AG Anadolu Grubu Holding A.S. ($AGHOL)

Good morning and good afternoon, everyone, and welcome to the Anadolu Grubu Holding's 2025 Earnings Conference Call. I'm Mehmet Colakoglu, Investor Relations Director at Anadolu Grubu Holding. We have Mr. Burak Basarir, our CEO; and Mr. Onur Cevikel, our CFO, on the call with us as well. As usual, we will first listen to Mr. Basarir for the key highlights of 2025 results and his general overview. And later on, Mr. Cevikel will provide a brief analysis on segmental performance. [Operator Instructions]. In addition, in accordance with the decree of the Capital Markets Board, our financials are reported using TAS 29 financial reporting in hyperinflation economy standards. Accordingly, financial figures in this presentation and all comparative amounts for previous periods have been adjusted according to the changes in purchasing power of Turkish lira in accordance with TAS 29 and finally expressed in terms of the purchasing power of Turkish lira as of December 31, 2025. However, certain items from our financials are also presented without inflation adjustment for information purposes. These unaudited figures are clearly identified as such. And with that, I will now turn the call over to Mr. Burak Basarir.

Thank you, Mehmet. Good morning, and good afternoon, everyone. Welcome to our 2025 webcast and conference call. I'll start with a high-level snapshot of our performance across 2 slides. First, the key highlights of 2025, then a look at performance across our major sectors. I will then briefly cover our financial results before handing over to Onur. Before we begin, I want to address the recent regional developments. We are cautiously monitoring the situation closely as this -- at this stage, our operations are running normally and our people safe. Should conditions change, we are fully prepared to act swiftly. As Anadolu Group, geopolitical crisis in our operating regions are not new to us, and they will not be the last, unfortunately. Our track record speaks for itself, diversified geographies and sectors, operational agility, disciplined execution and proactive risk management have guided us through ever prior cycle. Our business are fundamentally resilient, operating in structurally strong and growing categories. One figure worth highlighting, which we also presented at our Capital Markets Day in London last June, is 9.4% CAGR in revenue and EBITDA over the past decade through the numerous regional crisis. Our consistency across cycles is the clearest evidence of our durability. We remain cautious and are actively monitoring geopolitical developments. It is too early for more specific comments, but we are managing risk proactively. With that, let me turn to our 2025 results. Despite ongoing geopolitical tensions, macroeconomic headwinds and softer consumer sentiment in several markets, we've delivered another solid year of 6.2% revenue growth and 5.8% EBITDA growth, supported by our diversified portfolio, operational agility and disciplined execution. The fourth quarter was particularly strong. Revenue and EBITDA grew 12.8% and 19.9% year-on-year, respectively, with a balanced contribution from both volume and the value. Our flexible, resilient business model, combined with geographic and sectoral diversification was central to this performance with Central Asia emerging as the standout contributor. Despite a challenging start to the year, we met and exceeded our full year guidance, driven by a strong second half recovery. Looking to 2026, our group companies have already shared their guidance, and we expect continued top line and EBITDA growth across both domestic and international markets. Let me now walk through core sector performance on Page 4. Starting with the beer business, Anadolu Efes, macroeconomic volatility and inflationary pressure weighed on consumer purchasing power across our markets, yet we delivered stable beer volumes. This reflects the strength of our geographic diversification, local brand portfolio, multi-segment lineup and disciplined market execution. On profitability, higher input costs and a more favorable prior year cost base put pressure on segment margins in 2025, even as we maintained tight operational expense discipline. Beer remains a fundamentally resilient category with strong structural growth drivers and our long-term strategy is unchanged. Going forward, we will continue to grow the top line through export development, new category entries and strengthened international presence. We expect operational profitability ratios to remain broadly in line with last year while maintaining disciplined liquidity management and leverage optimization. On the soft drink side, on Coca-Cola Icecek, we've delivered strong consolidated volume of 8% in 2025. International markets led the way with Central Asia as a standout, posting double-digit growth and reflecting resilient consumer demand. Turkiye volumes declined slightly year-on-year. However, excluding waters, which we intentionally deprioritized, Turkiye volumes grew 3.8%, underscoring the resilience of our core categories. Our approach was deliberate. In the first half, we prioritized volume and affordability. In the second half, we have shifted towards value creation. This phased discipline enabled us to exceed volume growth expectations, meet our EBIT guidance and generate a significant year-on-year improvement in the free cash flow for the business. For 2026, we expect the operation environment to remain broadly similar. We will focus on the disciplined daily point-of-sale execution, right pricing to keep products affordable and quality mix management to support the margins. On Migros, on our retail sectors, we maintained strong sales momentum across all formats, supported by the competitive pricing and our omnichannel multi-format structure. Both inflation-adjusted basket size and customer traffic grew on a like-for-like basis, and we continued to gain market share. Online operations expanded further now representing about 21% of our total revenues, a clear demonstration of our scale and capability in digital and omnichannel retailing. Margins improved year-on-year, supported by the efficiency initiatives, including the logistics investments, solar power generation, self-checkout systems and electronic price tags. Looking ahead, while food retail remains the core focus, initiatives across online trade, fintech and media will continue to drive traffic, expand basket size and support sustainable long-term growth. On the Auto segment, now we call it Mobility, the solid performance from Anadolu Isuzu was partially offset by intense sector competition at Celik Motors and the ongoing investment cycle at Anadolu Motors. That said, Auto remains a relatively small part of our overall business, representing just about 2% of our consolidated EBITDA figures. Anadolu Isuzu also completed the acquisition of a 75% stake in the joint venture of SAM Auto in Uzbekistan for $81 million, expanding our Auto segment's international footprint. Maybe turning to Slide 5. Turning to the full year results, both with and without TAS 29. Looking at the full year 2025, revenues increased by 6.2%, while EBITDA increased by 5.8% on an inflation accounted basis. As noted, the fourth quarter was a standout period. Revenue and EBITDA grew 12.8% and 19.9% year-on-year, respectively, driven by a balanced contribution from volume and the value. Excluding the impact of TAS 29 in 2025, revenues increased by 42.6% and EBITDA rose by 31.3%. At the bottom line, losses narrowed on a year-on-year basis in Q4, supported by reduced losses from the joint ventures accounted for under the equity pickup method. Let me move on to Slide 6. Our segmental breakdown reflects the range of our portfolio. Retail is the largest contributor at 58% of our total revenues, followed by soft drinks 26% and beer at 8%. In terms of EBITDA, soft drinks led at 48%, followed by retail at 39% and the beer at 10%. Collectively, these 3 core segments account for approximately 97% of our total EBITDA. The charts on the right illustrate our geographic diversification. Strong retail performance and relatively stable Turkish lira supported the domestic revenue share in 2025. Central Asia posted notable growth, particularly in soft drinks and beer, keeping the share of international revenues broadly stable at 18.2% of our sales and close to 42% of our EBITDA. With that, I'll now hand over to Onur for a detailed overview of segment performance and financials.

Thank you, Burak Bey. Good morning, and good afternoon, ladies and gentlemen. It's a huge pleasure to host all of you today in our financial year 2025 results conference call. We do understand that today is quite a volatile day for the market. So special thanks for taking the time to listen to our call today. As mentioned by Burak Bey, we have successfully finished financial year 2025 despite rising geopolitical tensions and macroeconomic headwinds. As usual, I will briefly take you through our segment results first, and then we'll talk about our balance sheet management and balance sheet performance, starting with our beer operations. Before talking about the operational results in beer operations, it's important to mention that following the appointment of temporary management in our Russian beer operations back in 2024, we have deconsolidated Russian beer operations and reclassified to financial investments back in first quarter 2025. All the numbers in this presentation will exclude Russian beer operation figures, both in 2024 and 2025 as pro forma for comparison reasons. Our beer volumes in the financial year 2025 was recorded at 13 million hectoliters and was flattish compared with the same period of prior year. Our international operations grew by 0.8%, while Turkey operations were down by like 1%. Sales revenues in financial year 2025 was at TRY 64,329 million with a decline of 2.4% compared with financial year 2024. Excluding the TAS 29 inflation accounting adjustments, net revenue was at TRY 52,640 million with a 29.7% increase compared to prior year. EBITDA BNRI for the beer operations was at TRY 7,294 million with a decline of 15.6%. Excluding the TAS 29 inflation accounting effects, Beer Group EBITDA BNRI was at TRY 10,321 million with a growth of 15.6%. Beer Group net income for the period was at TRY 4,125 million. Continued with our CCI operations. Our volumes in financial year 2025 has reached to 1,622 million unit case with a strong growth of 8% compared with the prior year same period. International sales volume growth was at 13.5%, mostly led by Uzbekistan and Kazakhstan primarily. Our Turkey volume was a slight decline of 1%. It's worth to mention, as Burak Bey mentioned that we recorded a growth in KAP excluded water segment, which was deprioritized due to relatively lower value generation. Net sales revenue was recorded at TRY 187,185 million with a growth of 3.9% in 2025. Excluding the KAS 29 inflation accounting effects, net sales revenue was at TRY 179,455 million with a strong growth of 38.2%. Continued focus on revenue growth management, price adjustment across the markets implemented selectively and cautiously contributed to this growth. EBITDA was recorded at TRY 33,198 million in financial year 2025, being flattish compared with the prior year same period. Excluding one-off items of tax and other penalties, this growth was recorded at 2%. Excluding TAS 29 inflation accounting adjustments, EBITDA reached TRY 33,905 million with a growth of 31.6%. Our net income for CCI was at TRY 14,072 million if we excluded one-off tax and other penalties, it would have been at TRY 15,271 million. Free cash flow, on the other hand, for CCI was at TRY 2.8 billion, having a significant improvement compared to negative TRY 2.9 billion prior year. While talking about Migros, we continue to grow our number of stores to 3,792 stores with an increase of 259 stores. Also, our online serving stores grew by 681 stores and reached to 2,103 stores. Our net sales in Migros reached to TRY 412,756 million in financial year 2025 with an increase of 7.3% compared to the same period of prior year. Excluding the TAS 29 inflation accounting adjustments, our revenues were at 45% increase, reaching to TRY 35,276 million. Online sales percentage in total sales, obviously excluding tobacco and alcohol, reached 21%, which positively contributed to the growth. EBITDA reached TRY 27,320 million with a strong growth of 32.1%. Without the inflation accounting adjustments, EBITDA was at TRY 24,198 million with a strong growth 43.6%. Efficiency improvements in expenses through investments contributed positively in Migros. Net income for financial year 2025 was recorded at TRY 6,467 million in 2025. And in 2025, Migros generated a net free cash flow of TRY 7,800 million and net cash excluding IFRS 16 effects was a strong TRY 27,137 million by the end of financial year 2025. Briefly continuing with the Auto segment. Our net sales for the Auto Group was recorded at TRY 69,863 million with a strong growth of 14.9%. Both Anadolu Isuzu and Celik Motor contributed to the growth with growth rate of 7.9% and 26.6%, respectively. Despite the strong growth in revenues, EBITDA remained under pressure due to strong competition pressuring profitability, strong TL promoting imports and investment phase of Anadolu Motor [indiscernible] brand. EBITDA for the segment was recorded at TRY 1,346 million with a decline of 26.5%. Excluding TAS 29 inflation accounting effects, EBITDA was at TRY 4,611 million with a growth of 13.1%. Net income for the segment was at TRY 245 million with a growth of 49.3% on the back of monetary gain and loss and acquisition accounting that we had from some of our newly acquired Uzbekistan business. And lastly, on our segments, Agri, Energy and Industry segment, our net sales for the segment was recorded at TRY 5,314 million with a decline of 24.2%. The decline is mostly attributable to our stationary segment, which had a decline of almost 41%. Overall economical conditions, slowdown in stationary sector as well as back-to-back 2 year strong performance normalizing were the main reasons. Etap revenues grew by 12.6% and Energy revenues grew by 3%. EBITDA was recorded at TRY 562 million with a decline of 43.7%. Again, the decline is attributable mostly to our stationary business. Excluding TAS 29 inflation accounting, EBITDA was recorded at TRY 950 million with a growth of 1.5%. Net loss for the segment was at TRY 818 million for the financial year 2025. Talking about our balance sheet management, as you well know, tight balance sheet management and positive free cash flow generation is a major priority for us. As you can see, despite the challenges, we successfully managed our indebtedness at a very healthy 1.1x net debt-to-EBITDA level, keeping it flattish with the prior -- without compromising on our investments. Our consolidated net debt is TRY 74,148 million, corresponding to EUR 1,475 million, including the IFRS 16 effects. Throughout the years, despite headwinds, we remain committed to tight balance sheet management, and we continue to strengthen and derisk our balance sheet management. Our free cash flow generation continued to be on the positive territory and was at TRY 3,411 million. And finally, talking about our financial priorities, given the volatility in the markets, which become more important in the recent times. Our tight management on balance sheet remains at the top of our list. And this is backed with the commitment on positive free cash flow generation, profitability and efficiency improvements and obviously, relentlessly decreasing our working capital management across our segments. Right deleveraging and proactive risk management will continue throughout 2026 being on our priority list given the situation in the market. So this basically concludes my presentation. I will hand over to Burak Bey for his closing remarks.

Okay. Thank you, Onus. As we approach the final slide, let me highlight a few priorities for the remainders and remainder of the 2026 and beyond. We will continue to manage our businesses proactively through inflationary pressures and broader economic challenges, maintaining close watch on consumer environment across all of our geographies. Obviously, we're going to have to add the geopolitical tensions that we are foreseeing right now in our geography. In 2025, we've delivered solid top line and EBITDA growth, gained market shares and outperformed sector growth in several segments. Our operational and financial priorities are clearly defined and consistently communicated at both holding and the subsidiary levels. Financial discipline is embedded in every stage of our decision-making process. Free cash flow generation, effective utilization of our assets and rigorous balance sheet management remain core KPIs for all of our businesses. Our group companies in 2026 guidance signals a continuation of their growth and value creation trajectory. And finally, our key priorities going forward. We will continue to strengthen our core businesses while selectively pursuing expansion into new sectors and geographies in line with our Vision 2035. Quality growth at scale remains central priority for us. Sustainability will continue to guide how we build a better future for our people, communities and the planet. We will also advance the digitalization of our operations across the group of companies. Financial discipline remains a core pillar, and we will continue investing in our people, empowering diverse future-ready talent to support our long-term ambitions. I would like to thank you for joining us today, and we appreciate your continued interest in Anadolu Group and our companies. And I think we are now ready to take your questions. Thank you.

[Operator Instructions] We don't have any questions at the moment. So thank you for joining us today. We look forward to meeting you in the next presentation. Goodbye.

Thank you. Thank you very much for joining us today. We do understand that it's quite a volatile day. Thanks for joining again. Thank you.