.
Distinguished Members of the Press,
We now proceed to the ISO 500 rankings, eagerly awaited by all. The report provided to you includes an in-depth ranking based on production-based sales. Within the table, you will find the top 10 companies, as is the tradition each year.
According to the ISO 500 Industrial Enterprises 2022 survey, the largest enterprise by production-based sales was Tüpraş with TL 418.4 billion worth of sales. This enterprise maintained its long-standing leadership position in 2022 as well.
The second largest organization by production-based sales in 2022 was Star Refinery with TL 189.2 billion.
Meanwhile, Ford Otomotiv took the third place with TL 140.1 million in production-based sales.
As we can see in the table, there have been no changes in the composition of the top 10 enterprises compared to 2021.
Dear Members of the Press,
The 2022 ISO 500 results serve as testament to our industry’s robust performance during a challenging year. These results underscore the significant improvements achieved by our industrial giants in numerous basic indicators.
Conversely, several macro indicators and developments, both on a global and local scale, indicate that 2023 will bring forth notably more challenging circumstances for industrialists. It would come as no surprise to witness the repercussions of this unfolding scenario in the 2023 ISO 500 results, slated for announcement in the upcoming year.
This is because we have started to witness the repercussions of the tightening monetary policies in the global economy with a certain delay. Indeed, both the trajectory of global production and the outlook for our key export markets, such as the Eurozone, the USA, and the UK, point towards a slower growth pace in 2023 compared to 2022.
The monthly Export Climate Index data that we publish corroborates this assessment. This index, which remained robust throughout 2021 and the first half of 2022, when exports played a substantial role in driving growth, began to wane in the latter half of 2022. By August 2023, it had dipped below the 50-threshold, signifying a contraction phase. In this regard, it is challenging to identify significant grounds for optimism in terms of global export prospects.
Focusing on domestic developments, particularly since the latter half of this year, we find ourselves at the outset of a period of grappling with fundamental macro vulnerabilities, such as inflation and the current account deficit. Measures taken in this direction will inevitably lead to a dampening of growth momentum. The descent of ICI Türkiye Manufacturing PMI into the contraction territory in the latter half of the year underscores this trend. Sharp declines, particularly in sub-items such as new orders and new export orders, temper optimism for the forthcoming months.
Simultaneously, there has been a notable uptick in market interest rates due to the tightening measures instigated by our Central Bank since June. This process is also anticipated to curtail imports, particularly driven by the robust consumption trend. Hence, in a climate where exports are receding, it is foreseeable that the robust domestic demand bolstering industrial production will also experience a degree of weakening.
Another consequence of the interest rate hike process will be a marked escalation in the financial costs incurred by our industrialists, a trend whose effects we have been witnessing for some time. To reiterate, it would not be unexpected if all these factors exert a negative influence on indicators such as sales performance, financial costs, exports, and resource structure in the 2023 ISO 500 survey outcomes.
Dear Members of the Press,
In this final segment of my speech, anchored in the insights gleaned from the ISO 500 results, I want to reiterate that Turkish industrialists, as they have consistently demonstrated, uphold their expectations for our country’s growth in 2022. This conviction persists despite the ebbs and flows in foreign markets initiated by the pandemic, the supply chain disruptions brought about by the Russia-Ukraine conflict, and the domestic financial challenges. They remain unwavering champions of Türkiye’s progress and development.
It Is imperative that we regard the ISO 500 data presented today as an embodiment of our industrialist’' faith in the future of our nation. To sustain this conviction and resolve, the foremost requirement for our industrialists and the vitality of our production sector is financial stability. In this light, we view as significant the measures taken by the economic leadership to reestablish financial stability, a prerequisite for the sustainable and high-quality growth we consistently advocate.
Thus, the "Medium-Term Programme," a highly anticipated and diligently crafted strategy that enjoys our Chamber's support, assumes paramount importance.
I hold the belief that the effective implementation of the Medium-Term Programme, which we anticipate with determination, will facilitate the influx of the foreign resources our nation has long needed. Our greatest aspiration is to merge this resource inflow with the establishment of technology-driven, high-quality new industrial ventures, a need we have harbored for an extended period.
Concluding my speech on that note, I would like to greet you once again sincerely all with respect.