Arçelik Investor Presentation

Transcription

1 Arçelik Investor Presentation

2 Company profile Performance Indicators T icker ARCLK T I Shareholder structure Revenues TL 12,514 mn USD 5,720 mn Share of international sales 61% EBITDA TL 1,334 mn EBITDA margin 11.0% Net Profit * T L 638 mn Free Float 25.2% Burla Group 17.6% Koç Group 57.2% Production plants 14 Present in +130 countries Employees Blue Collar 20,517 White Collar 4,359 Listed on ISE since 1986 Bonds trade on Irish Stock Exchange 3.875% Notes due 2021 (EUR350mn) 5% Notes due 2023 (USD500mn) * Net income pre minority 2

3 60 years of history Domestic Regional Global 1955: Arçelik establishment 1959: Washing machine launch 1960: Refrigerator launch 1977: Compressor production 1980: Economic Liberalization 1991: R&D center establishment 1996: Customs Union with EU : Consolidation of Arcelik s Turkish operations 2002: International investments : Arctic (Romania), Blomberg (Germany), Electra Bregenz (Austria), Leisure (UK) and Flavel (UK) 2006: Arçelik plant in Russia 2007: Acquisition of washing machine plant in China 2008: Grundig acquisition 2011: South African acquisition (Defy), sales and marketing Co in Australia 2012: Sales and marketing Co in Egypt, and Ukraine 2015: Thailand Investment 3

4 A global player HQ (Turkey/Istanbul) Production Plants International Sales & Marketing 4 4

5 Product groups Appliances Consumer Electronics Other Refrigerators Freezers Washing machines Dryers Dishwashers Ovens Hobs Hoods Microwave oven TVs Home theatre systems Hi-Fi systems Portable audio systems Dect & mobile phones Notebooks & desktop PCs POS cash register HVAC Air conditioners Combi boilers Water heaters Room heaters Small Household Appliances Vacuum cleaners Kitchen appliances Personal care Garment care Steam cleaners Fans Warming drawers Water dispensers & water filtration Other Hermetic compressors Industrial motors Appliances motor pumps Ready-made kitchen 5

6 Brand portfolio 6 6

7 7 Main pillars

8 Main pillars Strength in Turkey Leading producer of white goods with a c.50% market share Exclusive dealer network for Arçelik and Beko brands Exclusive authorized after-sales service points, the widest network in Turkey International growth c.60% of sales from international markets Beko the second brand in Europe (up from 7th position in 2008) Arçelik the third largest white goods player in Europe Sales &marketing organizations in 27 countries, sales in +130 countries Expansion into higher segment via Grundig brand in appliances Further diversification via investment in Thailand Leading R&D capabilities Manufacturing with its technology, no external licensing The only TR company repeatedly on the top 200 PCT applicants list of WIPO R&D activities in locations with favorable cost base Strategy: delivering an innovative product pipeline, energy efficient products with world records and cost competitiveness Cost competitiveness Production in low cost regions Proximity to the key markets Manufacturing facilities are largest of their kind=> economies of scale Flexible manufacturing to address different local needs efficiently 8

9 Strength in Turkey Strong sales and dealer network Dealer network c.3,000 exclusive dealers in Turkey for Arçelik and Beko brands on long-term relationship Dealer network => customer loyalty, proximity, and brand awareness Arçelik manages marketing, store formats and dealer training Indirect consumer financing=> Arçelik supports dealers via payment terms, while dealers bear consumer risk After-sales service After-sales services includes delivery, assembly, installation, repair and general customer support processes 10 regional after-sales service centers Widest after-sales service network in Turkey, +600 exclusive after-sales service points Strong technology infrastructure. Extensive database and immediate feedback on product performance Local call center to address customer issues quickly and effectively (7 days/24 hours) 9

10 Strength in Turkey Powerful brand image Lovemark Arçelik ranks first in most loved brand survey of IPSOS in general and respective categories General White Goods Consumer Electronics 1. Arçelik 2. Adidas 3. Samsung 4. Nike 5. LC Waikiki 1. Arçelik 2. Bosch 3. Beko 4. Siemens 5. Vestel 1. Arçelik 2. Bosch 3. Samsung 4. Beko 5. LG Source: IPSOS Lovemark survey,

11 Strength in Turkey Demand drivers Marriages mn Source: Turkstat Young population 60+, 12% 0-14, 24% Divorces 's Construction permits mn Favorable demographics Population : ~78mn Population growth rate : 1.3% Population under age 30: 48% Population under age 15: 24% Average household size: 3.6 New household formation: c. 2-3% Number of marriages annually: ~ 600, Replacement sales Old appliance pool % of refrigerators, and 45-50% of washing machines currently in use have energy rating below A+ level*. Transition to built-in 30-59, 40% 15-29, 24% Penetration levels Low penetration in categories like dishwashers and dryers Source: Turkstat Source: Arçelik estimates, 2014 YE 11

12 International growth International sales account for c.60% of revenues 3rd largest appliances company in Europe Beko: 2nd brand in Europe Leading positions in core markets Third largest player in EMEA region Leading manufacturer in South Africa Investment in Thailand in progress Share of international sales 70% 60% 50% 40% 30% 20% 10% 0% # countries present Share of international employees % 35% 30% 25% 20% 15% 10% 5% 0% 12

13 EE (12) WE (13) France Russia Spain Denmark UK Germany Austria Lithuania Estonia Italy Belgium Romania Poland Latvia International growth Beko: Fastest growing white goods brand in the European market Beko: Fastest growing white goods brand in the European market for the last 7 years Beko moved from 22nd position in 2000 to 2nd position in 2014 Despite the ongoing consolidation, European market is still relatively fragmented => further organic growth opportunities Beko market share in EU25 8% 7% 6% 5% 4% 3% 2% 1% 0% Market share of top-5 manufacturers 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Beko rank in EU Rank Source: GFK, unit volume share Source: GFK (2014), unit volume share 13

14 International growth Virtuous cycle for growth Scale economies Sustainable growth R&D investments and competitive product design capabilities Product mix Improvement Expansion to new distribution channels and countries Awards & endorsements Brand Investments Positive buyer & retailer experience 14

15 International growth Core positions in European markets Beko is: The 2nd largest brand in Europe The leading brand in the UK white goods market Leader in France and Poland in the freestanding white goods market The fastest-growing brand in the German white goods market, doubling its market share in the last five years. Leader in Belgium in refrigerator and deep freezer segments Leader in Spain in deep freezer segment PT ES IE GB FR NL BE LU CH NO DK DE IT SE FI EE LV LT BY PL CZ SK AT HU SI HR RO* BA RS BG ME MK AL GR UA RU TR* GE AM AZ KZ Source: GFK 2014 (volume share), Arctic position in Romania, Arçelik & Beko positions in Turkey, Beko in other countries > 6 Data not available 15

16 International growth Leveraging on sponsorships Football sponsorships Beko: Sponsor of Beşiktaş Football Team (Turkey) Grundig: Official Technology Partner of Bundesliga Beko Sponsor of FA Cup in UK in & Grundig: Partner of Borussia Dortmund Grundig: Sponsor of Nürnberg and 1.FC Nürnberg in Germany Beko FC Barcelona Premium Partner Beko-Basketball League Sponsorships Germany: German Basketball League- Beko Basketball Bundesliga Italy: Premier Basketball League-Beko Lega Basket Serie A Lithuania: Lithuanian Basketball League-Beko LKL League Beko-Basketball Event Sponsorships Presenting Sponsor of 2015 EuroBasket European Basketball Championship (France, Germany, Latvia, Croatia) 2014 FIBA World Basketball Cup (Spain) 2013 EuroBasket European Basketball Championship (Slovenia) 2011 EuroBasket European Basketball Championship (Lithuania) 2010 FIBA World Basketball Cup (Turkey) Main Sponsor of 2009 EuroBasket (Poland) 2009 FIBA Asian Championship (China) Other Grundig: Sponsor of Fenerbahçe Volleyball Team Grundig: Main Sponsor of Norway Handball League - Grundig Ligaen Beko: 2014 Major Home Appliance Sponsor of NRL Auckland Nines (New Zealand) Beko: Official Naming Rights Sponsor of the Ocean Thunder Surf Boat Series for (Australia) 16

17 International growth Southeast Asia investment overview Investment Investment of c.usd100mn (during initial 3 years), including working capital requirement 263k sqm plot at Hemaraj Rayong Industrial Land. Ground breaking ceremony on 6th January Expandable capacity Start-of production by YE15, exports by early 2016 ASEAN Market 620mn population Low penetration of white goods Expected GDP CAGR between 14 and 2017E: +5% Washing Machine market is estimated to be c.usd1.65bn and at c.6.8mn units* Refrigerator market worth c.usd2.5bn at c.8.6mn units* Strategy Leverage Beko brand and its European image across the region Sourcing to 10 countries incl. Philippines, Vietnam, Malaysia, Singapore, Indonesia, Australia and New Zealand Local production for refrigerator from Thailand. WM sourced from other Arçelik plants. Expectations c.90% of production will be exported c.usd500mn revenues and +800k units production in 3 years following the completion of the investment (cumulative) Incentives Corporate tax exemption for 8 years (capped at investment amount excluding land cost). Reduction on corporate tax during the following 5 years Exemption on import duties on machinery Source: GFK 2013 Partial exemption on duties on raw materials 17

18 International growth ASEAN countries overview Vietnam Laos Asean total Myanmar Vietnam Laos $ $/ 2.1 $ 5.9% $ 12 7 $/ 1.7 $ 7.6% GDP (USDbn) $ 2,459 Population (mn) 620 GDP/capita(USD 000 s) $/ 4.0 GDP growth (14-17E) $ 5.1% Thailand Myanmar $ Cambodia Philippines Cambodia $ Philippines $ $/ 1.2 $ 8.4% $/ 1.1 $ 7.2% $/ 2.9 $ 6.3% Malaysia Thailand $ Singapore $/ 5.4 $ 3.9% Indonesia Malaysia $ $/ 10.8 $ 4.9% Singapore $ $/ 56.3 $ 3.1% Indonesia $ $/ 3.5 $ 5.5% 18 Source: WEO April 2015

19 R&D and innovation R&D staff More than 1,000 researchers in 9 R&D Units in 5 countries Most active Turkish company in European research platforms (FP7/H2020) Patent applications +2,000 patent applications The only Turkish company in top 200 of WIPO international list in the past five years 50% of the patents are actively used in products Cost advantages R&D activities in locations with favorable cost base Self reliant Manufacturing with own technology R&D capability in motors and compressors R&D staff 1,200 1, Patent applications

20 R&D and innovation World records in energy efficiency Static combi (A+++)-%30 No-Frost combi (A+++)-%20 (A+++) -%10 6 lt water consumption Oven (Surf Technology) (A+++) -%70 %45 Less Energy Dryer with heat pump (A+++) -%10 A++ 20

21 R&D and innovation Innovative product launches in 2014 Innovative products HomeCream Ice cream machine in a refrigerator A refrigerator that runs on solar energy for South African provinces without electricity IonFresh technology, which prevents the release of unpleasant odors from dirty dishes in the dishwasher The VUX interface to control dishwasher, cooker, and range hood from a single center Everfresh technology, which keeps fruits and vegetables fresh for up to 30 days in a climate-controlled compartment AirDry Washer and Dryer that dries without the use of water Auto Glass Shield technology prolonging life of glasses by more than 20 times (dishwasher) 21

22 R&D and innovation Innovative Expanding in product value added launches services: in 2014 New generation payment systems A new business model As per regulations, in Turkey cash registers need to be replaced by new generation cash registers New generation payment systems combine the features of cash registers and POS machines=> facilitate controls and audits of revenue administration Phase I: Oct 1st 2013 deadline for replacement of EFT-POS machines (mobile POS) with new generation payment systems Phase II: Jan 1st 2016 deadline for replacement of cash registers Apart from the first time machine sales, opportunities for Arcelik in: 1. banking services 2. retail & value added services Competive advantages of Arcelik Strong sales and after sales network Leader in cash register with Beko brand 22

23 Markets covered by Arçelik Cost competitiveness Proximity to the markets 347mn USD 164bn Avg. Logistic Cost (EUR/40 dc container) 100% 2,500 90% 80% 2,000 70% 60% 50% 40% 30% 20% 10% Other South East Asia Africa Middle East East Europe West Europe 1,500 1, % MDA Market (volume) MDA Market (value) 0 Turkey China Turkey China Germany Germany UK UK Source: GFK 2014 Source: Arçelik market estimates strategically located in markets comprising c.50% of the global market share logistics cost is significantly lower than Asian manufacturers due to shorter distance to target markets 23

24 Cost competitiveness Production plants located in low labor cost countries Hourly labour cost (exc. apprentices) (EUR/employee) < 7 [7-14) [14 24) NO SE FI [24 32) >32 n.a.. PT ES IE GB FR NL BE LU CH DE IT DK EE LV LT BY PL CZ SK AT HU SI HR RO BA RS BG ME AL MK GR UA RU TR GE AM AZ KZ Most labour intensive functions including headquarters and production plants are located in low labour costs countries (LCC) Source: Eurostat 2014, Arçelik estimates for Turkey and Russia 24

25 Growth strategy Turkey Growth in Products with low penetration upper segment in white goods, built-in products and SDA Strengthen dealership network Position dealer network as destination stores Design focus on SDA and products creating customer traffic Continued roll-out of dealer stores with the new concept Continue efficient utilization of CRM Focus on B2B Organic growth Inorganic growth International Strengthen brand awareness and image Continue to improve product mix Improve market share of built-in Strengthen SDA position in international markets Improve the penetration in existing countries Grow Grundig brand in the more premium segment of appliance category (vs. Beko) Use internet channel more effectively Overall Focus on R&D, innovation, design, brand and customers Continue rolling-out world leader products in resource efficiency and low noise levels Leverage on sponsorships Access to high-end segment Opportunistic M&A: Acquisition of a higher-end brand in developed markets Growth in emerging markets Via acquisitions, partnerships, and greenfield investments in: MEA South Asia and Southeast Asia (Thailand investment in progress) 25

26 26 Financial performance

27 Income statement TL mn 2015 Q Q Q2 Δ% YoY Δ% QoQ M M Δ% YoY Revenue 3,877 3,234 3, ,099 9, ,514 11, Δ% YoY Gross Profit 1,260 1,046 1, ,214 2, ,979 3, margin EBIT * , margin Profit Before Tax margin Net Income** margin EBIT DA* ,063 1, ,370 1, margin * EBIT includes net other income/expense from operating activities (part of operating income as per CMB reporting) and income and expenses from sale of PP&E, but excludes foreign exchange gains/losses arising from trade receivables and payables, credit finance income/charges and cash discount expense. ** Net income before minority 27

28 Revenue and gross profit by segment TL mn 2015 Q Q Q2 Consolidated Δ% YoY Δ% QoQ M M Δ% YoY Revenue 3,877 3,234 3, ,099 9, ,514 11, Gross Profit 1,260 1,046 1, ,214 2, ,979 3, Gross Profit % Δ% YoY White Goods Revenue 2,947 2,444 2, ,384 6, ,069 7, Gross Profit 1, ,555 2, ,080 2, Gross Profit % Consumer Electronics Revenue ,317 1, ,829 1, Gross Profit Gross Profit % Other Revenue ,399 1, ,616 1,673-3 Gross Profit Gross Profit %

29 Sales by region TL mn 2015 Q Q Q2 Δ% YoY Δ% QoQ M M Δ% YoY Total Revenue 3,877 3,234 3, ,099 9, ,514 11, Turkey 1,542 1,337 1, ,192 3, ,852 4,617 5 International 2,335 1,897 1, ,907 5, ,662 6, Δ% YoY 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% 41.4% Turkey 39.8% 32.4% 33.2% Western Europe 13.6% 13.1% CIS&Eastern Europe 7.7% 7.9% 1.8% 2.5% 3.2% 3.5% Africa Middle East Other 50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% 41.5% 38.6% Turkey 33.3% 31.9% Western Europe 13.5% 12.2% CIS&Eastern Europe 8.3% 8.0% 3.3% 2.9% 3.5% 3.0% Africa Middle East Other 2014 Q Q M M 29

30 Sales bridge 12,000 10,000 TL mn ,000 6,000 5,597 5,907 Impact on Rev International 4,000 Turkey 2,000 3,515 4, M Organic Int. Organic TR FX impact M M Organic Currency effect Total % International Growth 1% 5% 6% % Consolidated Growth 8% 3% 11% 30

31 Working capital TL mn FX Basis TL Basis FX Basis TL Basis Total ST Trade Rec. 2,529 3,074 5,603 ST Trade Payables 994 1,154 2,148 Other Receivables Other Payables Inventory 1,255 1,238 2,493 Working Capital 2,626 3,024 5,650 TL mn FX Basis TL Basis FX Basis TL Basis Total ST Trade Rec. 1,994 2,440 4,434 ST Trade Payables ,781 Other Receivables Other Payables Inventory 1, ,125 Working Capital 2,110 2,423 4,533 Working capital /sales 40% 33.3% 38.9% 39.2% 39.1% 38.7% 36.2% 37.2% 39.3% 41.8% 30% 20% 10% 0% Dec-12 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 31

32 Balance sheet TL mn Current Assets 9,965 8,472 Current Liabilities 5,567 4,431 Cash and Cash Equivalents 1,564 1,621 ST Bank Borrowings 2,310 1,803 Trade Receivables 5,603 4,434 Trade Payables 2,148 1,781 Inventories 2,493 2,125 Provisions Other Other Non-current Assets 4,415 3,923 Non-current Liabilities 4,064 3,566 Property, Plant and Equipment 2,018 1,813 LT Bank Borrowings 3,501 2,965 Financial Investments Other Other 1,558 1,217 Equity 4,749 4,399 Total Assets 14,380 12,395 Total Liabilities 14,380 12, Net Financial Debt/Equity Total Liabilities/Total Assets

33 3,000 2,000 1, ,000-2,000-3,000-4,000-5,000-6,000-7,000 Debt profile TL mn ,317 1,174 1,741 1,267 1,621 1,645 1,053 1,564-1,915-1,924-1, ,218-1,629-1,528-2,144-1,673-1,803-1,982-2,274-2,310-1,859-2,581-2,965-2,943-2,785-3, Q1 15 Q2 15 Q3 Cash and cash equivalent Short term debt Long term debt Debt profile (as of 30 Sept 2015) Effective mn Original TL mn Interest Rate p.a. (%) Currency Equivalent TRY 11.2% 2,032 2,032 EUR 1.6% ZAR 8.6% RUB 8.7% CNY 4.9% Other 1.4% 5 Total Bank Borrowings 3,073 USD 5.1% 509 1,549 EUR 4.0% 347 1,189 Total Eurobond 2,738 Total 5,811 Debt maturity profile 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1, ,007 4,247 3,076 2,988 3,146 3,281 1,983 2, , Q1 15 Q2 15 Q3 Net Debt (TL mn) Net Debt/EBITDA % % % % % % 33

34 Cash flow* TL mn M M Beginning Balance 1,621 1,266 Net Operational Cash Flow CapEx Acquisition of minority interest Fixed Asset Sales 11 2 Dividend Paid Dividends Received Changes in Bank Borrowings Bonds Issued Other Financial & Investing Activites Differences due to FX Conversion Changes in Cash Ending Balance 1,563 1, figure reclassified 34

35 expectations

36 2015 expectations Market share Stable or higher market share in key regions White goods volume growth Turkey* : 3 :> to 5% 5 %, International : > c.2% 6% Revenue growth c.10% in TL EBITDA margin (2015)** c.10.5% c.11% Long-Term EBITDA margin** c.35% c.11% *5 main products, in compliance with WGMA data. **EBITDA margin calculations are inline with the methodology used in calculation of historical values 36

37 37 Appendix

38 Dividend policy 120% 100% 98% 80% 60% 68% 77% 48% 58% 67% 45% 53% 40% 20% 22% 21% 0% * * Bonus share distribution on 2008 income Payout Ratio Average Arçelik conducts a dividend policy within the framework of the provisions of the Turkish Commercial Code, Capital Markets Legislation, Tax Regulation, other relevant legislation and the provisions of the Articles of Association governing the distribution of profits. A balanced and consistent policy incorporating shareholders and Company requirements in line with Corporate Governance Principles is followed. In principle, subject to be covered by the resources existing in legal records, by taking into consideration market expectations, long-term strategy, investment and financing policies, profitability and cash position, other legislation, and financial conditions, minimum 50% of the distributable profit for the period calculated within the framework of the Capital Markets Legislation is distributed in the form of cash or stock. The dividend distribution date is determined by General Assembly and targeted to be within one month after General Assembly Meeting date. General Assembly, or if authorized Board of Directors, could decide to pay dividend in installments within the framework of Capital Markets Legislation. According to Company s Articles of Association, Board of Directors can distribute advance dividend with the condition of being authorized and compliant with Capital Markets Legislation. 38

39 Financial risk management Receivable risk Credit risk of receivables is managed by securing receivables with collaterals covering receivables at the highest possible proportion. Apart from bank guarantees (guarantee letters, LOC etc.), Arçelik utilizes credit insurance for international receivables and mortgages for receivables in Turkey. In credit risk control, for the customers which are not secured with collaterals, the credit quality of the customer is assessed by taking into account its financial position, past experience and other factors. Liquidity risk Arçelik seeks to minimize gap risk in its financial and commercial liabilities by managing its balance sheet according to expected cash flows. Maturities of financial liabilities are arranged according to maturities of assets, and where possible, a mismatch between the maturities is eliminated Average maturity of debt extended via issuance of two bonds (due in 2021 and 2023)=> now at +3 years FX risk Arçelik targets to maintain a net FX position close to zero and limit its exposure to set amounts as a % of capital. On top of the on-balance sheet natural hedge and financial liability management, derivatives are also employed to maintain the FX risk at targeted levels. 39

40 Turkish white goods market 8 7 mn units mn units Cooling Laundry Dishwasher Oven Total

41 Turkish market development (2015) Domestic market monthly progression Domestic market in 9M mn units 1% 3% 16% 28% 7% 6% 5% 13% -5% 30% 25% 20% 15% 10% 5% 0% -5% in 000's 9M15 9M14 YoY Refrigerator 1,495 1,438 4% Freezer % Washing mach. 1,500 1,366 10% Dryer % Dishwashers 1,106 1,065 4% Ovens % 0.0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec -10% Total 5,420 5,031 8% YoY (RHS) Domestic market in 3Q15 in 000's 3Q15 3Q14 YoY Refrigerator % Freezer % Washing mach % Dryer % Dishwashers % Ovens % Total 2,132 2,050 4% Source: TURKBESD 41

42 European markets Western European market development volume indexed (2006=100) Eastern Europe market development volume indexed (2006=100) WE (13 countries) EE (12 countries) Source: GFK (MDA6), EE includes Russia 42

43 Revenue and COGS structure Breakdown of sales by currency (2014) White goods raw material cost breakdown* Other 17% Copper 5% Aluminum 3% Other 2% USD 4% EUR/GBP 40% Metal sheet 40% Plastic 50% TRY 39% * Only commodity purchases overseen by Arcelik 43

44 Contacts for Investor Relations Polat Şen CFO Tel: ( ) Doğan Korkmaz Finance Director Tel: ( )

45 Disclaimer This presentation contains information and analysis on financial statements as well as forward-looking statements that reflect the Company management s current views with respect to certain future events. Although it is believed that the information and analysis are correct and expectations reflected in these statements are reasonable, they may be affected by a variety of variables and changes in underlying assumptions that could cause actual results to differ materially. Neither Arçelik nor any of its managers or employees nor any other person shall have any liability whatsoever for any loss arising from the use of this presentation. 45