EARNINGS RELEASE
August 29, 2024
Şişecam (BIST-100: SISE) reported financial results for the second quarter ended June 30, 2024
M. Görkem Elverici, CEO of Şişecam, commented:
2024 began with significant global economic uncertainties and geopolitical tensions, which persisted into the second quarter. Economic slowdown, market imbalances, fluctuations in energy prices, and geopolitical tensions influenced not only the broader business environment but also the sectors in which Şişecam operates. The sluggish demand in the first half of the year, along with slowdowns in some regions, made cost-saving and operational efficiency practices even more necessary. Agile decision-making and the ability to act swiftly have become increasingly important.
With its experience in foreseeing uncertainties and strategic decision-making mechanisms, Şişecam successfully managed risks in the first half of the year. Aligning with its long-term strategic goals and regional strategies across business lines, Şişecam continues to focus on value-added areas and manage investment plans that create sustainable value while taking economic and geopolitical developments into account. This strategic approach, which significantly contributes to the sustainable increase in shareholder value, will enable Şişecam to meet the demand with enhanced capabilities as uncertainties decrease and more favorable market dynamics emerge.
Trust is the fundamental value we need during challenging times. Şişecam reaffirmed global confidence in the company with its record-demand bond issuance in April. Our Eurobond issuance, totaling $1.5 billion and executed in two tranches, 55% with an 8- year maturity and an average yield of 8.455%, and 45% with a 5-year maturity and a yield of 8.056%, attracted nearly $5 billion in international institutional demand, setting a record. This extraordinary interest further reaffirms the global confidence in Şişecam
Our transformation journey, which began with the Roots and Wings Program, continues with the key step of ERP transition. On April 1, 2024, our transition to the SAP S/4HANA system was successfully completed for Şişecam's Glass Packaging and Chemicals operations in Türkiye. On July 1, 2024, transitions in our Flat Glass and Automotive Glass operations in Türkiye were completed. As a result, at least one location in each of our operational areas has gone live. This program, which will enhance our capabilities to standardize processes, access data end-to-end swiftly, and make strategic decisions based on data beyond global best practices, is targeted to be completed for all of our operating areas at all locations by the end of this year. Our transformation initiative, encompassing every function and geographical area we operate in, will also serve as a significant differentiator for Şişecam.
In the second half of the year, we believe that interest rate cuts and improvements in demand will support moderate economic developments and the recovery in our sectors. Despite all the uncertainties, we will continue on our path with determination, leveraging our abilities to make correct strategic decisions and manage changes effectively. With our sustainability and innovation-
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focused strategies, we will continue lead our sectors and add value to our stakeholders despite economic and geopolitical fluctuations.
I want to express my sincere gratitude for your trust and support in Şişecam. In the upcoming period, we will maintain our commitment to open communication, responsible financial management, and continuous improvement.
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Important Notice Regarding the Accounting Principal Change
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Turkey has economic conditions that require reporting entities in the country to follow the methodology set out in
International Accounting Standards ('IAS') - 29 'Financial Reporting in Hyperinflationary Economies'. - Pursuant to the decision dated December 12, 2023, and numbered 10744 by the BRSA, banks, financial leasing, factoring, financing, savings financing, and asset management companies are not subject to inflation adjustments required under TAS-29 in their financial statements as of December 31, 2023.
- IAS 29 requires the financial statements of any entity whose functional currency is the currency of a hyperinflationary economy to be restated for changes in the general purchasing power of that currency. Comparative figures for prior period(s) should be restated into the same current measuring unit.
- According to IAS 29.3, hyperinflation is indicated by the characteristics of an economy, which include but are not limited to the followings:
- The cumulative inflation rate over three years is approaching, or exceeds, 100 percent. The general population prefers to keep its wealth in non-monetary assets or in a relatively stable foreign currency
- The general population regards monetary amounts in terms of a relatively stable foreign currency
- Pricing of credit compensates for the expected loss of purchasing power, even in short credit periods
- Interest rates, wages and prices are linked to a price index
- The consumer price index ('CPI') issued by the Turkish Statistical Institute was 36.08%, 64.27%, 64.77% and 24.73% in 2021, 2022, 2023, and 30.06.2024 respectively, thus IAS 29.3 is applied for reporting entities in Turkey.
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Pursuant to the Capital Markets Board Decision dated 28.12.2023 and numbered 81/1820, Sisecam is subject to IAS 29 inflationary accounting provisions, starting from its 2023 year-end earnings disclosure. Thus, Q2'24 and comparative Q2'23 financial results, stated in this earnings release, contain Sisecam's audited financial information prepared according to
Turkish Financial Reporting Standards by application of IAS-29 inflation accounting provisions. - Non-monetaryassets and liabilities are restated
- Non-monetaryitems carried at current value are not restated
- Monetary items (ie cash, financial assets) are not subject to indexation and thus not restated
- All items in P&L are expressed by monthly indexation through consumer price index from the dates when the incomes and expenses accounted and up until the reporting date. Cost of goods sold, depreciation, and deferred tax items are subject to recalculation based on respective restated B/S items.
- Application of IAS-29 inflationary accounting provisions of Sisecam's financial figures is expected to continue until Turkey's economic conditions no longer meet the above stated IAS 29 criteria.
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Consolidated Summary Financial Results for Q2'24
Important Notice: Pursuant to the Capital Markets Board Decision dated 28.12.2023 and numbered 81/1820, issuers and capital market institutions shall prepare their annual financial statements ending on December 31, 2023, or later, in accordance with IAS-29 inflationary accounting provisions. Accordingly, this Earnings Release on Q2'24 financial results and comparative prior period, contains Sisecam's audited financial information prepared in accordance with Turkish Financial Reporting Standards by application of IAS-29 inflation accounting provisions.
Summary Financials (TRY Mn) | H1'23 | H1'24 | YoY |
Revenue | 103,568 | 85,792 | -17% |
Gross Profit | 29,344 | 19,887 | -32% |
Gross Profit Margin | 28% | 23% | -515 bps |
Şişecam EBIT | 15,704 | 539 | -97% |
Şişecam EBIT Margin | 15% | 1% | -1,453 bps |
Şişecam EBITDA | 22,639 | 7,777 | -66% |
Şişecam EBITDA Margin | 22% | 9% | -1,279 bps |
Parent Only Net Income | 10,660 | 4,928 | -54% |
Parent Only Net Income Margin | 10% | 6% | -455 bps |
Capex | 13,153 | 10,784 | -18% |
Capex/Sales | 13% | 13% | -13 bps |
Analyst EBIT* | 9,057 | -1,492 | -116% |
Analyst EBIT Margin* | 9% | -2% | -1,048 bps |
Analyst EBITDA* | 15,992 | 5,745 | -64% |
Analyst EBITDA Margin* | 15% | 7% | -874 bps |
Q2'23 | Q1'24 | Q2'24 | QoQ | YoY |
Change | Change | |||
50,931 | 43,995 | 41,797 | -5% | -18% |
13,606 | 10,059 | 9,828 | -2% | -28% |
27% | 23% | 24% | 65 bps | -320 bps |
8,864 | 1,431 | -891 | -162% | -110% |
17% | 3% | -2% | -538 bps | -1,954 bps |
12,301 | 5,171 | 2,606 | -50% | -79% |
24% | 12% | 6% | -552 bps | -1,792 bps |
4,889 | 2,553 | 2,375 | -7% | -51% |
10% | 6% | 6% | -12 bps | -392 bps |
8,090 | 4,689 | 6,094 | 30% | -25% |
16% | 11% | 15% | 392 bps | -130 bps |
3,238 | -344 | -1,148 | 234% | -135% |
6% | -1% | -3% | -196 bps | -910 bps |
6,675 | 3,396 | 2,349 | -31% | -65% |
13% | 8% | 6% | -210 bps | -748 bps |
*Excluding other income/expense from operations, investing activities, investments in associates and joint venture
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Financial Highlights (Q2'24 vs Q2'23)
- Revenue came in at TRY 42Bn, down by 18% YoY
- Gross profit was at TRY 10Bn, down by 28% YoY with a margin of 24%
- EBITDA came in at TRY 2.6Bn, down by 79% with 6% margin
- Parent Only Net Income came in at TRY 2.4Bn, down by 51% with 6% net margin
- Capex recorded at TRY 6.1Bn and Capex/Revenues stood at 15%
- FCFE had a negative balance of TRY 21.2Bn. WC/Revenue was at 37%
- Currency Sensitivity: TRY 927Mn Net Long FX Position, Hard currency share in Gross Profit is 7% (48% in Revenue, 41% in COGS) in Q2'24
- Net Debt/EBITDA was at 2.6x
Segmental Analysis1H1'24
Q2'24 | H1'24 | ||||||||||||||||||||||||||||||||||
Segmental | |||||||||||||||||||||||||||||||||||
Breakdown of | Q1'23 | Q2'23 | H1'23 | 2023 | Q1'24 | Q2'24 | H1'24 | QoQ | YoY | YoY | Topline Drivers YoY | ||||||||||||||||||||||||
Revenue | |||||||||||||||||||||||||||||||||||
(TRY Mn) | |||||||||||||||||||||||||||||||||||
Architectural Glass | 10,619 | 10,207 | 20,825 | 38,954 | 9,340 | 9,136 | 18,475 | -2% | -10% | -11% | +21% volume, -31% pricing, prod. mix, | ||||||||||||||||||||||||
currency | |||||||||||||||||||||||||||||||||||
Industrial Glass | 5,209 | 4,424 | 9,634 | 19,752 | 5,042 | 4,538 | 9,579 | -10% | 3% | -1% | -7% volume, +10% pricing, prod. mix, | ||||||||||||||||||||||||
currency | |||||||||||||||||||||||||||||||||||
Glassware | 6,343 | 6,062 | 12,405 | 21,924 | 5,662 | 5,369 | 11,031 | -5% | -11% | -11% | flat at volume, -11% pricing, prod. mix, | ||||||||||||||||||||||||
currency | |||||||||||||||||||||||||||||||||||
Glass Packaging | 8,599 | 9,623 | 18,222 | 34,189 | 7,711 | 8,111 | 15,822 | 5% | -16% | -13% | +5% volume, -21% pricing, prod. mix, | ||||||||||||||||||||||||
currency | |||||||||||||||||||||||||||||||||||
Chemicals | 14,099 | 14,397 | 28,496 | 49,185 | 10,435 | 9,384 | 19,818 | -10% | -35% | -30% | -1% volume, -34% pricing, prod. mix, | ||||||||||||||||||||||||
currency | |||||||||||||||||||||||||||||||||||
Energy | 6,859 | 5,183 | 12,042 | 22,297 | 4,661 | 4,603 | 9,264 | -1% | -11% | -23% | +52% volume, -63% pricing, prod. mix, | ||||||||||||||||||||||||
currency | |||||||||||||||||||||||||||||||||||
Other | 910 | 1,035 | 1,945 | 3,289 | 1,145 | 657 | 1,802 | -43% | -37% | -7% | |||||||||||||||||||||||||
Consolidated | 52,637 | 50,931 | 103,568 | 189,590 | 43,995 | 41,797 | 85,792 | -5% | -18% | -17% | |||||||||||||||||||||||||
1Reference to Appendix for segmental breakdown analysis
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Segmental Analysis (cont'd)
Q2'24 | H1'24 | |||||||||||||||||||
Segmental Contribution to | Q1'23 | Q2'23 | H1'23 | 2023 | Q1'24 | Q2'24 | H1'24 | QoQ | YoY | YoY | ||||||||||
Revenue | ||||||||||||||||||||
Architectural Glass | 20% | 20% | 20% | 21% | 21% | 22% | 22% | 63 bps | 182 bps | 143 bps | ||||||||||
Industrial Glass | 10% | 9% | 9% | 10% | 11% | 11% | 11% | -60 bps | 217 bps | 186 bps | ||||||||||
Glassware | 12% | 12% | 12% | 12% | 13% | 13% | 13% | -3 bps | 94 bps | 88 bps | ||||||||||
Glass packaging | 16% | 19% | 18% | 18% | 18% | 19% | 18% | 188 bps | 51 bps | 85 bps | ||||||||||
Chemicals | 27% | 28% | 28% | 26% | 24% | 23% | 23% | -117 bps | -572bps | -441bps | ||||||||||
Energy | 13% | 10% | 12% | 12% | 11% | 11% | 11% | 42 bps | 84 bps | -83 bps | ||||||||||
Other | 2% | 2% | 2% | 1% | 2% | 1% | 2% | -103 bps | -66 bps | 22 bps | ||||||||||
Q2'24 | H1'24 | |||||||||||||||||||
Segmental Breakdown of EBITDA | Q1'23 | Q2'23 | H1'23 | 2023 | Q1'24 | Q2'24 | H1'24 | QoQ | YoY | YoY | ||||||||||
(TRY Mn) | ||||||||||||||||||||
Architectural Glass | 2,554 | 1,645 | 4,200 | 8,648 | 934 | 1,462 | 2,396 | 57% | -11% | -43% | ||||||||||
Industrial Glass | 113 | 88 | 202 | 1,421 | -280 | -223 | -504 | -20% | -354% | -350% | ||||||||||
Glassware | 795 | 1,560 | 2,354 | 1,803 | 458 | -409 | 49 | -189% | -126% | -98% | ||||||||||
Glass packaging | 1,383 | 2,701 | 4,084 | 6,220 | 691 | 768 | 1,459 | 11% | -72% | -64% | ||||||||||
Chemicals | 4,211 | 5,123 | 9,334 | 14,222 | 2,077 | 1,748 | 3,825 | -16% | -66% | -59% | ||||||||||
Energy | 311 | -170 | 141 | 58 | 257 | -191 | 65 | -175% | 13% | -54% | ||||||||||
Other | 1,116 | 1,351 | 2,466 | 7,249 | 944 | -346 | 598 | -137% | -126% | -76% | ||||||||||
Total | 10,483 | 12,298 | 22,780 | 39,620 | 5,081 | 2,808 | 7,889 | -45% | -77% | -65% | ||||||||||
Elimination | -145 | 3 | -141 | -366 | 90 | -202 | -112 | -325% | -6067% | -21% | ||||||||||
Consolidated | 10,338 | 12,301 | 22,639 | 39,254 | 5,171 | 2,606 | 7,777 | -50% | -79% | -66% | ||||||||||
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Segmental Analysis (cont'd)
Q2'24 | H1'24 | |||||||||||||||||||||||||||||||
Segmental Contribution to | Q1'23 | Q2'23 | H1'23 | 2023 | Q1'24 | Q2'24 | H1'24 | QoQ | YoY | YoY | ||||||||||||||||||||||
EBITDA | ||||||||||||||||||||||||||||||||
Architectural Glass | 24% | 13% | 18% | 22% | 18% | 52% | 30% | 3,370 bps | 3,870 bps | 1,194 bps | ||||||||||||||||||||||
Industrial Glass | 1% | 1% | 1% | 4% | -6% | -8% | -6% | -244 bps | -867 bps | -727 bps | ||||||||||||||||||||||
Glassware | 8% | 13% | 10% | 5% | 9% | -15% | 1% | -2,358 bps | -2,725 bps | -971 bps | ||||||||||||||||||||||
Glass packaging | 13% | 22% | 18% | 16% | 14% | 27% | 18% | 1,373 bps | 537 bps | 56 bps | ||||||||||||||||||||||
Chemicals | 40% | 42% | 41% | 36% | 41% | 62% | 48% | 2,136 bps | 2,058 bps | 752 bps | ||||||||||||||||||||||
Energy | 3% | -1% | 1% | 0% | 5% | -7% | 1% | -1,187 bps | -543 bps | 21 bps | ||||||||||||||||||||||
Other | 11% | 11% | 11% | 18% | 19% | -12% | 8% | -3,090 bps | -2,330 bps | -325 bps | ||||||||||||||||||||||
Note: EBITDA contributions are based on pre-consolidation eliminations.
Q2'24 | H1'24 | |||||||||
Segmental EBITDA Margin | Q1'23 | Q2'23 | H1'23 | 2023 | Q1'24 | Q2'24 | H1'24 | QoQ | YoY | YoY |
Architectural Glass | 22% | 15% | 19% | 21% | 9% | 15% | 12% | 562 bps | -18 bps | -663 bps |
Industrial Glass | 2% | 2% | 2% | 7% | -6% | -5% | -5% | 63 bps | -691 bps | -735 bps |
Glassware | 13% | 26% | 19% | 8% | 8% | -8% | 0% | -1,570 bps | -3,333 bps | -1,852 bps |
Glass packaging | 16% | 27% | 22% | 18% | 9% | 9% | 9% | 53 bps | -1,758 bps | -1,256 bps |
Chemicals | 27% | 33% | 30% | 26% | 18% | 17% | 18% | -80 bps | -1,599 bps | -1,259 bps |
Energy | 3.7% | -2.8% | 1.0% | 0.2% | 4.3% | -3.2% | 0.5% | -751 bps | -45 bps | -42 bps |
Other | 53% | 62% | 57% | 92% | 42% | -18% | 14% | -5,940 bps | -7,974 bps | -4,318 bps |
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Operational Highlights (Q2'24 vs Q2'23) 2
Q2'24 vs Q2'23 | ||||||
Architectural Glass | o Production up by 21% at 702K tons | |||||
o 85% capacity utilization rate* | ||||||
o Sales volume up by 12% (domestic sales up by 7%, international sales up by 18%) | ||||||
Auto Glass & Encapsulation | o Sales volume** down by 3% | |||||
Industrials | ||||||
o Production was up by 3% to 16K tons | ||||||
Glass Fiber | o 92% capacity utilization rate | |||||
o Sales volume up by 1% | ||||||
o Production was up by 13% to 625K tons | ||||||
Glass Packaging | o Sales volume up by 5% (domestic sales up by 11%, international sales up by 2%) | |||||
o 94% capacity utilization rate (91% in Turkey and 98% in Russia) * | ||||||
Glassware | o Sales volume was flat (domestic sales down by 3%, international sales up by 2%) | |||||
Soda Chemicals | o Production down by 6% | |||||
o Sales volume down by 1% (domestic sales up by 17%, | ||||||
international sales down by 3%) | ||||||
Chemicals | ||||||
Chromium Chemicals | o Sales volume was flat at 25K tons (domestic sales down | |||||
by 11%, international sales up by 2%) | ||||||
Energy | o Sales volume up by 52%, to 1.9Bn kWh | |||||
2 Glass and chemicals volume figures are based on metric ton * Actual output/effective capacity
** Auto Glass sales volume converted from m2 to tons, Encapsulation sales volume converted from units to tons
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Architectural Glass: 22% share in Revenue | #2 Topline & EBITDA Contributor in Q2'24
Despite the economic uncertainties caused by widespread inflation, the Architectural Glass business line demonstrated its resilient positioning in the construction and renovation markets.
While the business line continued to implement inventory balancing strategies throughout the quarter to adapt to the surrounding market conditions, flat glass output reached 702K tons, up by 21% YoY, and the quarter-wise CUR stood at 85% (vs. 75% in Q2'23) Production growth was driven by the capacity expansion in Turkey given the introduction of a new auto glass-dedicated production line back in Q3'23 and a relatively limited cut in gross pull rates. 62% of flat glass output was composed of Turkey- based operations while facilities located in the EU region accounted for 23% of the consolidated production volume. Russian and Indian operations corresponded to the remaining balance.
Consolidated sales volume increased by 12% YoY, primarily driven by a stronger performance in almost all regions and the low base effect. Sales from Turkey including exports, 57% of consolidated sales volume (vs. 59% in Q2'23), increased by 9% YoY. Despite a decline in the market consumption due to limited financing capabilities of the client industries, domestic market sales volume increased by 7% YoY, thanks to mainly the uptrend in renovation activities with gradually evolving macroeconomic environment and the re-urbanization efforts put in place in the earthquake region. Low base, stemming from the uncertainties during the general election period in 2023 and the impact of the devastating earthquakes, supported the operations. Domestic sales' performance was further backed by the decline in imports, due to import protection measures and TRY depreciation. Export volume was up by 20% YoY, driven by an expanded catchment area given inventory optimization strategies through channeling more products to overseas markets with gradual addition of new wholesaler and processor clients to our portfolio in Latin and North America as well as the resolution of logistic constraints from last year's massive earthquakes in Turkey.
Despite the downward trend in the new construction market, thanks to relative resilience of renovation activities within the EU region, sales from Europe-based facilities indicated a YoY volume growth of 24%. The share of the continent in consolidated sales volume was recorded at 25%, compared to 22% in Q2'23.
Although there was a contraction in sales volume performance at Russia-based facility due to the sales mix supporting the automotive line with intra-group sales, strong momentum in India led to an aggregate sales volume that is up by 10% YoY. Accordingly, the combined share of those two regions in the consolidated Architectural Glass sales volume remained flat at 19%.
As it was noted in the previous quarter, abundant low cost-products, outstanding decline in energy costs, and subdued demand continued to put pressure on the pricing environment. Accordingly, EUR-based product prices went down by on average 8% YoY across all regions.
Architectural Glass segment, with TRY 9.1Bn net external revenue, recorded a topline contraction of 10% YoY.
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Industrial Glass: 11% share in Revenue
Industrial Glass business line, consisting of automotive glass, encapsulation and glass fiber operations, generated TRY 4.5Bn net external revenue with an annual growth of 3%.
As a Tier 1 supplier to major brands in the OEM industry, our Auto Glass and Encapsulation sales volume remained intact flat in terms of units compared to last year yet indicated a YoY decline of 3% in ton terms. Sales mix was the reason for a ton wise-decline as the scheduled deliveries for the period were composed of lighter products. Auto Replacement Glass ("ARG") channel, continued to support the business line's performance, contributing 15% share in consolidated automotive glass & encapsulation revenue.
Despite weaker client industries' demand, glass fiber sales were up by 1% YoY in volume terms. Product prices moved south in the domestic market and the surrounding region due to the presence of low cost-imports. The share of Glass Fiber in Industrial Glass business segment topline was 10% in Q2'24.
Glass Packaging: 19% share in Revenue | #3 Topline & EBITDA Contributor in Q2'24
With a quarterly average CUR of 94%, consolidated Glass Packaging production increased by 13% YoY to 625K tons in Q2'24. This growth was primarily driven by the positive impact of the fifth furnace at the Eskişehir Glass Packaging plant, which became operational at the end of Q1'24 and capacity additions taken online at Georgia facility in June 2023. Additionally, production growth benefited from the low base of Q2'23 caused by the cold repairs at the Gorokhovets (Russia) and Mina (Georgia) plants. The share of Turkey-based facilities in total production was at 56%, while 41% was produced in Russia and the remaining balance in Georgia.
Consolidated Glass Packaging sales volume, of which 53% coming from Turkey-based facilities, grew by 5% in Q2'24. Despite weak demand conditions in Europe, which has the largest share in our Glass Packaging export, Turkey-based facilities' consolidated sales volume increased by 8% YoY with 11% growth in domestic operations, driven by strong performance of non- alcoholic beverage, particularly led by the soft drinks sector where we catered to the heightened demand and acquired new customers thanks to customized and effective capacity allocation. In spite of increased competition, food sector sales also contributed to the growth in the second quarter. Meanwhile, sales performance of Russia-based facilities was in line with the prior year. The tripling of excise tax rates on wine and champagne in early May had a month-long negative impact on the sector's sales. Yet, sales to the beer sector recorded an overperformance given the rise in beer consumption thanks to higher domestic tourism and netted off the impact of elevated taxes. Sales to the beer industry further strengthened with small to mid-size new entries to the beer market and continued aluminum can shortage in the sector. Having the lowest share in glass packaging sales volume, Mina facility recorded a positive sales performance compared to the low base of 2Q'23, in line with the incremental capacity taken online in June 2023. As a result, total international sales grew by 2% YoY.
On a quarterly basis, there was a positive sales volume trend in all locations with the onset of the high season.
In Q2'24, there was a low double-digit price adjustment in Turkey due to higher raw material and labor costs, resulting in average prices per ton in USD terms being slightly above the previous quarter but below YoY. On the other side, fierce price competition persisted in Europe to maintain market presence.
Glass Packaging business line, with TRY 8.1 Bn net external revenue, recorded a topline contraction of 16% YoY.
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