Japan’s Toyo suspends Turkey plant on falling lira

Toyo Ink SC Holdings has postponed building a plant in Turkey because a slump in the Turkish lira has raised the cost of buying materials from abroad, Japanese media reported.

The ink producer, which bought local manufacturer DYO in 2016, has purchased land of 62,000 square meters in an industrial area in northwest Turkey to build the plant, but it is now observing the impact of the lira’s decline this year on the local economy.

The construction of the plant was supposed to start later this year, the Japanese Times reported. The project's completion was earmarked for next year after which Toyo would invest in capacity increases.

The lira has slumped almost 40 percent against the dollar this year, including a 20 percent drop since the start of August, on concerns about the government’s economic policies and after a political crisis with the United States over the internment of a U.S. pastor and other Americans led to economic sanctions against the NATO member.

Toyo had planned to use the factory, which would initially cost almost $30 million, as a lynchpin for its expansion in the Middle East and North Africa.

Turkey needs foreign direct investment to help finance a current account deficit of 6.5 percent of GDP. The lira’s retreat, exacerbated by sales of local stocks and bonds, has helped push inflation to almost 16 percent, paring domestic demand. Economists are expecting a serious knock-on effect in terms of lower economic growth. The economy could contract in the third quarter of the year, according to their estimates, from a rate of growth of more than 8 percent in the nine months to March.

Toyo Ink says that operating profit for 2018 will be hit by about $1.8 million if the lira remains at current levels, the Nikkei Asian Review said. But the impact on overall earnings will probably be negligible, it said.

Toyota is among other Japanese firms active in Turkey, building sports utility vehicles and other products.  DyDo Group sells carbonated drinks and other beverages. Japanese construction companies are also active in the country.

 

https://www.japantimes.co.jp/news/2018/08/27/business/corporate-business/lira-plunges-toyo-ink-puts-construction-turkish-plant-hold/#.W4PNzegzaUk
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