The Inflation Paradox: 5 Impactful Truths Hidden in Arçelik’s 2025 Financials

1. Introduction: The Art of Measuring a Moving Target

Assessing the financial health of a global industrial powerhouse like Arçelik requires more than a cursory glance at the top line—it requires a mastery of accounting physics. As of the December 31, 2025, audit conducted by Güney Bağımsız Denetim (EY), the Group finds itself at the center of a historical reporting transition. While Arçelik remains a massive global conglomerate with 38 factories spanning 13 countries—including strategic hubs in Egypt, Bangladesh, and Italy—its financial narrative is now fundamentally dictated by the reality of hyperinflation.

For sophisticated investors, the 2025 financials represent a “signal-over-noise” challenge. When the reporting currency’s purchasing power is in constant flux, traditional metrics of growth become “moving targets.” To find the truth, one must look toward the mechanics of inflation adjustment and the structural hedges hidden within a truly global manufacturing map.

2. The “Real” Growth Gap: Why End-of-Year Totals Can Be Deceiving

Under the mandate of TMS 29 (Hyperinflation Accounting), Arçelik’s 2025 financials have been restated to reflect the purchasing power of the Turkish Lira (TL) as of year-end. This is not merely a cosmetic change; it is a rigorous recalculation based on the Consumer Price Index (TÜFE). To appreciate the scale of this adjustment, one must look at the “correction coefficients” applied by the auditors: a factor of 1.00000 for 2025 against 1.30892 for 2024.

When viewed through this lens, a startling “growth gap” emerges. Nominal totals suggest a titan in motion, yet the consolidated revenue for 2025 actually stood at 523,933,321 bin TL, representing a contraction compared to the 2024 restated revenue of 560,936,754 bin TL. This highlights the core paradox: in a hyperinflationary environment, “more” money often masks a decrease in real value. As the Independent Auditor’s Report notes:

“Given the significant impact of TMS 29 on the Group’s reported results and financial position, high inflation accounting has been considered a key audit matter.”

3. The Multi-Billion Dollar Invisible Engine: Brand and Goodwill

The most sensitive components of Arçelik’s balance sheet are not its physical assembly lines, but its intangible assets—the “invisible engine” of the Group’s valuation. The 2025 report records a staggering 15,230,900 bin TL for brand value and 10,671,568 bin TL in goodwill.

However, the “signal” for analysts lies in the methodology. These valuations are derived using the “Royalty Relief Method” (İsim hakkından kurtulma yöntemi). These figures are not static; they are highly dependent on Royalty Rates, EBITDA growth expectations, and discount rates. Because these intangibles rely on “significant estimates and assumptions” about future market conditions, they are the first to signal distress if market sentiment or consumer loyalty shifts. They represent a multi-billion dollar bet on the enduring power of Arçelik’s global brand portfolio.

4. A Truly Global Footprint: The Manufacturing Map as a Natural Hedge

While the bottom line is reported in TL, Arçelik’s operational risk is physically diversified across 38 factories in 13 countries. This manufacturing map serves as a structural “natural hedge” against local volatility:

• Europe: Turkey, Romania, Poland, Slovakia, Italy.
• Asia & Middle East: Russia, China, India, Pakistan, Bangladesh, Thailand, Egypt.
• Africa: South Africa.

By maintaining massive production hubs in markets like Egypt and Bangladesh, the Group creates a cost-basis diversification that nominal financials often obscure. While the reporting currency suffers from devaluation, the physical cost of production is spread across various global currencies, providing a buffer that allows the Group to maintain its competitive edge in the durable consumer goods sector regardless of the macro-instability in its home market.

5. The Auditor’s “Radar”: Revenue Recognition as a High-Stakes Game

With consolidated revenue exceeding 523 billion bin TL, the timing of revenue recognition is a high-stakes game. Under TFRS 15, Arçelik recognizes revenue only when “performance obligations” are met—meaning control of the goods has officially passed to the customer.

Given the sheer volume of transactions across different jurisdictions, EY’s auditors employed a rigorous verification “radar.” This included the use of “Direct Confirmation Letters” (doğrulama mektupları), where auditors verify account balances directly with third-party customers. For a company of this scale, even a minor delay in recognizing a shipment in Poland or a sale in Pakistan can shift billions of bin TL between reporting periods. The “unqualified opinion” from the auditors suggests that despite these complexities, the Group’s internal controls remain robust.

6. The Bottom Line: Navigating a Net Loss via Note 31

The 2025 headline figure shows a net loss of (9,799,313) bin TL, a deepening from the (2,889,171) bin TL loss in 2024. While high financing costs (Note 30) are a primary culprit, the “Truth Hidden in the Financials” is found in Note 31: Net Parasal Pozisyon Kazançları (Net Monetary Position Gains).

Arçelik recorded a massive “accounting gain” of 14,976,834 bin TL in 2025 due to the effects of hyperinflation on its monetary assets and liabilities. This is the ultimate paradox of the report: without this 14.9 billion bin TL paper gain, the company’s net loss would have been significantly more catastrophic. Investors must distinguish between this non-cash accounting benefit and the actual operational cash flow to understand the Group’s true profitability.

7. Conclusion: The Future of Confidence

Despite the complexities of TMS 29 and the reported net loss, the auditors have issued an “unqualified opinion,” confirming that the statements “fairly present” Arçelik’s financial position.

The sophisticated investor is left with a compelling choice: do you focus on the short-term pain of the 9.7 billion bin TL net loss, or do you look at the 330 billion bin TL in current assets and the massive global infrastructure that remains intact? The 2025 financials suggest that Arçelik is not just surviving hyperinflation; it is using its global footprint to bridge the gap between reporting volatility and long-term industrial strength. The question remains: how much of a premium is the market willing to pay for a company that has successfully learned to navigate the storm?

Arçelik A.Ş. 2025 Consolidated Financial Performance and Audit Briefing

Executive Summary

This briefing document provides a comprehensive analysis of the consolidated financial statements and independent auditor’s report for Arçelik A.Ş. (the “Group”) for the fiscal year ending December 31, 2025.

The Group’s financial results for 2025 reflect a period of significant structural and macroeconomic adjustment. While the Group continues to maintain a massive global footprint with 38 factories and a diverse product portfolio, the 2025 fiscal year resulted in a net period loss of 9.8 billion TL, a substantial increase from the 2.9 billion TL loss recorded in 2024. Total revenue decreased from 560.9 billion TL in 2024 to 523.9 billion TL in 2025.

A critical factor in this reporting cycle is the continued application of TMS 29 (Financial Reporting in Hyperinflationary Economies). Due to Turkey’s high-inflation environment, all financial figures—including 2024 comparative data—have been adjusted to the purchasing power of the Turkish Lira as of December 31, 2025. This adjustment is central to understanding the Group’s reported performance, asset valuations, and equity changes.

The independent auditor, Güney Bağımsız Denetim ve SMMM A.Ş. (a member firm of Ernst & Young), has issued an unqualified opinion, stating that the financial statements present a fair and accurate view of the Group’s financial position in accordance with Turkey Financial Reporting Standards (TFRS).

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1. Independent Audit Results and Opinion

The independent audit was conducted in accordance with the standards issued by the Capital Markets Board of Turkey (SPK) and the Public Oversight, Accounting and Auditing Standards Authority (KGK).

• Audit Opinion: The auditor concluded that the consolidated financial statements fairly present, in all material respects, the financial position of Arçelik A.Ş. as of December 31, 2025.
• Independence and Ethics: The auditors declared independence from the Group, adhering to the Ethical Code for Independent Auditors and relevant SPK legislation.
• Audit Responsibility: The audit aimed to obtain reasonable assurance that the statements are free from material misstatement, whether due to fraud or error.

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2. Key Audit Matters (KAMs)

The auditor identified three primary areas of focus that required significant professional judgment during the 2025 audit.

2.1 Application of Inflation Accounting (TMS 29)

Due to the Turkish Lira being classified as a currency of a high-inflation economy, the Group applied TMS 29 to reflect changes in the general purchasing power of the TL.

• Context: Financial statements were restated using the consumer price index (TÜFE). As of December 31, 2025, the three-year composite inflation rate was calculated at 211%.
• Audit Procedure: The auditor verified the models used for inflation adjustment, tested the accuracy of indices, and ensured that non-monetary items were correctly restated to reporting-date purchasing power.

2.2 Revenue Recognition (TFRS 15)

Revenue remains the Group’s most critical performance indicator and the primary metric for evaluating strategy results.

• Context: Revenue is recognized when performance obligations are met, typically at the point of delivery for durable consumer goods.
• Audit Procedure: Procedures included testing the effectiveness of sales process controls, performing analytical reviews to see if revenue met expected levels, and matching sales invoices with shipping documents (sevk irsaliyeleri) to ensure completeness.

2.3 Brand and Goodwill Impairment

As of year-end 2025, the Group carried significant intangible assets: 15.2 billion TL in Brands and 10.7 billion TL in Goodwill.

• Context: These assets have indefinite useful lives and must undergo annual impairment testing. Management uses complex estimates, including EBITDA growth expectations, long-term growth rates, and discount rates.
• Audit Procedure: The auditor utilized valuation experts to evaluate management’s assumptions against macroeconomic data and industry standards in the consumer electronics and durable goods sectors.

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3. Financial Position Analysis

The following table summarizes the Group’s financial standing, adjusted for inflation to 31 December 2025 purchasing power.

Summary of Financial Position (in Thousands of TL)

Key Observations:

• Asset Growth: Total assets increased slightly by approximately 4.4%, driven by a rise in current assets (notably cash and cash equivalents).
• Liquidity: Cash and cash equivalents rose to 97.8 billion TL, up from 66.5 billion TL in 2024.
• Equity Erosion: Total equity saw a marked decline of nearly 23%, dropping from 98.3 billion TL to 75.9 billion TL, largely impacted by the net loss and treasury share transactions.
• Liability Profile: Short-term borrowings increased significantly (from 67.3 billion TL to 115 billion TL), indicating a shift toward shorter-term debt financing.

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4. Operational Performance and Segments

4.1 Income Statement Summary (in Thousands of TL)

4.2 Segment Performance (2025)

The Group operates through three primary segments:

• White Goods: This remains the core business, generating 401 billion TL in revenue with a gross profit of 112.5 billion TL. It includes refrigerators, washing machines, dishwashers, and ovens.
• Consumer Electronics: Generated 25.2 billion TL in revenue. This segment focuses primarily on televisions (flat screens) and computers.
• Other: Includes air conditioners, small household appliances, and after-sales services, contributing 97.7 billion TL in revenue.

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5. Debt and Financing

The Group manages a complex debt portfolio consisting of bank loans and issued bonds.

• Short-term Borrowings: Totaled 115.0 billion TL. The largest portions are denominated in EUR (approx. 50.3 billion TL equivalent) and TL (30.9 billion TL).
• Long-term Borrowings: Totaled 87.9 billion TL, down from 99.2 billion TL in 2024.
• Bond Issuances: In May 2025, the Group issued a 2.5 billion TL nominal value bond due in 2026. This adds to existing USD-denominated bonds (500 million USD total) and a EUR-denominated Green Bond (350 million EUR) maturing in 2026.
• Interest Sensitivity: Over 144 billion TL of the debt is subject to repricing within the next 12 months.

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6. Organizational and Workforce Overview

Arçelik A.Ş. is a global industrial power controlled by Koç Holding A.Ş. and the Koç Family.

• Production Capacity: The Group operates 38 factories across 13 countries, including Turkey, Romania, Russia, China, South Africa, Poland, Italy, and Pakistan.
• Workforce: As of 2025, the Group employed an average of 48,784 personnel (12,653 monthly salaried and 36,131 hourly paid). This represents a decrease from 51,443 employees in 2024.
• Ownership: The Company is listed on Borsa İstanbul (BİST) with a free float of 17.86% as of year-end 2025 (adjusted for treasury shares).
• Subsidiary Developments: Notable structural changes in 2025 included the rebranding of Indesit Company International Business S.A. to Beko International S.A. and several subsidiary mergers under Beko Europe B.V. and Beko Balkans.