Turkish companies in Kazakhstan expect fall in profits

AfterKazakhstan adopted a free exchange rate system on Thursday, its currency, the tenge, lost more than a quarter of its value. It is said that Turkish companies operating in Kazakhstan, including Anadolu Efes, Alarko Holding, Coca-Cola İçecek and Turkcell, could be negatively affected by the devaluation of the tenge.

The official exchange rate, which was under pressure because of the decrease in oil prices, tumbled by 26.2 percent to 255.26 per dollar yesterday. According to the announcement of İş Yatırım, the Turkish investment arm of İş Bankası, the Kazakhstan operations of Anadolu Efes comprises 11 percent of the company's total sales, while Coca-Cola İçecek has a sales volume of 9 percent in the country. Moreover, shrinking customer demand can lessen profits gained in Kazakhstan.

It was also noted that the effect on Turkcell, which is operating in Kazakhstan together with K-cell, would be limited. "Turkcell is consolidating K-cell with the equity method via Fintur Holding. In other words, it takes shares from the net profit. K-cell has a short-term and tenge-based net debt of 31.7 billion tenge [$125.6 million] as of the end of the second quarter, which equals the EBITDA multiple of 0.34. Devaluation in the tenge will have a limited impact on Turkcell," İş Yatırım announced. A total of 31 percent of Alsim Alarko, which is a subsidiary of Alarko Holding and has a trade volume of $611 million, is located in Kazakhstan, and 29 percent of the company's total project capacity is carried out via the tenge. This situation is expected to affect Alsim's margins negatively, İş Yatırım said, adding: "On the other hand, pressure on margins can be relatively eased since costs of those projects are also in tenge to a large extent and it is possible to revise project contracts against devaluation."

Kazakh Central Bank Governor Kairat Kelimbetov appeared unruffled by yesterday's sharp market-driven drop in the currency, saying he expected the market would set "a fully balanced rate" in five or seven days. "This is not a devaluation, this is a transition to a freely floating rate when the market itself determines a balanced exchange rate," he emphasized.