Arçelik 2016 12-Month Financial Results
2016 Q4 Key Developments 2 Strong sales in domestic MDA market both in sell-in and sell-out Slowing growth in European MDA market at retail level First signs of growth in S. African market in comparison with the same period of 2015 Negative impact of increasing steel and panel prices on gross and EBITDA margin Finalization of the acquisition process of Dawlance, the leading appliance company in Pakistan Decreasing cash and increasing leverage following the acquisition Spinning off Turkish operations under the roof of Arçelik Marketing Company (December 30) Hitting the target of working capital over sales ratio Depreciation of TRY Strenghtening USD in global markets
2016 Q4 Sales Performance Key factors impacting revenues Turkish Market Strong sales in domestic MDA market both in sell-in (+11% in Q4) and sell-out (+7% in Q4) POS Cash Register Negative effect of the deadline extension for merchants with turnover up to 150 K TL until the end of 2017 (Sales value down 30% in Q4) International Growth Slowing end-consumer demand in West Europe, around 20% unit market shrinkage in December in the UK FX Impact Depreciating TRY against EUR and GBP Consolidation of Dawlance Despite the fact that Q4 is not a strong quarter (as majority of sales is in refrigeration), consolidation of Dawlance has positively affected quarter sales by 2% 3
2016 Q4 Margins Key factors impacting margins Raw Material Costs Increasing sheet metal and large size panel prices FX Impact POS Cash Register Negative impact of USD and EUR based raw material prices, following TRY devaluation Devaluation of EUR and GBP against USD Devaluation in EGP Service fee of almost 400.000 units of POS cash registers on the field, contributing to the topline and more to the profit Sales & Marketing Expenses Though still higher compared to 2016 Q3, decreasing share of sales & marketing expenses compared to the same period of 2015 Project Expenses Costs related with getting the consent of bond-holders within the process of partial spin-off of Turkish operations, and with Dawlance acquisition (TRY 22 million) 4
2016 12-Month Market Performance - Turkey Growth in MDA and air conditioner markets Market - Despite flat sales in Q3, a yearly unit growth of %5,4 in MDA market - Thanks to the high performance in first half, a growing A/C market around 9% Shrinking TV market (around 7%), where chains and import brands selling through these chains lost power. * MDA and A/C figures are based on BESD data. The data for TV is based on retail panel. Above market-average growth in all major product groups (MDA, TV, A/C) Arçelik A.Ş. - Outperforming unit growth (~%6) in MDA market - Highest unit market share gain in TV market (Unit market share above 28%) - Above 20% increase in unit sales for A/C - POS cash register sales increasing 6% in unit terms, compared to 2015 * Based on company sell-in unit sales. 5
2016 12-Month Market Performance - International Despite the slowdown in second half, a cumulative unit growth of 3,5% in Europe Market (West Europe: 3,2% East Europe: %4,8) - UK has recorded the highest unit growth in West Europe despite the slowdown in Q4 - Around 25% unit growth in Romania, supported by the VAT incentive - Positive growth in Russia and Ukraine, which were negative in 2015 A decreasing S. African market (down 5%) in 2016, following the 2% decline in 2015 Arçelik Group continuing to strenghten its position in international markets Arçelik A.Ş. - Beko continues to lead the European MDA free-standing segment - Beko is among the the Top 3 Winners in terms of market share gain in built-in segment Around 10% increase in built-in sales, Beko becomes the leader in B/I in the UK - Around 50% increase in Grundig MDA sales, targeting the premium segment - Undisputed market leading positions with local brands such as Defy and Arctic - Thai refrigerator plant, which became operational in 2016 Q1, reached a production volume around 100.000 units 6
2016 12-Month Market Figures Beko Unit Market Share in Europe (%) (MDA 6) Market Unit Growth in Europe (MDA 6) 10 % 9 8 7 6 5 4 3 2 1 Total Free-standing Built-in W. Europe France Germany Italy Spain UK E. Europe Poland Romania Russia Ukraine S. Africa January-December 2016 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016-10% -5% 0% 5% 10% 15% 20% 25% 0,9 0,8 0,7 0,6 0,5 0,4 0,3 0,2 0,1 0,0 Turkish MDA6 Total Market Monthly Sell-in Figures (MDA 6) mn units 11% 17% 9% -2% 3% 5% -7% 7% 0% 0% 20% 15% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 14 15 16 YoY 25% 20% 15% 10% 5% 0% -5% -10% Turkish Market by Product Group (MDA6) 000 Units 12M 2016 12M 2015 Change Refrigerator 2.040 1.976 3% Freezer 648 571 14% Washing M. 2.122 2.026 5% Dryer 93 82 13% Dishwasher 1.573 1.483 6% Cooker 995 951 5% Total 7.470 7.090 5% 7
2013 Q1 2013 Q2 2013 Q3 2013 Q4 2014 Q1 2014 Q2 2014 Q3 2014 Q4 2015 Q1 2015 Q2 2015 Q3 2015 Q4 2016 Q1 2016 Q2 2016 Q3 2016 Q4 Jan-13 Mar-13 May-13 Jul-13 Sep-13 Nov-13 Jan-14 Mar-14 May-14 Jul-14 Sep-14 Nov-14 Jan-15 Mar-15 May-15 Jul-15 Sep-15 Nov-15 Jan-16 Mar-16 May-16 Jul-16 Sep-16 Nov-16 Trends in Parity and Raw Material Index EUR/USD Development Raw material Market Price Index* 1,6 1,4 1,2 1,0 0,8 0,6 0,4 0,2 0,0 105 100 95 90 85 80 75 70 65 60 Annual Average EUR/USD Annual average RM price index (market) * Raw material price index for appliances category 8
2016 Q4 Other Developments: All closing conditions has been satisfied regarding the acquisition of production and sales companies operating in Pakistan under Dawlance brand and the share transfer has been completed on November 2, 2016. Following regulatory approvals and upon final General Assembly approval, a new company named "Arçelik Pazarlama A.Ş has been established to manage domestic operations with lean and focused management strategies in line with Group s international operations. JV Agreement with LG was renewed to be effective until end-2023. In addition to existing product portfolio, Arcelik-LG will produce commercial air conditioning products. At Turkish Innovation Week which was held by the Turkish Exporters Assembly in December 2016, Arçelik A.Ş. was granted "R&D Leadership" award. Arçelik has been awarded the title of most popular brand in Turkey in the white goods category based on the results of the research "Turkey's Lovemarks". 9
10 Sales Performance
Sales by Region TL mn 2016 Q4 2015 Q4 2016 Q3 Δ% YoY Δ% QoQ 2016 2015 Δ% YoY Total Revenue 4.526 4.067 4.083 11 11 16.096 14.166 14 Turkey 1.600 1.533 1.669 4-4 6.449 5.724 13 International 2.926 2.534 2.414 15 21 9.647 8.442 14 40,4% 40,1% 32,8% 31,6% 37,7% 35,4% 35,0% 32,8% 12,5% 13,0% 7,4% 6,9% 3,3% 3,3% 3,5% 5,1% 13,2% 13,9% 7,3% 8,2% 3,0% 3,3% 3,8% 6,6% Turkey Western Europe CIS&Eastern Europe Africa Middle East Other Turkey Western Europe CIS&Eastern Europe Africa Middle East Other 2015 12M 2016 12M 2015 Q4 2016 Q4 11
Sales Bridge 18.000 16.000 TL mn 725 551 566 89-14.000 12.000 10.000 8.442 9.647 Impact on Rev 8.000 16.007 International 6.000 4.000 2.000 5.724 6.449 Turkey - 2015 12M TR - Organic INT - Organic INT - FX Impact Acquisition 2016 12M 2016 12M Organic Currency Effect Acquisition TOTAL Domestic Growth 12,7% - - 12,7% International Growth 6,5% 6,7% 1,1% 14,3% Total Growth 9,0% 4,0% 0,6% 13,6% 12
13 Financial Performance
Income Statement Δ% Δ% Δ% TL mn 2016 Q4 2015 Q4 2016 Q3 YoY QoQ 2016 2015 YoY Revenue 4.526 4.067 4.083 11 11 16.096 14.166 14 Gross Profit 1.432 1.322 1.361 8 5 5.340 4.536 18 margin 31,6 32,5 33,3 33,2 32,0 EBIT * 301 371 375-19 -20 1.331 1.157 15 margin 6,7 9,1 9,2 8,3 8,2 Profit Before Tax 108 243 283-55 -62 1.202 785 53 margin 2,4 6,0 6,9 7,5 5,5 Net Income** 230 212 264 9-13 1.304 893 46 margin 5,1 5,2 6,5 8,1 6,3 EBITDA* 423 465 484-9 -13 1.769 1.527 16 margin 9,3 11,4 11,9 11,0 10,8 * EBIT was calculated by deducting the impact of foreign exchange gains and losses arising from trade receivables and payables, credit finance income and charges and cash discount expense and adding income and expenses from sale of property plant and equipment. ** Net income before minority 14
Revenue and Gross Profit by Segment Δ% YoY Δ% QoQ 2016 2015 TL mn 2016 Q4 2015 Q4 2016 Q3 Consolidated Revenue 4.526 4.067 4.083 11 11 16.096 14.166 14 Gross Profit 1.432 1.322 1.361 8 5 5.340 4.536 18 Gross Profit % 31,6 32,5 33,3 33,2 32,0 White Goods Revenue 3.368 2.915 3.130 16 8 11.707 10.299 14 Gross Profit 1.099 1.024 1.079 7 2 4.138 3.578 16 Gross Profit % 32,6 35,1 34,5 35,3 34,7 Consumer Electronics Revenue 634 649 528-2 20 2.266 1.966 15 Gross Profit 191 157 151 22 26 633 433 46 Gross Profit % 30,2 24,2 28,7 27,9 22,0 Other Revenue 525 503 426 4 23 2.123 1.901 12 Gross Profit 141 142 130 0 8 568 524 8 Gross Profit % 27,0 28,2 30,6 26,8 27,6 Δ% YoY 15
Balance Sheet TL mn 31.12.2016 31.12.2015 31.12.2016 31.12.2015 Current Assets 10.986 9.406 Current Liabilities 6.606 5.236 Cash and Cash Equivalents 2.442 2.168 ST Bank Borrowings 2.251 2.185 Trade Receivables 5.295 4.791 Trade Payables 3.086 2.090 Inventories 2.762 2.140 Provisions 412 335 Other 487 308 Other 857 627 Non-current Assets 5.924 4.332 Non-current Liabilities 4.299 3.826 Property, Plant and Equipment 2.750 2.056 LT Bank Borrowings 3.407 3.269 Intangible Assets 2.304 1.171 Other 892 557 Financial Investments 239 749 Other 630 357 Equity 6.005 4.676 Total Assets 16.909 13.739 Total Liabilities 16.909 13.739 31.12.2016 31.12.2015 31.12.2014 31.12.2013 Net Financial Debt/Equity 0,54 0,70 0,72 0,72 Total Liabilities/Total Assets 0,64 0,66 0,65 0,64 16
Working Capital TL mn FX Basis TL Basis 31.12.2016 FX Basis TL Basis Total ST Trade Rec. 2.381 2.914 5.295 ST Trade Payables 1.402 1.684 3.086 Other Receivables 48 58 106 Other Payables 313 44 358 Inventory 1.649 1.113 2.762 Working Capital 2.363 2.357 4.719 TL mn FX Basis TL Basis 31.12.2015 FX Basis TL Basis Total ST Trade Rec. 2.038 2.753 4.791 ST Trade Payables 798 1.292 2.090 Other Receivables 29 33 62 Other Payables 248 44 292 Inventory 1.035 1.105 2.140 Working Capital 2.057 2.554 4.611 Working Capital / Sales 33,3% 38,9% 39,2% 39,1% 38,7% 36,2% 37,2% 39,3% 41,8% 32,5% 30,9% 30,3% 30,8% 29,3% Dec-12 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 17
Debt Profile 4.000 3.000 2.000 1.000 0-1.000-2.000-3.000-4.000-5.000-6.000-7.000 TL mn 416 905 1.317 1.174 1.741 1.267 1.621 2.168 2.491 2.467 2.722 2.442-1.915-1.924-839 -1.218-1.629-2.144-1.673-1.803-2.185-2.508-2.078-2.370-2.251-1.577-188 -1.528-1.859-2.581-2.965-3.269-3.078-3.084-2.843-3.407 2008 2009 2010 2011 2012 2013 2014 2015 16 Q1 16 Q2 16 Q3 16 Q4 Cash and cash equivalent Short term debt Long term debt Debt profile (as of Dec 31 2016) Effective mn Original TL mn Interest Rate p.a. (%) Currency Equivalent TRY 10,7% 1.540 1.540 EUR 1,7% 151 559 ZAR 9,9% 750 193 RUB 8,9% 475 27 CNY 4,4% 110 55 GBP 1,0% 5 23 USD 1,4% 0 2 PKR 6,3% 5.432 182 Total Bank Borrowings 2.581 USD 5,1% 504 1.773 EUR 4,0% 352 1.304 Total Eurobond 3.077 Total 5.658 3.500 3.000 3.076 2.988 3.146 3.286 3.100 3.216 6 5 Debt maturity profile 2.500 2.000 1.500 1.000 500 0 2.263 1.983 1.207 5,1 2,6 740 2,3 2,2 2,3 2,2 1,8 1,5 1,3 0,9 2.689 2.491 1,8 1,4 2008 2009 2010 2011 2012 2013 2014 2015 16Q1 16Q2 16Q3 16Q4 4 3 2 1 0 2023 31% 2017 40% 18 Net Debt (TL mn) Net Debt/EBITDA 2021 23% 2018 5% 2019-20 1%
Cash Flow TL mn 2016 12M 2015 12M Beginning Balance 2.166 1.621 Net Operational Cash Flow 2.067 1.723 CapEx -831-640 Acquisition of subsidiary -746-1 Acquisition of minority interest 0-282 Fixed Asset Sales 7 19 Financial Asset Sales 559 0 Dividend Paid -262-350 Dividends Received 13 24 Changes in Bank Borrowings -440 230 Other Financial & Investing Activites -409-330 Differences due to FX Conversion 317 153 Changes in Cash 275 546 Ending Balance 2.442 2.166 19
20 2017 Expectations
2017 Expectations White goods market volume growth Turkey* : c.3% International : c.2% Market Share Stable or higher market share in key regions Revenue Growth >20% in TRY EBITDA Margin (2017)** c.11% Long-Term EBITDA margin** c.11% *6 main products, in compliance with WGMA data. **EBITDA margin calculations are inline with the methodology used in calculation of historical values 21
www.arcelikas.com Contacts for Investor Relations Polat Şen CFO Tel: (+90 212) 314 34 34 Hande Sarıdal Finance Director Tel: (+90 212) 314 31 85 Orkun İnanbil Investor Relations Manager Tel: (+90 212) 314 31 14 investorrelations@arcelik.com 22
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. 23