Anadolu Efes Biracilik ve Malt Sanayii Anonim Sirketi (AEFES) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to Anadolu Efes' Last Quarter 2021 Financial Results Conference Call and Webcast. My name is Asli Demirel, and I'm the Investor Relations Director of Anadolu Efes. Our presenters today are Mr. Can Çaka, the CEO; and Gökçe Yanasmayan, the CFO. [Operator Instructions] Just to remind you, this conference call is being recorded and the link will be available online. Before we start, I would kindly request you to refer to our notes in our presentation regarding forward-looking statements. Now, I'm leaving the ground to Mr. Can Çaka, Anadolu Efes' CEO. Sir?

Thank you, Asli. Good afternoon to all. I'm very happy to post you for the full year financial results call. Obviously, this is not a great day to talk about the operations. Actually yesterday, we reported our very solid results for 2021. And basically, yesterday, we were thinking and contemplating to highlight this call talking about our solid results, what we have delivered last year and how we managed these. However, as we all followed very sorowly all through the day, things changed rapidly in our region and unfortunate events we are facing actually forced me to give an update on the current tension between Russia and Ukraine. Like many of you, we watch the developments very closely with sorrow. Obviously, we are not in a position to comment on the politics. However, we hope that the 2 countries will meet on the ground of dialogue and -- as soon as possible, and that order and peace will be restored as soon as possible. Let me give you an update on how we are managing with the developments and how all these are impacting our business as of today. That's obviously very early to make long-term statements and any forecasts. However, I mean, obviously, the tensions didn't start yesterday. That was ongoing for a while. And since the start of the tensions, we had a team consisting of the top management and the key personnel who were working on several different scenarios. So all these happenings are part of our scenario planning as well. So we had a planning for this. And our plans today, we're already ready, and we took very rapidly actions up until now, specifically for Ukraine. In Ukraine, we have 3 breweries. They're in the states of Chernihiv in Central Ukraine, Kharkiv in the North and Mykolaiv in the South, and around 3,000 employees. As usual, as always, our first priority is to ensure the safety of our employees. All possible precautions have been taken in this regard. We are making sure that we are -- we will support our employees in every other possible way. The second priority is to make sure that the plants and brewing infrastructure is safe in the country. And as of this morning, we -- the breweries were shut down and the sales operations were halted. We are also making sure that the necessary equipment related to IT infrastructure and communication is also being relocated. In terms of financing and liquidity, we are checking our situation at the moment, but we still have some available limits from several banks. Let me remind that the share of Ukraine operations within Anadolu Efes sales revenues is around 5% and even lower for our EBITDA. Similar to our -- the results, the timing of the guidance, that's a part of our annual results, as usual, was also kind of unfortunate. Obviously, when we put forward certain assumptions and we provided the guidance yesterday, we were -- the assumptions were based on the normal course of business. There will always be risks associated and we have seen some of the risks materialize as of this morning. Therefore, we need to observe what's happening, how long this will take. So obviously, we need to revise our guidance in the coming days. But today, it's quite early to make any judgment and any forecast. So -- but I know -- but I can say there would be some amendments, and we will need to follow the developments in the region. So as of today, my focus is ensuring the safety of our employees. And my hope is around the -- that peace would be restored as soon as possible. So that's the general remarks about what's happening in Ukraine specifically, and the tensions between Ukraine and Russia. So going into the year, let's -- at the end of the day, we need to go through review our results. Looking -- one thing we wanted to emphasize on this page, we just wanted to look back on a longer horizon, 5 years -- the last 5 years. I would like to note that -- which I'm very proud with is we have achieved solid and consistent growth momentum in all the other metrics. Obviously, this has been supported with the merger in Russia, the inorganic growth as well. But again, that's a testimony of our value creation capabilities, our passion to create value for our stakeholders. We have been very successful to grow our EBITDA ahead of our revenues and our revenues ahead of our volumes. So that's a quite strong algorithm. And as you see all the numbers on the screen and free cash flow generation capability was even stronger than the EBITDA growth. And -- which grew 3 -- more than 33% on an annual basis for the last 5 years on an average CAGR basis. And over the last 5 years, the growth came from both business lines. But obviously, thanks to the healthy growth that we have achieved in our beer operations, especially on the international side, our portfolio is now much more diversified and balanced compared to 5 years ago. But given what's happening on the ground, we may say, we are on more geographies, and we are open and exposed to the issues going on in all these geographies, obviously. And when it's -- when we look at the international versus domestic portion, the contribution of our international business in both business lines have been continuously increasing, and we are now generating almost 70% of our revenues. And that's again, underlining our, let's say, passion to grow our business internationally and becoming a successful regional player. Next page, please. Going into 2021, specifically, despite considerable headwinds and challenges we faced through the year, I would -- let me remind, the beginning of the year was marked with the increase on the COVID cases and basically, in every other country, there were lockdowns that were impacting our business. And then starting from the mid-year second half, we are seeing enormous increases on the commodity prices. So -- but despite all, very satisfied with the very strong results that we have reported. We have achieved that in some metrics, I would say, the results were beyond our planning and beyond our expectations. You would remember our guidance at the beginning of the year. As noted, the year started with strict pandemic-related restrictions. And in the second half of the year, we entered -- despite the fact that we entered in a period of normalization in terms of the COVID, so the restrictions were lifted. So we were more -- especially during the season, things were more -- much more normalized, but we -- then we started to saw sharp increases in commodity and raw material prices globally. And that also inevitably impacted our business. These unexpected increases in our procurement prices as well as the inflationary environment, reflecting all this across the board, necessitated us to revisit our value proposition and basically to be ready for 2022, actually, we have taken early steps. We have discussed this in the third quarter call actually, and we started to take pricing -- increase prices in every other operations, looking into existing prices -- price levels and also the hedges that we have. And therefore, that also -- these price increases in the last quarter also helped us to deliver the strong top line growth, and our revenues grew more than 47% on a year-on-year basis. And when we look into that on a constant currency basis, the growth was 28%, and that was quite a strong growth. These numbers were obviously nourished by the strong volume growth, which was around 12%. And the price increases that we have taken at the beginning of the year and at the end of the year, throughout the year, I would say, an increased share of our premium portfolio, as we discussed in every other call, and those were supporting our top line growth. Although we started the year with the strategy to expand our -- to continue to support our -- the brand power, the brand equity, so on and so forth. So we were -- as we discussed in the last couple of years, we were focusing to support more of -- our business more with more marketing and sales spend. The -- when we started to face the input cost pressures, especially starting in the second half, we've taken the, let's say, precautionary steps in spending less in that perspective in order to mitigate the pressure in gross margin to some extent. And as Gökçe will go through, the -- we were able to cover some of the gross margin dilution at the profitability bottom line level. Although we have seen -- still, we have still seen some dilution year-on-year basis, we were able to achieve profitable margins -- I would say, profitable margins this year as well. And when it comes to capital -- working capital management, we had been presenting a superior performance for the last 3 years and again that supported this year also our free cash flow generation and we continued to deliver a record-high level of free cash flow, which was more than TRY 4 billion on such a challenging year. And I'm also, very happy to announce that in line with our commitment to maximize shareholder value, our Board of Directors proposed TRY 1.1 billion dividend for 2021, taking into consideration the significant amount of free cash flow generation throughout the year. I'm going on the next page. And as you see, our consolidated sales volume showed a solid growth both in quarter 4 and for the full year, yielding a performance that's -- when you look at the fourth quarter, it's better than the prior quarter's peak COVID, let's say, period. And the volumes also increased by 12% on a year-on-year basis. On a reported basis, if we exclude the impact of Uzbekistan acquisition by CCI, growth was still strong, around 11%, reaching around 116 million hectoliters. And both business lines contributed positively to this growth. And the Beer Group volume expansion was 5%. And again, that's supported by international and Turkish domestic operations as well. And in the -- on the soft drink side, both -- again, similarly, both domestic and international operations were resilient, recorded double-digit volume growth in -- specifically for the performance through the year. Going a little bit around various operations. Probably, we'll discuss around Russia and Ukraine as I've started. Let's look into what happened throughout 2021. Again, what's happening today on the ground we have no, let's say, forecast or vision what's going to -- how long this will continue, how much it would extend. So that's very difficult to make any judgment here, comment here. But again, let's look back for 2021 performance, and the Russian beer market actually grew throughout the year around 3%. And basically, the Russian beer market, I mean, the news was that the beer -- Russian beer market was -- this was the fourth consecutive year of growth in Russia. And again, since the merger, we've outperformed in the market. And with that outperformance, we sustained both our value and volume leadership in the country, with around 30% value share on average for the year. As you would recall, we are focusing on the value share, making sure that the volume performance is also supported with the pricing strategy in the country in order to improve the profit pool. And our sales, main drivers of this success, the strong growth or outperformance of the market was, again, as we discussed in the past, on the premium segment, the premium side of the business, where we were -- we are having stronger position. And specifically, our focus on the non-alcoholic and flavored beer categories as we are expanding into these categories slightly lately beyond our competitors. But again, we have seen very strong double-digit growth rates compared to a year ago. And when looking at the brand performance, the growth was supported by our main -- premium brand Bud in the country, Redds and Essa. And also on the mainstream side, Stary Melnik iz Bochonka, [indiscernible] and Bud Light was supporting, together with the Gold Mine Beer, Zhigulyovskoe and -- contributing to the portfolio growth. On the other hand, as I mentioned, we have started to focus on the growing non-alcoholic beer segments. Our portfolio, again, with strong international brands, enabled us to achieve superior performance in the non-alcoholic and flavored categories and demonstrating a significant growth versus the market and we became the second player in the non-alcoholic beer segment that was a result of strong performance through the year. This performance, obviously, the growth of the non-alcoholic segment, we are discussing globally, but also, in Russia for more recently, supported with the trends around the health lifestyles as well as the development of e-commerce and express delivery services. Look, that's about Russia. When we look -- when we switch to Ukraine. For Ukraine -- specifically, for Ukraine, for us, it was a, let's say, another tough year. Very obviously, the whole market was impacted by the pandemic. But again, as our focus is more and more on the value, we have price increases higher than -- our competition didn't follow us, let's say. We believe that's the right amount of price increases in the country. We have taken the price increases. And -- but unfortunately, the competition didn't cope -- follow the price increases properly, even continued the promotions and discounting. But again, we are really -- don't regret on our side, but we lost some volume share as a result of this underpricing and the increased promotion by the competition, but we believe that's much more healthy for our -- the balance of our profitability and volume in the country. And we are obviously focusing on the premium segment in the country, like we do in other countries. And that segment contributed to our sales volume, Stella Artois, Corona, Kozel showed market share increases. So those were promising developments in Ukraine. And also, we have seen -- again, our volumes positively supported by the Beyond Beer categories. As we discuss from time to time, we are focusing to expand our portfolio and Beyond Beer categories especially kvass and cider specifically for Ukraine as part of our portfolio expansion and they outperformed their segments, and we are happy with the development of these new categories that we are moving into. And our cider brand in Ukraine has become the second biggest brand in this segment. Similarly, kvass brand -- our kvass brand gained a strong position in the segment. Going into CIS. Basically, in CIS, as we discussed, for the last 3 years, we've been focusing very much on strengthening our mainstream brands, premiumization -- increasing the premium portfolio in our -- premium brands in our portfolio. So -- and investing in our brands in both range that was supporting our business, and we see the results, solid results continue, and I'm very happy with this -- let's say, all these efforts of this strategy reflecting into our performance. So -- and that's creating a very sustainable performance. And we see the leadership in every other market. The volumes grew by mid-teens on average for the year. And CIS countries other than Russia and Ukraine makes around 11% of our volumes. And then, we have higher margins with our much more balanced portfolio in these countries. So the contribution of these countries to profitability is higher in that perspective. In Kazakhstan, we have benefited from the eased restrictions as well as the economy growth in the country. Again, I mean, maybe, we need to make a statement here. At the beginning of the year, there were some public unrest in Kazakhstan, but the -- I was in Kazakhstan 10 days ago. Everything was calmed down in the country. So the businesses continues on the normal case. And we have also premiumization in Kazakhstan. We have introduced Miller brand in the country 3 years ago, and it has become the leader in the premium segment, supporting our -- both top line and the profitability. And also, we are expanding with non-alcoholic segment. We have now Efes 0.0 in Kazakhstan and flavored beers in various brands are -- now, there are various brands, we have flavored beer segment. So we are expanding our portfolio in these countries as well. Similarly, very strong performance in Moldova, especially on trade, following the easing of restrictions, similarly -- similar to other countries. Our core mainstream brand and our premium segment continued to grow and especially the premium was supported with our flagship brand Efes and Corona from the ABI portfolio. Similarly, Georgia showed a good momentum with strong growth rates supported by the economic rebound in the country, the market growth following that and both our beer and lemonade sales achieved double-digit volume growth this year. And again, here, we see the premiumization. We have Efes, Lowenbrau, Staropramen brands on top of the mainstream brands. So basically, as I noted, I'm very happy with the performances of the successful operations and sustaining and even expanding margins and continuing to generate a very strong free cash flow in these countries. Going into Turkey. Turkey -- as we discussed from the very beginning of the pandemic, Turkey was the mostly impacted operation from pandemic and following restrictions for the pandemic. Most of you who are living in Turkey and following Turkey very closely would recall, in the first 5 months of the year, actually, the restrictions were very tough. There has been almost no on-trade sales and during the weekends, there were off-trade sales limitations as well, even in the -- let's say, during the second -- the mid of second quarter, there were continued 17 days of sales ban, actually I mean curfew and following sales ban for the 17 days of the second half of the Ramadan. So restrictions were tough that impacted the market. And the -- right after the restrictions were lifted when we -- as we entered into the season, unfortunate events like the forest fires and other -- continued for 2 weeks in the southern provinces in Turkey, where actually the tourism and the hotel reservations were affected at the high season. So -- through the beginning of the third quarter. So -- however, during the fourth quarter, we have seen normalization in our sales performance. Last year's fourth quarter was below base. And again 2020 fourth quarter was impacted by these similar restrictions in terms of the on-trade sales and partly with off-trade. So that was a low comparable. So that's -- we benefited in the fourth quarter this year 2021. As a result, Turkish beer operations, we have seen volumes growing 5% on a year-on-year basis, reaching 4.9 million hectoliters. Our export operations also demonstrated double-digit volume growth that has been led by the volume growth in China, Middle East, Northern Africa regions. And with this performance, we've been able to reach our target of doubling our export volumes for the last -- within the last 3 years. And now, we are setting even higher targets. And as you may recall, we had, in 2020, Efes -- for our mainstream brand -- our flagship brand Efes, we had a new production brewing technique, plus +1 technique. So we have relaunched Efes +1 and -- but most of the marketing was limited throughout the -- since the relaunch. Basically, this year was our first year of the season and we had more marketing efforts in that perspective. But again, all these unfortunate events and the pandemic was kind of always a barrier in that perspective. But anyway, we never gave up and continued to invest into our efforts to reach out to our consumers and describing, telling them this story around the Efes +1 relaunch, better quality and better drink with smooth drinking experience, which our consumers are obviously liking much, but that would continue, that would strengthen our ties with our consumers. Together with the efforts around our Efes, we also continue to have the innovation leadership and Efes Glutensiz was the start of the that perspective. So we have introduced the first gluten-free beer produced in Turkey. Again, that has been highly appreciated by our consumers, and we have seen volumes growing nicely and contributing to our volume performance. So with all these, I'm also very happy with the development of our portfolio. Our upper premium mainstream brands and Efes extension is also like the special series, the green bottles, where we have also sustainability effort behind our brand. So we have seen such a phenomenal performance through the year, with our Bud brand and with Efes -- Özel Seri Efes special series. So they increased the market shares in the period. So those were the positive developments in Turkey. Finally, a couple of short remarks, I'm sure you all follow the CCI. That's why we don't need to go into details, but again, a few words for those who are interested. Consolidated sales volumes increased its momentum in 2021. And we reported a strong growth of around 16%. And excluding Uzbekistan, the organic growth was around 14%. Again, very strong, and all operations contributed positively to this successful performance. Turkey operations -- domestic operations for CCI recorded a strong recovery in 2021 and grew by 14% stronger than the circle trends, continued to focus on -- at-home consumption occasions and the recovery in the on-trade channel helped this, let's say, trend-breaking successful result. On a full year basis, Coca-Cola brand grew around 15%. Both still and sparkling categories recorded double-digit growth. So those are positive contributors. We have also witnessed a significant increase in the share of on-trade compared to a year ago. That's obviously a result of released restrictions -- pandemic-related restrictions. In the international side, all operations, particularly Pakistan and Kazakhstan contributed positively. Despite the price increases taken throughout the year, Pakistan -- sales volumes in Pakistan increased around 17% and sustained its leadership in the market. Good performance was based on higher penetration in the outlets, improved route-to-market initiatives and, again, strong promotion and trade management. Kazakhstan. In Kazakhstan, sales volumes grew around 15%, with the support of the sparkling category growth. And then one word about the new operations -- newcomer to the portfolio, Uzbekistan. Again, Uzbekistan contributed just for one quarter into the performance and recorded around 25 million unit case, which was predominantly sparkling beverages. And let's look into the numbers before I leave the ground to Gökçe for more -- much more details. Let me give a very high-level introduction and the consolidated. When we look into our consolidated financial results, earnings grew around 47% to TRY 39.3 billion as a result of the solid volume performance as we discussed. On top of that, the price increases, premiumization and revenue growth management initiatives supported this further growth. Please note that the -- excluding the impact of the FX translation in our results as we report in TL basis, the growth was still quite successful. It was around 28% on the top line. We were able to deliver 38% EBITDA growth with a margin of close to 18%, around 1 percentage point below last year, in line with our guidance of slight decline, I would say. And we have been impacted from the rise in the procurement prices, as I noted at the beginning. However, we had, obviously, hedges in place and all that helped with the strong volume performance. So we were able to limit this -- the margin dilution impact of all this commodity and input price increases and we were in line with our guidance in that -- in margin perspective. We delivered a TRY 1.1 billion net income compared to 815 million a year ago, so increased in our bottom line profitability as well. This growth was coming from higher operational profitability, obviously, and higher financial income supported by the FX gains on the soft drink operations. And then on the other hand, the losses from Anadolu Etap and increased tax expenses with the profitability increase limited the growth to some extent. Yet, together with all the profitable bottom line growth, we recorded all-time high free cash flow, as I mentioned at the beginning, around TRY 4.3 billion, and that's supported with the operational profitability and working capital management and obviously, as usual, a prudent CapEx spending. As a -- overall, as a result, we closed the year with a consolidated net debt to EBITDA ratio of around 1.5x, mainly due to the acquisition of Uzbekistan and partly sharp devaluation of TL in the second -- the last quarter also was a contributor to this. If we were to exclude the currency impact in that perspective, the leverage would have been there at 1x. So thank you for listening. Let me leave the ground for Gökçe to take us for more details.

Thank you, Can. Good morning, and good afternoon, everyone. I would like to also start repeating the same wish that Can did. I hope that the dialogue will start as soon as possible and that peace will be restored. While you have just seen our strong set of financials on a consolidated level for fourth quarter and full year, so I'm going to focus on the financial results of Beer Group. As a matter of fact, we are reporting another quarter with growth in sales volume, revenues and profitability, which actually means that we achieved to grow in all 4 quarters of 2021 versus last year. And these results obviously makes us very happy in such a challenging year and environment. Beer Group sales revenue was again substantially ahead of volumes and grew by 66.9% in the fourth quarter versus last year, mainly driven by higher pricing, better discount management and premiumization of our portfolios across the board. The growth in fourth quarter is the highest quarterly growth achieved during the year. The FX-neutral growth was also quite high and realized at 22.4%. Beer Group sales revenue in full year 2021 reached TRY 17.4 billion, with a year-on-year increase of 40.6%. And that makes, on a constant currency basis, an increase of 18.4%. Well, as discussed many times by now, one of our major challenge of 2021 has been the dramatic rise in input costs. And as this is expected to continue in the foreseeable horizon, we responded with pricing actions in fourth quarter, which are extended to 2022 as well. Naturally, we saw a decline in gross profit margin. However, the decline was less compared to third quarter, thanks to these price increases implemented. As a result, The Beer group gross profit in full year 2021 was TRY 6.4 billion, with a margin of 37.1%. Pressure in gross profit was partially offset by efficiencies and savings in OpEx. Consequently, EBITDA grew by 39.8% and 20.2%, respectively, in fourth quarter and full year, and increased to TRY 2.4 billion. Beer Group cash flow generation also beats last year's numbers, both for fourth quarter and full year. In fact, it's more than 2x compared to 2020. We were able to deliver a very strong free cash flow of almost TRY 1.8 billion. In the next slide, I'm going to give you more details on EBITDA and free cash flow. Actually, EBITDA bridge tells the story of fourth quarter and full year very clearly. Both for fourth quarter and full year, we see a very similar trend of strong revenue growth, which was ahead of our guidance for the year. Fourth quarter got even better with additional price actions taken to mitigate rising cost pressure. The numbers you see on the graph, by the way, are on a constant currency basis. And to underline it again, successful revenue management is a result of volume growth, price increases and favorable price product mix. In other words, growth is driven by all 3 growth components of revenue moving in the right direction, which makes it as a very healthy case. We can also clearly see in the graph that the pressure from COGS in fourth quarter got bigger compared to the full year numbers. Again, this was also mixed with rising input costs starting from second half of the year. What's also obviously seen in the graph is that tight OpEx management was under our focus throughout the whole year. This effort paid off even better in the fourth quarter, as we were able to move the prices but limit the increase in OpEx. We were able to keep increasing OpEx lower than the revenue increase, not only in the fourth quarter but also in full year, thanks to our zero-based budgeting approach. And the other line you see in the EBITDA bridge mainly refers to currency translation. Overall, I believe we have done a pretty good job growing our EBITDA despite headwinds during the year. Free cash flow numbers were also really strong up until the fourth quarter, and I'm happily reporting that the same trend continued in fourth quarter, despite higher CapEx spending, which was, by the way, already expected to be realized in the last quarter. However, this impact was netted off with strict working capital management, especially on trade payable side. Consequently, better working capital together with higher profits led to TRY 133 million in fourth quarter and TRY 965 million more cash generation in full year. Again, this is more than doubling its level versus the year ago. And on the next slide, I want to talk about balance sheet. Our policy is to hold the majority of our cash in hard currencies. And given the volatile environment together with geopolitical risks, we had even more cautious approach in cash management. And by the end of the year, close to 95% of our cash we are holding was hard currency denominated in Beer Group and 75% in Anadolu Efes consolidated. One of the highlights of the year was to refinance our existing bond maturing in November 2022. Again, considering current volatility, I think we have executed our transaction with great timing, achieved to extend our maturity for another 7 years, which makes our average debt maturity 4 years now. Net debt to EBITDA was 1.5x for Anadolu Efes consolidated and 2.5x for Beer Group. You would remember that we experienced a very rapid FX hike in Turkey in the last quarter of the year, even very close to the end of the year, actually. Turkish lira got depreciated very rapidly and sharply. This led to a translation difference for our balance sheet and P&L items, so if we were to exclude this impact, our net debt to EBITDA would be 1x for Anadolu Efes consolidated and 1.6x for the Beer Group. In an environment where we constantly speak about commodity price increases, I would like to give you a piece of information about our commodity and FX hedges for 2022 as well. From the commodities we can hedge, we have so far hedged 64% of aluminum, 95% of PET and 82% of our barley exposure for the next year. Turkish lira was already up and volatile, as I said, since quarter 4 of 2021. And unfortunately, with recent developments, we are experiencing a volatility in Russian ruble as well. These fluctuations obviously make our FX hedges even more important. And to give you an idea, around 38% of our COGS and OpEx are FX denominated. 29% of this comes from Russia and Ukraine and 6% comes from Turkey. The good news is that in these countries, we have available tools to utilize the hedge. These are ultra-weak exposures, and they are almost completely hedged. 91% for Russia and Ukraine, 98% for Turkey exposure already hedged. And next slide. Last but not least, I want to talk briefly about our financial priorities for 2022. As you see, we have 4 pillars. The first one is profitability. In an environment of high inflation and cost pressures, and it looks like this pressure will be persistent in 2022, pricing is very important. Therefore, ensuring necessary pricing action is our #1 priority to protect our bottom line and margins, but at the same time, tight OpEx management after end of this year should also continue and support our bottom line. We have leveraged almost 70% of our OpEx through zero-based budgeting approach, and in a year that we will see cost inflation, decline in OpEx net sales ratio will help protecting our margins. Second pillar is balance sheet management. And here, our priority is the same for ever actually and it's to maintain leverage at healthy levels and to ensure dividend flow from operations, especially dividend from CIS contributes to our cash flow steadily. And from risk point of view -- risk management point of view, we've touched base a few months ago, but it's mainly about commodity and FX hedges being in place. But at the same time, supplier base expansion and diversification is also very critical not only from a cost point of view but also for business continuity. And the last pillar is cash flow, free cash flow. We want to continue our disciplined efforts to CapEx spending and tight working capital management to support our cash generation. This will conclude my presentation. So I will give the word back to Can. Thank you.

Thank you. Thank you, Gökçe. Let's look into, again, our strategy, our priorities, and I will try to reflect back to the outlook. But again that given what's happening on the ground today, the outlook, we need to revisit the outlook once we see -- once have much more visibility. Again, let's -- when we look at the portfolio priorities, you would recall, for the last 3 years, I've been talking about strengthening our core segment, making sure that our mainstream brands that are national champions, that are the largest volume contributors, that are key to our business success, we wanted to strengthen that. And basically, here that was kind of a message also in every other market we see our competition more and more going into economy segments, trying to underprice so on and so forth. With the strengthening of the core segment, actually, that's a response to these developments as well. Stronger the mainstream brands, we are much more stronger to respond back to the pricing environment, so on and so forth. So that's -- that was the key that still will be the key going on. On top of that, we always continue to discuss around the -- our focus on the premium portfolio expansion. So we have, throughout the last 3 years, expanded our premium portfolio, improving our profitability, supporting our top line growth over the volume growth. So that's an ongoing effort and that would continue. That's very important. That's how the global experience shows that the premium portfolio is expanding, and we are having a much stronger position in every other country. And again, together with the core, ensuring the affordability play, especially given the happenings on the pandemic, its impact on the economies in our region, especially. And moreover, I mean, given the price escalations in every other line and energy prices are increasing, cost of living increasing, inflation increasing in every other country, so in that perspective, the disposable incomes of our consumers are under stress. So there, we have to ensure that we are -- obviously, we produce the best beer brands, the best -- the most relevant beer brands to our consumers, but I'm sure that also, we are helping them in that affordability perspective, so that's part of the strategy going forward. And finally, expanding into the adjacent categories, non-alcoholic beverages, low-alcohol beverages and different ciders, so on and so forth. So we have commitment that now we have much more strong portfolio with stronger means growing and strong premium. Now, we -- our portfolio and our muscles, we believe we are capable of carrying different categories. And obviously, consumers, I mean, we have seen also, throughout the pandemic healthy lifestyle expanding, so on and so forth. So consumer preferences are changing. So in that perspective, we have to make sure that our portfolio is responding properly to these trends in every other countries. We have commitment into expanding our portfolio in that perspective. So those are the portfolio priorities that would shape our strategy going forward. And next page, please. When we look at the capital allocation priorities on our side. And again, we are -- we will continue to strengthen our position as a leading regional beverage company, but more and more focusing on our presence in our operating markets, with the portfolio strategies having a higher share in every other market we are and our strategic goals are to maximize organic growth through investing in each of our brands, as I mentioned, and into the markets where we are present and catching the right trends and ensuring we are tapping those consumer trends. Digitalization and automation of the processes are inevitably going into our agenda. Again, 3 years ago, we started the digital revolution of Anadolu Efes and we are continuing to invest to become more and more efficient and we believe there are a lot of opportunities in that perspective to become more efficient and also create much more value to our customers with the data that we are generating within the operations. Furthermore, we believe, also, that we have a strong track record of successful acquisitions and integrations, and that's also an opportunity to continue growing organically and the expansion of the -- our operations in that perspective. Export is another area. That also -- sorry, that's also seeding for the -- this inorganic growth. And export geographies as an opportunity. We learned a lot more of the markets. We learned a lot of the consumers in these markets and we believe that seeding our brands before making any investments is important. And as I mentioned during the presentation, our export volumes are growing strongly. We are happy with all these developments. And we also take into account our commitment to maintaining our investment-grade rating. Our target is to sustain a healthy balance sheet, as Gökçe went through, and keep the leverage ratio below 2x and probably over 1x and optimizing -- that would help us to optimize the capital structure and ensure efficiency of our balance sheet and the cost of debt. And then we are also committed to preserving shareholder value, and that will be -- we are happy to higher dividend yields and providing high returns to our shareholders as evidenced by the proposal this year and also what we have done for the last 2 years. And finally, the outlook for 2022. Again, please note that this was as of yesterday before all these unfortunate events happened in Ukraine, as we all expect, hope to and pray that this would be settled soon. But we need to revisit all of these outlook once we have much more visibility in that perspective. However, I mean, while we were setting the outlook for 2021, obviously, what we have achieved throughout 2021 was giving us the confidence, and despite the cost increases, as we discussed and all these macroeconomic developments in the country. And obviously the risk factors were these macroeconomic developments, geographical tensions, currency volatilities and the cost of funding, which, I believe is fading away and starting from the second quarter onwards, we'll see much better, let's say, situation versus compared on the pandemic. So unfortunately, as I noted at the beginning of my speech, one of the risk factors is realized today. So that would be -- that could cause us to revisit our guidance. And then under these circumstances, as always, we were expecting our consolidated sales volume to grow by mid-single-digit level. And significant price increases we have taken, we are expecting there would be an impact on the beer markets, especially in Turkey and Russia, probably and normal and Ukraine, again, more normal. We face some headwinds that we expect again, on the CIS side, we -- volumes to be flat and slightly higher over last year. Therefore, our overall beer volumes were expected to decline by -- slightly by around mid-single-digit levels, and we expect a high single digit to low teens growth in soft drinks side of the equation. And as the price increases as we start from the fourth quarter onwards in every other business types, our consolidated net sales revenue is expected to grow low 30s on an FX-neutral basis. Our beer revenues are expected to grow by mid-teens on an FX-neutral basis with high single-digit growth in international beer revenues and low 50s percentage growth in Turkey beer revenues. The expected growth from the soft drinks, it was low to mid-40s on FX-neutral basis as well. And our consolidated EBITDA margin is expected to decline -- was expected to decline around 100 basis points, impacted by the increased cost pressures as we discussed. As usual, our CapEx sales ratio would be stable-ish and normalized levels of high single digit growth. We will continue to invest in our [indiscernible] brewing and filling infrastructure and our brands. And accordingly, we will continue to deliver some free cash flow. Obviously, through this cycle at very high level of 2021 that those were the, let's say, guidance as of yesterday, as we report the results. So basically, thank you for your patience. Thank you.

I have seen a lot of questions actually on the screen. Thank you for your questions. Basically, when I look at the questions, first couple of questions were around, let's say, different proportions of Russia and Ukraine. I'm sure Gökçe will help me in that perspective, and I can comment on some other ones. Gökçe if you don't mind, can you take the lead there?

Sure. Sure. Let me start with the questions then. Thank you. Actually, the first question was about the Beer's EBITDA breakdown between regions. So I can give a rough guidance on that, obviously. So if we are talking about the EBITDA, around 50% to 55% of that comes from our Russia and Ukraine business, close to 20% is for Turkey, and the rest is coming from CIS. And the second part of the question was about the net debt of Russia-Ukraine JV business and there also, I can say that this is -- this was less than $100 million by the end of last year. And the second question, again, comes with Russia -- related with Russia, but this time, revenue percentage of the group. And this is around 30% of Anadolu Efes consolidated revenues come from Russia and Ukraine operations, I can say. And again, we have a question about the cost for regulatory increases for the group and for Beer alone. And there's -- actually, on a constant currency basis, our costs per hectoliter are increasing around 25% for the Beer Group and more than 20% for the overall group for the next year to come.

Gökçe, I think there is a question around the price increases in Russia during first quarter and during 2021. Let me note there our price in Russia was higher than the inflation in Russia throughout 2021. So basically -- and that's throughout the year. That's what I can say and was ahead of our competitors. And basically, I mean, there was the following questions around the performance back in 2014 and 2015. Frankly speaking, I can't recall that -- the performance throughout that period of time. But I mean, please note on that and that's a very good question. I understand where we are coming from. But the issue [indiscernible] very well as well throughout this period of time [Technical Difficulty]

Can bey, can you repeat because the line was broken?

Yes, but I was having some noise. So I was saying, thank you for the question. I understand that you are trying to make an analogy with the 2014 similarly when it unfortunately happened at that time and sanctions in Russia. But again, I mean, please let me remind you that back in those days, there were a lot of regulatory changes in Russian beer market as well, basically between 2010 and 2017, '16, I would say. There were impacts of those in the market. So it is very difficult to make a -- the same analogy here. But when it comes to self-sufficiency in production in Russia, I would say the barley is local -- majority of the barley local. The packaging producers are local. So there is not that much of an issue in terms of -- I mean, I'm sure there are certain chemicals or there are certain for our suppliers. I would say I refer to chemicals for the production of the -- I don't know where these packaging materials are so on and so forth. There might be further, let's say, dependencies on, let's say, importation. But again, I mean, back in 2021, we had the supply chain dependabilities. We haven't seen any issues in that perspective. And probably, there wouldn't be much of an issue. And the team is on the ground looking at all those perspectives. And is there any debt or substantial cash sitting on these 2 entities? I -- Gökçe, please correct me if I'm wrong, but I would say basically, no, because I mean, there is debt, but that's -- majority is local debt in both countries and cash also distributed as a dividend to our shareholders into our Dutch entity. Again, the question around what would be the price increase in Russia during 2020, we have taken a price increase at the beginning of the year following the fourth quarter increase also. And that's basically, again, we believe our pricing in the country will be higher than the inflation throughout the year. We are following the competition. We have seen the competition complying with our -- following the price increase that we have taken during the fourth quarter. That's a very good news for us, specifically for Russia, and we have the price increase at the beginning of the year. We expect them to follow that, and that would be helpful for the profitability improvements that we are expecting. Well, I mean the next question is about the strategic plans against the developments. I mean, frankly speaking, that's very -- I mean, we have a team following all what's happening on the ground and ensuring the first in Ukraine for the safety of our people and keeping the infrastructure ready for when everything is resolved. Russia is more or less on the normal course of business. We don't have a brewery in Russia, I would say. We had in the past, we closed down that brewery. I can't recall the year exactly, but probably 10 years ago. But again, I mean, that's very early to make any judgment what's going to happen. Volume and price split per -- again, we gave the volume guidance and the difference between the volume and the revenue growth base, the majority is the pricing, and we also have a little bit of premiumization and channel improvements. In that perspective, I would say, how do you expect profitability in Russia to develop during 2022, is again, we need to see how things would evolve around the current conflict. Before that, it's very difficult to make any judgment today. I would have said, I mean, if we had this call the day before, I would say our aim is to have our profitability in line with our general guidance. I mean, the pricing, the causing the pricing and everything. But now again, I have to be more cautious and we need to see. How do you independent of seen any negative developments were volume impacts from price increases in Beer Group? That's a very good question. I would say, basically, again, region-by-region, different reactions. CIS was kind of normal-ish. So we haven't seen any major impact with the prices we have taken at the beginning of the year. For Russia, it was okay-ish in January. Again, Ukraine and Turkey were struggling more of the pricing, I would say, we have taken at the beginning of the year. So that is, I guess, that takes us to the end of the questions. Thank you very much for your interest, again. And this was kind of a difficult call for us within all the -- heat of the developments. We've been following all what's happening and trying to reach out to our people and ensuring their safety and helping our teams on the ground. And thank you for your interest. Thank you for your questions. And at this time, I see no new questions. So basically, I would take this as a time to say goodbye and to end this call. Thank you all.

Thank you.