AZFEN's financial performance & strategic challenges: Insights from Azerbaijan & Georgia operation

By Ulviyya Shahin

The joint venture between Azerbaijan and Turkiye, AZFEN, has tripled its income from operations in Georgia. In 2023, the venture generated 10,422,000 manats in revenue for the country, equivalent to 6,131,000 US dollars at the current exchange rate of USD/AZN 1.7. This marks a threefold increase compared to the previous year, when AZFEN earned 3,488,000 manats from its Georgian operations.

AZFEN LLC, a partnership between SOCAR and Turkiye's Tekfen, provides manufacturing, installation, construction, and repair services for control and measurement devices and electrical equipment in Georgia. Despite changing its organisational and legal form from a joint venture to an LLC in 2023, AZFEN maintained its ownership structure unchanged: 60% owned by SOCAR and 40% by Tekfen.

However, in 2023, AZFEN reported a total income of 217.55 million manats and achieved a net profit of 11.46 million manats. In contrast, income from its activities in Azerbaijan decreased by 63%, amounting to 207.13 million manats, compared to 566.27 million manats in 2022.

Head of the Innovative Economic Research Centre of Azerbaijan Technical University, professor and economist Elshad Mammadov, stated to Azernews that the decline in AZFEN's revenue in Azerbaijan may be attributed to a decrease in the share of investment projects involving the company.

“In my view, companies of this nature primarily engage in projects associated with state-owned entities. Generally, state institutions serve as the primary source of domestic investment in Azerbaijan. As the volume of projects undertaken by these institutions under agreements, contracts, and directives diminishes, and the participation of specific companies in these projects decreases, it directly impacts the economic indicators of those companies. Therefore, I believe that the reduction in AZFEN's revenues in Azerbaijan can primarily be explained by a weakening of economic ties between relevant state institutions and the company,” the economist noted.

As for AZFEN's international participation and the expansion of the company's activities in this direction, the economist believes that it appears somewhat challenging given the current opportunities.

“Entering foreign markets is not a simple matter. However, considering the company's relevant experience, especially in the context of regional developments such as the escalating tensions between Russia and the West, there may be contracts and projects involving AZFEN in the post-Soviet space, which could facilitate expanding the company's geographic footprint. Nevertheless, it is important to acknowledge that expanding market positions abroad is inherently challenging. Therefore, it will not be easy for AZFEN and other companies operating in our country to establish themselves and expand their activities in foreign markets,” E.Mammadov concluded.