49.29% 47.63% ERDEMİR IN BRIEF

Transcription

1 PROFILE 2015

2 ERDEMİR IN BRIEF Ereğli Demir ve Çelik Fabrikaları T.A.Ş., our main company within our group, maintains its status as Turkey's first and biggest integrated flat steel producer. İsdemir, which produces flat and long steel, Ermaden, which operates mining fields in Sivas and Malatya, Romania, which produces silica steel in Romania, Engineering, which provides engineering management services to Group companies, and Çelik Servis Merkezi, which meets the sector's need for sized flat steel, are some of the other companies within our group. In addition to these companies Pacific Pte. Ltd., established in October 2014, to perform our group's purchasing, marketing, sales and business development activities in the Asia-Pacific Region. Our group, which was incorporated to OYAK in 2006, is one of Turkey's largest industrial enterprises in terms of total assets. commenced operation in 1965 and is Turkey s largest producer of integrated flat steel. manufactures hot rolled, cold rolled, tin, chrome and zinc coated flat steel at international quality standards. provides basic inputs to the automotive, white goods, energy, construction, piping, shipbuilding, home appliances, general machinery manufacturing, pressure vessel equipment, heavy industry, food and packaging industries and leads the country s industrial development. The shares of Ereğli Demir ve Çelik Fabrikaları T.A.Ş. have been publicly traded and lead the stock exchange since the establishment of the Istanbul Stock Exchange (BIST) in 1986 and is in the BIST 30 index. Besides, the shares of İskenderun Demir ve Çelik A.Ş., our group company, have been publicly traded on the Pre-Market Trading Platform with transaction code "ISDMR" since 28 March 's own shares 3.08% Ereğli Demir ve Çelik Fabrikaları T.A.Ş. Ereğli Demir ve Çelik Fabrikaları T.A.Ş. () was established in 1960 pursuant to special legislation in order to produce flat steel desperately needed by Turkish industry but which the country was unable to manufacture at the time. The Company commenced operation in Karadeniz Ereğli in 1965 and has created value ever since for both the domestic and global economy by manufacturing high-quality, Turkish steel. İskenderun Demir ve Çelik A.Ş. Established in 1970 in Hatay s İskenderun district, İskenderun Demir ve Çelik A.Ş. (İsdemir) is an integrated iron and steel factory with the largest liquid steel production capacity in Turkey. İsdemir also began manufacturing flat products in 2008 with the Modernization and Transformation Capital Investments undertaken after İsdemir s acquisition by that year. This largest single investment in the history of the Republic of Turkey served to mitigate the imbalance between long and flat steel production in the country. Madencilik San. ve Tic. A.Ş. Commencing ore production in Sivas-Divriği in 1938, the company continued operations under the business name Demir Madenleri İşletmesi from 1940 and joined Group in The company s nine iron and one manganese sites undertake 50% of all iron ore production in Turkey and meet 20% of the country s iron ore needs. Mühendislik Yönetim ve Danışmanlık Hizmetleri A.Ş. Mühendislik Yönetim ve Danışmanlık Hizmetleri A.Ş. offers Group companies a wide range of engineering and project management services, from planning to application, in their capital investments undertaken to attain their profitability, product diversity and high-quality product manufacturing goals. Held by public Ataer Holding A.Ş % 49.29% Çelik Servis Merkezi San. ve Tic. A.Ş. Çelik Servis Merkezi San. ve Tic. A.Ş. (Ersem), which provides high-standard services for companies active in many fields of industry such as general machinery and production, heat industry, electrics & electronics, particularly automotive and white goods, was established in In 2015, in addition to its existing facilities, Ersem put into service a new steel service center in Manisa with a cold slicing capacity of 150,000 tons per year. Romania S.R.L. Located in Targoviste, Romania, Romania joined Group in The company is engaged in silicon flat steel manufacturing. It's products serve those industries that manufacture electric motors, power transformers, generators and power distribution units. Flat Steel ERDEMİR GROUP COMPANIES İsdemir Long & Flat Steel (95.07%) Maden Iron Ore (90%) Engineering Asia Pacific Pte Ltd. " Asia Pacific Private Limited (EAPPL)", a wholly-owned subsidiary, was founded on 4 July 2004 in Singapore with a share capital of USD 250,000 in order to carry out Group s commercial activities in the Far East. Ersem Service Center Romania Silicon Flat Steel Asia Pasific Trading

3 SELECTED FINANCIALS (MILLION USD) * Net Sales Revenue 4,382 Net Prof it 414 Net Operating Prof it 585 Total Assets 6,409 EBITDA 770 Shareholders Equity 4,189 SELECTED FINANCIAL RATIOS * Prof it Margin 9.45% EBITDA Margin ABOUT ERDEMİR STOCK EREGL (MILLION USD) * *As of 31 December 2015 DID YOU KNOW? 17.58% 2015 Average Market Capitalization 2015 Foreign Transactations Free Float Return on Assets 5.95% Return on Equity 10.17% 5,294 4, % The 13th edition of the Forbes 2000 list, prepared by assessing four basic criteria, which are income, profitability, assets and market value of all the publicly held companies worldwide, has been published. Group ranked 1729th on the list with a sales figure of USD 5.3 billion, a profit of USD 732 million, assets worth USD 6.9 billion and a market value of USD 5.7 billion dollars. Group has become a member of WorldAutoSteel, the automotive group of the World Steel Association. Through its membership to WorldAutoSteel, where leading steel manufacturers from various countries such as the USA, Japan, England, Germany, Sweden, Austria, Luxembourg, South Korea, Brazil, Russia, China and India are represented, has taken a major step in increasing its influence in the automotive industry. In the Corporate Governance Compliance Rating Report prepared by Kobirate Uluslararası Kredi Derecelendirme ve Kurumsal Yönetim Hizmetleri A.Ş., Group got 8.83 points out of 10 in total from four main categories. In the research performed by the International Transparency Association, Group ranked 6th right behind Turkey's leading holdings and banks, in the main categories, which are transparency of the anti-corruption program, organizational transparency and country-specific reporting, among 45 companies that have overseas affiliates and are defined as A group companies. In the research "Turkey's 500 Largest Industrial Enterprises" carried out every year by the Istanbul Chamber of Commerce every year, two Group companies ranked in the top 10 and four of them in the top 500 according to 2014 data. AWARDS In its 15 th survey regarding "Turkey's Most Acclaimed Companies" carried out in 2015, business and economy magazine Capital once again named the most acclaimed company in the iron and steel industry. In its "Export Stars 2014" awards, Istanbul Mineral and Metal Exporters' Association awarded İsdemir with the first place in the category of billet, second place in the category of mineral fuels and third place in the category of flat products, and was awarded the second place in the category of flat products and third place in the category of mineral fuels. ranked second in the category "Large Scale Enterprises - Sustainable Production" at the "Efficiency Project Awards" which was held in 2015 for the second time and the award was given by the Ministry of Science, Industry and Technology for the purpose of increasing our country's competitive force and bringing an efficiency-based, sustainable structure to the economy. Over the past three years, İsdemir decreased energy density by 21.6% and was awarded first place in the category "Decreasing Energy Density in the Metal Main Industry Sector" by the General Directorate of Renewable Energy in Group was granted "The Green Era" award which is given for recognition and appreciation of the successes and leading sustainability practices in the field of environment. The 2014 Annual Report with the theme of We Gave Life to Steel was deemed worthy of eight awards by Arc Awards and LACP (League of American Communications Professionals). WHAT ANALYSTS SAY ABOUT ERDEMİR? Goldman Sachs: We expect to achieve strong operating and financial performance in 2016 as: we expect HRC prices to increase by 41% qoq in 2Q16; we believe the company can maintain profitability at high levels even in an environment of falling steel prices which we expect in 2H16, as lower steel prices will likely be driven primarily by decreases in iron ore prices. Ata Invest: Due to lagging impact, current recovery in spot prices in late February could turn into significant recovery in profitability in 2Q16 after a possible further weakening in margins in 1Q16. We believe that is likely to remain competitive in the Turkish steel market against both local and international competitors which have difficulty in sustaining profitability. HSBC: We expect recovery in 2H 2016 financials likely to offer strong growth y-o-y, making FY16 a good year in terms of profitability and cash generation in contrast with expectations of a gloomy outlook at the beginning of the year.

4 SUSTAINABILITY In 2014, the Sustainability Directorate was launched to operate in coordination with Environmental Managers of Group and to be affiliated to the Chairman of the Board of Directors. Also after a long time we published a Sustainability Report. Significant environmental factors and environmental objectives in line with the national legislation and international developments are defined and incorporated in the management strategies The primary goals in our Journey of Sustainability include tracing environmental footprints of steel production, supporting its life cycle, promoting the notion of life-cycle and smart product design for widespread reuse, and ensuring recycling of wastes. To achieve these goals, a Life Cycle Assessment is started in Life Cycle Assessment is an approach which determines environmental, economic and social dimensions of a product or a production system, starting from the supply of raw material throughout the production and physical life of the product. In this frame, believes that such assessment for a sustainable future remains under the responsibility of industrial corporations. Moreover, Ereğli Demir ve Çelik Fabrikaları T.A.Ş (), the Group's main company, which bases all its activities on sustainability and creating permanent values, was listed in the Sustainability Index of the Istanbul Stock Exchange (BIST) in 2015, which showcases companies traded in the stock exchange who have a high-level performance in corporate sustainability. TURKISH STEEL SECTOR IN BRIEF After the 1.8% decrease in 2014, Turkey completed 2015 with 31.5 million tons decreasing by 7.4%. With this production amount, Turkey went down one place and ranked 9th among steel producers worldwide in % of the crude steel produced was long products and 26% of it was flat products. Turkey's steel production capacity utilization rate stood at 68% in 2014 and 62% in Flat steel production capacity, 16 million tons in 2015, reached 18.5 million tons thanks to the domestic investments commissioned in late Capacity utilization rate in production of long products decreased by 5 points and stood at 55% in the same period. As of 2015, according to the Worldsteel data, Turkey was; the world s 9th largest steelmaker. However, for the last 3 years the sector has been suffering from a glut of imports being dumped from countries with a large excess supply, preventing the sector from strengthening its position gained over years of efforts in the world markets, despite the advantages of high production technology, knowledge and high-quality production. Turkey ranks 8th among the top 10 steel consuming countries in the world. While a decrease in steel consumption was recorded in 2015 in comparison to 2014 in 6 of these 10 countries, Turkey showed the highest growth among them with an 11.7% increase. Domestic steel consumption of our country, which has a young population, is increasing due to the rising urbanization rate and new large-scale investments. On the other hand, the growth linked with industrial production supports the trend of increase in steel production. Especially the automotive, white goods and machinery production industries, which turned the devaluation of TL against USD in 2015 into an advantage, gained competitive advantage in the foreign market and also registered a significant increase in production amount through high domestic consumption. TOP PUBLICLY TRADED STEEL MANUFACTURERS BY ASSET SIZE (AS OF 31 DECEMBER 2015) (Million USD) ISO 9002 Quality Management System Accreditation (1997) Establishment of Suggestion System (ERÖS) National quality award f inalist (2001) TS EN Energy Management System Accreditation (2011) Performance Management System, Process Management Model, Process Improvement Methodolgy, Strategic Management Model, Improvement Teams Starting the Environmental Management System Studies (1999) 2015 Transition to TS EN Energy Management System Statistical Data Analyses Trainings Life Cycle Assessment 2014 Sustainability Report Design of Experiment Project Second Wave Commissoning of New ERÖS Software Document integration Project (2014) ISO TS Quality Management System for Automotive Industry Accreditation (2007) ISO/TS SurveillanceExamination Design of Experiment Project First Wave Knowledge Management System Project Improving the efficiency of Suggestion System, Deployment of improvement Teams, ( ) İZDEMİR KARDEMİR ERDEMİR 1995 Commissioning the Calibration Laboratory (1996) Establishment of Total Quality Executive Committe, Redesigning of Process Management Model (2003) Conferences on What the 3rd Millenium will Bring, Corporate Membership to EFQM, Business Excellence Trainings, First Self Assessment (1998) EFQM Europen Quality Award, Recognition for Excellence, National Quality Award, large Scale Company Achievement Prize, Commisioning of e-isoft Quality Management Software, TS EN ISO Environmental Management System Accreditation, TS Occupational Health and Safety Management System Accreditation (2004) 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 Source: Public Disclosure Platform

5 RISKS AND THREATS AROUND TURKEY >Turkey is one of the most difficult steel market in the world > Flattening demand, increasing imports and depreciation of Russian Ruble and Euro puts more pressure on the local market DEVELOPMENTS IN GLOBAL STEEL SECTOR As of the end of 2015, the worldwide crude steel production decreased by 2.8% in comparison to 2014 and stood at 1.6 billion tons. The worldwide crude steel production capacity utilization rate, which was 73.4% in 2014, decreased to 69.7% in % 100% 96% 95% 93% 90% 88% 84% 85% 80% 75% 80% 78% 78% 70% 73% 70% 65% Source: Group, Worldsteel TÜRKİYE In Europe, one of the markets near to Turkey, an increase was observed in visible steel consumption through the recovery in economic growth in Steel consumption decreased in Ukraine due to the tension with Russia, a Commonwealth of Independent States country, and also in Russia due to sinking oil prices and the deterioration of economic outlook because of the sanctions imposed on the country. The Chinese economy, which permanently drifted away from the double-digit growth rates it reached for years, had its lowest growth in the last 25 years with a rate of 6.8% in It is predicted that the low-rate growth period of China will continue. Due to the decreasing growth rate, steel consumption in China sank by 5.4%. While Chinese producers had to turn to exports due to increasing excess supply, exports from the country increased 20% in 2015, exceeding 110 million tons. Sector Figures (Million Mt) Global Crude Steel Production Source: Worldsteel (*) Temporary EU EUR / USD parity Overcapacity Deflation threat Group CIS Russia sanctions Ukranine crisis Shrinking economies Rapid decrease in energy prices TURKEY MENA Regional tension New capacities Rapid decrease in energy prices World ,600( * ) ,647 Turkey's Crude Steel Production ASIA Slowing local demand Increasing exports 2015 STEEL IMPORT/CONSUMPTION RATIO OF THE COUNTRIES INCREASING PROTECTIVE MEASURES 60% 50% 40% 30% 20% 10% 0% 50% 19% Turkey India USA EU (28) Source: Worldsteel, ISSB 24% EXPECTATIONS FOR % To protect their local steel industry, many countries in the world filed anti-damping, subsidy and/or safeguard investigations for various products against countries that make a high amount of imports. Although some of these investigations are justified, a big majority of them were filed as a result of the political pressure applied by local steel producers against their own governments based on the claim that they incurred damages. According to the World Trade Organization data, 2015 was a year of comprehensive investigations due to the rapid increase in the steel exports of countries such as Russia, China and Brazil. Especially the USA, the second largest steel market in the world after China with a consumption of 100 million, increased its protective measures in 2015 as well. Despite going through a difficult year due to increasing competition in foreign markets and unfavorable market conditions in 2015, Turkey registered 12.8 million tons of exports in steel as end product. With the expected improvement in the demand-supply balance and the decrease of the pressure created in global markets by the countries with excess supply, Turkish steel producers are expected to play a more efficient role in export markets in 2016 in comparison to In 2016, the worldwide steel production is expected to stand at a similar level without a big change compared to Consequently, the shrinkage in 6 of the top 10 consumer countries worldwide is foreseen to be limited to two countries, China and Russia, in The fact that the housing prices were suppressed in China from the first half of 2014 had a negative impact on the steel sector. In line with the anticipated improvement in the housing industry of China, the construction industry is expected to have a positive impact on the steel industry in 2016 but we also expect shrinkage in domestic demand in China will continue in 2016 and therefore, steel exports from China which has been 110 million tons in 2015, will reach 120 million tons started as a year of low reliability, dominated by uncertainty and fluctuations every other day in global steel markets, due mainly to the situation in China. The most important problem in the sector remains to be the excess supply emerging due to the shrinkage in the domestic demand in countries with excess capacity worldwide, particularly in China. We expect an improvement in the balance between steel demand and supply in the next 3 years through the elimination of 200 million tons of excess steel capacity in average. In fact, as of the end of the first two months of 2016, the decrease in China's steel production, with the annualized effect, stand at around 50 million tons. Preliminary data from Russia also show that the decrease in production continues but it is slowing down. In addition, news of facility closedowns is received from various parts of the world. Balance in the world economy... Turkey s potential for industrial transformation It is estimated that the world economy hit the bottom in 2015 and the worst period has been left behind. Balance in the steel market It is predicted that a capacity of over 200 M tons will be out of use and the capacity utilization rate will increase to 80%. It is expected that Turkey will continue its economic development with an upper-middle performance (a level of around 3.5%) and the production industry will increase its share in the total GDP.

6 For further information please contact Investor Relations. Address : Barbaros Mahallesi Ardıç Sok. No: 6 Ataşehir / İstanbul / Turkey Tel : +90 (216) Fax : +90 (216) Company Website : Group Website : investorrelations@erdemir.com.tr Disclaimer: Ereğli Demir Çelik Fabrikaları T.A.Ş. () may, when necessary, make written or verbal announcements about forward-looking information, expectations, estimates, targets, assessments and opinions. has made the necessary arrangements about the amounts and results of such information through its Disclosure Policy and has shared such policy with the public through the website, in accordance with the Capital Markets Board regulations. As stated in related policy, information contained in forward-looking statements, whether verbal or written, should not include unrealistic assumptions or forecasts. It should be noted that, actual results could materially differ from estimates taking into account the fact that they are not based on historical facts but are driven from expectations, beliefs, plans, targets and other factors which are beyond the control of our Company. As a result, forward-looking statements should not be fully trusted or taken as granted. Forward-looking statements should be considered valid only considering the conditions prevailing at the time of the announcement. In cases where it is understood that forward-looking statements are no longer achievable, such matter will be announced to the public and the statements will be revised. However, the decision to make a revision is a result of a subjective evaluation. Therefore, it should be noted that, when a party is coming to a judgement based on estimates and forward-looking statements, our Company may not have made a revision at that particular time. Our Company makes no commitment to make regular revisions which would fully cover changes in every parameter. New factors may arise in the future which may not be possible to foresee at this moment in time. /