Koç Holding 1Q12 Earnings Webcast Transcript. Koç Holding Participants: Funda Güngör Akpınar, Investor Relations Coordinator

Transcription

1 Koç Holding Participants: Funda Güngör Akpınar, Investor Relations Coordinator Ahmet Çimenoğlu, Chief Economist Gökhan Dizemen, Finance Coordinator Funda Güngör Akpınar: Good afternoon ladies and gentlemen. Welcome and thank you for joining us this afternoon. In today s webcast, our first speaker will be Mr. Ahmet Çimenoğlu, our Chief Economist at Koç Holding. During his presentation, Mr. Çimenoğlu will briefly talk about the main developments in the global and Turkish economies. Following his presentation, I will walk you through the important developments in Koç Group s core sectors and companies. Finally, Mr. Gokhan Dizemen, our Finance Coordinator, will present you our financial results as of the first quarter of As always, at the end of the presentation, we will have a Q&A session. We have sent out the Investor Bulletin yesterday, which contains the link to our earnings presentation. The Turkish and English summary financial statements are available for downloading and printing on our website. There will also be a replay facility of the call on our website, together with the transcript and a copy of the presentation. As always, our presentation and the Q&A session might contain forward-looking statements. Our assumptions are based on the environment and our businesses as we see them today, and this may be subject to change. Let me now turn it over to Mr. Çimenoğlu. Koç Holding Investor Relations 1 / 17

2 Ahmet Çimenoğlu: Thank you Funda. Good afternoon everyone and welcome to our call. Let me first start with a wrap up of the global environment. In the first quarter of 2012, resolution of the Greek sovereign debt debacle as well as betterthan-expected macro data flow mostly from the United States, have helped economic actors breathe a sigh of relief after a rather volatile period. Thanks to the cheap and long-term liquidity that has been provided to the European banks by the ECB, the worst seems to be avoided in terms of much feared uncontrolled deleveraging in the European banking system. However, economic backdrop in Europe remains fragile, with most Eurozone countries announcing that they would miss 2012 and 2013 growth and fiscal targets. Meanwhile, political environment in Europe is challenging as evidenced by the political stalemate in Greece, defeat of Mr. Sarkozy in presidential elections, poor results for Ms. Merkel in federal elections, and collapse of the Dutch government in April. It is now being more widely accepted that most fiscal targets are simply unachievable unless European growth recovers. Downgrade of Spain s sovereign and banks by credit rating agencies, and renewed speculation on Greece s exit from Eurozone serve as reminders that sovereign debt issues as well as interrelated banking sector difficulties in peripheral Eurozone countries will continue to present significant challenges to global financial stability. Risk assets in emerging markets have significantly benefited from the improvement in global financial market sentiment at the start of this year. However, bleak economic backdrop in developed countries started to take its toll on economic activity in developing countries, forcing policy makers to assume a more growth-oriented stance in order to prevent their economies from spillover effects from poor growth in developed world. Still, while economic growth in developing countries in 2012 will likely remain below its long-term average, it will be much stronger than the developed world. Koç Holding Investor Relations 2 / 17

3 Overall, although 2012 took off to a very good start in global financial markets, it is still too early to be complacent about the global economic challenges. European sovereign risk issues are still posing a threat to the functioning of the global economy, as well as low level of confidence in the economies almost everywhere in the world. Escalation of political risk in the Middle East through Syria and Iran is another potential destabilizing factor for the global economy. Therefore, we keep our cautious stance against global economic issues. Improvement in global market sentiment in the first quarter of this year has been reflected on Turkish financial markets even more forcefully. As you can follow on slide 3, both equity and bond markets have seen fresh foreign capital inflows, leading to a decline in bond yields and a rally in Istanbul stock exchange. Meanwhile, Central Bank s decision to focus primarily on inflation since November 2011 onwards has helped the Bank to regain some lost credibility. As the economy started to move in the desired direction, with a cooling down in domestic demand and improvement in current account balance, Central Bank management started to feel more confident about their policy framework. Within this context, the Central Bank made it very clear at the end of April that TL liquidity will remain tight and short-term funding costs for the banks will remain elevated as long as the inflation remains significantly above the 5% target. Second quarter of the year, on the other hand, saw global market sentiment deteriorating once again on the back of renewed Eurozone sovereign and banking concerns and negative macro data flow. Turkish financial markets, especially equities, have been negatively affected as well, giving back the gains registered in the first three months of the year. Moving on to slide 4, I would like to talk briefly about the economic activity in Turkey. Economic performance in Turkey in the first three months of 2012 has been broadly in line with our expectations. Industrial production grew by 2.8% over a year ago, with capacity utilization rates hovering around 75% during the quarter. Koç Holding Investor Relations 3 / 17

4 Although first quarter national income figures are not released yet, leading indicators suggest that domestic demand growth has decelerated on the back of higher interest rates and increasing prices. Meanwhile, there has been a recovery in consumer and real sector confidence in the first quarter of the year, providing support to domestic economic activity. Putting all of these factors together, we think that GDP growth in the first quarter will be in the range of 2-3%, giving support to our long-held growth forecast of 4% for 2012 as a whole. On slide 5, I would like discuss briefly about the trends in foreign trade and balance of payments. Despite poor economic performance in Europe and increased political tension in the MENA region, which are absorbing about 70% of Turkey s exports together, exports increased by 12.6% in the first quarter of Meanwhile, in spite of the increase in oil prices, slowdown in economic activity and weaker TL has combined to result in a 0.7% decline in imports. As a result of these favorable developments, Turkey s foreign trade deficit contracted by 17.5% in the first three months of 2012, leading to a material decline in the current account deficit that the markets have been eagerly waiting. Eventually, as of the end of March 2012, current account deficit has come down to 71.8 billion dollars on annual basis, from a record high of 78.6 billion dollars in October In the rest of 2012, we expect current account deficit continue to decline gradually, and close the year at around 7.5-8% of GDP. I would like to conclude my remarks on macroeconomic outlook by touching upon briefly the developments about inflation. Koç Holding Investor Relations 4 / 17

5 As you can follow from slide 6, consumer prices have increased substantially in the first four months of the year, reaching 11.1% in April, representing the highest figure since October Albeit decreasing gradually, pass-through impact on prices of weaker TL, price hikes in electricity and natural gas, and adverse weather conditions all contributed to the rise in inflation. As I have mentioned previously, Central Bank s focus has shifted almost entirely on inflation in 2012, as they are concerned about deterioration in inflation expectations and a subsequent distortion in pricing behavior, if inflation rates remain at unacceptably high levels. Central Bank continues to rely on its tight TL policy that is based on daily management of both the amount and cost of funding for the banks. This policy helps interest rates remain at elevated levels via both higher funding costs and also increased uncertainty about future course of interest rates. We believe that the Central Bank will maintain this policy stance as long as it takes to bring inflation back to levels that are compatible with their medium term inflation outlook. According to our forecasts, inflation will decline to 7-8% plateau only in the last quarter of this year, meaning that the Central Bank will probably have to keep its tight TL policy well into the third quarter of Let me now turn it over to Mrs. Akpınar. Funda Gungor Akpinar: Thank you Ahmet. I will now briefly touch upon the sectoral analysis and talk about the main developments in our Group companies. Koç Holding Investor Relations 5 / 17

6 As you might remember from our previous call, we expected 2012 to be a difficult year for the global economies, anticipating a soft-landing scenario for the Turkish economy. As Ahmet already explained, we still maintain our expectation of a soft-landing base case scnario. According to our estimates, the most challenging quarter for the year was the first quarter mostly due to a strong base year impact accompanied with the impact of the deteriorated consumer sentiment as well as increased tax rates in certain consumer related sectors towards the year-end In fact, the first quarter of 2012 was even more challenging than our expectations due to higher than anticipated interest rate hikes in the market in line with the Central Bank s strict monetary policy and a stronger than anticipated winter season, especially in the first two months of the year. These challenging macro conditions were naturally reflected on our operational and financial performance as well. However, please remember that while providing you our 2012 guidance last quarter, we had already taken into account the difficulties that were foreseen for the year as a whole. In fact, as of the year-end guidance, when we look at the realizations for the first quarter and compare them with the first quarter estimates in our guidance, the realizations had been better than our expectations for most sectors. While evaluating our first quarter results, we would like you to pay attention to one-off items that were registered last year and make a like-a-like comparison in our earnings in order to have a fair judgement of our financial performance. For example, when you look at some of the profitability figures and margins, you will realize some deterioration compared to the same quarter of last year. However, when you exclude the strong base year impact, which included some significant one-off gains and make a like-a-like year-on-year comparison instead, you will realize that the deterioration has been very slight in some sectors and there were improvements in others despite all the difficulties in the operating environment. Mr. Dizemen will explain you our financial results further in detail after I biefly walk you through the developments on a sectoral and company basis. Now, let s move to the energy sector on slide 8. Koç Holding Investor Relations 6 / 17

7 The highest decline in our profit figures were due to the lack of one off items that were registered in the energy sector during the first quarter of In terms of operational performance, the performance of our companies were quite in-line, even better than our projections. As our largest company in the energy segment, let me start with Tüpraş. Tüpraş net margins were about 1 dollar below the benchmark for a quarter. However, please keep in mind that this is not unusual for the 1st quarter results. In fact, we have outperformed our own expectations of 1.5 dollars. Only the extraordinary inventory gain in 2011 led to a margin premium last year. Our overall margin premium usually comes from the 2nd quarter onwards. Tüpraş net income was very strong in comparison to a normal 1st quarter, although down compared to 2011, which was exceptionally high due to strong inventory gains we have discussed. The heavy winter, especailly in the first two months of the year, led to weak gasoline & asphalt sales. Inventory gains were more than expected in the first quarter of this year as well but still much less than last year same quarter. Last year, we have registered around $184 million of inventory gain, which came down to $67 million during the first quarter of this year. Tupras reached around 74% CUR during the quarter. We maintain our above 80% capacity utilisation expectation for the full year under normal conditions. The natural gas price increase, led to higher operating expenses. This increase came earlier than our expectations. Finally, the weakening dollar was negative for EBITDA, but led to a FX gain below operating line. Let me also briefly mention about where we stand in our Residuum Upgrade Project. As you can recall, the $2.1 billion of the financing is already secured with very favorable terms, including a four years of grace period. The Residuum upgrading project is proceeding as planned. So far, around $700 million have been spent. Mechanical completion was 2% at the end of March, which is slightly ahead of our target. More than four fifths of the procurement Koç Holding Investor Relations 7 / 17

8 is already completed, with the big ticket items all ordered. As you might remember, we expect the mechanical completion and testing by the second half of 2014 and the Project to become operational by Following the completion of the Project, we expect around $550 million increase in our annual EBITDA. Before moving on to Aygaz, let me also briefly explain the latest developments in our oil distribution company Opet, which is also consolidated under Tüpraş. Opet is now firmly in the second place, after outperforming Shell in During the first quarter of this year, profitability was down marginally YoY due to again inventory gains that were registered in Opet market shares reached 20.5% both in gasoline and diesel as of the first quarter of 2012 compared to 18% levels at the end of Finally, let me touch upon the developments in Aygaz, our leading LPG distribution company. Aygaz Group s total LPG sales increased by 11% YoY. The company registered TL92 million in net profit in 1Q12 against TL51 million in 4Q11 and TL245 million in the first quarter of However, please keep in mind that the first quarter of 2011 included the TL194 million capital gain that was registered following the sale of Entek shares. When this one-off item is excluded, there is about 80% increase in net profit like-a-like on an annual basis. Let me now move on to the automotive sector on slide 9. Among our core sectors, 2012 was expected to be the most challenging for the automotive segment. Automotive market contracted by 26% in the first quarter. This was mainly due to the high base impact of the extraordinary sales of 2011 first half. However the current performance of the market has been above our companies forecasts and some of them already revisited their year-end expectations with slight upgrades. As communicated by our companies during their guidance for the year, we were committed to be a little more aggressive on the margin side rather than attracting market shares. Ford Otosan had 13% and Tofas had 12.9% market share by the end of the quarter. Ford Otosan registered 37% decline in its domestic sales but increased its exports by around 15%. Please remember that Koç Holding Investor Relations 8 / 17

9 due to its export composition where over 50% share of sales are destinated to mainly U.K., German and North American markets, export volumes in Ford Otosan has been more resilient than some of its peers. On the other hand, Tofas domestic retail sales, excluding sales to PSA in Turkey) contracted by 31% and exports contracted by 24%. Here, I would again like to remind you that Tofas has take-or-pay agreements in its export contracts, so even though there might be contraction in total export volumes, the margins are guaranteed from the original figures so there is significant resilience in exports on the bottom-line. Production was temporarily contracted with a capacity utilization rate of 59% in Tofaş. However the outlook for the year-end utilization rate is maintained at above 75%. In fact, we have already registered around 63% CUR in April stand-alone. The CUR in Ford Otosan is expected to be around 80% for the full year. I will now briefly touch upon consumer durables and our flagship company Arçelik as you can follow on slide 10. Arçelik increased its revenues by more than 40% YoY. Domestic revenues increased by 23%. International revenues registered 59.4% increase in line with our expansion strategy. In line with our target of becoming a strong global player and achieving further geograhical diversification, the share of domestic sales declined to about 43% from close to 50% a year ago and share of international sales increased to 57% respectively. Although acquisition of Defy had an impact on revenues, it was only around 6% of total revenues in the first quarter of the year. So if normalized by inorganic growth impact, the increase in total revenues were still as high as 33% and the increase in international sales was still as high as 42%, both of them being quite remarkable achievements in this very difficult operating environment, especially in our major export markets. Arçelik was able to achieve market share gains in the domestic market with campaigning especially for energy efficient products and our market share gains in key international markets also continued. The performance had been quite outstanding especially in the electronic business. The strong increase in revenues and the higher than anticipated increase in the share of electronics, which is relatively lower-margin business compared to white goods, led to an unfavorable margin impact but we expect margins to stay at normalized levels for the full Koç Holding Investor Relations 9 / 17

10 year. There was a slight improvement in working capital and further improvements are expected throughout the year. For the full year as a whole, we expect a stable or increasing market share in key regions from Arcelik. Strong operational cash flow will continue due to working capital improvement. We expect 5% growth in white goods sales in the domestic market and over 20% growth in our international sales. Accordingly, our revenues are expected to register around 20% growth in TL terms. We still maintain our full-year guidance of EBITDA margin which isaround 11 to 11.5% levels. As our final core sector, I will now move into the finance sector on slide 11. For the first quarter of 2012, Yapı Kredi posted TL 415 million net income with solid business performance accompanied by continued funding diversification. Return on Average Equity (ROAE) was at 13.1%. If you were to normalize this with the regulatory changes it was around 17.4%. Capital adequacy ratio stood at 14.6% at Group level and 14.8% at Bank level. We achieved robust core revenue performance with 13% increase YoY, driven by disciplined net interest margin management and growth focused on value generating segments. Our cost/income ratio stood at 49.4% by the end of the first quarter. Our focus on customer-oriented business continued in 1Q12 with loans to total assets further rising to 60%. Total loan growth was stable with solid above sector performance in TL loans with around 4.4% increase. TL loan growth was driven by profitable segments and products including general purpose loans, TL company loans and credit cards. Yapı Kredi maintained strong market presence in credit cards, being #1 with 19% acquiring volume market share and again ranking #1 with 14% number of cardholders market share. Yapı Kredi also ranked number 1 in leasing with 20% market share and factoring with 18% market share. In 1Q12, Yapı Kredi further strengthened its funding emphasis with a differentiated approach. Deposits recorded a slight decline with 3%, driven by release of costly big ticket FC Koç Holding Investor Relations 10 / 17

11 deposits on the back of comfortable foreign currency liquidity position. TL deposits grew significantly above sector. We have registered 4% growth versus flat volumes in the sector, mainly focusing on small ticket retail deposits, further diversifying our deposit base. Demand deposit to total deposits ratio was maintained above sector at 16%. In terms of asset quality, Yapı Kredi recorded a mild rise in NPL stock in 1Q12, in line with ongoing macroeconomic soft-landing. NPL ratio was at 3.2% and specific coverage was at 67%. This brings me to the conclusion of the review of our core business lines and companies. I will now turn it over to Mr. Dizemen to review our financial results. Gökhan Dizemen: Thank you Funda. Hi everyone; I will continue directly with slide 13. On slide 13, we have provided a summary of our financials. As you can follow, Koç Holding registered TL 19.3 billion in revenues, TL 866 million in operating profit, TL 1.15 billion in EBITDA and TL 538 million in net income after minority interest during the first quarter of Slide 14 contains a summary of the main financial indicators. As always, I will not go into the details of this table line by line but rather move on to discuss the results further in detail by business segments. Now, let s move on to slide 15, to analyze the segmental contribution within top-line performance. As I previously stated, our revenues stood at TL 19.3 billion as of the 1Q12, which suggests 27% increase compared to the same period of Despite the large base year effect, the highest contribution to the increase in revenues came from the energy sector with a 33% and consumer durables segment with 40% increase. As Funda mentioned, the increase in consumer durablşes takes into account the inorganic growth through Defy Koç Holding Investor Relations 11 / 17

12 acquisition as well but even in the absence of the inorganic growth impact, there was still around 30% increase in the revenues of the consumer durables segment. The finance sector revenues also increased by 25%. Due to the strong contraction in the auto market during the quarter, our revenues in the automotive sector slightly contracted by around 2%. Accordingly, energy continued to make 63% of our total revenues, followed by automotive and durables with 12% and finance with 9%. Slide 16 contains our operating profit performance. Our operating profit declined by 36% on an annual basis. However, a significant portion of this decline resulted due to a very strong base year impact with some significant one-off items. As Funda previously mentioned, Aygaz registered about TL 194 million due to the sale of Entek sales and Tupras registered around TL 180 million higher inventory gain compared to the same quarter of this year due to increasing oil prices. We have also adjusted the results for the finance sector due to the changes in figures as a result of the impact of regulatory changes. So in order to make more of a like-a-like comparison, we have normalized last year s figures excluding the one-off items and made the comparisons one more time. If these one-off items are set aside, the decline in our operating profit comes down to 8%. There is about 24% decline in normalized operating profit in the energy segment and about 8% normalized decline in the finance segment. The decline in the operating profit of the automotive segment was only 1% and we have registered around 14% increase in operating profit in the durables sector. When we move to slide 17, it shows the details of the profit before tax (PBT), which declined by a slight 3% YoY when normalized by the one-off items. We have only taken into account the capital gain in Entek sales while normalizing last year s profit before tax. According to the normalized figures, the PBT in the energy segment actually improved by around 13% in the first quarter of 2012, while PBT in auto, durables and finance contracted by around 11%, 15% and 15%, respectively. In terms of the performance of EBITDA, which is presented on Slide 18, the normalized decline was 3%. As per the composition of our EBITDA breakdown, 30% came from finance, 26% came from energy, 21% came from consumer durables and 20% came from the automotive sectors. Koç Holding Investor Relations 12 / 17

13 Slide 19 shows our performance in exports and international revenues. Despite all adverse conditions in export markets, our strong performance continued both in exports and international sales. On a combined basis, our exports increased by 17% to 4 billion dollars and our combined international sales reached 4.9 billion dollars. On slide 20, you can see our total investments in the first quarter of the year. We have almost doubled our investments where investments were mainly concentrated in energy and automotive segments. As we have announced previously, the financing terms we have achieved for most of these investments are extremely favorable and proves the confidence of the financing sector and investment community. When we move on to our margins on slide 21, we see that our profit before tax and net income margins improved on a quarterly basis and declined slightly on normalized terms on a YoY basis. In fact, here we can also adjust the topline figure for Defy acquisition which would be more favorable but since impact would be quite incremental, we have excluded it for simplicity. The operating profit margin stood at 4.5%, profit before tax margin at 5.7% and net income margin at 2.8%. Now, let s move on to the risk management issues. As we always emphasize, the diversity of sectors in our portfolio is one of Koç Holding s advantages since we are not dependent on the opportunities and risks of any one sector. Meanwhile, the cyclicalities and sensitivities of our sectors vary and ensure a balance of different risks in our portfolio during a period of uncertainty. In addition, our steadily rising international revenues and our increasingly diverse export markets minimize geographical risks. The balance sheet structure is strong at the Holding level as well as underlying companies. As you can see on slide 22, our net cash position at the Holding company increased slightly to $641mn at the end of the first quarter. Through our robust net cash position at the Holding level, we have the capacity to effectively take advantage of new investment and privatization opportunities in both local and international markets. This figure includes only the dividends that we have collected from Otokoç, Zer, Otokar, Koçtaş, Koç Tüketici Finansmanı and Ram. So none of the high dividends that will be included in the second quarter results are shown here. Also our dividend payments as Koç Holding are also not included in this figure. In fact, we expect at least an Koç Holding Investor Relations 13 / 17

14 additional TL490mn in dividend payments from our companies. There will also around TL 373 mn payment by Koc Holding in total dividends. Our consolidated net debt excluding finance stands at around $2.0 billion, compared to $2.2 billion at year-end As we have previously suggested we believe that Koç Holding was one of the companies best prepared to deal with the uncertainties experienced in global business cycles over the past four years. Please remember that, we have applied an extremely prudent risk management policy across the board since 2008 onwards. In Koç companies, we do not maintain speculative foreign exchange positions. We also want to maintain the net financial borrowing and the current ratios of our companies within certain limits so as to keep their indebtedness and liquidity levels at confortable levels. We take potential risks into consideration when making investment decisions and identifying anticipated returns by utilizing sophisticated methods such as risk-adjusted return on equity. As you can see on slide 23, at the holding level, we carry a small long FX position of 242 million dollars. Consolidated short FX position is at 4.2 billion dollars, and 3.2 billion dollars of this 4.2 billion is subject to a natural hedge due to the FX linked pricing of Tüpraş, Opet & Aygaz inventories and take-or-pay agreements of Tofaş. The FX position weighted by the effective ownership, which leads to the real P&L affecting position, is 1.9 billion dollars and again a very significant portion of this is naturally hedged. This concludes my presentation. Thank you for listening. Now we can open the floor for questions. Koç Holding Investor Relations 14 / 17

15 Q&A OPERATOR: go ahead sir. The first question is from Mr. Alper Paksoy of EFG Istanbul Securities. Please PAKSOY A: Thanks a lot for the presentation ladies and gentlemen. I would like to ask about the electricity projects which you had given some information a bit limited in the previous conference call. Would you be able to share with us if there has been any developments about these projects realization or financing or new projects? As far as I can remember there was a wind project and there was a hydro project in addition to a coal project. And another question related with the segment is from what I remember there was some long-term lending by Aygaz and KOÇ Holding to AES Entek, I think about 65 million 70 million TL. Can you explain the rationale behind this lending because it rather looked like an equity injection, why this loan was structured that way? Thanks a lot. GÜNGÖR AKPINAR F: Hi Alper, thank you. Well in terms of the overall plans in the electricity sector you know, the investment plans that we have shared last quarter are still kind of maintained, in terms of financing we had been doing some preliminary work, but we are not yet in the market overall and especially, two large projects are the main projects that we are working on right now. One of them is the JV with Oyak which is a coal-fired plant as you might remember to be completed by 2016 to 2017, which was for about 625 MW. And the second one is mainly the Kırıkkale natural gas plant which is for about 205 MW which will be mainly natural gas conversion. For the wind plant this is being reevaluated. We might postpone it a little bit you know, in terms of a better operating environment and so forth. For the injection, you know, it was rather an executive decision, whereby we simply wanted to create some funding opportunity for our company to engage itself to some of these investments without only depending on external financing. So that s what, you know, the main reason of the shareholders, meeting some of the financing needs. And you know most of the risks will be met through external financing. Obviously, the global macro conditions and the financing markets, the behavior of the financing markets are also being instrumental over these kind of decisions. Koç Holding Investor Relations 15 / 17

16 PAKSOY A: I understand. As far as I can remember, AES Entek was supposed to take over a hydro plant from AES s previous investments in Turkey, has that happened yet? GÜNGÖR AKPINAR F: There is about 52 MW of hydro, since it s not a pure investment, I didn t mention that, but yes, those will be transferred to our portfolio. PAKSOY A: Okay. So the financing of AES Entek, the lending, is it related to that acquisition or is it something different? GÜNGÖR AKPINAR F: No it s related to all these you know, plants that we have in our portfolio right now in terms of the Greenfield investments and so forth. We, you know, obviously evaluate them as the total need of financing rather than project-by-project. PAKSOY A: I understand. One more question, you presented the EBITDA comparison for example without the one-offs. I just want to confirm that the one-offs in there one-offs then probably came from Tüpraş and the other one from Aygaz, is that correct? DIZEMEN G: Right, it s correct. The one that is coming from Aygaz is related with the sale of Entek shares, it was 194 million TL, and the one the one-off impact comes from Tüpraş related inventory) gain recorded in the first quarter of 2012, it was more it was 180 million more than the inventory gain recorded in , sorry. GÜNGÖR AKPINAR F: So the total adjustments in the EBITDA is mainly 194 million TL for Entek sale, 180 million for the additional capital gain that was registered in the first quarter. And also there is about 30.5 million TL addition, which was in the finance sector, you know, which takes into account the regulatory impacts as well. PAKSOY A: I understand. So I think Tüpraş also had some inventory gain in the first quarter of DIZEMEN G: This is the data actually, data between the inventory gains recognized in the first quarter of 2012 alone. PAKSOY A: Okay. Koç Holding Investor Relations 16 / 17

17 DIZEMEN G: So we adjusted the data from the 2012 figures. GÜNGÖR AKPINAR F: This is the difference between the inventory gains registered in both years. PAKSOY A: I see, I see. So, you took all of them into account, okay. GÜNGÖR AKPINAR F: Yes, we took all of them into account, yes. DIZEMEN G: But we adjusted for the 2012 figures. GÜNGÖR AKPINAR F: and 11 figures. PAKSOY A: I understand. Thank you very much. GÜNGÖR AKPINAR F: No problem. OPERATOR: Madam, gentlemen, there are no more questions registered at this time. You may now proceed with your closing statements. GÜNGÖR AKPINAR F: Many thanks everyone for participating in our webcast. We will be at your disposal if you have any further questions afterwards. We will post the transcripts of this call Monday both English and Turkish versions, Turkish version being uploaded afterwards. Have a nice weekend all of you, many thanks. Bye-bye. Koç Holding Investor Relations 17 / 17