1H 2016 RESULTS Earnings Review August 17, 2016
Economic Climate Turkey & Other Operational Territories 2
2016H1 at a Glance Global Outlook Global growth rates of 3,1% and 3,4% in 2016 and 2017 respectively expected by IMF slower growth OECD growth rate forecasts have been revised down to 3% and 3,3% in 2016 and 2017 respectively Political instabilities across different parts of the world led to significant uncertainties; i.e. Brexit, political turmoil in Latam, removal of sanctions to Iran, tension between Turkey & Russia, refugee problem, terror attacks Continuous risks in EU zone fuelled by Brexit but still domestic demand-led growth witnessed Negative interest rate environment Gradual slowdown and rebalancing of economic activity in China continued with a growth rate of 6,7% realized in Q1 Lower prices for energy and other commodities FED s rate hike not happening Sources: http://www.imf.org/external/pubs/ft/weo/2016/update/02/pdf/0716.pdf, http://www.oecd.org/eco/outlook/oecd-economic-outlook-june-2016-handout.pdf, http://www.imf.org/external/np/g20/pdf/2016/072116.pdf 3
2016H1 at a Glance Macro Environment in Turkey 2015 2016E 2017E 2018E GDP (USD 000) 720 751 791 834 GDP per Capita (USD 000) 9,4 9,6 9,9 10,4 Real GDP Growth (%) 4,0% 3,5% 3,5% 3,6% CPI (year-end)% 8,8% 8,5% 8,0% 7,5% Unemployment rate (12m average) % 10,8% 10,2% 10,5% 10,5% Current Account Balance (USD 000) -29,5-27,2-32,2-36,9 Foreign Trade Balance (USD 000) -63,4-55,2-67,2-71,8 CBRT policy rate decreased to 7,5% in four steps TL devalued against USD+EUR currency basket by 4% on YTD (Aug 1) Foreign trade deficit declined by 16% in the first 6 months of 2016, compared to the same period of last year GDP grew by 4,8% in Q1, exceeding expectations. World Bank expects Turkey s growth rate below 4% in 2016 Sources: http://www.tuik.gov.tr/, http://www.tcmb.gov.tr/, IMF Outlook Database, April 2016, http://www.kalkinma.gov.tr/lists/ortavadeliprogramlar/attachments/12/orta%20vadeli%20program%20(2016-2018)(revize).pdf 4
2016H1 at a Glance Macro Environment in Operating Territories EURO ZONE In Q1, despite high volatility in financial markets and weakening external demand, EU zone has grown higher than expected on the back of domestic demand Low inflation continues to be a problem With Brexit, sustainability of EU is questioned. Brexit is also expected to slow down the economic growth of EU zone UNITED STATES GDP Growth by 2,1% in Q1 and 1,2% in Q2 fuelled by domestic demand Cautious on interest rate increase in 2016 due to low growth in developing countries, decreasing demand, strengthening USD and BREXIT, no hike expected before the elections RUSSIA & UKRAINE Negative impact of falling oil prices as being the world s largest energy exporter Negative growth continued in 2016 Q1 by 1,2% following 3,7% negative growth in 2015 Inflation is down to 7,5% as of June 2016 Imposed economic sanctions are expected to extend Recovery in the Russian economy is expected in 2017 GDP growth rate of Ukraine is expected to be 0-1,5% High inflation environment is expected to improve, coupled with lower devaluation of UAH High country risk profile due to political instability, lack of reforms, currency fluctuations and high public debt levels 5
Key Developments through the Year Related Industries & Şişecam 6
Glass Industry Sustained Growth in Global Sense with Capacity Increases Average growth rate in glass industry worldwide is expected to be 2-4% annually with total production estimated to be around 140 Million tons Turkish glass industry has a production capacity of 3,8 Million tons, of which approx. 3,1 Million tons belong to Şişecam Turkey s glass exports increased by 3% YoY in the first half of 2016, while glass imports remained almost flat In terms of volume, while imports have increased by 3%, exports decreased by 0,5% YoY in the first half of the year 7
Other Industries 2016 Trends in Related Industries Automotive Industry Turkish automotive market has grown by 9% in the first half of this year while in Europe this rate is 9,4%, growth mainly coming from Cyprus, Italy, Spain, France and Germany Construction Industry Construction industry has grown by 6,6% in the first quarter of this year and housing sales increased by 7,8% in the second quarter compared to the first quarter of this year White Goods Industry In 5M 2016, production increased by 9%, domestic sales by 6% and exports from Turkey by 10% Tourism Industry Significant drop in tourism revenues 8
1H 2016 Highlights Flat Glass Partial division of auto-glass business in Lüleburgaz Full consolidation of Bulgarian operations EUR 90 Million bid offer for Italian Sangalli Vetro Porto TRKCM s stake sale of Soda Sanayii A.Ş. 23% discount on Bulgarian natural gas prices in April Fired the furnace in Mersin, which underwent a cold repair for 2 years, in June Ministry of Economy starts investigation against flat glass imports from Russia Glass Packaging Establishment of a new company with the purpose of building capacity for glass recycling ANACM s stake sale in Soda Sanayii A.Ş. Agreed with Kristal-Is union for collective labour agreement Chemicals Agreed with Petrol-Is union for collective labour agreement Soda ash production capacity increased by 30k tons in Mersin in the beginning of Q2 9
Group Performance Financial & Operational View 10
Key Financial Indicators 1H2015 1H2016 YoY Growth Revenue 3.529 4.002 13% Gross Profit 1.046 1.212 16% EBIT 538 489-9% EBITDA 892 878-2% Net Income 421 391-7% Capex 528 578 9% Margins: Gross Profit 30% 30% 65 bps EBIT 15% 12% -302 bps EBITDA 25% 22% -335 bps Net Income 12% 10% -217 bps Capex/Sales 15% 14% -53 bps Excluding Income generated from Beyoğlu Building Sale - TL 62 Million in 1H 2015 1H 2015 1H 2016 Growth Adjusted EBIT 476 489 3% Adjusted EBIT Margin 13% 12% -13 bps Adjusted EBITDA 830 878 6% Adjusted EBITDA Margin 24% 22% -16 bps Adjusted Net Income 359 391 9% Adjusted Net Income Margin 10% 10% -4 bps 11
Revenue & Cash Generation Sustained Growth in Revenue with Preserved EBITDA Margin 6.876 7.415 4.979 5.320 5.954 3.529 4.002 1.267 966 1.223 1.365 1.764 892 878 EBITDA Margin 2011 2012 2013 2014 2015 1H2015 1H2016 Revenue EBITDA EBITDA Margin 25% 18% 21% 20% 24% 25% 22% 12
Revenue & Cash Generation Segments Contribution to Revenue Balanced Contribution of the Segments in Conformity with Previous Years Results 1H2015 1H2016 5% 4% 19% 33% 19% 33% 21% 23% 21% 22% * * Consists of energy trade of Şişecam 13
Revenue & Cash Generation Segments Contribution to EBITDA Balanced Contribution of the Segments in Conformity with Previous Years Results 1H2015 1H2016 28% 11% 26% 33% 6% 30% 19% 16% 19% 12% Flat Glass Glassware Glass packaging Chemicals Other * * Consists of energy trade of Şişecam 14
Capex Analysis Lower Capex/Revenue Sustained After Heavy Investment Cycle 4.979 5.320 5.954 6.876 7.415 3.529 4.002 830 1.008 1.665 1.136 1.106 528 578 2011 2012 2013 2014 2015 1H2015 1H2016 Revenues Capex Capex/Revenues Capex/ Revenues 17% 19% 28% 17% 15% 15% 14% 15
Capex Analysis Strong EBITDA Levels Continue to Support Our Growth Strategy 1.764 1.267 1.223 1.665 1.365 830 966 1.008 1.136 1.106 892 878 528 578 2011 2012 2013 2014 2015 1H2015 1H2016 EBITDA Capex EBITDA/ Capex 1,53 0,96 0,73 1,20 1,60 1,69 1,52 16
Operational Excellence Increasing Production In Line with Capex Undertaken K tons 4.154 4.235 3.757 3.683 3.612 3.437 41% SODA 59% 2.693 1.347 1.702 1.898 1.816 1.982 2.116 2.170 2.091 2.149 1.082 1.116 2009 2010 2011 2012 2013 2014 2015 1H2015 1H2016 Glass Soda Chemicals Domestic International GLASS 42% 58% Domestic International 17
Leverage Sustained Capital Base & Conservative Leverage Net Debt / EBITDA came within the comfort zone of 1,25 Net Debt () 1.631 1.470 1.449 1.578 968 1.068 596 2011 2012 2013 2014 2015 1H2015 1H2016 Net Debt/EBITDA Net Debt/Equity 0,47 0,12 1,00 0,17 1,33 0,25 0,78 0,15 0,83 0,15 0,95 0,19 0,90 0,20 18
Leverage Solid Liquidity 3.584 3.843 3.144 4.614 4.346 4.538 2.897 2.960 2.196 2.128 1.953 2.775 1.600 1.160 968 1.631 1.068 1.470 1.449 1.578 596 2011 2012 2013 2014 2015 Net Debt Gross Debt Cash & Cash Equivalents 1H2015 Net Debt 1H2016 Cash & Cash Equivalents 19
Debt Profile up to 1 years 1-2 years 2-3 years 3-4 years 4-5 years 5 years - Total % in Currency USD* 28 114 41 1.481 17 32 1.714 38% EUR* 806 415 308 166 56 59 1.809 40% RUR* 503 340 88 24 15 0 970 21% UAH 23 5 5 5 4 0 44 1% TL 2 0 0 0 0 0 2 0% Total 1.362 874 443 1.676 92 91 4.538 % in Maturity 30% 19% 10% 37% 2% 2% 30% - Short Term Well-balanced interest rate mix 49% 50% 70% - Long Term *USD 31,5 Million loan with 3 year maturity swapped to Ruble. *EUR 75 Million loan with 2 year maturity swapped to Ruble. 51% 50% 2015 YE 2016 1H Fixed Variable 20
FX Risk On Balance Sheet Benefiting from net long FX position as most of its cash is held in hard currencies 2011 2012 2013 2014 2015 1H2015 1H2016 605 532 551 1.087 920 764-235 323 242-6 16 30 27-160 -185 104-367 59 29-559 -874 USD EUR Other Currencies 21
Segments Profile Flat Glass Glassware Glass Packaging Chemicals 22
Flat Glass Trakya Cam Consolidated Financial Results* a)excluding TRY 129,7mn one-off gain from the sale of Paşabahçe and SODA shares in 2014 26% 19% 18% a) 19% 18% b) Excluding TRY 284mn one-off gain from the sale of SODA shares on May, 2016 42% b) 21% 2.019 2.118 19% 1.488 1.350 1.034 986 265 422 566 565 260 398 517 562 193 269 391 186 2012 2013 2014 2015 1H2015 1H2016 Production Breakdown* K Tons 1.113 1.216 1.491 1.450 102 191 1.113 1.216 1.390 1.259 Including Bulgarian Operations 869 956 248 302 621 654 2012 2013 2014 2015 1H2015 1H2016 Domestic International 1.040 Revenues Gross Profit EBITDA EBITDA Margin Revenue Breakdown* 1.489 977 2.019 2.118 1.192 1.253 849 666 572 512 827 865 191 414 475 2012 2013 2014 2015 1H2015 1H2016 International Domestic (Excluding Bulgaria) * Consolidated results for YE figures are excluded from equity-pickups: Bulgaria India & Egypt - Quarterly results are excluded from the equity pickups: India&Egypt after full consolidated of Bulgaria in 1Q 2016 **International Sales include sales from foreign operations + export from foreign operations + export from Turkey 986 1.141 1.350 666 684 1H 2016 1H2016 Financials Exc. Bulgarian Operations 986 19% 1H2015 186 1.141 47% 1H2016 538 Revenues EBITDA EBITDA Margin 22% Excluding TRY 284mn one-off gain from the sale of SODA shares on May, 2016 23
Glassware Consolidated Financial Results Revenues Breakdown 17% 17% 13% 14% 13% 12% 1.348 1.446 1.616 1.728 1.616 1.728 1.348 1.446 441 434 505 581 171 206 209 293 840 884 287 270 145 109 840 884 744 847 616 656 375 501 732 790 872 881 465 383 2012 2013 2014 2015 1H2015 1H2016 Revenues Gross Profit EBITDA EBITDA Margin 2012 2013 2014 2015 1H2015 1H2016 Domestic International *International Sales include sales from foreign operations + export from foreign operations + export from Turkey 24
Glass Packaging Anadolu Cam Consolidated Financial Results* EBITDA Margins Adjusted to One-off Gains 62% 62% 1.459 1.523 1.555 1.552 1.285 33% 1.132 25% 23% 25% 21% 25% 22% 834 518 734 264 316 312 341 387 393 245 295 354 323 242 269 328 163 186 One-off gains from subsidiary and asset sales; - 2013: TRY 100mn (Topkapı land) - 2014: TRY 120mn (Paşabahçe & Soda shares) - 1H 2015: TRY 73mn (Soda shares) - 1H 2016: TRY 342mn (Soda shares) 23% 25% 21% 22% Adjusted EBITDA Margins 16% 25% 17% 25% 21% 33% 23% 21% 2010 2011 2012 2013 2014 2015 1H2015 1H2016 Net Sales Gross Profit EBITDA EBITDA Margin 2010 2011 2012 2013 2014 2015 1H2015 1H2016 Glass Packaging Production Breakdown K Tons 1.857 1.723 1.611 1.703 1.745 1.764 1.001 951 878 889 931 899 882 876 428 432 733 772 856 814 814 865 455 444 Anadolu Cam Consolidated Revenues Breakdown 1.459 1.523 1.555 1.552 1.285 1.132 728 688 702 619 595 834 734 495 259 315 637 690 731 835 853 933 475 519 2010 2011 2012 2013 2014 2015 1H2015 1H2016 Domestic International * *International Sales include sales from foreign operations + exports from foreign operations + exports from Turkey 2010 2011 2012 2013 2014 2015 1H2015 1H2016 Domestic International * 25
Chemicals - Soda Sanayii Consolidated Financial Results* 32% Soda Sales Breakdown K Tons 27% 28% 28% 28% 21% 19% 23% 1.772 1.607 1.404 1.182 964 872 516 500 833 660 326 232 224 235 268 136 153 250 243 288 397 475 217 276 2010 2011 2012 2013 2014 2015 1H2015 1H2016 Net Sales Gross Profit EBITDA EBITDA Margin Soda Sanayii Consolidated Revenues Breakdown 2.011 2.026 1.766 1.851 1.642 1.726 1.294 1.339 1.056 1.178 1.000 1.093 1.001 1.040 660 687 643 709 633 672 717 686 342 354 2010 2011 2012 2013 2014 2015 1H2015 1H2016 Domestic International ** Chromium Chemicals Sales Breakdown K Tons 1.607 1.772 1.182 1.404 911 1.091 786 964 872 833 660 678 597 577 508 440 220 295 505 618 696 681 325 367 2010 2011 2012 2013 2014 2015 1H2015 1H2016 ** Domestic International 70 81 76 83 72 71 31 35 *One-off gains; TRY 93mn from the sale of two subsidiaries and Paşabahçe share sale in 2014, TRY 0,4mn from Denizli Cam share sale in 2015. Adjusted EBITDA margins are 21% and 26%, respectively **International Sales include sales from foreign operations + exports from foreign operations + exports from Turkey 191 121 209 128 193 117 215 212 213 133 139 142 99 109 68 74 2010 2011 2012 2013 2014 2015 1H2015 1H2016 Domestic International ** 26
Key Takeaways Remarkable growth in revenues while keeping EBITDA at sustainable levels despite political and economic turmoil across almost all geographies we operate in Continued strong cash position & conservative leverage Continuous focus on operational excellence leading to smart cost management Above industry average profitability compared with global peers Continuous focus on M&A opportunities on a selective basis 27
Disclaimer This information in this document has been obtained by T. Şişe ve Cam Fabrikaları A.Ş. ( Şişecam from sources believed to be reliable, however, Şişecam cannot guarantee the accuracy, completeness, or correctness of such information. This document has been issued for information purposes only. The financial reports and statements announced by Şişecam to the public and the relevant corporations are accepted to be the sole material. Şişecam does not accept any liability whatsoever for any direct or consequential loss arising from any use of this document or its contents due to the misleading information in this document. All estimations contained in this document are the opinions of Şişecam and can be subject to change without notice. This document cannot be interpreted as an advice to the investors and Şişecam cannot be held responsible for the results of investment decisions made on account of this document. This document has been issued specially to the person, whom the document is concerned and may not be reproduced, distributed or shared with third parties for any purpose. FX Rates 2011 2012 2013 2014 2015 1H2015 1H2016 USD/TL Period End 1,89 1,78 2,13 2,32 2,91 2,69 2,89 Period Average 1,67 1,79 1,90 2,19 2,72 2,56 2,92 EUR/TL Period End 2,44 2,35 2,94 2,82 3,18 2,98 3,20 Period Average 2,32 2,30 2,53 2,90 3,02 2,86 3,26 28
T. Şişe ve Cam Fabrikaları Şişecam Genel Merkezi D-100 Karayolu Cad. No:44A 34947 Tuzla/İstanbul Turkey Tel : (+90) 850 206 50 50 Fax: (+90) 850 206 40 40 Contact Details Görkem Elverici, Chief Financial Officer gelverici@sisecam.com Tel: (+90) 850 206 3885 Başak Öge, Investor Relations Director boge@sisecam.com Tel :(+90) 850 206 3262 Investor Relations Team SC_IR@sisecam.com Hande Özbörçek Kayaer hozborcek@sisecam.com, Tel: (+90) 850 206 3374 Sezgi Eser Ayhan seayhan@sisecam.com, Tel: (+90) 850 206 3791