Polisan Holding AsBIST: POLHO

2Q 2024 Interim Report

Nov 14, 2024 at 4:31 PM UTC · MarketScreener

Interim Report

(January 1 - June 30, 2024)

General Information

A. About Polisan Holding

Polisan Holding A.Ş., a long-established Turkish conglomerate, traces its roots back to 1956. Starting in textiles, the Bitlis Family's ventures have branched out over time, encompassing chemicals, port management, paint, and real estate. In 2000, the family's investments consolidated under the banner of Polisan Holding A.Ş., streamlining operations and fostering cross-company collaboration.

Today, Polisan Holding employs 1,128 across its paint, port, and chemical businesses, boasts global partnerships with giants like Dow Chemical and Kansai Paint, six international investments including Greece, and a strategic real estate portfolio. For more information about Polisan Holding, a publicly traded company on Borsa Istanbul, visit www.polisanholding.com.

As of June 30, 2024, the Group's proportion of ownership interests of subsidiaries has been shown in the following table:

Title of the subsidiary	Nature of business	Shares owned by the	Effective ownership
Group	rate

Polisan Kimya Sanayii A.Ş.	Production and sale of	100%	100%
("Polisan Kimya")	chemical products
Poliport Kimya Sanayi ve	Port, storage and	100%	100%
Ticaret A.Ş. ("Poliport")	warehousing services
Polisan Hellas S.A.	Polyethylene	100%	100%
("Hellas")	Terephthalate (PET)
	granule and preform
Polisan Yapıkim Yapı	Construction chemicals	100%	100%
Kimyasalları San. ve Tic.
A.Ş. ("Polisan Yapıkim")

The table below shows the partnership ratios of the Group's Business Partnerships and Affiliates as of June 30, 2024. Investments in Business Partnerships and Affiliates are accounted for using the equity method.

Title	Nature of business	Partnership	Shares owned by	Effective
		Type	the Group	ownership rate

Polisan Kansai Boya Sanayi ve	Boya İmalatı ve	Joint Venture	%50	%50
Ticaret A.Ş. ("Polisan Kansai	Satışı
Boya")
Tintomix Pigment Pasta	Pasta Pigment	Joint Venture	%51	%25,50
Sanayi A.Ş. ("Tintomix")	Üretim ve Satışı
Rohm and Haas Kimyasal	Kimyevi maddeler	Subsidiary	%40	%40
Ürünler Üretim Dağıtım ve	üretimi ve satışı
Ticaret. A.Ş. ("Rohm and
Haas"

This statement has been translated into English for informational purposes. In case of a discrepancy between the Turkish and the English versions of this disclosure statement, the Turkish version shall prevail.

2 | Polisan Holding, Interim Report for the period January 1 - June 30 2024

B. Company Information:

Accounting Period Relevant to the Report	01.01.2024 - 30.06.2024
Business Name	Polisan Holding A.Ş.
Affiliated Trade Registry Office and	5769 Gebze
Number
Headquarters Addess	Dilovası Organize Sanayi Bölgesi 1. Kısım Liman Caddesi No:7
	Dilovası-KOCAELİ
Telephone / Fax	0 262 754 8000 / 0 262 754 8056
Headquarters Address- branch	Hilltown Ofis, Aydınevler Mah. Siteler Yolu Cad. 28 No:1/A
	Küçükyalı-Maltepe, İSTANBUL
Telephone / Fax	0 216 578 5600 / 0 216 573 7792
Website	www.polisanholding.com

C. Shareholder Structure

The company's registered capital ceiling is 1,000,000,000 Turkish Lira, and its paid-in capital is 758,500,000 Turkish Lira, with no changes in the first half of 2024.

As of June 30, 2024 and December 31, 2023 the Group's shareholder structure is as follows:

	June 30, 2024	December 31, 2023
	Share (%)	Amount	Share (%)	Amount
Mehmet Emin Bitlis	22,72	172.354.218	22,72	172.354.218
Ahmet Ertuğrul Bitlis	22,72	172.354.465	22,72	172.354.465
A.Melike Bitlis (Bush)	9,14	69.316.770	8,56	64.916.770
Fatma Nilgün Kasrat	8,41	63.768.770	8,41	63.768.770
Ahmet Faik Bitlis	7,83	59.368.770	8,41	63.768.770
Serdar Demirel	1,86	14.129.867	1,86	14.129.867
Melis Bitlis	1,71	12.974.553	1,71	12.974.553
Burcu Bitlis	0,91	6.894.284	0,91	6.894.284
Banu Bitlis	0,91	6.894.284	0,91	6.894.284
Alaattin Bitlis	0,82	6.187.618	0,82	6.187.618
Melda Bitlis	0,70	5.314.204	0,70	5.314.204
Mehmet Haluk Akşit	0,63	4.790.542	0,63	4.790.542
Publicly Traded (*)	21,64	164.151.655	21,64	164.151.655

	100	758.500.000	100	758.500.000

As of June 30, 2024 and December 31, 2023, the Group shareholders have no hold of the shares in the publicly traded shares.

On May 31, 2024, Ahmet Faik Bitlis sold 4.400.000 shares of Polisan Holding A.Ş. to A. Melike Bitlis Bush. Following this transaction, Ahmet Faik Bitlis' share in the company's capital decreased to 7,83% as of May 31,2024, while A. Melike Bitlis Bush's share increased to 9,14%.

D. Amendments in the Articles of Association during the Period and the Reasons:

There is no change in the Articles of Association in this period.

3 | Polisan Holding, Interim Report for the period January 1 - June 30 2024

E. Board of Directors

At the Ordinary General Assembly meeting held on 26.04.2024, it was decided, in accordance with Article 10 of the Articles of Association, to set the total number of Board of Directors members at 6. The following Board Members, who are to serve for a period of one year, were elected at the relevant general assembly meeting:

		Whether an Executive/
Name/Surname	Position	Independent Board
		Member
Tayfun Bayazıt, who is currently the natural person	Chairperson	Non-executive member
representative on behalf of Emin Bitlis Yönetim Danışmanlığı

Esra Yazıcı, who is the natural person representative on	Vice chairperson	Non-executive member
behalf of Ertuğrul Bitlis Yönetim Danışmanlığı Limited Şirketi

Ali Tuğrul Alpacar, who is the natural person representative	Member	non-executive member
on behalf of AFB Yönetim Danışmanlığı Limited Şirketi

Bilal Cantekin Dinçerler, who is the natural person	CEO	Executive member
representative on behalf of FNK Yönetim Danışmanlığı
Limited Şirketi

Onur Kipri	Member	Independent member

Hamit Sedat Eratalar	Member	Independent member

By the decision of the Board of Directors dated 26.04.2024; Emin Bitlis Management Consulting Limited Company and its individual representative Tayfun Bayazıt have been appointed as the Chairman of the Board, and Ertuğrul Bitlis Management Consulting Limited Company and its individual representative Esra Yazıcı have been appointed as the Vice Chairman of the Board1.

F. Board Committees

By the decision of the Company's Board of Directors dated 29.04.2024 and within the framework of the provisions in the Capital Markets Board's Corporate Governance Communiqué, it has been decided to establish the committee structure as follows.

	Audit Committee	Corporate Governance	Early Assessment
		Committee*	of Risks Committee
Chairperson	Hamit Sedat Eratalar	Hamit Sedat Eratalar	Onur Kipri
Member	Onur Kipri	Ali Tuğrul Alpacar	Esra Yazıcı
Member		Banu Çamlıtepe	Tolga Üzümcü

It has been decided not to establish the Nomination Committee and the Remuneration Committee, and that their duties will be performed by the Corporate Governance Committee.

1 The biographies of the Board of Directors are available on the company's corporate website (www.polisanholding.com).

4 | Polisan Holding, Interim Report for the period January 1 - June 30 2024

G. Senior Management

The information regarding senior executives who have resigned and those who are currently in office during the year is as follows.:

POLİSAN HOLDİNG SENIOR MANAGEMENT2

NAME & SURNAME	POSITION
Bilal Cantekin Dinçerler	CEO

Tolga Üzümcü	CFO

Mahmut Temiz	Human Resources Director

Cumhur Aksoy	Information Technologies Director

Mete Öztürk	Project and Procurement Director

POLİSAN HOLDİNG GROUP COMPANIES SENIOR MANAGEMENT

NAME & SURNAME	POSITION

E. Burak Ekmekçioğlu	Polisan Kansai Boya General Manager

Selçuk Denizhan	Poliport Genel Müdürü

M.Serkan Metan	Polisan Kimya & Polisan Yapıkim Genel Müdürü

Cenk Bitlis	Polisan Hellas Ülke Müdürü

Number of Personnel, Collective Bargaining Practices, and Rights and Benefits Provided to Personnel and Workers

As of June 30, 2024, the average number of employees for the company, its subsidiaries, and business partnership is 1,128 (December 31, 2023: 1,101). In calculating the average numbers, the number of employees from Polisan Kansai Paint and Rohm and Haas were not weighted according to the Group's shareholding ratio but were taken as full numbers.

The provision for severance pay has been calculated as 64.876.548 Turkish Lira as of June 30, 2024 (December 31, 2023: 47.525.766 TL).

Collective Labor Agreement

Our Collective Labor Agreement with our subsidiary Poliport and Liman İş Union, which covers a three-year period from January 1, 2022, to December 31, 2024, is in effect. Additionally, an agreement was reached on April 2, 2024, during collective labor negotiations for the Dilovası, Adana, and Samsun facilities of Polisan Chemical Industry Inc. and Polisan Yapıkim Building Chemicals Industry and Trade Inc., which are members

2 The biographies of the Senior Executives are available on the company's corporate website (www.polisanholding.com).

5 | Polisan Holding, Interim Report for the period January 1 - June 30 2024

of the Lastik-İş Union. A two-year Collective Labor Agreement covering the period from January 1, 2024, to December 31, 2025, has been signed.

Financial Rights Provided to Members of the Management Body and Senior Executives

At the Ordinary General Assembly meeting held on April 26, 2024, it was decided that each Independent Board Member would be paid a monthly gross remuneration of 95.000 Turkish Lira for the 2024 fiscal year and until the subsequent Ordinary General Assembly meeting, while other Board Members would not receive any remuneration.

The total amount of compensation and similar benefits paid to senior management from January 1 to June 30, 2024, amounted to 21.099.510 Turkish Lira (January 1 - June 30, 2023: 8.860.462 Turkish Lira). The Group has designated the board members, the general manager, and the deputy general managers as senior management.

Significant Developments Related to Company Activities

A. Significant Developments in the First Half of 2024

Statements Regarding the General Assembly Meeting (April 26, 2024)

The Ordinary General Assembly Meeting of the Company for the year 2023 was held on April 26, 2024, at 11:00 AM at the company's headquarters located at Dilovası Organize Sanayi Bölgesi, 1.Kısım, Liman Cad., No:7, Dilovası - Kocaeli. The meeting was conducted under the supervision of the Ministry Representative Sultan Kurbanoğlu, who was appointed by the Kocaeli Provincial Directorate of Commerce with their letter dated April 18, 2024, numbered 95967693. The Minutes of the General Assembly Meeting and the List of Attendees are available on the company's corporate website at www.polisanholding.com. The General Assembly was registered on May 3, 2024.

Dividend Distribution:

At the Ordinary General Assembly meeting held on April 26, 2024, Polisan Holding approved the Board of Directors' decision regarding dividend distribution, which was taken on April 1, 2024, and previously announced to the shareholders. It was decided to distribute a gross dividend of 90,000,000 TL on April 30, 2024. The cash dividend distribution was carried out between April 30 and May 3, 2024.

Resumption of Operations at Polisan Hellas (April 22, 2024)

According to the notification made by Polisan Hellas S.A. on April 22, 2024, the damage and repair works related to the flood disaster announced on the Public Disclosure Platform (KAP) on September 6, 2023, have been completed. It was reported that Polisan Hellas resumed production activities at its Volos factory as of April 19, 2024.

According to the disclosure from our subsidiary Polisan Hellas, the damage assessment related to the flood disaster, which we announced on the Public Disclosure Platform (KAP) on September 6, 2023, has been

6 | Polisan Holding, Interim Report for the period January 1 - June 30 2024

completed. The process has been finalized with a total payment of 7,700,000 Euros received from the insurance company, including the advance payment announced on KAP on October 20, 2023.

Investor Relations Unit

As of February 19, 2024, Banu Çamlıtepe has started working full-time in our company as the Investor Relations and Corporate Communications Manager.

Investor Relations Contact Information

Tel: +90 216 578 56 00

Email:yatirimciiliskileri@polisanholding.com.tr

B. Subsequent Events

Completion of the Polisan Yapıkim Polymer Investment

As stated in the Public Disclosure Platform (KAP) dated November 13, 2023, the PCE (Polymer) investment with a capacity of 30,000 metric tons within the Adana factory limits of Polisan Yapıkim Yapı Kimyasalları A.Ş., a subsidiary of the Company, was completed and put into operation on July 31, 2024. This investment is anticipated to increase capacity and save on transportation, intermediate goods costs, storage, and handling expenses.

2023 Sustainability Report

The 2023 sustainability report of Polisan Holding has been publicly disclosed on the Company's website (www.polisanholding.com) on July 17, 2024.

Renewal of Executive Liability Insurance

As reported on the Public Disclosure Platform (KAP) on July 2, 2024; In accordance with Article 4.2.8 of the Capital Markets Board Corporate Governance Communiqué; the "Executive Liability Insurance," already in place for the members of the Company's Board of Directors and senior executives, has been renewed. The total annual liability limit of the insurance exceeds 25% of the Company's capital.

C. Information on Investments and Incentives

Total investment expenditures were TL 268.229.336 in 1H2024 (1H2023: TL 206.353.517).

7 | Polisan Holding, Interim Report for the period January 1 - June 30 2024

The incentive certificates obtained for the ongoing renewal projects are as follows:

		Incentive			Incentive		Incentive Amount		Amount of Incentivized	Incentive Certificate

								Date
Company									Expenditure (as of

					No		(TL)		30.06.2024 - in TL)	(incl. renewal)

Poliport(*)	Crane Incentive		B/104761	15,092,285	15,092,285		29.03.2013
Poliport(*)	Tank Incentive		D/112076	148,770,416	148,770,416		17.08.2018
Poliport(*)	Tank Incentive		C/137652	167,959,754	167,959,754		03.12.2021
Polisan Kansai Boya(*)	Gebkim Plant Constr,		E/122296	351,850,411	351,850,411		07.07.2020

Polisan Kimya (*)	Samsun Plant		B/131376	2,570	2,569,653		12.04.2023
Polisan Kimya (*)	Oxide Plant		D/112337	16,259,209	16,259,209		21.07.2016
Polisan Kimya	New Resin Plant	515368	89,240,000	102,870,555		29.09.2020

Poliport	Tank Incentive	528259	736.282.559	322.253.451		06.10.2021

Polisan Kimya	Novalak Resin Plant	556036	52.467.238	0		17.07.2023

Polisan Yapıkim	Adana PCE Plant	568145	31.314.000	12.984.614		30.05.2024

Polisan Kansai Boya	Gebkim Solvent Plant	541914	42.951.200	54.712.545		07.09.2022

* Completed Investments

D. Analysis Related to Operations

The Company's summary consolidated financial information for 1H2024, prepared in accordance with inflation accounting (IAS 29 "Financial Reporting in Hyperinflationary Economies")3, is provided below:

3 Unless otherwise stated, amounts in the tables and explanations are expressed in millions of Turkish Lira ("TL") in terms of the purchasing power of the Turkish Lira as of June 30, 2024.

8 | Polisan Holding, Interim Report for the period January 1 - June 30 2024

CONSOLIDATED INCOME STATEMENT SUMMARY

TL million	1H2024	1H2023	Change YoY
Sales	2.640	3.885	-32%
Gross Profit	662	542	22%
Operating Expenses	398	332	20%
EBITDA	490	454	8%
Other operating income/expense, net	-19	-108	-82%
Profit/(loss) from investments acc. using the equity method	-86	-160	-47%
Operating Profit	159	-58	n.m.
Income/Expense from investment activities, net	-14	19	n.m.
Financial income/Expense, net	-58	-39	51%
Monetary Loss	-29	-145	-80%
Profit/Loss Before Tax	58	-223	n.m.
Tax Expense/Income	-174	60	n.m.
Profit for the Period	-117	-163	-28%

Gross Margin	25,1%	14,0%	-11,1 p.p.
EBITDA Margin	18,6%	11,7%	-6,9 p.p.
Net Profit Margin	-4,4%	-4,2%	0,2 p.p.

Consolidated revenues totaled 2.64 billion TL this year, down from 3.88 billion TL the previous year. Despite the increase in revenues from Polisan Yapıkim and Poliport, the main reason for the decrease in consolidated revenues was that Polisan Hellas resumed production on April 19, 2024, after the flood disaster, and due to low demand, its revenues were approximately 1.2 billion TL lower compared to the same period of last year. Polisan Hellas generated 237 million TL in revenue during the first half of 2024, a significant decrease from the 1.482 billion TL earned in 1H2023.
Despite the challenging economic and commercial environment, consolidated gross profit for the first half of 2024 rose by 22%, reaching 662 million TL, compared to the same period last year. The gross profit margin increased from 14% in the first half of 2023 to 25.1% in 2024. This improvement was largely due to higher value-added products in port operations, price adjustments, and a reduction in Polisan Hellas' operating losses, despite the inflation-exchange rate gap's negative impact in the second quarter.
Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) increased by 8% in the first half of 2024, amounting to 490 million TL compared to the same period last year. The growth in EBITDA was driven by increased revenues and operating profit from Poliport and the reduced losses from Polisan Hellas. However, higher freight and raw material costs, driven by geopolitical tensions in the Red Sea, partially offset Polisan Yapıkim's revenue gains, negatively affecting EBITDA. Despite these challenges, the holding's consolidated EBITDA margin improved from 11.7% in the first half of 2023 to 18.6% in 2024.
Other net operating expenses fell by 88 million TL, resulting in 19 million TL in expenses in the first six months of 2024. This reduction was primarily due to a 124 million TL decrease in exchange rate losses.
Profit/(loss) from investments accounted using the equity method was a loss of 160 million TL in the first half of 2023. However, this loss decreased to 86 million TL in the first half of 2024. Polisan Kansai Boya recorded a loss of 97 million TL, while Rohm & Haas contributed a profit of 11 million TL.

9 | Polisan Holding, Interim Report for the period January 1 - June 30 2024

Despite fluctuations in financial markets and a sudden slowdown in demand, operating profit increased by 217 million TL year-on-year, reaching 159 million TL. Pre-tax profit also grew by 280 million TL compared to the same period last year, reaching 58 million TL by the end of the first half of 2024. However, despite the positive operational trends, a deferred tax expense of 174 million TL resulted in a net loss of 117 million TL for the first six months, compared to a net loss of 163 million TL in the previous year. The increase in deferred tax expense was due to adjustments related to inflation accounting.

CONSOLIDATED CASH FLOW SUMMARY

TL million	1H2024	1H2023	Change YoY
Cash flows from operating activities	-29	854	-
Cash flows from investing activities	-237	-52	358%
Cash flows from financing activities	-79	-737	-89%

Net increase/decrease in cash and cash equivalents	-345	65	-

Cash and cash equivalents at the beginning of period	524	977	-46%
Cash and cash equivalents at the end of period	75	540	-86%

Cash flows from operating activities were -29 million TL, primarily affected by an increase in working capital. Inventory levels rose due to Polisan Hellas restarting operations, as well as minimum stock purchases by Polisan Yapıkim in preparation for the high season after the Suez Canal crisis.
Additionally, declining sales led to a reduction in trade receivables, though this was offset by a similar increase in trade payables, balancing the overall effect.
Cash inflows from the Z Office Project amounted to 4 million TL, a sharp decline from 60 million TL in 1H2023, reflecting the slowdown in the real estate sector. Capital expenditures in the first half of this year increased to 268 million TL, compared to 206 million TL in the same period last year. Consequently, cash outflows from investing activities totaled 237 million TL, up from 52 million TL in 1H2023, driven by reduced real estate sales and higher capital expenditures.
In the first half of 2024, net cash inflows from loans were 87 million TL, while 49 million TL was paid in interest and 22 million TL in rent payments. Furthermore, a dividend payment of 95 million TL in the second quarter resulted in a net cash outflow of 79 million TL from financing activities (1H2023: 737 million TL net cash outflow).

10 | Polisan Holding, Interim Report for the period January 1 - June 30 2024

Earlier from Polisan Holding As

Polisan: 2Q 2024 Financial ReportSep 26, 2024

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