Dogus Otomotiv Servis ve Ticaret A.S. (DOAS) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen, and welcome to Dogus Otomotiv 9-Month 2021 Analyst Briefing Presentation on the 10th of November 2021. Today's host is Mr. Kerem Talih, the CFO of Dogus Otomotiv. Mr. Kerem, Please go ahead. The floor is yours.

Thank you very much for your introduction. Hello everybody, with our greetings from Dogus Otomotiv, in the name of the company management and also as the CFO of the company, I will be going through the presentation and I will be hosting you through the presentation. And I'm not alone in this process. My colleagues from our company, namely, Ms. Muge Yucel; Mr.[ Ibrahim Hanach ]; Ms. [indiscernible]; and Mr. [indiscernible] is also with me. And initially, I would just like to thank to my team for their related contributions through the presentation -- through the preparation period of this meeting. So thank you all. Considering that the presentation had been revealed beforehand, as I was always doing, I'll be going through -- smooth through the presentation and will try to put more time for your questions if you have any. So when we have a global glance at the performance of the first 3 quarters of year 2021, we can see that we are stick with all of our targets in the perspectives of our sales performance and market share, our operational performance and financial results together with our liquidity situation. We believe that as Dogus Otomotiv management team, we have quite a very successful results despite the negative effects of COVID circumstances and also supply challenges due to lack of semiconductors, that affects not only the Volkswagen Group, but also which affects all automotive industry worldwide. So this and the -- all the figures that we will be going through will be the combined and consolidated performance of our new car sales, spare part sales and are also used car activities. As, just to recall from the last meeting, we -- I have informed you all that year 2021 is a year that is full of new launches, and through the whole year, we are going to launch more than 25 new models within the body of Volkswagen Group. And at the end of third quarter, I must say we have completed the launch of almost most of them and -- but effective from the last time we have met in the last 3 months, in the third quarter, we have made the launches of new Polo, in the third quarter also in Audi, the new Q5 Sportback and also in SEAT, the new Arona and Ibiza, and in Skoda, the Kodiaq, in Lamborghini, the Huracan, and in our Porsche brand, the new 911 GTS has been launched in the market successfully. So I just would like to refresh that we are stick with our new launches through the year. Just to recall from the performance of year 2020, it was a year that almost all the new model launches has been postponed to the next year, namely year 2021. Having a look at the performance of the markets, as you can see in the presentation, the market has just expanded 14% better than the previous year and has reached to a level of 575,000 units, more than even. And in the respective segments, you can see that the performance of Volkswagen Group in Turkey has even performed better than the expansion in the market, and our degree of expansion is almost 25% at a level of 102,000 units in the retail area. Just note, this is the -- these figures are retail sales performance and these sales figures also covers Skoda as well. And when we have a glance at the segment basis allocation, you can see that in passenger vehicle market and in light commercial vehicle market and heavy commercial vehicle market, the performance of our brands are even much better than the performance of the market itself. And only exception is our -- is the performance in the premium segment, which is computed mainly by Porsche, Audi, Lamborghini and Bugatti. But the reason why we are a bit beyond the performance of the market is mainly stemming from our Audi brand, within which the degree of technical specification of the vehicles has just caused us to be more affected because of the lack of supply of semiconductors, in that respect, we are a bit stick behind the performance of the market. Having a look at the competition in retail area, as you can see in the passenger car segment, we are ranked as the first with a share of 20.4%. And in the light commercial vehicle segment, we are sharing the fourth line together with Renault Group with a market share of 9.7%. And when we consolidate them all with a market share of 18.1%, and which is also -- which was the case throughout the year, as Volkswagen Group of vehicles in Turkey, we are just keeping and maintaining our first position in terms of market share that we are really very happy and satisfied out of this performance. And having a glance at the detail of the passenger vehicle market itself, sorry, yes, in the first 9 months of the year, the market itself has just increased 12%, and Dogus Otomotiv has the market share of [ 24.4% ], which is followed by Renault Group, Tofas and PSA Group. But the important point here is that the only group of brands that has increased its market share is the Dogus Otomotiv, the rest of the competitors has somehow lost some portion of their market share as you can see in the presentation. And when we have a glance at the performance of the models within the body of Volkswagen brands, as we can see Golf and Passat and Tiguan are the leading models, in SEAT, the Leon and the Arona and Ibiza is the leading models, in Skoda, the Superb and Kodiaq and the Scala is the leading models. And in the luxury segment, in Audi, we have the A3 Sportback Sedan and A4 and A6, respectively, and in Porsche, Taycan is the leading model within its segment with a share of 20%, which may seem to be ranked as the second best performance in the market. In the composition of light commercial vehicles, as I have said, the market has increased by 18% on a yearly basis. And we are sharing the fourth position -- fourth place together with Renault Group, and within the segment of the market Ford, Tofas and the PSA Group are the first 3 leading brands. And within the body of Volkswagen, as it has always been the case for many years, our leading models are the Transporter, Caddy and Crafter respectively. Having a look at the wholesale performance in the first 9 months of the year, as you can see, we have increased the sales performance from 85,000 units to 97,000 units and with an expansion of 14%. And as you can see apart from Audi and I do not want to go or comment on the performance of Bentley and the Lamborghini, no impact, and as you can see their figures are so low as compared to our volume brands since they are very niche models, niche brands. Apart from Audi, all of our brands have just increased their performance as compared to the first 9 months of the previous year, apart from Audi, the reason of which just -- I just explained in the beginning of the presentation. But before the meeting since last week, the market performance of October has been revealed. We also would like to share this information with you as well. As you can see, the market size has just gone up to almost 634,000 units with an expansion of 6%, but the performance of Volkswagen Group has just expanded at a rate of 13% and has almost reached 110,000 units. And as you can see, as it was the case in the first 9 month -- first 9 months performance, the respective segments, namely passenger vehicle, light commercial and heavy commercial vehicles performance of Volkswagen Group Turkey is definitely is much beyond the performance of the market on a positive manner despite the premium segment, which was more adversely affected because of the chip supply obstacles, I must say. And having a look at the total wholesale performance, as you can see, the rate of expansion is going relatively flatter, and the total market to total sales on the wholesale area has just increased 4% and has reached to a level of almost 104,000 units. At this point, I must say that knowing that on a yearly basis without Skoda as we have put a target of 100,000 units target in the first -- not only the Dogus Otomotiv group of brands, but also the market has just performed much better than the plans for the first -- mainly 6 months or even for the first 3 quarters of the year. And the allocation was like 50% in the first 6 months, 50% in the second months, which turned out to be that in the first 6 months of the year, the market has just performed almost 65% to 70% of the total market perception of the year. And you can see the brand basis allocation, that's all of our brands, without Audi again, just increased their performances. And having a glance at the financial output of these sales and market information, we are lucky to present you that we have reached historically the highest volume of turnover and also profitability and also net profit, which is stemming from our new car sales, spare part sales and also used car activities, but also since this is the consolidated financial information, the contribution of our categories that I will note in detail in the pages to come is also very crucial in attaining this level of profitability. And with the -- by the influence of increase of -- increase in sales volumes, which is almost 15% higher than the previous year, with the devaluation of Turkish lira on a yearly basis at a level of 14% as compared to previous year, and, of course, with the effect of the model year changes of -- I mean, with the increase in the sales prices of vehicles in terms of euro is also has just caused our -- or ended up our revenue to reach a level of TRY 18.4 billion, which is more than 50% higher than the previous year. Respected with this expansion, our EBITDA and net profit margins has just increased 63% and almost 70% respectively. And our net profit after-tax has reached a level of TRY 1.2 billion, which is historically the highest profit performance, I must say. And also by achieving this result, of course, our disciplined management of our operational expenditures and our right financial expenditure management strategy has also served for us to attain this successful results, I must say. But it is also important to note that this performance is not only stemming from the output of the new car sales, but also our spare part and logistics activities are also very important in this performance as well. From having a look at the capital expenditures knowing that the year of 2020 was a year of -- which was full of negative and adverse effects of the COVID, most of the capital expenditures has been postponed, frankly speaking. In that respect, since even it's not higher than the year of 2020, it has increased to a level of TRY 140 million, which is a moderate figure for Dogus Otomotiv, which is mainly computed by purchase of test cars and hardware and software investments in our activity -- IT and digitalization activities. But the crucial point that I would like to take your attention here is, as you can see, the -- the size of the balance sheet is almost at the same level, only 6% higher than the previous year. And also the -- our working capital is again at TRY 4.5 billion to TRY 4.7 billion level. So we have achieved to increase the profitability of our company without increasing the size of the balance sheet that we believe is a very successful financial performance. Having to look at the margins, I mean, in line with those nominal values, our gross profitability has also reached to a maximum level of 13.5%. Just to remind, it's not only stemming from vehicle sales, but also spare part activities. And also when we combine the issue with the efficient and disciplined management of our operational expenditures, OpEx over sales has just come to a level of very minimum percentage of -- I mean, historically, the one of the lowest performance to almost 4%. But here some -- even the postponed expenditures, mainly advertisement expenditures, marketing expenditures, which has been postponed from year 2020 to year 2021 has taken the expansion of the turnover to a level of more than TRY 18 billion has ended up with a level of 4%. And respectively as you can see, EBITDA and EBIT margins are 10% and 9.4%, respectively, that ended up with a net profit margin of 6.8%, nominally 1. -- more than TRY 1.2 billion. Within the acquisition of these results also, the turnovers has also set for our performance as well. In the coming page, as you can see in the screen, we are seeing the P&L comparison on a quarterly basis. The left part is the comparison of the third quarter with the second quarter of this year, and the right part is the comparison with the third quarter of the previous year. As the most important determinant is the number of sales units as you can see -- as you can -- in the third quarter of last year, we have sold almost 35,000 units, because just to put your attention, the performance of the third quarter of the last year was the period that we were recovering from the negative effects of the COVID issues. But the third quarter of this year is the period that, unfortunately, automotive sector as a whole is influenced by the effect of supply obstacles stemming from semiconductor and chip crisis issues. And to have a glance at the performance of the third quarter itself as compared to previous year, we have almost more than -- we have sold 50% less than the previous year, in that respect, our turnover has gone to a level of [ TRY 4.8 billion ]. But as you can see, our gross profitability and in terms of nominally annual gross profit margin is much better than the performance of the previous year at a level of 16%, because as I have said, the lack of supply has just caused us to be able to sell vehicles at this price level. Here also our disciplined control of our operational expenditures is also very important. As compared to previous year, you can see that we have increased the operational expenditures from TRY 160 million to TRY 249 million. But as I have said, within that, the depreciation expense effect of the postponed investments plus the postponed marketing expenditures of the new model launches in this year has also caused this nominal increase, of course, together with the adverse effects of the inflation and also with the devaluation of Turkish lira has caused our operational expenditures to increase as compared to previous year. But as we can see in the second and the third quarter of this year, we have almost spending the same nominal value in line within the body of second and the third quarter of this year. Within the body of the P&L, our financial expenditures are also very important. On the right-hand side, you can see that financial expenditures are [ 80% ] higher than the previous year's third quarter, because last year for the specific composition of the third quarter performance, our average cost of funding was 14%, but now it is around 20%. So on average the overall increase in the interest rate has also for this increased, but also average funding level has also increased from TRY 2 billion to TRY 2.7 billion level, in that respect, our financial expenditures is slightly higher than the previous year. But at the end, as you can see, despite the adverse effects of the supply crisis as compared to previous year, we have almost reached to 8% in terms of net profit margin. And within this year, even the performance of the third quarter, the adverse effects of which -- the adverse effects of the supply issues is more negatively influencing the vehicle availability has enabled us to also a net profit margin of a level of 7.7 percentage. And nominally when I just consider the perception of the analysts, the overall quarterly net profit expectation for Dogus Otomotiv was around [ TRY 250 million ], but we have attained a level of TRY 371 million, which is a very successful outcome for us. When we have a look at the consolidated income statement as compared to previous year, now this is 9 and 9 months of 2020 and 2021. As you can see, our turnover has increased more than 50%, and our gross profit in terms of nominal value has almost reached to a level of TRY 2.5 billion, which is stemming from vehicle sales and also spare part sales as well. At this point, I would like also to emphasize that there are almost some questions and talks about not only for, of course, Dogus Otomotiv and Volkswagen group of brands, but the semiconductor supply issues and vehicle availability is an hardcore topic for the automotive sector as -- worldwide. In that respect, even we are not able to sell one new vehicle in the short run, our performance in the spare parts and logistics activities are still going on. And I must note that the performance of the spare part sales and gross profitability that is stemming from this logistics activities is more than 80% encompassing our total operational expenditures. In that respect, this is a kind of start behind the signs, but which is also very important for our performance both in terms of operational and also financial expenditures. And also within this period, as you can see, income from associates has also increased almost 50% and which has reached to a level of TRY 256 million, that in the next page, I will talk about it on a company basis. And with the influence of financial income and expenditures and after the deduction of taxes, just as a footnote, this year the corporation income tax is 25%. We ended up with a performance of TRY 1.2 billion and -- which is almost 60% -- 70%, I'm sorry, better than the performance of the previous year. So this page is also very important, and I really like to give as much as detail within the body of our associates, namely VDF Group, TUVTURK, Dogus Sigorta, Yuce Auto, Dogus Teknoloji and Dogus Sigorta are really very strategic and important players within the body of value chain of the automotive economy. As you know, VDF Group, which is computed by consumer finance company, dealer financing, VDF Faktoring, operational rental activities, VDF Filo and VDF Insurance is computed by 4 companies. And as you can see, they have just increased their performance more than 300% and equity pickup contribution in the consolidated financials of VDF Group has just reached to a level of [ TRY 105,000 ]. But at this point, I must just remind you that since VDF Consumer Finance has been consolidated under the body of VDF Servis, since these companies are much, the performance of VDF is only covering the first 6 months. Effective from 1st of July, we are seeing the performance of VDF in the body of VDF Servis to avoid any misunderstanding, I just would like to remind that. The other important player in this part is also definitely our very valuable associate, TUVTURK, which is the sole company in the vehicle inspections business, within which we are acquiring 33% of this company. And as you can see, they have increased their performance to a level of -- I mean, this is one-third, of course, this is the part of Dogus Otomotiv, and they have increased their performance, 22%. And also Dogus Teknoloji's contribution has finally turned out to be positive, and also Dogus Sigorta is also taking its part as well. Relating to Yuce Auto, the reason why it is 48% lower than the previous year is the dividend policy since they have paid most of their profits coming from year 2020, in terms of equity pickup, since -- even though their profitability has increased in the equity pickup figures, it is even half of the performance of their previous year. But from also liquidity performance, I must note that the dividends in terms of cash flow in the liquidity of Dogus Otomotiv, which is stemming from TUVTURK and which is stemming from Yuce Auto, on a yearly basis is almost TRY 400 million for this year and which is expected to be higher and higher in the years to come. And within the body of our liquidity management, I just would like to put the important of this information as well. Having a look at the balance sheet, as I have said previously, we have almost kept the same size of the balance sheet without increasing the total working capital, we have attained more profitable results successfully. As you can see, it is -- the balance sheet size is at TRY 7.5 billion. And this is a period in which we have increased financial liabilities, as you can see, to a level of TRY 2.9 billion, but also our cash and cash equivalents has also increased more than 200% to a level of TRY 2 billion. This is also not -- in period which is for Dogus Otomotiv not only profitable, but also so liquid, I must note. And within the detail of the financial expenditures, I will also give more insights relating to our financing strategy. And as you can see, the receivables are almost at the same level, and inventories in line with the increase in the turnovers are more than 30% lower than the previous year, and we have used those financial liabilities in the financing of our working capital and also to finance our dividend policy. Having a glance at the details of the financing costs, as you can see, the most important figure is the interest expense on borrowings. I just would like to give some brief information relating to the financing strategy of Dogus Otomotiv. I can happily and I must happily say that our policy to avoid any foreign currency loan has just proven our right decision to avoid any open position considering the unfortunate depreciation of Turkish lira in the last 6 months. For the moment, our solo -- sorry, consolidated borrowing level is at a level of TRY 2.9 million. The average cost of which is 19% in terms of -- or 20% in terms of Turkish lira, because our financing strategy is totally based on Turkish lira funding, and in the original date of utilization, we are granting -- we are getting loans from the Turkish banking system only in Turkish lira and with -- minimum with one-year maturity and with fixed interest rates. And as you would appreciate, this is very crucial in such volatile conditions. And effective from the January of next year, I mean, 2 months later, the renewal process of these loans will start again and current limits of Dogus Otomotiv Group within the Turkish banking system is more than sufficient to be able to renew and roll those financial liabilities. And commission expenditures on letter of guarantees is also at the same level as compared to previous year, so we are carrying a volume of EUR200 million in the books of the OEM for the vehicles to be imported to Turkey. As I have said, the sufficiency in the better performance of the turnovers has served for us to attain more profitable results. As you can see, both receivable turnover in days has just decreased to 14 days, inventory turnover has just decreased from 60 days to 31 days, and payable turnover has decreased 60% from 41 days to 17%. And the -- not only the lack of vehicles relatively, of course, because of the supply crisis is here serving for it, but also the suspended demand coming from year 2018 and to the year 2019 is also serving for us to be able to manage this better performance in our turnover ratios, I must say. Within the body of our presentation, we are also updating you relating to the key material disclosures that we have made in the third quarter. And it is as you have all known and it has -- it's an information that is made to put on public in the related field that we have started to -- we have decided to liquidate our subsidiary in Iraq, the company, the -- namely D-Auto LLC because of the -- because of the OEM in the region, Volkswagen Group is not able to provide related peoples which are technically suitable for this region. In that respect, with an agreement together with the Volkswagen Group, we have started -- we have decided to liquidate our subsidiary in Iraq markets. At this point, I would like to come to a very important heading, the strategy of Dogus Otomotiv in the body of sustainability. And since we have informed you on that beforehand, I will just ask my colleague, Muge to update you on that very briefly. Muge, can you please take the stage?

Thank you very much. Just really briefly our sustainability strategy takes the stance on primarily transparency and stakeholder participation. We look into the non-financial aspects of risk management further. We take as base the UN Sustainable Development Goals, as well as we look into impact management. And you can tell from the breakdowns here that this is our road map towards integrated reporting as well, which is why we have actually taken a stance on to the entire company and we're looking at it from a whole perspective of the entire company. So I want to move on to our second slide on this matter and the things that we've done in the third quarter so far, one, there is a few things that I would like to point out. One is that human rights has become a very important issue and this is one of the aspects that we have not completely fulfilled. But we have the educations completed and we've also selected a Human Rights Officer in our teams of sustainability. We are revamping our code of ethics and the procedures there too, which means we have a huge compliance function right now that actually works on looking into the procedures that we have in place and making them up-to-date, as well as selecting it into different important degrees. Furthermore, on the economic aspect here, I think one thing to look into is also that VW Group in its supply chain, we are now part of their sustainability program, and that basically shows how far we have come with our sustainability doing since 2009. That said, we are also expanding our sustainability towards our authorized dealers. So we're incorporating their corporate governance, as well as their sustainabilities into our program as well. This means that we are encompassing the entire universe, Dogus Otomotiv universe on the sustainability aspect. Of course, all of this is supported with the [indiscernible] that was recently released on the sustainability site, which we completely abide by right now. Environmental aspects that we're actually missing were some of the ISO certifications which are now completely done and we are completely certified on these aspects, as well as we are moving forward, like I said earlier, towards integrated management and integrated reporting that said. Thank you very much, Mr. Kerem.

You're welcome, Muge. Thank you. Thank you very much. And in the last page of our presentation, we would just like to brief you relating to our main strategy and also our expectations relating to the finalization of this year. I mean, knowing that we have almost completed the first 11 -- almost 11 months of the year, our expectation is that the total market is going to be around [ 750 ] units. And just at the beginning of the presentation, as I have said, we are stick with our target and we believe that we will be able to -- together with Skoda, we will be able to acquire the targeted sales performance of this year. And as it has always been discussed and in the agenda of even in the newspapers and in the media that everybody is curious relating to the influence of the semiconductor supply problems affects the automotive sector, I can say that at this stage, we are not only stick with the target of this year, but also for the years to come, we are making our plans in a way that we will be keeping the performance of year 2021, and we will do our best to add some more sales units at the top of it hopefully. But for this year, as you can see in the presentation, without Skoda, we are aiming to reach a level of 100,000 units. And as of now, we have almost exceeded 85,000 units of it. And relating to our investment expenditures, which is mainly composed by infrastructure expenditures, test starts and to our digitalization projects and information technologies, which will -- which is expected to around TRY 360 million. And under the umbrella of our general strategy, which is also route by the macroeconomic developments in the automotive factory, mobility, digitalization and also innovations in all service area and operational efficiency and optimum profitability, of course, on the competitive area -- arena is the pillars of our Dogus Otomotiv and -- which is always -- and which is -- which as always in line with the strategy of the OEM that we are trying to do our best to represent these valuable brands in Turkish automotive markets. So this is the end of the presentation. Thank you for your patience of listening to me. At this point, I would like to give the stage to Michael to lead questions if they have any.

[Operator Instructions] our first question comes from Mr. Vladimir Bespalov from VTB Capital.

Congratulations on great numbers and great profitability. I have a few questions. First -- so basically, my first question, how many vehicles do you have in stock currently in inventories, because as I look at the numbers, you're going to sell 100,000, you sold slightly less than 6,000 in October. So basically, you still need to sell 17,000 vehicles in November, December, which is above the October level. So maybe could you comment on that a little bit? And how -- do you have the vehicles in stocks or do you have the supplies, what makes you so sure about meeting this target?

Yes. For the moment, we have an inventory level of around 3,000 units and also the same volume in the body of our dealers. But the confront manufacturing planning for the rest part of the year will let us to be able to reach to a level of around 100,000 units.

Okay. So basically, these units were contracted, right?

Yes, yes, yes, yes.

And on the way, I would say, right?

Yes, on the way, on the way, yes.

Okay. Then the second question is on your profitability as always. Maybe could you decompose -- you mentioned that spare parts logistics contributed quite a lot to your margins in the quarter. Maybe could you decompose a little bit, and what was the margin, for example, for vehicle sales, and what were the margins for spare parts and logistics and how much those spare parts and logistics contributed to the revenue line in the quarter?

Okay. In general, in terms of revenue, our spare part sales are around 10% to 15% of our revenue, but in terms of their profit contribution, I mean, in terms of its gross profit margin, it is more than [ 30% ] I can say. But relating to the performance of vehicle sales, which is almost 85% to 90% of our revenue, the related profit margin is around 12%, but, of course, the competition and vehicle availability in this field is very important.

Okay. And maybe could you elaborate a little bit also about the FX impact on this profitability, and maybe how the things are working right now in terms of settlement with the Volkswagen Group? So are you like making payments as early as possible, given that the lira is depreciating, and are you building like a big cushion to just in case the lira depreciates in prices? And on the top of this like when Volkswagen will be looking at your margins? So don't you think that at some point, they can say, okay, your margins are too high, so maybe we can change a little bit in terms of our relations and things like this?

Yes, yes, yes. Thank you, Vladimir. This is a very good -- very valuable question. This is something -- I mean, the profitability of the distributor is something that we are -- that we are budgeting together with the Volkswagen Group in our budgeting process. Just for instance, that for the years to come, let's say, I will sell 100,000 used vehicles and we are just targeting an [ x percent ] of profitability. But here the price index, which is very soft -- which is so crucial in the competitive area is also very important, and, of course, which is determined by the level of exchange rates. As you all know, since you are following Dogus Otomotiv for many, many years, as you know, we are not changing our sales prices on a daily basis as Turkish lira depreciates. Our strategy here is the just-in-time stock management, and in the days that we find that the currency is relatively lower, we are just importing and paying the vehicles in the inventory. But if we feel that the average currency or euro to Turkish lira level is just stick to a new path, then we are, of course, together with the competitors and by considering our average price index, we are increasing and reflecting it to our prices. Relating to what we are doing in terms of payment to OEM, just to remind you that we just need to pay, I mean, when you nationalize the vehicles in the customs, and to-date, you nationalize them, you need to make the payment to OEM as well, because, unfortunately, with -- if you are not importing the vehicles without you pay, then there is 6% resource utilization support bump, there is additional 6% tax on it. So in order to avoid it, we are not using maturity given by the Volkswagen Group, in that respect, our average payment period is also at the minimum level, mainly in those days that our sales performance is also very satisfactory. This those that I can say. Yes, I hope I'm clear enough for you.

Yes. That is very clear. And probably my last question will be on liquidity management. This year there is a significant decrease in inventories, and this release some of working capital, as a result, your cash position is strong and net debt is pretty low. So -- but in terms of new supplies, when do you expect that supplies are going to normalize and you need more cash just to increase your inventories? And the second question is like in terms of debt repayment or refinancing, are you going to reduce your leverage in general or you don't see any opportunity? And the last one on dividends, what do you expect in terms of dividends given the current situation?

Okay. Vladimir, frankly speaking, we are just in pace of making the plan and financial planning both in terms of profitability and also in terms of liquidity of the year to come. This is -- I mean, I will be able to give more precise information on that even at the end of November. But with the current information on hand, I must say that we can foresee that we will be at a sales performance which is not less than the performance of this year. In that respect, we are -- we will not be seen that we are -- we will not be in need of working capital financing. In that respect, we will be able to deleverage the balance sheet by the utilization of the current liquidity in hand. But, of course, in the general assembly of the company, which is ruled by the shareholders, will shape our dividend policy. But for the moment, both the cash in hand, the current liquidity plus our banking clients are much more sufficient for us to be able to sustain the need for vehicle financing plus the probable dividend payments, which is to come next year. In general, within the current information in hand, I can say that it seems that we are not going to increase the total financing of Dogus Otomotiv in year 2022.

Our next question comes from Mr. Luca Franza from Ausonio Fund.

Kerem, can you hear me well this time?

Yes, yes, yes, yes.

Okay, very good. Thank you. I always have issues with the audio. Just a clarification because you mentioned about Skoda that the drop in profitability in the equity contribution in the 9 months was affected somehow by their dividend policy, but I always thought that there we consolidate pro rata the profit, not the dividend. So am I wrong? Do you consolidate the dividend this time?

No, no, no. We are not consolidating the dividend. It is, I mean, since this is a consolidated financial statement in line with the International Financial Reporting Standards, we are just consolidating their -- our portion in their shareholding equity -- shareholders' equity. If their shareholders' equity is [ TRY 100 million ] and if our percentage is 50%, then in our investments account in our assets, it is [ TRY 50 million ]. But if -- but if they pay dividends, then these dividends are stemming from the body of shareholders' equity, the portion that is paid as dividend diminishes their shareholders' equity. In that respect, the consolidation accounts the figure, even their profitability is better than previous year, but their shareholders' equity is a little bit lower since they have paid all the accumulated profit of the retained earnings, that's why.

Understood. But I'm sorry, so let me ask a different question then. If I look at the contribution in the P&L, right, which goes below the line, again, we see a significant drop, whereas you guys...

Yes, because -- I got you, because the Skoda sales performance in the first 9 months of the year has decreased 20% from 20,000 units to 16,000 units. And also on a specific fall this year, they also had some negative inflows of their open position and there is some FX loss, which also caused them to have lower profitability as compared to the previous year. This is the explanation of -- this is the score of Skoda. Yes.

Okay. No because -- I'm sorry, just as a final commentary, I would say, I never congratulate you enough for a great performance, cost control, everything is always so good since I started following. But if I have to raise one issue, it seems that Skoda somehow make much, much, let's say, not as good as a job as you guys, I mean, their profitability is always significantly lower despite the fact that they sell quite a lot of maintenance, right, in the Turkish market. So anyway just maybe we should take over that business. That's just my observation.

Yes. Okay, thank you for your observation.

Our next question comes from Mr. [ John Wooten ] from Wood & Company.

Thank you very much for the presentation and congratulations on a good set of numbers. I have a couple of questions, and my first question is related to the spare part business. When I look at the -- your quarterly numbers, I'm seeing some kind of seasonality in your spare parts revenues -- sorry, not spare parts, total other revenues. And it seems like the second half of the year is much better than the first half of the year, is there a specific reason behind this? And secondly regarding the gross profitability of this line of business, it appears that the -- this quarter's gross profitability is extremely well at almost 33% gross margin on a quarterly basis, and it appears that this is the highest margin that has been ever just in the last couple of years. I just want to understand what are the inventory effects here, because in case of a depreciation of lira against euro, I think it has some kind of an impact here? And secondly, the higher sales of secondhand cars could be had -- could have an effect on this, if you please guide me through this?. And my second question is regarding the EBIT...

Yes. Let me answer the first one, if you let me. In fact, the consolidated reply of the first part of your question is the vehicle availability in the second quarter of the year was definitely much better than the vehicle availability of the third quarter. In that respect, in the third quarter, our gross profit margin that as I have said that we have almost sold all the vehicles at the list price and there is no need for any discount on the sales list, sales price list, our gross profitability in new vehicle sales has also reached to a maximum level, which caused as you know the secondhand prices is a reflection of the new car prices. And as new car prices increases and mainly in Turkey, which is also influenced by the depreciation of Turkish lira, we also made some good contribution in terms of profitability in our used car business as well. So that is what I can say. So vehicle availability allocation in between second quarter and third quarter is the key thing, as I replied to your question.