Turkish jewelers try to diversify
ISTANBUL – Turkish jewelers are diversifying their businesses and investing more in areas such as energy and real estate as sky-rocketing raw material prices and fierce competition put an end to easy profits. Turkey has been overtaken by China and India in terms of low cost production over the past couple of years and profit margins have been badly hit due to competition. «We cannot profit from this (jewelry) business as much as we used to,» Atasay Kamer, chairman of Turkey’s top jewellery exporter, Atasay, told Reuters this week. World gold prices have risen more than $300 an ounce since 2005 but fierce competition from countries like China and India has prevented jewellers from increasing prices at the same pace. «Raw material prices are very high but profit margins are low. So we look for other areas,» he said. Atasay has a joint venture, The Tuscan Valley project, with United Arab Emirates’ Emaar Properties, to construct luxury villas in Istanbul with an initial investment of $700 million, which will be followed by $5-10 billion over the next few years. In addition to this project, Emaar and Atasay also focus on identifying potential sites for shopping centres, commercial space and hotel developments. «We want to be involved in businesses where the profit margins are high and ones that are getting more and more popular,» said Sedat Yalinkaya, CEO of Goldas, a leading jewelry producer. «We aim to become a vertically integrated company in our sector – from mines to the consumer, but also we want to diversify to compensate for lower profit margins.» He said Goldas aimed to invest in the energy sector over the coming years via Yalinkaya Energy, another subsidiary of Yalinkaya Holding. However, none of the companies planned to get out of the gold sector entirely as some small Turkish jewellers have done over the last couple of years. They say they are loyal to their traditional family business and stress that they are still making money, although it is less than before. The sky’s the limit Profits in the jewelry sector are limited while «the sky is the limit» in industries such as energy, said Hakan Sezgin, chairman of Sezgin Mucevherat, Turkey’s top silver producer. «Competition, especially in plain products, is very fierce, and this has affected our profit margins,» he said. «We want to diversify the business,» he said, adding that over the next year they aimed to invest in the retail sector, but declined to elaborate. Altinbas, a jewelry producer, has invested in finance as well as energy and recently bought a Turkish football club. «These companies have accumulated a certain amount of capital over the years. Now they want to invest in something more profitable rather than struggling to make money in this business,» a senior industry representative told Reuters. Kameroglu Group, which owns leading jewelry producer Ekol, began investing in the construction sector in 2006. The chairman of the Istanbul Chamber of Jewellery is among the owners of the Group. One sign of the challenge facing the Turkish jewelry sector was attendance at this week’s International Jewellery Fair in Istanbul. Many halls were quiet and visitor numbers were well down on previous years, dealers said. Turkey is used to holding international jewelry fairs twice a year, in March and August, but this year participants questioned the need for the summer event. «Do we really need two fairs? I don’t think so,» said another senior industry source. Sezgin of Sezgin Mucevherat said the timing was wrong: «In August all foreigners are on holiday. When people come and see this quiet fair here they may not want to come back in March,» he said. «Turkish jewelers have diversified their markets,» a wholesaler from the United States speaking on the condition of anonymity told Reuters on the sidelines of the fair. «They are not as aggressive as before in the US market. The volumes have dropped because they are doing more deals with Dubai and Russia,» he said.
