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Dutch leasing giant sees 48 pct decline in net profits in Turkey due to currency crisis

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The sharp depreciation of the Turkish lira forced LeasePlan, a full service leasing giant based in Netherlands, to take a €73 million hit, causing a 48 percent decline in net profits, according to the CEO of the company, quoted on the Fleet Europe website.

The company had been pricing its lease contracts in euros, but selling end-of-contract vehicles in lira. As a result, the depreciation of the lira led to a steep decline in the prices of used cars when converted to euros. The €73 million write down (€84 million pre-tax) represents LeasePlan’s lower residual value forecasts in euros for its current euro contracts in Turkey.

Tex Gunning, chief executive officer of LeasePlan, said Turkey is the only country where LeasePlan has meaningful transactional currency exposure.

“We have taken clear actions in Turkey to mitigate exposure to currency volatility for new business,” he said.

These actions include pricing new business in Turkish lira, as well as extending current leases and developing used Car-as-a-Service products to boost residual value revenues.

In October LeasePlan announced that it had decided not to proceed with its planned initial public offering due to market conditions.

The situation in Turkey led to a 48 percent decline in LeasePlan’s net profits for the quarter to €67 million, compared to €129 million for the same period last year. For the first nine months of the year, profits were down by 12.6 percent to €353 million, from €404 million for the same period of 2017.

Without the Turkey impairment, underlying net profits rose by 6 percent in Q3 to €147 million, in line with the 6.8 percent increase in LeasePlan’s serviced fleet during 2018 to 1,822,000 vehicles.

Overall, the company’s revenues were up 2.9 percent to €2.391 million in Q3, from €2.323 million in the same quarter of 2017, and are up 2.4 percent for the first nine months of 2018 to €7.193 million.

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