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bne Turkey Daily ListExecutive Summary:
This is bne's Turkey daily newsletter, a list of the top stories in the country this morning. To manage your delivery options: click here: | ||
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| 1. Toyota to reach full capacity production in Turkish plant |
| bne |
| May 16, 2012 Japanese car manufacture Toyota is hopeful to reach full capacity production in its Turkish Adapazari plant by 2013, Turkey's daily Sabah reports. The Japanese firm currently runs its 150,000-vehicle/year capacity Adapazari, Sakarya factory at a reduced production rate. However, the plant can reach its peak output when it begins manufacturing the new C segment sedan, which will replace the popular Corolla mode, according to Toyota Turkey CEO Ali Haydar Bozkurt. We expect the new C segment sedan to roll out in June, 2013. The Adapazari plant will reach its maximum capacity with the introduction of this model, Bozkurt told the press, after a high-level visit by a Turkish delegation to Toyotas main production plant in Nagoya, Japan. Turkeys Minister of Science, Industry and Technology, Nihat Ergun, accompanied by the Toyota Turkey CEO, paid a visit to Japan last week. During the visit he suggested that Toyota produce a new vehicle model called Sakaria, named after the province that hosts the Toyota plant. The company plans to invest about EUR 150m in the plant for the production of the C segment vehicle. The investment will create 400 new jobs. |
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| 2. Turkey: April budget-surplus up |
| bne |
| May 16, 2012 Turkey's budget produced a surplus of TRY1.4bn in April, up slightly compared to TRY1.1bn in the same period of last year, according to economy ministry data. However, figures for the first quarter show that the economy is slowing, though the finance minister says the country can easily reach 4% growth this year. "The stronger than expected outcome mainly stemmed from the TRY5.7bn income from Treasury portfolio revenues, deriving from the high dividend payments of the [Turkey's central bank] and state banks," says Erste in its 'Turkey in the Morning' research report released today. However, first quarter data shows that the budget registered a TRY6.4bn deficit in the first three months of the year. Revealing the first quarter-budget figures in Ankara on Monday, Turkey's finance minister Mehmet Simsek commented that the slower economic activity in recent months has also affected the country's tax revenues. We observe that tax revenue growth in April slowed down further to 4% with the slowdown in economic activity, while overall budget revenues were up by 24% thanks to profit transfer of CBT and state banks, writes Ozgur Altug, chief economist at BGC Partners, in an emailed note on Tuesday. Despite this, both Altug and Simsek are hopeful for economic growth in the second quarter of 2012. Simsek says that the country can easily reach 4% growth this year. He says that the slowing of the economy is expected and that the country's economy is rebalancing. In truth, it won't be until second quarter day is released that it will be possible to tell where Turkey's economy is headed. April figures benefitted from a one-time central bank dividend amounting to TRY5.7bn. With out the dividend, the budget would have produced a deficit. |
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| 3. Turkish Kardemir posts strong 1Q12 financials |
| Erste |
| May 16, 2012 Kardemir announced TRY 75mn net profit, up 61% y/y in its consolidated financials, significantly higher than the consensus estimate of TRY 35mn. The company had posted TRY 5mn net profit in 4Q11 and TRY 47mn net profit in 1Q11. Kardemirs sales volume increased 26% y/y to 342k tons, while the company posted TRY 415mn in consolidated revenues in 1Q12, up 40% y/y, indicating higher average sales prices y/y. On the other hand, Kardemir posted gross profit of TRY 66mn, with a 15.9% gross margin (down 3.5pp y/y) and TRY 72mn EBITDA, up 19% y/y, with an EBITDA margin of 17.4% (down 3.1pp y/y). Below the operating line, the company recorded TRY 30mn net financial income, which positively supported the strong growth on the bottom line. Despite the strong revenue growth y/y, we see a margin contraction, mainly due to the higher input costs, which the company could not reflect in sales prices. Apart from that, we deem the 1Q12 results positive for the company. |
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| 4. Turkish Botas voiced support for Nabucco West |
| bne |
| May 16, 2012 Turkish state pipeline company Boru Hatlari Ile Petrol Tasima AS (Botas) reiterated its support for the Nabucco project, reports Bloomberg. Botas felt the need to voice support to the project after RWE AG (RWE) said it's reviewing its commitment to the whole Nabucco venture. "Botas and the Turkish Ministry of Natural Resources fully support it," Levent Ozgul, Botas's director of strategy and business development, told to Bloomberg by e-mail. "Turkey assumes that Nabucco West will be the natural continuation of Tanap (Trans-Anatolia Pipeline)," which is led by Azerbaijan and Turkey, Ozgul added. The Nabucco pipeline project -designed to carry natural gas from the Caspian Sea region to central Europe- has been facing many set backs recently. German power company RWE became the latest company to consider abandoning the Nabucco project as it said on Monday that it is looking at the project to see if its commercial and strategic goals are still respected." |
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| 5. Euro area and EU27 GDP stable |
| Eurostat |
| May 16, 2012 GDP remained stable in both the euro area1 (EA17) and the EU271 during the first quarter of 2012, compared with the previous quarter, according to flash estimates published by Eurostat, the statistical office of the European Union. In the fourth quarter of 2011, growth rates were -0.3% in both zones. Compared with the same quarter of the previous year, seasonally adjusted GDP remained stable in the euro area and increased by 0.1% in the EU27 in the first quarter of 2012, after +0.7% and +0.8% respectively in the previous quarter. During the first quarter of 2012, GDP in the United States increased by 0.5% compared with the previous quarter (after +0.7% in the fourth quarter of 2011). Compared with the same quarter of the previous year, GDP rose by 2.1% in the United States (after +1.6% in the previous quarter). |
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| 6. IFC study to help chemical plants in Europe and central Asia improve efficiency |
| bne |
| May 16, 2012 PRESS RELEASE: IFC, member of the World Bank Group, launched a first of its kind benchmarking study of the chemicals and fertilizer production industry to help local firms in Europe and Central Asia identify areas for resource efficiency improvements and become more competitive. IFC is conducting in-depth analyses of select companies in Kazakhstan, Russia, Turkey, Ukraine and the Western Balkans to help them improve operations and save costs through resource efficiency management. IFC will also conduct a sector wide assessment of the nitrogen chemicals and fertilizer production industry in the region, benchmarking the sector against Western Europe. Manufactured fertilizer is involved in the food production for nearly half the world's population, and nitrogen fertilizer production consumes around 1.2 percent of the world's total energy. "The chemical and fertilizer industry in Europe and Central Asia is a significant generator of exports and employment," said Viera Feckova, manager of IFC's Resource Efficiency Program in Europe and Central Asia. "IFC is launching this study to generate more investment into resource efficiency in this industry and enable decision makers at local firms to make more informed investment choices, which will help them to compete in the international marketplace." The IFC study results will serve as a practical tool for corporate decision makers to benchmark their operations against a broad spectrum of competitors and help to identify areas for improvement. IFC, in partnership with the International Fertilizers Association and the European Fertilizers Manufacturers Association, intends to turn this resource efficiency benchmarking initiative into a regular global practice in the industry. The Ministry of Finance of Austria supports IFC's Resource Efficiency Program in Europe and Central Asia. |
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| 7. OECD unemployment rate stable at 8.2% in March 2012 |
| OECD |
| May 16, 2012 The OECD area unemployment rate was stable at 8.2% in March 2012, the same level recorded since February 2011. This flatness is largely the result of increasing rates in some euro area countries being offset by declines in North America. The euro area unemployment rate rose by 0.1 percentage point to 10.9% in March, 3.6 points higher than its all time low of 7.3% in March 2008. Within the euro area in March, the unemployment rate rose by 0.3 point in Portugal (to 15.3%) and Spain (to 24.1%, the highest rate in the OECD area), by 0.2 point in Italy (9.8%) and by 0.1 point in the Netherlands (5.0%). It fell by 0.2 point in Ireland (14.5%) and Slovenia (8.5%), and by 0.1 point in Austria (4.0%) and the Slovak Republic (13.9%), while unemployment rates remained stable in all other euro area countries. Outside Europe, unemployment rates across the OECD area remained broadly stable. Korea experienced the largest fall in March 2012 (to 3.4%), with no country recording an increase. New data for April 2012 show that the unemployment rate fell in the United States (to 8.1%, down from its peak of 9.1% in August 2011) while it rose slightly in Canada (to 7.3%, up 0.1 point from the previous month). Around 45.0 million people were unemployed across the OECD area in March 2012, up 0.8 million from March 2011 and 14.1 million from March 2008. |
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| 8. Emigration and demographics are CEE's next crisis |
| bne |
| May 16, 2012 Since accession to the EU, it has been assumed that the countries of Central and Eastern Europe would provide a virtually unlimited supply of good-quality, cheap labour to the West. But demographic trends across the region suggest that like the other dominant resource of developed economies - oil - the time to worry about shortages at both ends of the supply chain is already here, and nowhere provides a better example of the looming crisis than Latvia. "We have a joke that in 2030 the last Latvian can switch off the light at Riga airport," says Aldis Austers, chairman of the European Latvians' Association. "Emigration creates two major problems: it weakens the fiscal position of the state... and the outflow presents questions on the preservation of national identity." Austers was among the speakers at an April seminar in the Latvian capital considering how to turn the decade-long tide of emigrants from the small Baltic state. It was the second event in as many weeks, following on from an even more apocalyptic forum run by the American Chamber of Commerce titled: "Too late to defuse the ticking time-bomb for Latvia?" Click to read more |
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| 9. MOSCOW BLOG: Occupy Abai - a revolution of nobodies |
| bne |
| May 16, 2012 Its Moscows answer to Wall Streets Zuccotti park: Muscovites are camping out at Chisti Prudy park in what they are calling "Occupy Abai", the latest stage in the standoff between the Kremlin and the nascent protest movement. There are no drum circles, but life in the small park is noisy at times and some inhabitants are a bit smelly, especially in the mornings. With free food, blankets and warm clothes, free publicity, and a welcoming attitude, the venue has also attracted some homeless who also congregate around the camp wearing the white ribbons that symbolise the opposition movement. The camp appeared on the evening of May 7, the day of President Vladimir Putins inauguration and the day after the so-called "Millions March", a civil protest which turned into violent clashes with the police. Like the "Occupy Wall Street" protestors in Zuccotti park, the protestors at Chisti Prudy have set up a small, leaderless, self-governing community. Some of them have not left the site since the first day; others drop in for a chat, take part in the campers assembly, bring food and go home at night. The camp was named after the statue of famous Kazakh poet Abai Kunanbaev that stands at the head of the park and is the focal point of the community. Around a thousand people congregate daily at the statue, bringing notes and flowers, and the monument has become another symbol of the rebellion. The camp would resemble a students cooperative on a university campus if it werent for the 24-hour police presence. Click to read more |
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| 10. VISEGRAD: Highway robbery in the Czech Republic |
| bne |
| May 16, 2012 The construction industry is a murky business and no more so than in the Czech Republic, where the fate of Miloslava Posvarova, a former employee for the UK engineering firm Mott MacDonald in Prague, has become a matter of fierce debate. Posvarova was dismissed in early May by Mott MacDonald under circumstances that still aren't clear. People in the industry and media unambiguously link her dismissal to her sterling work highlighting the widespread dodgy practices and cost inflation in the Czech Republic's notoriously corrupt infrastructure construction sector, and that she has been sacrificed by her firm as it seeks to worm its way back into lucrative state construction contracts from which it's been frozen out. However, Mott MacDonald tells bne that contrary to press speculation, the loss of her job was part of a general downsizing of the Czech office (from 180 to 124 staff) as the UK firm exits parts of the construction business; indeed, she was one of only three people who were offered continued cooperation on a consultancy basis. Further, Mott MacDonald complains that the company is finding itself in the midst of a political battle between the government and certain construction contractors, and this rampant speculation by the press, few of which have bothered to contact the UK company to seek its comment, is part of that battle. Click to read more |
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| 11. Police implicated in Dink case promoted in Turkey |
| Hurriyet Daily News |
| May 16, 2012 A police chief accused of negligence during the assassination of Hrant Dink, a Turkish-Armenian journalist murdered outside his office in Istanbul in 2007, received a promotion through the unanimous voting of a commission in the Turkish Police Headquarters. The commission decided to promote Ali Fuat Yilmazer, who was serving as a deputy director in charge of intelligence at the Istanbul Police Department at the time of Dink's assassination, from second to first class police director during a meeting May 12. Click to read more |
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| 12. Ukranian climber dead in Turkey identified |
| Hurriyet Daily News |
| May 16, 2012 Twelve Ukranian mountain climbers, who had been lost on the Demirkazk Mountain in central Anatolia, were found by rescue teams this morning, although one was already dead, Anatolia news agency reported. Click to read more |
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| 13. MHP, BDP vow not to leave charter talks in Turkey |
| Hurriyet Daily News |
| May 16, 2012 The Nationalist Movement Party (MHP) and the Peace and Democracy Party (BDP) yesterday declared their commitment to the constitution-drafting process, joining the other two parties represented in Parliament in making pledges never to quit the negotiations. "The MHP will not leave the negotiating table. We will keep at it until the end," MHP deputy chairman and Constitution Conciliation Commission member Faruk Bal told the Anatolia News Agency. Bal also outlined his party's "red lines" for the new charter, many of which in stand in stark contrast to the BDP's demands for broader Kurdish freedoms. Click to read more |
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| 14. Ruling party kills plans to free jailed deputies |
| Hurriyet Daily News |
| May 16, 2012 Parliament Speaker Cemil Cicek's initiative to hammer out a formula for the release of the members of Parliament currently being held in prison collapsed in acrimony yesterday as the ruling Justice and Development Party (AKP) rejected the opposition's joint proposal and referred the problem to the courts. "There cannot be any [legislative] formula for this. The law and Article 14 of the Constitution are loud and clear on the issue," Prime Minister Recep Tayyip Erdogan said yesterday, referring to a constitutional provision stipulating that no freedom can be used against the unity of the country. Click to read more |
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| 15. Turkey ramps up pace of EU bid after French polls |
| Hurriyet Daily News |
| May 16, 2012 The Turkish government tries to break the impasse with EU as several draft bills have been presented aiming to help it open new chapters in the stalled negotiations. The moves reflect cautious optimism after the French presidential election Ankara has moved fast to boost its prospects in accession talks with the European Union after Franois Hollande's recent victory in the French presidential elections offered a glimmer of hope to revitalize the faltering process. Several draft bills that would help Turkey open new chapters in the stalled negotiations were presented to ministers to sign and would be sent to Parliament, Deputy Premier Blent Arn said. Click to read more |
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| 16. Employment in Turkey: A miracle in the making against all odds? |
| BGC Partnera |
| May 16, 2012 This is the fourth edition of our ?Picturing Turkey? reports. In every edition, we present graphs/tables on a selected topic in Turkey. Previous editions: ?What has changed in Turkey in the last 10 years?? (February 2, 2012 ) ?Why does Turkey grow faster?? (March 15, 2012) ?Why does Turkey have a large C/A deficit?? (April 19, 2012) We tried to present all aspects of development in the labor market in Turkey in 2004-2012, which also covers the global financial crisis period (2008-2009) as well. It is clear that Turkey?s employment grew fast (in fact, the country created more than 3 mn jobs in the last four years), while many other things (labor participation, women?s contribution, technological transformation, industrialization, etc.) improved as well mainly thanks to fast GDP growth. However, rigidities still exist in the labor market and a comprehensive labor market reform could accelerate the improvement process, in our view. We observe that despite a massive improvement in the last eight years still-high level of unemployment, low labor participation rate, grey economy, fixed minimum wage, low coverage of unemployment insurance fund, rapid urbanization, migration, young population, rigid employment contracts, high seasonality, entrance barriers to the market, high taxation on employment, severance pay, women?s low contribution are existing problems in the labor market. |
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| 17. Highway tunnel in Turkey raises hope for stronger regional trade |
| Hurriyet Daily News |
| May 16, 2012 The construction of a new highway tunnel in the northeastern region of Turkey, which is planned to be the third longest tunnel in the world, is invigorating the commercial prospects of local businessmen, both regionally and internationally. "It will galvanize the Black Sea region economy wise, and it will lead to the full capacity utilization of ports," Omer Faruk Ofluoglu, the president of the Rize Trade and Industry Chamber, told the Daily News during a phone interview yesterday. Click to read more |
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| 18. Turkey's employment hurt by slowdown |
| Erste |
| May 16, 2012 February's unemployment rate declined to 10.4% from 11.5% last year, although the seasonally-adjusted unemployment rate slightly picked up to 9.1% from 9% a month ago. Slowing economic activity seems to have begun hurting the labor market, slashing 65.8K from employment in seasonally-adjusted terms. The labor force participation rate, meantime, remains weak at 49.37%, down from last year's 49.94%. Employment generation compared to last year was moderate at 536K after 15 consecutive months with an employment increase of over 1,000K. The bulk of the contribution again came from the service sector, which created 681K jobs, while employment in agriculture and construction has actually declined by 146K and 32K, respectively. Job creation in industrial sectors was quite weak at 32K. Specifically, transportation and warehousing, administrative and support services, public administration and defense, education, and health were the leading sectors with a combined 588K employment increase. |
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| 19. Turkey's April budget balance up |
| Erste |
| May 16, 2012 The central government budget balance in April generated a TRY 1.4bn surplus against last year?s TRY 1bn, while the primary surplus stood at TRY 6bn, thus well above last year?s TRY 3.9bn. The stronger than expected outcome mainly stemmed from the TRY 5.7bn income from Treasury portfolio revenues, deriving from the high dividend payments of the CBT and state banks. Weakening economic activity and a lower contribution from domestic VAT, SCT and VAT on imports have led to negative growth in tax revenues in real terms in the order of 6.9%. This would have been worse still had the contribution of the tax amnesty not appeared in the numbers. Against weak tax revenues, non-interest expenditures were strong, with an 11% real increase over the previous year, mainly due to a 21.6% rise in social security transfers. Thus, tax revenues covered just 88% of non-interest expenditures, down from 97% a month ago. Meanwhile, the rise in interest expenditures in the order of 47.1% was another factor distorting the budget figures, negating the positive contribution of CBT profit. In year-to-date terms, the first four months? results reveal the budget balance generating a TRY 5bn deficit, short of last year?s TRY 3.1bn, while the primary surplus is higher, at TRY 16.9bn, than last year?s TRY 13.7bn. Meanwhile, tax revenues rose by 1.6% compared to 2.3% rising non-interest expenditures. As we had contemplated in previous months, slowing economic activity, plus the decelerating contribution of tax and social security amnesty income, as well as weak privatization performance are likely to reverse last year?s strong display. And while the government is expecting some TRY 15bn (around 1% of GDP) in proceeds from the sale of state-owned land (2B zones), this would take time to contribute to the overall budget balance, while a new incentive scheme at an estimated cost of TRY 2bn (some 0.15% of GDP) and possibly higher civil servant wage increase due to higher than targeted inflation stand to place an additional burden on the budget. Indeed, the budget balance is almost certain to fall short of last year?s 1.4% of GDP. In short, we expect the 2012 budget balance to generate a 2.5% deficit at year-end with risks on the upside. |
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| 20. MSCI Turkey Index Changes |
| Erste |
| May 16, 2012 The following changes in MSCI Turkey indices which will be effective as of the close of May 31, 2012: - MSCI TURKEY STANDARD INDEX No addition & No deletion -MSCI TURKEY SMALL CAP INDEX Additions: SAFGY, VKGYO Deletions: ALTIN, BJKAS, BOLUC, TIRE, TRGYO, TSPOR |
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| 21. Turkish Koc Holding gives TRY 33mn shareholder loan to energy subsidiary |
| Erste |
| May 16, 2012 Koc Holding announced that it decided to give a shareholder loan to AES Entek, to be used for electricity generation investments. 24.81% of AES Entek shares are held by the holding, while 24.8% and 50.4% stakes are held by Aygaz and AES, respectively. Koc Holding and Aygaz will each give a TRY 32.75mn loan to AES Entek, with a coupon rate of TRLIBOR + 3.75%, with the principle amount of the loan to be repaid in the fifth year. Koc Holding aims to increase its current 303 MW electricity generation capacity to 3,000 MW in the coming five years through acquisitions and new greenfield investments, through its unlisted subsidiary AES Entek. The loan amount is not significant for the holding, so we do not expect any impact on the share price today. |
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| 22. Turkish Airlines signed an interline agreement |
| Erste |
| May 16, 2012 Turkish Airlines announced that the company signed an interline agreement to connect the carriers' networks at New York's John F. Kennedy (JFK) International Airport and Washington Dulles International Airport. |
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| 23. Turkish Enka Insaat posts strong bottom-line thanks to non-operating income |
| Erste |
| May 16, 2012 Enka Insaat (ENKAI TI, N/R) posted TRY 327mn net profit in 1Q12 up by 48.3% y/y and pretty much higher than CNBC-e consensus estimates of TRY 256mn. Although bottom- line is higher than the expectations, the company's operating figures (revenues and EBITDA) lagged behind the expectations. Non-operating income seems to be the main reason behind the strong bottom-line. The Company posted total revenue of TRY 2.0bn, up 14% y/y in 1Q12, below the consensus estimate of TRY 2.4bn. In details, the contracting segments growth was 30% y/y while real estate up 22%, trade and manufacturing up 18% and energy up by 8% in 1Q12 respectively. The Company generated a total EBITDA of TRY 317mn (with an EBITDA margin of 15.8%) below the consensus estimate of TRY 374mn. Below the operating line the company recorded TRY 118mn net financial income in 1Q12 which positively supported the strong growth on the bottom line. |
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| 24. Turkish DOCO: Company report after analyst change |
| Erste |
| May 16, 2012 Following an analyst change, we keep our Buy call and set our new target price at EUR 36. This includes a 10% liquidity discount. The company will release full-year figures on May 24. We expect sales growth of 9% to EUR 466mn, EBIT of EUR 32mn and net profit of EUR 19mn. Based on the 20% distribution policy, we expect DPS of EUR 0.40. For the next two years, we assume a gradual diversification of revenue streams away from airline catering through the new Austrian railways catering contract, the planned hotel in Istanbul and the upcoming UEFA Euro tournament in Poland/Ukraine. We expect the new business areas to offset expected declines in the Austrian aviation accounts. The DO&CO share offers an interesting growth story in the area of food services. Despite the strong focus on airline catering (70% of EBIT), the share is uncorrelated to aviation stocks. Due to its strong net cash position of EUR 88mn (almost EUR 10/share), the company has a ready war chest for further acquisitions which are not built into our projections. In a peer group comparison, the share offers discounts on EV/EBITDA, P/CF and cash adjusted P/E. |
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