Ülker Bisküvi Sanayi A.S. (ULKER) Earnings Call Transcript & Summary

Beste, please go ahead.

Thank you. Good day, and thank you for joining us today in Ülker Bisküvi First Quarter Earnings Webcast. Before we begin with the financial results, I would like to take a moment to share some important news with the investment community. As many of you may have seen in our recent announcement, we are pleased to welcome Ozgur Kolukfaki as our new Chief Executive Officer. We are confident that Ozgur's [indiscernible] specific vision, deep industry expertise and strong leadership POV instrumental. I know many of you are eager to hear directly from him today, and we will give Ozgur the opportunity to share his initial perspectives shortly. Also joining us on today's call are Fulya [ Banu ], our Chief Financial Officer. As always, we will begin with the prepared remarks followed by Q&A. With that, I would like to hand it over to new CEO, Ozgur Bey, some introductory comments. Ozgur Bey, please.

Thank you, Beste. Hi, everyone. Thank you for joining us today. It's a true privilege to speak with you for the first time as the CEO of Ülker, and it's a pleasure to address you today in my first earnings presentation as CEO of Ülker Bisküvi. As you can see on the screen, this is a short journey of me up to now and let me briefly introduce myself. My career journey began with electronics engineering degree from Middle East Technical University, followed by an MBA at the same university and I have more than 27 years' experience in general management, marketing and sales. I had the opportunity to have a diverse multinational carrier working at different functions and geographies, geographies including Turkey, Middle East, Africa, Russia, Central Asia, Europe and the U.K. I have worked both in emerging markets as well as developed markets at a local, regional and global scope. Before joining Ülker, my last role -- in my last role, I was the CEO, General Manager of Hayat Kimya responsible for Turkey and export operations. Hayat for those who doesn't know, is a major player in the fast-moving consumer goods sector, operating in tissue, hygiene, personal health and home care categories sold in more than 100 countries. My last role at Unilever, as you know, Unilever is a global consumer goods giant, where I have worked for more than 22 years. My last role was the Vice President, Foods and Refreshment division responsible for [indiscernible] standing for North Africa, Middle East, Turkey, Central Asia, Russia, Ukraine, Belarus, leading a diverse region comprising 35 countries. Having worked across different geographies in this diverse leadership roles, I bring a deep belief in combining operational discipline with strong strategical thinking. Now I'm here to continue and elevate the success journey of Ülker, a brand I have been passionate attached to since my childhood, as well as our iconic global brands, McVitie's and Godiva under the Pladis umbrella. At Ülker, I'm honored to lead a company that's reaching heritage, purpose and innovation. Today, I'll walk you through our Q1 2025 results, our strategic focus areas and our approach in creating sustainable shareholder value. So let me continue with the key messages that I would like to leave with you today. As you can see on the screen, I have 6 messages. To start with, we started 2025 with strong momentum in a challenging environment, our world and region going through. Secondly, inflation and market volatility remain as the key challenges, but we are confident and determined to manage these challenges. Thirdly, we are doubling down on our bank investments for long-term growth of our business. Next, we remain disciplined and proactive in monitoring commodity markets, taking the most relevant procurement actions on time in full. The next point I would like to leave with you is innovation and sustainability are our non-negotiables, which we will continue our momentum on as we had already done in the first quarter. Last, but not the least, we are evolving our portfolio to future-proof our business with critical transformation pillars on our innovation and digitalization agenda. Okay. So let's zoom in to our initiatives that took place in Q1 in terms of innovation in our innovation portfolio. Products launched in the first 3 months of the year already generated 2% of total Turkey revenue that will rise to significant levels with the full distribution, visibility and investment support took behind in the near future. Internationally, product loans are gaining traction, especially in the Middle East and North Africa. Our localization model is proving effective, and we are adapting core SKUs to regional tastes. So looking at our Q1 performance in terms of the new product development, if you look at those NPDs launched in the last 3 years, these are contributing to 12% to snacking revenues in our Ülker Bisküvi's portfolio. This figure is even more impressive when you consider the base effect of 2024 inflationary environment. Domestically, in Turkey, NPDs drove 14% of revenues, a sign of strong innovation revenues with Turkish consumers. Internationally, we are still scaling with a 4% good contribution. For the investment community, this is a key KPI for us, and it shows our innovation pipeline is healthy, aligned to consumer trends and commercially successful. And we are really determined to keep up the momentum of the innovation in the upcoming periods. Together with innovation, we also continued strongly our communication campaigns in our geography. We launched high-impact campaigns for Cokonat, Laviva, Biskrem and Dankek brands that anchor our snacking leadership. Our 3 campaigns are awarded with 2 golden and 2 silver Effie awards in Turkey. So we are at the top of the list in our confectionery market in terms of the Effie awards. With over 36 million in reach and 367 million digital impressions, our media efficiency and brand sellings remains best-in-class. Afra Saracoglu, the celebrity of [indiscernible] campaign with Ülker Cikolata boosted the brand equity which is an evidence that our marketing isn't just creative. It also delivers high return on investments. So looking at some of the highlights in our corporate communications, our visibility in the media and consumer engagement continues to be strong. The Yüregiyle Yarisanlar campaign in Turkish, of course, which means competing with heart exemplifies our commitment to authentic storytelling and social impact. As the main sponsor of the Turkish National Olympic Committee, we are producing the "Competing with Heart" video series to bring the inspiring stories of national Paralympic outlets filled with ambition and determination to a wider audience. It resonated deeply the first 2 exhaust garnered over 400 million views and earned coverage reaching more than 10 million people. We also earned important awards, we were recognized by important awards in the landscape, LSEG's first place Green Check and retained our top employer certificate. These recognitions support our investment case, reinforcing Ülker's reputation on consumers, regulators, stakeholders and the tenants. As you know, Ülker is at a really good place in terms of sustainability agenda as a leading company in Turkey and the region. And our efforts also continued in Q1. First, in the LSEG assessment conducted by the LSC London Stock Exchange Group, Ülker ranked first in the food sector, outperforming all our competitors. We were also placed in the top 3% of the companies globally in the S&P Global Sustainability Index with an impressive score of 72. The 2025 Global Chocolate Scorecard was released, and we are extremely pleased to see that. Ülker Pladis was recognized among the top 10 global companies. On the grounds, our environmental and societal initiatives continued its strong momentum. In Giresun, the Beyond Hazelnut program is progressing steadily, involving 200 farmers half of whom are women. This is a very important and meaningful effort that we are putting in the region of the nut -- then we also had a factory producing nuts, and nut products for our products. Similarly, our Regenerative Agriculture in the Wheat program is ongoing with the participation of 500 farmers. These milestones are not just achievements for today, but strategic step towards securing a more sustainable future for all. In our people agenda, our people are our greatest asset. This is what we are believing in. We have been certified as Turkey's Happiest Workplace for 3 consecutive years and top employer for the 4 years. We saw a 10.7% year-on-year increase in applications, which is a perfect sign that we continue to attract top talent in Turkey. Initiatives like Mom Mentoring, wellness talks and Iftar gatherings drive retention and productivity, which is also a sign of inclusion and diversity. We firmly believe an engaged workforce is a more innovative and resilient one. So after this, let's move to operational performance. Looking at Q1 regional performance, Türkiye grew by 7.2% in revenue and 11.1% in EBITDA, outperforming peers in a tough consumer climate. As we all know, Q1 has not been an easy quarter in the region and also locally, domestically in Türkiye. But in this, really, in this volatile and difficult and challenging in Q1, Türkiye's growth in terms of revenue and EBITDA is really a strong one. North Africa surged by 28.7% in revenue, showing strong momentum in Egypt and Algeria. The Middle East remains relatively flat, while Central Asia declined due to currency devaluation and trade headwinds that we are all aware of. Export volumes softened due to challenging global context as we have been already observing in the first quarter. But overall, we remain well diversified and resilient in the challenging environment with our strong results. Looking at the Q1 revenue breakdown. Domestic operations account for 74% of our revenue, a core growth engine supported by scale and brand loyalty. The remaining 26% international share is strategic for us, and we are happy to see that it's also rising. This TRY 27 billion in net revenue in this quarter, including the TRY 7.1 billion from international, we are well positioned to grow both organically and inorganically in selective markets. Looking at our market share, U.K. remains the discrete market leader in Türkiye with 34% market share. Our presence in [indiscernible] is also substantially across EMEA and Central Asia. These are categories with structural growth potential, especially as consumers premiumize. We are dominating the Türkiye's snacking market with a 34% market share. We are strong #1 in Saudi Arabia and Egypt markets, and we are the strong second player in Kazakhstan with 14% market share. So now I think we will speak about the financial performance, and I would like to leave the stage to our CFO, Fulya.

Ozgur Bey, thank you so much. As our CEO mentioned, we have a great start to the year for 2025. And I'm very pleased to share with you the details of our very strong Q1 results. Please note that unless stated otherwise, all the financial numbers are slowing inflation accounting applied numbers. For Q1 marked another quarter for top line growth for our business despite challenges, marked by headwinds, volatilities and uncertainties. But we delivered solid revenue growth while focus generation was better than expected. Before I dive into more details, let me share with you and remind you the environment we operate currently and operated in the last 2 to 3 years. As you know, CPI and PPI has been extremely high in Türkiye, which has started to stabilize starting this year. And CPI and FX increases not being in parallel creates extra growth on how we manage profitability and cost. Another challenge that we navigated very successfully, in fact we needed to -- also be that we need to navigate going forward is raw materials. And while we have made progress on the margin fronts, the input cost environments continues to challenge us, particularly in raw materials like cocoa, sugar and wheat. Cocoa had reached multi-decade highs, nearly tripling year-on-year due to structural supply businesses than what we had experienced and the direct impact of chocolate segment, which is one of our largest contributors to revenue. And sugar and wheat, we also needed to deal with volatilities and uncertainties. So these improved trends necessitate precision in pricing, in hedges and procurements while we had implemented selective pricing and hedging strategies to mitigate the pressure. The pass-through to consumers must be managed carefully to maintain competitive business and volume retention. So on the next page. First, I wanted to start to compare our numbers, Q1 numbers where we left Q4 -- 2024, which is Q4 2024. Comparing to 2024 Q4 last quarter, we achieved a strong momentum. Volume grew by 5% quarter-on-quarter, which is a strong recovery considering seasonal softness. Revenue increased 10% and more importantly, gross profit and EBITDA jumped 23% and 20%, respectively. This translated into gross margin improvement of 430 basis points and EBITDA margin expansion of 230 basis points. These results again elevate our pricing strategy, fixed improvements and operational discipline as we begin the year with a firm foundation. When we compare our numbers versus prior year's Q1, our volume decreased by 9% to 182 Ktons due to a high base globalization cost inflation. And revenue remains relatively stable. However, our gross profit rose by 4% to TRY 9 billion, improving our margin to 33.4% from 32%. Again, this demonstrates our ability to defend margins despite volume pressures. And so our EBITDA declined slightly, while net income reached TRY 2.4 billion, largely mainly driven by FX headwinds and higher financial expenses decrease versus prior years quarter. Net debt EBITDA is at 1.62, it's a very healthy range, reflecting temporary working capital effects, but this is just the calculation from the face of the balance sheet. And from a covenant perspective, the number goes down to below 1.30, which I will be going through on the coming pages. Let me take a look on the breakdown by region, domestic versus international, our domestic operations were resilient with 7% revenue growth and 11% increase in EBITDA. Domestic gross margin rose from 19.2% to 19.9%, again validating how effective our strategies were implemented in terms of cost, pricing, mix management and supply chain management. EBITDA margin held steady at 21.5% in terms of domestic operations. International operations revenue fell 17% and gross profit fell another 17% and EBITDA declined by 24%, but reaching to 21.5% EBITDA margin, which is still a very healthy EBITDA margin and those were driven by FX volatility, regional softness and also some impacts that impacted us in Central Asia as well. However, margin in international operations remained very strong. 21.5% is a very healthy EBITDA margin and showing our strong cost base and brand equity, delivering these very strong EBITDA margins, both domestically and internationally. And on the next page, we will be renewing the performance by category. Category-wise, chocolates continues to outperform now contributing 60% of revenue, up from 64% last year. And cake has stable and the mix shift supports margin resilience and FX stable this quarter also tempered international revenue growth, especially in exports. On the next page, we share the EBITDA analysis -- EBITDA margin analysis by region. EBITDA contributions across our key international regions remained robust despite year-over-year declines. The Middle East less with 22.3% EBITDA margin and 13.8% of total EBITDA contribution. Central Asia saw margin pressure dropping to 12.8%, but still contributing 1.7%. This is mainly driven by macroeconomic conditions that took place in Kazakhstan mainly. North Africa had an 11.9% margin with 1.5% contribution. And while of course EBITDA declined versus plus due to FX and demand normalization our margin structure across these regions remain healthy, providing a strategic buffer against domestic volatility. And on the balance sheet side, we also closed the Q1 as a very strong -- with a very strong and healthy balance sheet and healthy KPIs in terms of all key important highlights. So our net debt EBITDA stands at 1.29 per covenant calculation per covenant performance, outperforming industry norms and which shows a very healthy and strong balance sheet in terms of net debt and EBITDA leverage. The seasonal working capital, the increase in the working capital reflects some seasonality in the working capital especially getting ready for the high-end finance summer season and certain FX volatilities, increase in working capital, but we still believe that the working capital base that we have by the end of Q1 is still healthy and strong, taking into consideration that we have long cycle for raw materials like cocoa. In terms of Risk management, we have 60% of the open balance sheet position hedged which shows that FX is not a problem anymore, $409 million of open position is hedged. And in terms of debt financing, 64% of our financial debt is long term, which provides us with a healthy liquidity runway and minimize short-term financing risk. And one other very important news that we shared this quarter is we continue to maintain a balanced capital allocation policy. The Board of Directors has proposed an approximately $77 million dividend distribution subject to general assembly approval. We believe that this reflects our confidence in our free cash flow generation and our commitment to returning value to our shareholders whilst reserving capacity for strategic investments and debt services. So in summary, our balance sheet remains robust, liquid and flexible well positioned to support both operational growth and shareholder returns in 2025. So back to our CEO to talk about our outlook.

Okay. Thank you, Fulya. As you can see, I think what we have seen in financial terms is really strong results, which is also -- which gave us the confidence to also come up with the dividend proposal and to be a signed of it General Assembly, I think, which will be also appreciated by our shareholders. So looking at outlook, looking forward for our guidance for 2025, we project net sales growth of 3%, plus/minus 100 bps and EBITDA margin expected to be at 17.5% plus/minus 50 bps. We are really confident in these targets based on the robust Q1 trends, our innovation traction and continued cost discipline. As we move forward, we will focus on managing input costs and scaling high-margin SKUs. We are building a company that delivers not only quarterly results, but long term, compounding value. And we really remain confident in our strategic direction and position Ülker for sustainable long-term growth. At Pladis, we are a well-established global company that brings together [indiscernible], McVitie's and Godiva families. As you can see on the screen, our founders in the past made meaningful statements, which is putting product and happiness at the core of whatever we do in our business. We are one of the fastest-growing snacking companies in the world, delivering happiness in every bite through our brands and products. We merge our company's promise of bringing happiness with every bite with our vision of Make Happy Be Happy. Purpose-driven companies and brands achieved sustainable success by making a positive impact on people's lives and creating value. With this belief at Ülker, we operate with a clear timeless purpose to make people happy and nourish their lives. This is not only a CSR slogan. It's embedded in how we approach product innovation, market execution and people management. In a volatile consumer landscape, purpose-driven companies like ours have proven to be more resilient. We serve over more than 100 markets and our focus remains on delivering happiness in every bite, which translate to long-term brand loyalty and consistent revenue growth. Moving forward, my goal as the CEO is to place this purpose at the core of our business, driving purpose-driven growth and value creation. Let's move to the next slide. I think there's a Murphy effect on the slide.

That's technical issues.

Okay. Let's wait, I think we are good in time.

Just give us one second. Apologies for the technical issue. We're working on it.

Okay. Let me rewind on this slide. So I was saying that moving forward, my goal is really to replace this purpose at the core of our business, driving purpose-driven growth and value creation. I'll call this 5H growth model based on 5 seculars of what I call 5 happiness growth. Firstly, this is consistent happiness growth. We will reach more consumers with our iconic and strong brands Ülker McVitie's and Godiva through effective innovations, continuing to deliver happiness with every bite. Secondly, it is competitive happiness growth. We will further strengthen our competitiveness in Turkey, Central Asia, Middle East and North Africa, providing even greater value to our consumers and business partners. Thirdly, it is profitable happiness growth, we will ensure to reach more consumers with our highest quality products at affordable prices. At the same time, we will enhance operational excellence through strategic investments in digital transformation and artificial intelligence. Fourthly, the sustainable happiness growth. With our deep commitment to our planet, society and people, we will continue our sustainability journey with determination. We will play our part to create a more livable world. Lastly, but not the least, people centered happiness growth. This is the most important pillar for me because at the heart of this journey lies the people. While bringing happiness to our consumers with our brands, we will continue to prioritize the happiness of [ Ülkeroedis ] employees and all stakeholders in our ecosystem. Together, by posting mutual trust, collaboration and dedication, we will get stronger powered by our collective intelligence. So thank you for listening to us and happy to have any questions you might have.

Thank you, Ozgur Bey.

Apologies for the brief interruption with the slides. So we are now moving to the question and answer section. In the meantime, we are opening a quick survey for our web participants. Your feedback is highly valued and greatly appreciated. [Operator Instructions] So our first question comes from [indiscernible]. So we will move to the next voice question from the line of [indiscernible] from Barclays.

Can you hear me?

Yes.

Okay. Good. And congrats on your new role Ozgur. I have several questions I would like to go -- I would like to ask them all at once. So my first one is could you please again touch on what was the driver for volumes decline in first quarter? Then my second question, there was a significant increase in inventories and is it a seasonal increase? Because I don't think that in previous first quarters, we saw similar increase. So just trying to understand what happened there. And finally, could you please provide a breakdown of your cost of sales in terms of what is the percentage of cocoa costs in there and other materials, other raw materials like wheat, sugar, et cetera? That would be very helpful.

Thank you very much for you for the question and your good wishes. I appreciate that. Let me try to answer the first question and then leave it to Fulya to answer the others. In terms of the volume decline, it's affected by the market contraction in the main categories that we have seen. This is based on a strong base of Q1 2024. And also there is some seasonality and also transition of Ramadan at a different periods versus Q1 of this year. So overall, we don't think that this is a kind of continuous impact in the market. We believe that in the upcoming quarters, it will turn into positive as we have seen in the other years. So we feel confident that the market will regain back to growth. And as the leader of this market, we will continue to really lead the market with market development and continue to gain market share. The second question was about the inventory increase. Maybe Fulya, you can elaborate on that one.

Yes, I can answer the second and third question, and really, I'll start with the first one. We do not -- our cost of sales breakdown is not public. We do not disclose it publicly. But if you follow up, we'll try to give you a range of whatever we can. So it is not -- since this is not precisely publicly disclosed, I cannot give you any numbers. Related to inventory, the increase in inventory is related to rising the price of key raw materials. So the drastic price increase in cocoa and the significant cocoa shipments during Q1 impacted our inventory numbers. Just to give you some numbers, like compared to Q1 '24, cocoa unit prices increased 147% in terms of GDP. So it's like I mean hard currency numbers. Compared to Q4, the unit price increased just 35%. So there is a huge impact in cocoa prices that impacts, that's number one. And the second one is, as I have already shared with you, the cocoa supply is a long cycle. And there might be from shifts and delays and timing issues in terms of the cocoa shipments and supply. So what we have experienced in this quarter is most of the shipments came by the end of Q1, so which we could not use in terms of manufacturing since it came after like March 20s and so on. And in terms of procurement, the numbers also increased like we procured more than what we procured in last -- compared to last year in 2024, all included and it increased total inventory number. That's how I can summarize. I hope that helps.

So do you expect normalization throughout the year? And also on cocoa, given that you are using hedges, is it right to assume that your volumes are safe for this year. It's just a question of time and the timing might be delayed sometimes.

It is -- the volumes are safe for this year. We feel very comfortable in terms of related to timing. I mean, we do not expect these like bulk shipments that come. I mean towards the last one week or two weeks of the month. That's not what is expected throughout the year. We expect the normalization. But again, the cocoa prices like almost tripled, the total numbers may increase and it's a huge one cycle that impacts are definitely working capital, please also factor into consideration in your calculation. .

So we are now moving to the next voice questions coming from Erica Ive from MetLife.

The first one would be on a lower EBITDA margin than last year. So I was wondering, all considered, do you expect a slight increase in leverage this year from where we are now?

Thank you for the question. So our objective is to maintain a very healthy net debt-to-EBITDA number. We do not disclose an exact net debt-to- EBITDA number that I mean we expect to end the year. But our objective is to maintain this healthy levels, and we had a very strong balance sheet throughout each quarter of the year. So that's all you can assume that having a very strong healthy net debt-to-EBITDA number is one of our objectives, but we do not disclose this exact number of the subs.

Understood. And in terms of dividend, the $77 million payout, I guess, is expected this year, correct me, if I'm wrong, and will it be fully covered by free cash flow?

Yes, this approximately $77 million is expected to be distributed this year, upon the approval of our General Assembly, which will take place beginning of June, with which we have already announced. So upon the approval of Genera Assembly the expect distributed also after the General Assembly given the coming weeks or months. Yes, it will be provided for our cash flow and it will be paid in Turkish lira by the way. It's just converted to U.S. dollars just to give you a sense of the total FX amount. So we feel very confident and comfortable to make the payment to our cash flow.

And then I wanted also to ask that the EBITDA has been also impacted by higher marketing expenses. Is it that you've been investing more in innovation and fundamentally promotion and marketing?

Yes, I think as we already mentioned in the presentation, in order to drive consumer pool, and also support our innovations and our core brands. We have increased the percentage of marketing investment in our P&L. So with that, we are believing we will create more market development for our consumers, which will also scale up our further growth.

That's good. And then finally, could you give me a little bit -- provide a bit of color on the current trading, you said is strong. So is it in line or stronger than what you've seen in Q1?

Can you please repeat the question? I don't think we understood well.

Could you provide some color on current trading?

Sorry, you said current trading environment?

Yes. Basically, what you're seeing in terms of sales fundamentally volumes and sales.

Yes, I think now we understood. Okay. So as I said earlier, Q1 was a challenging quarter in globally, not only regionally, not only locally, but globally, as we have observed. And we had also some seasonality phasing of Ramadan and this kind of impact. Having said that, we don't see a fundamental issue in the pool of the consumers. So with our market development efforts which we already started to see in April. We believe that the consumer pool will not be impacted seriously. And we will -- the market will return back to growth in terms of volume. And as the leader of the category, we will continue to grow the market and gain market share. So this is our -- how we build our plans for Q2 onwards.

Our next question is a voice question from [indiscernible] from KCA.

Congratulations on your new role, Ozgur Bey. The guidance suggests 16.5% EBITDA margin for the remainder of the year. After having achieved more than 20% EBITDA margin in the first quarter. Is this a very conservative guidance? Or this is what you are seeing as the current trading environment suggests? That's my first question. And the second one is the deterioration in working capital in the first quarter is the largest one we have ever seen in Ülker's history, almost a $100 million quarter-on-quarter increase in working capital requirements mainly coming from inventory. Fulya mentioned that this is primarily driven by the core procurement and prices as per as I understand. But what should we expect for the remainder of the year for the funded working capital.

Thank you very much for the 2 questions and your good wishes, highly appreciated. Thank you. Let me answer the first question, then I'll leave it to Fulya to answer the second one. In terms of EBITDA guidance, you're right, we have given a 17.5% EBITDA guidance plus/minus 50 bps in our guidance. In preparing this guidance, we consider various factors, including inflation, foreign exchange trends, local and global macroeconomic indicators and geopolitical developments based on the latest forecast that we have. So we are hopeful to go to the upper end of this window, 18 plus hopefully. But based on all these indicators, we would like to remain in this 17.5% plus/minus 50 bps, which we still believe a very good guidance in this very challenging environment in Q1. Looking at the different players in the market, their results in the first quarter I believe Ülker Bisküvi stands at a very strong position, not only on the net sales growth, but also on the EBITDA performance. We really remain confident and determined to drive for further EBITDA for our shareholders in the upcoming quarters.

And regarding to your second question in terms of working capital, let me start with the inventory. So inventory, the impact or unfavorable impacts on inventory is driven by mainly 2 factors, which is the shipment that is that came by the end of March due to phasing and shift of the shipments that came very late and which could not be used in terms of manufacturing. And the second one is, as you know, cocoa prices have increased significantly, which started to impact the inventory amount. So I have also given the examples very a couple of minutes ago that compared to Q1 2024, cocoa prices increased by 147% in terms of GDP hard currency. And compared to Q4, it increased by 35%, again in terms of hard currency. So that's one component. The other component related to trade receivables is related to seasonal FX and sales growth and in business as usual temporary outcome, and we expect to stabilize and normalize in the coming quarters. Again, working capital is an important priority for us, and it will continue to be an important priority for the next of the year as well.

So we'll now move to the next question from Cemal Demirtas from Ata Yatirim.

Congratulations for good results. And of course, congratulations for dividends. And thank you, Ozgur Bey. It's nice knowing you, and we believe you will add a lot to the company. My question is most of the part has been answered. But again, I would like to reiterate one thing about the margin side. You have around 17.5% as Mohammad mentioned, in the first quarter, it was 20.3%, and it supplies around 16%, 16.5% percent margin in the remainder of the year. So is that fair just assumption even though we think that you are cautious or like conservative that I would like to be elaborated further. And the second question is about the FX position you have. You have still have a healthy debt position, net debt position. And I would like to understand your FX position. Now as of first quarter, we have $192 million plus EUR 347 million short FX position as of the closing. What would be the effect in the second quarter? Or do you have any actions to take on that front? And again, I would like to congratulate you about the dividend because since 2011 is the most significant dividend distribution by Ülker, and it's really welcomed in terms of corporate governance and everything. So thank you again.

Cemal Bey,thank you very much. First of all, for your good wishes, highly appreciated. And let me try to answer the first question, but -- and then leave it to Fulya for the other -- for FX one. Before coming to that one, I also would like to underline the dividend, which we have paid after many years. This is also a proof of the confidence that we have in our business and our future potential of our business, which I believe is a sign for our shareholders as well. So hopefully, by the approval of this dividend in the General Assembly in early June, we will be able to release from our cash flow, this nice dividend to our shareholders. So reiterating of the EBITDA, you asked that question. Actually, my answer will remain the same. So we -- we stay at 17.5% plus/minus 50 bps guidance in terms of EBITDA. So this is regard-- I mean, based on all the various factors that we have embedded in our forecast, including inflation, foreign exchange trends that we anticipate, local and global macroeconomic indicators, the raw material fluctuations that we have and we would expect to have and the geopolitical developments. Of course, we will all strive to drive more for our business and for our shareholders. But at this stage, we believe this is the realistic window plus/minus. But please make no mistake that, of course, we will make sure to strike for the better end of it, 18 plus, but this is the current guidance that we believe is the right guidance at this stage.

In terms of open position, we have a policy to be -- to have a growth FX position on the balance sheet between the 60% to 80% range. So we are currently at 60%, and we plan to maintain this 60% to 80% policy rates going forward. So depending on the total amount I cannot give you an exact number, but this is the policy. I think it's generally calculated very easily.

We are now moving to the next voice question from [indiscernible].

I have a few questions. First, on the weakness in the international business, is that just driven by Ramadan, the fact that Ramadan was in Q1 this year and Q2 last year? Or are there any other fundamental drivers do you expect this international to recover for the rest of the year? Then the second question is I just really wanted to understand that your raw material hedging because looking at all the raw materials apart from maybe one of them, they're all trending higher prices. Could you just tell us, for instance, for cocoa are you fully hedged on your supply for this year? Your supply needs for this year? Or do you still have more that you need to buy in the spot market? And any other important raw materials, if you can just talk about your hedging there. Then in terms of price increases, could you talk about what happened in Q1? Did you increase prices in the domestic market? Or in the international market. Just talk through how you're thinking about price increases for the rest of the year given all the commodity prices higher? Then in terms of leverage, do you have a leverage target? Because you mentioned you want to keep a healthy leverage profile. Do you have a net debt to EBITDA target? And then finally, on your refinancing, I think the debt that you had commented here was some bank debt, are you in advanced stages of refinancing that debt do you think you could come back to the bond market to refinance any of the short-term debt that you have.

Thank you, for your questions. Let me start with the first question. In terms of the business in international markets that you have asked, actually, in terms of the performance on international markets, we believe we had a good performance, because it was really a competitive growth. So we increased our market share in most of our markets, international -- and also despite the decline in top line metrics, our gross profit improved by 2.5%. So that's also a good sign. And what we also did was we also increased our brand investment so which was also another good sign investing into our brands. which also gave us the competitive advantage in order to gain market share in this very critical period of Q1. So overall, we believe that our business is healthy. What we see in terms of the net sales decline is below the market reality. And in the upcoming periods, we will continue to grow at all the market continue to gain market share and to continue to have a healthy profit growth. So I think this is to answer to your first question. You asked also about the price increase. So obviously, we don't disclose the price increase in our internal operational elements here. But what I would like to highlight here is our approach, our general approach. At Ülker's Pladis, we are doing the best in our efforts in terms of operational excellence to have the best costing in order to reflect the list into our prices all those volatility in the raw materials and increasing costs. So we really make sure to have the best possible operational excellence efforts to minimize the cost exposure and reflected to our price increases. So this is what we have done in Q1 and which seems to be working as we have done in the past. And this will -- this is what we will also do in the future to really do our best into operational excellence minimize the cost increases to our consumers and provide the best quality products to our consumers with the best possible P&L. So I think this is always general approach on price increase.

Regarding your other questions, in terms of raw materials, we feel very comfortably in terms of cocoa, oil and nuts coverages and hedges. And for wheat and sugar, which is procured mainly locally, we are also at a very safe place to sustain the operational continuity as business continues to. Regarding debt financing, net debt and debt financing, our syndication is due on April 2026. Of course, we are currently preparing our strategy and assessing all the options. We do not say we will never come back to both markets again. We are assessing all the options and our strategies will be prepared very shortly. And once we mandate what we are going to do, you will also hear from us.

Just as a follow-up. So when you say you're comfortable with the cocoa oil and nuts, you mean you're fully hedged for this year?

Yes. We are pretty much 100% close to hedge. Yes, we can say.

Okay. And then in terms of your leverage, I think you forgot to answer that one. Is there a leverage target? Do you -- could you possibly tell us what you think leverage could be peaking?

No, this is not the expectation. Our key priority is to sustain our very strong balance sheet position going forward. And one of the key KPIs for that is net debt EBITDA. So we do not disclose the exact number in terms of net debt-to-EBITDA. But what I can share you with you is to have a very strong balance sheet, net debt EBITDA number should be at a very healthy level and this is our key priority, and this is going to be a key priority going forward as well. So you can feel comfortable that net debt EBITDA is not going to peak.

[Operator Instructions] Next question is from Ali from [indiscernible]. It's a text question. How does the trading environment compare before and after the end of March in Turkey.

Thank you, Ali Bey, for your question. Let me take this in terms of the trading environment compare before and after the end of March in Turkey. So the -- of course, we have completed one month, April. So the -- what we see in April is more promising than what we have seen in the quarter 1, which is a good news for the market and also for us as Ülker Bisküvi. This is what we can -- what I can say for the timing in terms of the market environment. As my experience -- based on my experience in this type of challenging times in the world and in the region. We actually stayed at a kind of lucky category has been the snacking category because the consumer insight is in this kind of environment, consumers are tend to decrease their spending in the high value items, like free car, house, big investments. They just hold or they just decrease. But at the same time, they would like to give themselves some personal pleasures, personal happiness in their impulse behaviors or the in-home consumption. So that's where we step-in, actually providing the small happiness for our consumers. And as we have in our purpose, we are here to really make people happy with our products, providing them the best quality products through our best brands in the snacking market. So as we had seen in the past, we believe in this current context, this will also work on our opportunity as a tailwind for our category and reading the market insights being close to our consumers, we would like to also continue providing them the best offers through our brands and products to drive also happiness for them and happiness for our business and happiness for our P&L.

At this point in time, we're seeing no further questions. So I would like to pass the line back to [indiscernible] for concluding remarks.

Thank you for joining us. Hope to meet you in our second quarter results.

Thank you. Thank you all for joining.

Have a great day.

Thank you. This concludes today's call. We are now closing all the lines. Thank you and good bye.