If you had to pick a company as a metaphor for the key themes of this year’s World Economic Forum, you’d be pressed to find a better example than Turkey’s Yildiz Holding. The Istanbul conference — themed “bridging transformations,” and which opened Tuesday — is the first WEF meeting to focus specifically on the Middle East, Africa and Eurasia regions. It’s a region that Yildiz, an Istanbul-based food and beverages conglomerate that owns sweets maker Ulker and the luxury chocolate brand, Godiva, knows all to well. Propelled by a strong domestic market and rapid expansion across markets from West Africa to South Asia, the company, which posted an average of 11% revenue growth over the past two years and forecasts an expansion of 14% this year, is one of fast-growing Turkey’s corporate success stories.
A private conglomerate that owns seven publicly listed subsidiaries, Yildiz has insulated itself from the euro zone?s problems by expanding rapidly and gobbling up assets across the Middle East, former Soviet Union and North Africa. One subsidiary, Ulker, Turkey?s largest standalone food company, has seen its market value surge 40% to $2.5 billion since the beginning of the year. According to Cem Karatas, the company?s Chief Financial Officer, Yildiz?s success in breaking into new markets is indicative of Turkish companies? willingness to invest and create supply chains in countries where firms from developed markets have feared to tread. He says Yildiz is currently eyeing ?three or four? companies in emerging markets as possible acquisition targets as the firm tries to deepen its foothold across the region. Yildiz?s cash-generative business means it has accumulated a large war chest, and wouldn?t need to secure external financing, Mr. Karatas added. ?We are looking at a number of companies quite seriously, but [that] doesn?t mean that the acquisitions will happen,? he said. ?We don?t have any capital raising needs. We have free cash generating business.? In many senses, Yildiz?s fortunes have dovetailed with Turkey?s rising economic and diplomatic muscle. In the decade since the governing Justice and Development Party swept to power following a savage economic crisis in 2001, which skittled a large part of the banking system, Turkish incomes have tripled and foreign trade has quadrupled. Bolstered by surging economic growth and a government with strong Islamic roots, Turkey?s diplomatic reach across the Middle East and Africa has grown rapidly, boosting Turkish companies? prospects across a vast and rapidly expanding region. Yildiz has expanded into a regional space stretching from Senegal to Pakistan ? a market containing 1.3 billion consumers, Mr. Karatas says. Yildiz?s profitable foray into so-called frontier markets has been buttressed by a surging domestic market, which grew 8.5% in 2011, the fastest expansion in the Group of 20 countries bar China. Rising incomes have propelled robust growth rates in Yildiz?s core food products as well as its operations in packaging, industrial products, finance and other services. One of the fastest-growing products is chocolate, which saw demand expand 9% last year and has posted 11% growth this year. ?Chocolate consumption in Egypt is growing even faster,? Mr. Karatas said. ?We also expect the market in Saudi Arabia to triple.? Yildiz?s decision to avoid pursuing an expansion strategy in the highly competitive and stagnating euro zone hasn?t entirely insulated the company from the impact of the financial crisis. Mr. Karatas says that if the euro zone?s woes intensify, Turkey would be ?significantly affected,? but stresses that the resulting shock could also hasten Turkey?s efforts to diversify its export base away from Europe and into more profitable emerging markets across Eurasia. ?If the euro crisis had happened 10 years ago, Turkey would be in a dismal condition because of our exposure to it,? he said. ?Now, we have a more diverse product base which protects us from the worst effects, and the crisis actually could present us with an opportunity to look at markets we?ve neglected so far.? Despite Yildiz?s robust growth, it?s not all plain sailing. Operating in many markets means the firm has been buffeted by exchange-rate volatility as Turkey?s lira fell almost 20% against the dollar last year. Investors had become skeptical over the imbalances of Turkey?s growth model and the credibility of its central bank, which has pursued an unorthodox monetary policy to simultaneously weaken the currency and deter speculative inflows without putting the brakes on economic growth. Mr. Karatas concedes that the bank?s policies were received poorly by many investors but stresses that recent data show that the moves are having a positive effect. Data on Monday confirmed that inflation eased more than expected in May, falling back to single digits for the first time this year. ?If you look at data of [the] past two or three months it indicates that the policies are working. The central bank has followed them with persistence; it looks like a soft landing,? he said. Many investors are yet to be convinced. Inflation may be easing after jumping due to a dramatic cut in interest rates and a weak currency. But the bigger problem is that the country?s rapid growth rate is supported almost entirely by demand, sucking in imports and pumping the current-account deficit to 10% of gross domestic product. (By Joe Parkinson, Wall Street Journal )
Last modified onSaturday, 06 May 2017 10:07
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