Q1 2025 Earnings Reveal Tough Conditions Amid Political Tensions and High Interest Rates in Türkiye

The first quarter of 2025 proved challenging for Turkish companies, shaped by tight macroeconomic conditions, heightened interest rates, and renewed political uncertainty. As the Central Bank of the Republic of Türkiye (CBRT) adjusted its monetary policy in response to inflation and late-quarter political tensions, financial markets faced volatility and domestic demand cooled off sharply.

According to Borsa Istanbul (BIST) data, 546 companies (excluding those requesting an extension) disclosed their Q1 financials. Of these, 269 reported net losses, while 275 posted net profits, highlighting a deeply divided earnings season.

BIST100 Snapshot: Banks Resilient, Industrials Under Pressure

Out of 93 companies in the BIST100 Index, 27 reported losses and 66 posted profits. The top loss-maker was Vestel (VESTL) with a net loss of TL 5.07 billion, while Garanti Bank (GARAN) led the earnings chart with TL 25.28 billion in net profit.

Notably, banks—exempt from inflation accounting rules—posted results in line or above expectations, reaffirming their resilience. In contrast, companies in sectors such as energy, petrochemicals, industrial manufacturing, and machinery suffered significant operational losses. Major underperformers included PETKM, ALARK, ARCLK, KRDMD, ENJSA, ODAS, KCHOL, TOASO, many of which disappointed investors with losses well beyond projections.

Seasonality also impacted aviation and tourism-linked stocks, as THYAO, PGSUS, and TAVHL saw earnings deterioration.

Consumer Weakness Hits Retail and Durable Goods

Weakened consumer confidence weighed heavily on retail and consumer durables, with many households postponing or limiting expenditures. Volume growth proved elusive for companies across these segments.

The biggest operational challenges stemmed from:

• Rising personnel costs

• Elevated raw material and energy expenses

• And a sharp surge in financing costs, particularly for firms with high debt levels or FX exposure

Inflation Accounting Still a Burden

Inflation-adjusted accounting rules remained a drag on headline results, especially for non-financial firms, distorting YoY comparability and masking organic performance.

Yet, some companies managed to buck the trend. Firms with strong operational efficiency, effective cost control, and robust cash positions weathered the storm better. FROTO, TTKOM, TURSG, EKGYO, ULKER, ANSGR, AEFES, MGROS all beat market median expectations. Şişecam (SISE) was a standout, delivering solid profitability despite loss expectations.

Outlook: Operational Resilience Remains Key

As the quarter closed, the CBRT’s return to higher policy rates due to political risk reversed temporary rate advantages, further straining demand. Analysts expect continued bifurcation in corporate results throughout 2025, with selective stock picking becoming critical.

“Operational resilience, disciplined spending, and low leverage are likely to remain the key differentiators,” market analysts note.

Although limited signs of a macroeconomic recovery may emerge in the second half of 2025, tight monetary policy and lack of forward guidance on rate cuts suggest domestic demand will remain muted.

Conclusion: A Stock Picker’s Market

Going forward, investors are advised to focus on companies with:

• Low FX risk

• Solid cash flows

• Scalable cost structures

• Strategic exposure to exports rather than local demand

As inflation accounting and high base effects linger, earnings divergence will continue to define Borsa Istanbul’s landscape in the quarters ahead.

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