Ülker Bisküvi Sanayi A.S. ($ULKER)

Hello, everybody. My name is Beste, I am leading the Investor Relations department of Ulker Biskuvi. Welcome to Ulker Biskuvi's Full Year 2025 Results webcast. Here with me in the room are CEO, Ozgur Kolukfaki; and our CFO, Fulya Banu Surucu. Now I leave the ground to our CEO, Ozgur Bey, please.

Thank you, Beste. Good morning, good afternoon, everyone, wherever you are, and thank you for joining Ulker Biskuvi's Fourth Quarter and Full Year 2025 earnings call. I'll walk you through our results, strategic progress and also 2026 road map. I'll start with key highlights, then review operation and financial performance and close with our outlook and 2026 growth plan. And then as usual, we will take a few questions at the end. Looking at the key highlights. 2025 was a resilient year despite softer demand and regional challenges. We maintained our leadership in Turkiye and strengthened regional competitiveness. Innovation scaled strongly, contributing meaningfully to the growth. Balance sheet discipline remains as a core strength of ours. And [ ESG ] progress continue to differentiate Ulker in our sector as a pioneering company. Looking at the macroeconomic highlights. Turkiye operated in a high inflation environment with low confidence consumer environment. Looking at inflation, the inflation is around -- we finished year with 30.9% consumer inflation, where the PPI was slightly lower than to 27.7%. And looking at the breakdown of the inflation, the highest inflation we see in the education with 66% and rent following with 49.5% and then afterwards the food with more than 28%. GDP expectations remain in low single digits, reflecting a cautious backdrop compared to previous years. Consumer confidence stayed around mid-80 levels throughout the year. Despite of this challenging environment, we navigated these conditions with disciplined executions and pricing discipline and cost control. Now let's look at the key messages that we would like to highlight today. We preserved our leadership position in Turkiye and the broader MENA region. Top line, we closed the year with a top line growth of around 2% in a global commodity volatility and inflationary environment. The new product launched contributed 12% of our net sales, reaffirming Ulker's ability to capture shifting consumer trends. With our successful refinancing operations, we strengthened our liquidity visibility by extending our maturities to 2030 and 2031, overall. With net debt-to-EBITDA ratio, Ulker -- with 1 net debt to EBITDA ratio, Ulker continued to maintain its healthy balance sheet structure. By increasing our ESG score by 8 points, we become the highest scoring food company in Turkiye, which is a really strong strength of Ulker differentiating in the market. Looking at the new product launches, in Q4 alone, new product launches delivered 9% of the snacking revenue demonstrating the strength of our innovation funnel and the speed of consumer adoption. Ulker's brands carried tremendous trust, which allows new launch to gain instant shelf visibility, strong support from retail partners and rapid consumer trial. Our Q4 pipeline targeted the right consumer needs, taste-driven indulgence, portion control, gifting formats and family-friendly concepts all supported by strong in-store activation. The velocity of our launches was significantly above category norms reinforcing that Ulker's innovation resonates quickly and deeply with consumers' needs. And looking at the full year 2025 revenue contribution of the new product launches, in domestic, Turkiye, it contributes 14%. Here on the screen, you see the 3-year contribution of the innovations. As usual, we shared the 3-year contributions. Domestically, it has a 14% contribution. International is 6% and in average, it boils down to 12% contribution. This sustained contribution confirms that innovation at Ulker is systematic, predictable and repeatable, supported by strong R&D, agile manufacturing and best-in-class distribution. Looking ahead, strengthening repeat purchase, premiumization and export trading concepts will help us unlock even more value from innovation across 2026. Now let's look at this sustainability. As highlights, this year, we strengthened our leadership in sustainability with measurable and globally recognized achievements. We maintained our #1 position in the London Stock Exchange Group ranking and placed among the world's top 10 in chocolate sustainability. Our strong climate and supply chain strategy was reaffirmed with the A rating from CDP Supplier Engagement Assessment. We completed our transition to 100% recycled-ready packaging. We launched Saklikoy biofortified limited edition, which was developed with Sabanci University and continue to advance our Beyond Cocoa and Beyond Hazelnut programs, deepening our partnerships with cooperatives in Ivory Coast and supporting local communities in the Black Sea region. In Giresun, in Black Sea region, we expanded good agricultural practices training -- gave training to our farmers, half of whom are women. Our regenerative agriculture pilots delivered promising outcomes, guiding our plan to scale to at least 10,000 da. With these steps, our ESG performance rose to the top 3% of companies globally. Reflecting our long-term commitment to responsible growth and resilient value chain. And looking at the corporate communication highlights, in 2025, our communications and brand initiatives significantly increased Ulker's visibility and audience engagement. One of our strong brands is Cizimen and the Cizimen-Osimhen campaign, you know Osimhen is one of the world-known football starts playing at Galatasaray. By the way, for the Galatasaray fans, congratulations for the last night's match. As you know, Galatasaray scored 1 to nil against Liverpool in the Champions League. So with this Cizimen-Osimhen campaign, this achieved remarkable impact, delivering 9 million reach and 29.1 million impressions. The Ulker Chocolate Istanbul launch reached 4.3 million people and generated 5 million social impressions, while the competing -- with their heart series highlighted the inspiring stories of five Paralympic athletes. I would like to just give a highlight on Ulker Istanbul Chocolate, which was the social first innovation done first in our history. Taking Dubai as a kind of benchmark, which was a big success last year, which turned out as a kind of global trend. We as Ulker created Istanbul as a global trend in the chocolate industry and which was a really big hit in the market. The sustainability press conference further implied these efforts -- our efforts in the sustainability platform. Our Ulker My First Match Project connected deeply with football communities through simultaneous films for the four major football clubs in Turkiye. And Ulker being the biggest -- one of the biggest supporters of sports. It was a big highlight for our 2025 plans. Through our TMPK partnership, we strengthened our sponsorship presence and shared our long-term sustainability progress, including our Net Zero 2050 commitment and road map. Additionally, our leaders represented the company at 10 major industry events as keynote speakers, reinforcing our position and ensuring that we are more visible than ever. Our people and employer brand highlights, looking at these highlights, in 2025, we strengthened our people-first culture and employer brand with major achievements. We are recognized as one of the world's best employers for the fifth consecutive year in the top employer certification. We are also recognized as Turkey's Happiest Workplace in the snacking category for the fourth time consecutively. Within our commercial talent program, which is designed to develop future leaders for our commercial function, we welcomed 6 new talents to our organization. In 2025, as ambassadors of our GOYA culture, we traveled a total of 20,000 kilometers across the country and captured the pulse of the field through 455 one-on-one meetings. We received EQUAL-SALARY Certification and world-known certification important for diversity, which confirms that at an international level that we ensure equal pay for equal work. Covering more than 5,000 employees, we achieved a 93.2% success rate in the statistical phase, which confirmed that women earn an average of 1.2% more than men. Ulker became the first company in Turkiye with over 5,000 employees to receive this certification. And also the first company worldwide in the snacking industry with more than 5,000 employees to be certified, which we are really proud of. In 2025, the employee engagement survey included blue-collar employees and Godiva field team for the first time. Our engagement score reached 89%, which is the highest level in the 5 years. We redesigned in -- our diverse agenda in line with our IDE values, our mentoring programs have brought 1,015 employees into our mentoring network since 2021, reflecting our learning-organization culture. We launched in Turkish Senin Icin Iyi Gelecek program. It will be good program for our blue-collar employees reaching 750 colleagues. So after these highlights, let's look at our operational performance, which I'm sure you are all curious for. Looking at full year in Turkiye, we delivered 2.1% net sales growth, a resilient outcome given the sharp deceleration in consumer demand in the second half of the year, especially the unusually weak December period where purchasing power fell faster than anticipated. EBITDA erosion driven primarily by gross margin pressure. The category mix was also unfavorable. Chocolate is one of our highest margin segments and nearly half of our portfolio, and the chocolate market contracted by 7.5% in volume in the market in the last quarter and our own sales follow that trend in line with the market, creating a margin dilution despite of our strong market share leadership. Despite these pressures, our underlying brand strength remains powerful and we expect demand to normalize gradually throughout 2026. Exports grew by 8.3% for the year with some EBITDA erosion, mostly due to the spillover from the Middle East market weakness. The Middle East was the most challenging region in 2025. Full year net sales declined by 1.4%, while EBITDA dropped by 25%. The major driver was the severe FMCG market contraction in Saudi Arabia, where Q4 was the weakest quarter in the last 2 years with the market down by 4.6% in value and 4.7% in volume. Low consumer confidence, intense promotional pressure across modern and traditional trade and the rapid shift towards value-seeking behaviors, all led to weaker volumes. In Q4, specifically, our EBITDA margins fell to 10.3%, the lowest of the year. This was not a structural issue with our brands. It was an external market shock compounded by a strong prior year base. North Africa remained a major bright spot for the company -- for our company. Net sales grew by almost 29% for the year, supported by effective pricing, mix management and solid commercial execution. In Q4, volumes accelerated with 14.1% growth, benefiting from a more stable inflationary environment. EBITDA margin improved by 233 bps, thanks to tight overhead control. This region continues to demonstrate strong consumer momentum and strategic importance for Ulker. Looking at Central Asia. Central Asia delivered 20.3% net sales growth for the year. EBITDA declined 11.8%, but this was fully planned. We intentionally reinvested our gross profit gains into marketing, distribution and brand building to secure long-term share and visibility. Q4 was the strongest quarter of the year, showing clear momentum heading into 2026. This region remains highly strategic, and our investments are already translating into improved consumer demand. In summary, despite of extremely challenging market environment, full year 2025 was the year of diverging regional dynamics, strong growth in North Africa and Central Asia, resilience in Turkiye despite of a sharp market slowdown and clear external headwinds in the Middle East. Across the board, brand strength, our pricing discipline, execution power and long-term investments allowed us to protect the business in 2025 and position Ulker for healthier and more balanced growth in 2026. In Central Asia, Uzbekistan is an important opportunity for us, which we see as one of the most strategically important growth engines in our international portfolio. Uzbekistan represents a unique combination of scale, demographic strength and category under penetration with a population of more than 37 million people, which is the largest consumer market in Central Asia and more importantly, it's a market where modern trade continues to develop and where snacking categories are still structurally young. This gives Ulker a long runway for sustainable and profitable growth. First of all, Uzbekistan has strong market fundamentals. The total snacking market in Uzbekistan is estimated at around USD 1.27 billion for 2025 and it is forecasted to grow at approximately 7% CAGR through 2030. This is one of the highest growth rates across all the markets where we operate. The core drivers are clear. A young and growing population, rising disposable income and the steady expansion of organized retail currently at only about 18%, which shows how early we are in the development curve. In short, Uzbekistan offers the kind of long-term demographic and economic fundamentals that support compounding growth for the next decade. Second of all, Uzbekistan has a strategic role in Ulker's Central Asia growth strategy. It's not only a commercial opportunity by itself, it's a strategic anchor market alongside Kazakhstan. These two markets together give us a strong hub in Central Asia, both in terms of manufacturing logistics and consumer reach. Positioning Ulker as the long-term partner of choice in Uzbekistan trade will strengthen our presence across the entire region, enabling us to scale innovation, optimize logistics and run coordinated commercial programs that enhance efficiency. Thirdly, we have a strong focus on marketing, brand building and consumer recruitment in Uzbekistan. Marketing investment in Uzbekistan is another core pillar for our approach. We are building brand equity with localized communication, culturally tailored creative content and strong visibility programs for our core brands. We are expanding our footprint and route-to-market strength. We already had a meaningful presence in Uzbekistan and our ambition is to build a fully nationwide footprint through direct distribution model trade and focused distributors dedicated exclusively to Ulker in traditional trade. And overall, to sum up, we see Uzbekistan as a high potential underpenetrated...

Ladies and please stand by. We'll be reconnecting shortly.

I think the line was broken in this slide, I'm rewinding from the slide. So looking at the full year 2025 revenue breakdown. For the full year, our IAS '29 adjusted revenues reached TRY 112 billion with a breakdown of 70% domestic and 30% international. This mix has been one of our biggest strengths, allowing us to smooth out volatility and protect the P&L even when certain regions face temporary pressure. Our domestic market, looking at those domestic markets, starting with Turkiye, generating nearly 70% total revenues. It continues to be the foundation of our business. Despite the softening in demand, we observed, especially in the last quarter, the domestic market remains robust from a structural standpoint, supported by our powerful brands, unparalleled distribution network and category ownership. And looking at international markets, which is growing and strategic for us, 30% of the revenues come from the international operations which continues to grow ahead of domestic inflation and represent a significant long-term opportunity for Ulker. Each of these regions plays a strategic role for us. Together, these markets create a diversified revenue pool that reduces concentration risk and positions us well against economic cycles. A key point here is that our geographical mix is not accidental. It is the result of a long-term portfolio strategy. It allows us to deploy capital more selectively, allocate marketing where marginal returns are highest and shift supply chain capacity towards markets that are scaling faster. Moreover, this mix ensures resilience. When one region experiences demand softness as we saw in the Middle East, for example, this year, momentum in North Africa and Central Asia has offset the impact. This is one of the reasons our overall full year performance remained broadly stable even under challenging Q4 conditions. Our strategic priority is to maintain this balanced revenue distribution while accelerating growth in high potential regions. This mix allows Ulker to remain competitive, flexible and highly resilient regardless of the macro cycle. In short, our geographic revenue mix is a strategic advantage, not just a reporting line. It gives us scale where we are strongest, growth where the opportunity is rising and resilience across the entire portfolio. This balanced structure positions Ulker exceptionally well for sustainable profitable growth in 2026 and beyond. In 2025, in Turkiye, which is our [ admiralship ] country, we have risen to leadership across all FMCG companies with 5.1% is the source of Nielsen. While our closest competitor remains at 4.2%, as I said, the Ulker leads the market with 5.1% sales value share, looking at the entire FMCG market. This result clearly reflects our brand's strong consumer preference, our excellence in category management and the impact of the strategic actions we carried out throughout the year. In the highly competitive FMCG landscape, this leadership not only demonstrates our current success, but also strongly signals our future potential. Our position is a solid outcome of our sustainable growth strategies and the right moves we made based on field insights and consumer understanding. Looking at the market share. Geographically, our influence spans Turkiye, the Middle East, North Africa and Central Asia, where our brands continue to deliver strong performance and high consumer engagement. We hold a strong leadership with 34% share in Turkiye in total biscuit, chocolate and cake categories. A 27% share in Middle East biscuit market, a 14% share in North Africa in biscuit category and a 14% share in Central Asia in chocolate category. These numbers emphasize our ability to maintain momentum in both major and emerging markets. This regional presence positions us as a key player with sustainable long-term potential. So after this operational performance, let's look into our financial performance. I'm leaving it to our CFO, Fulya, over to you.

Good morning, good afternoon, good evening, everyone. Thanks for joining our full year results and Q4 results webcast. Ozgur bey, thank you for your comprehensive overview of our strategic direction and the marketplace. It's now my pleasure to go through the deep dive analysis into our financials. So before I go in detail for Q4, let me just summarize how I see 2025. As we close 2025, we remain committed to driving operational efficiency and strengthening our strategic market position. Fourth quarter presented a very challenging macro environment, but I believe that we navigated through these challenges with disciplined and decisive actions. So when we go through more in detail in Q4 in two of our core regions, Turkiye and Middle East, demand conditions softened. Market, especially in chocolate category declined more than projected and estimated in Q4 and highly in December 2025. Inflationary pressures continued to put pressure on consumer purchasing power, especially in Turkiye, and several Middle East markets experienced macro headwinds. Month of December, which historically showed the seasonal uplift came in below historical trends. Despite this, all these conditions, consolidated volume declined only by 0.7% in Q4. Turning to revenue. We see a 6.6% decline versus prior Q4 2024, reasons being softer demand, as I have shared, overall market contraction, chocolate market contraction, especially and with that product mix normalization and shift following the high base effect created by last year's strong Dubai chocolate performance. All these factors coupled with lower-than-expected sales volume, limiting our ability to fully observe cost pressures, drive the margin dilution and we landed at a margin of 24.9%. Having said that, I'd like to add that we have continued to implement pricing discipline, cost optimization measures and procurement efficiencies to protect our margins as we did in prior years. EBITDA margin came in at 12.4%, a higher decrease than the gross profit decrease in absolute value terms, mainly driven by high marketing expenditure, which is also investing in our brand equity and investment in our future for short term, midterm and long term. Net income came up as higher than 0. So we landed at TRY 81 million. Net income was driven by four main factors. FX losses, interest gains and losses, deferred tax and monetary gain and loss. So let me explain you one by one very briefly what happened and what drove our net income decrease. So I'll start with monetary gain and loss, which is basically an accounting entry driven by the inflation impact. In 2024, total inflation was around 44%, 45%, whereas this year's inflation landed at around 30%, 31%. So this decrease impacted our monetary gain, which reflects the decrease on our monetary gain. So that's number one. Number two is FX losses. You know we have a hedge policy that dictates us a 65% close position on the open position of balance sheet. We applied this policy, and we are definitely committed to apply it in the future as well. However, our FX open position, which composes of euro and USD chunks changes. So while euro increased by 36% -- 37%, whereas U.S. dollar increased by 23%. And with euro open position being higher than the USD, we were hit by that in terms of FX losses. The other one, number three, interest gains and losses. So I'd like to highlight and underline here that interest expense and losses increase has nothing to do with our interest rates being higher. In fact, you know that we have completed a very successful syndication with much more favorable rates. The impact -- the unfavorable impact comes here on this slide is from the total interest income decrease versus prior year. And interest income decrease is related to that we have paid eurobond of $250 million, which was our outstanding eurobond that was going to mature in October 2025. And the good thing is we paid from our working capital generated cash, which is also another item that strengthened our balance sheet. And deferred taxes also and other accounting-related items. Deferred tax expenses were higher in 2024 due to the reduction in deferred tax assets on tax losses carried forward. And in fact, in 2025, we see a normalization, which gave us favorability. So to sum up, net income decreased by these 4 factors, 2 accounting treatment, one interest gains being lower because we paid dividends and we paid eurobonds and FX losses being driven by the higher euro FX rate increase versus U.S. dollar. So when we continue with this next page. Its full year consolidated performance. Now stepping back from the fourth quarter and looking at the full year, you see that total volume decreased by 1.3%, total revenue increased by 1.7%. Gross profit declined from 29.8% to 28.9% and EBITDA at full year EBITDA, we landed at 16.5% and net income 4.4%, reaching to TRY 4.9 billion. Again, I'd like to highlight something. Okay, this is our profit and loss statement, but as you all know, and which I will be talking also shortly on the coming slide, that we strengthened our balance sheet significantly through the year -- throughout the year with all the actions we have taken. Branded challenges are tough in the market, our balance sheet remains solid and strong. We utilized our cash results. I mean, as I have shared, we paid our Eurobond, and we also paid our dividend last year to reduce debt and we strengthened our balance sheet, lowered future financial risk and improved our long-term financial flexibility which is a great asset for our company. So while we go to the next page, which is the P&L breakdown by region, let me start with our domestic performance in fourth quarter. Total revenue decreased by 6.1%, gross profit 24.1% and EBITDA decreased by 35.7%, landing at 13.1%. These figures reflect challenging results, but it's important to understand the underlying drivers first. First, market dynamics, both Ozgur bey, our CEO and I have also shared, were weaker than anticipated and Turkish snacking market was broadly flat and I mean, slightly decreased, but however chocolate category decreased significantly, which is 7.5%. The highest we have seen in history and which was much more than what we have projected and estimated. And as you know, it's -- I mean it has a very decent share in our portfolio in terms of revenue and profitability, which also impacted us. From a profitability perspective, the margin contraction driven by mainly three key factors: input cost timing, which by that, I mean mainly some long-cycle raw materials that we are using that impacted us, lower-than-expected demand, sharper market slowdown and decline and product mix impacts. I mean, when chocolate market decreases, then there is a shift to other products, which impacts the revenue and also margin as well. So turning to our international operations. Fourth quarter international revenue declined by 7.6%. Gross profit declined by 10.6% and EBITDA decreased by 35.3%, landing 11% EBITDA margin. Gross margin was relatively resilient at 26.5% and EBITDA came in at TRY 972 million corresponding to an 11% margin. Unlike Turkiye, where the primary pressure was at the gross margin level. Internationally, the impact was more below gross profit. Saudi business was the main driver behind the softer EBITDA margin as we have shared, and as also, Ozgur bey, our CEO had shared, we have seen a significant decline in Q4 -- historic declines by 4.6% and by 4.7% market value and volume share decline in Saudi historically, which unfortunately impacted us significantly. Operating expenses remained stable, lower sales volume being insufficient resulted in a temporary deleveraging effect consequently, which resulted in EBITDA of 11%. But looking ahead, we view Q4 as a more concentrated period of a cyclical softness rather than a structural shift in our international business and we believe that the fundamentals in our key markets remain very, very strong. On the next page, I'll talk about our consolidated volume and revenue contribution. As you can see in terms of volume, there is Q4 2025 and Q4 '24, in terms of snacking pretty much stable, 58% of our volume is mainly biscuit, 33% is chocolate, 9% is cake. Where we take a look at the snacking sales value, we see that their share is 55% in the chocolate, 38% is biscuit and 8% is cake. Comparing to Q4 2024, we see that chocolate shares in terms of revenue pretty much stayed the same. And so this is biscuit. When we go to the next page, I will talk about some key balance sheet highlights. So as of year-end 2025, net debt-to-EBITDA ratio stood at 0.9%, which is one of the major indicators of a very strong and solid balance sheet. And we have a great KPI here in terms of net debt to EBITDA number. I believe that this is just a reflection of our disciplined financial management, strong cash flow generation throughout the year and our continuous focus on working capital optimization. And this provides definitely a huge financial flexibility for the company. Speaking of working capital, I also wanted to share with you the working capital trend for versus prior year and this year on a quarterly basis. You see that there is a 10 days improvement versus prior quarter in terms of our working capital numbers. And when you compare the beginning and ending numbers, working capital cash conversion cycle versus prior year of ending number, the difference between those ending numbers is better than versus prior year. And as you know, we never announced a working capital target rather than when I received questions from you, I keep saying that our objective here is optimization of working capital now, working capital other than keeping an eye on the number. So in terms of maturities, all of our financings are long term. As you know, we have completed a very successful financing, 5-year bullet in Q4 of 2025, which is first time in Turkiye in the last 5 years for a corporate. And also, I am pleased to announce today that -- today, a very prestige international recognition has been given to Ulker Biskuvi, the Turkish Deal of the Year award by GlobalCapital. And for those -- I'm sure you all know, GlobalCapital was established in 1987 is a leading London-based publication, highly authoritative in global debt and equity and DCI markets, and if you take a look at the prime owners and winners of this award, you will see big giants very global important companies. So we continue to execute our very strong treasury policies, 65% of the net position was closed as of year-end and $749 million of open position was hedged. So what we are seeing is our policy of maintaining a prudent leverage will continue to preserve liquidity and sustain a strong balance sheet as a cornerstone of our long-term value creation. So back to our CEO.

Thank you, Fulya, for the detailed explanation. Now let's look at the 2025 results, which we shared last night. As we stated at the beginning of the year, our 2025 guidance targeted revenue growth of 2% to 4% and an EBITDA margin in the range of 17% to 18%. These were our guidance to the market. For the first three quarters, we were progressing well and tracking with that framework. However, the fourth quarter brought a sharper than anticipated slowdown, as we explained, myself and Fulya, and as a result, we closed the year slightly below our initial targets. We take our guidance commitment seriously. Ulker has a strong track record of delivering on what we promised, which makes it especially important to explain clearly what changed. So that's why we tried to explain the fourth quarter in more detail. The shortfall was not driven by execution issues. But rather, but by an unexpected and simultaneous demand slowdown across two of our core regions in the final quarter of the year. In Turkiye, inflationary pressures continue to weigh on consumer purchasing power, and we saw a visible shift towards more cautious spending behavior. December is typically one of the strongest months of the year due to seasonal demand was materially softer than expected. At the same time, our key international markets particularly in the Middle East, face their own macroeconomic challenges. Consumer sentiment softened and order patterns slowed. In Saudi Arabia, for example, the FMCG market recorded its weakest performance in the past 2 years with volumes declining by 4.7% and value by 4.6%, as I also mentioned earlier. This broader market contraction naturally impacted our performance in the region. That said, we view the fourth quarter as a market-driven event rather than a reflection of any structural change in our competitive position. Our brands remain strong, our market presence is intact, and our operational capabilities remain strong, agile and resilient. We are proactively adapting to the current environment, refining our product mix and portfolio, strengthening affordability propositions and carefully aligning our cost structure with evolving demand trends. As we enter 2026, we do so with realism about the environment, but also with confidence. Confidence in our brands, confidence in our teams and confidence in our ability to navigate volatility while continuing to create long-term value for our shareholders. And I would like to thank you for the continued trust and support. So now looking at the 2026 road map. Our road map is guided by the 5H Happiness Growth Model, which serves as our compass for building sustainable people-powered growth. This model helps us create value and happiness for employees, consumers and business partners while thanking our competitive position, addressing consistent competitive, profitable, sustainable and people-centric growth. And at the core is our purpose, which is as we state in our latest platform, where there is Ulker there is happiness, which is the purpose of our company. Our strategic focus for 2026 centers on 5 growth action plan pillars. Firstly, master brand strength. Elevating Ulker, where there is Ulker there is happiness promise across all touch points. We will grow the core, deepening strength in core categories and brands through quality, accessibility and consistent execution in all 6 Ps, the product, pack, proposition, promotion, pricing and place, leaving no stone unturned. This is strategically important as TAM brands in our portfolio is making 50% of our net sales. The third biggest, better and fewer innovations, prioritizing fewer but higher impact innovations driven by consumer insights, leveraging macro and micro trends in the market, positioning consumers at the core of whatever we do. Fourthly, perfect field execution, which is our strong muscle, ensuring excellence in visibility, distribution and commercial performance. And lastly, operational excellence, improving efficiency, flexibility and technology adoption across the value chain from source to shelf. Together, these priorities shape a growth plan, rooted in people, performance and long-term sustainability. And the biggest driving force will be our people, our talented people at the core of whatever we do. The year ahead represents a moment to build on our heritage while courageously shaping our future. Our performance in this challenging context reinforces that Ulker is not only ready for this next chapter, but strongly positioned to lead it. In 2026, despite of the challenging context, we are determined to grow powered by strong growth action plan in the light of our 5H Happiness Growth comparison. So that's it from us. Thank you for listening, and we will be welcoming any questions you might have.

[Operator Instructions] Our first question comes from Evgeniya Bystrova from Barclays.

Thank you very much. Hello, and good afternoon. Thank you for the presentation the detailed explanation of all the things that happened in Q4. I have three questions. So my first one is about the domestic market or about Turkiye. I was just wondering if you could provide color in terms of how the first 2 months of the year are going? And have you seen a recovery in demand and consumer demand or in your volumes in the first 2 months compared to Q4? My second question is about the Middle East. Given the current escalation in the region, have you already seen any disruptions in terms of procurement or logistics or on the demand side? And what are the tools available to you to potentially mitigate the impacts of the escalation? And my final question is about the Uzbekistan. Could you please provide maybe more color in terms of how we can quantify your plans in Uzbekistan? Should we expect higher CapEx this year? Or will you mostly spend like more on the OpEx side to expand your operations? Are you planning like production footprint increase. So any details would be very helpful.

Again, thank you very much for the three valuable questions. Let me start one by one. Firstly, you asked about the domestic market, how we start the year. So we have completed 2 months and 11 days of the third month as of today. Now it's almost finished officially today. So I can say we had a stronger -- stronger start of the year compared to Q4 and it is definitely a good start to the year. And as you know, we will be sharing our performance of Q1 in May as usual. But we are optimistic and we feel confident that it will be a good quarter in Q1 2026. So this is the answer to the first question. And the second question about -- you asked about the Middle East. So in Middle East, it's definitely a specific market for us where we have been operating for many years and where our brand holds a very strong [ growth ] position. It can be expected that ongoing tension in the region may have some fluctuations in consumer behavior in the short term. However, we consider our presence and the market potential in the region from a long-term perspective. We are closely monitoring the tension in the region, as all of us are doing these days. While we have not yet seen sufficient data flow that will require a revision of our targets, our action plans are ready for different scenarios. So we continue to follow up the situation. But currently, we don't see significant issues that will need to change our plans in the short term. We are cautiously optimistic about the Q1 performance overall, and we will continue to follow up the ongoing situation in the Middle East. Coming to your third question about Uzbekistan. Uzbekistan is obviously an important opportunity for us in Central Asia. As I explained, it is the biggest population market which is the growing market opening up. So that's why we will really be focusing on Uzbekistan. We don't have any CapEx requirements because we have already a strong presence in Kazakhstan. As you know, we have a factory in Almaty in Kazakhstan, which is also -- there is no customs in the region in Central Asia. So we can easily export our products from Kazakhstan and also across our other factories in the region. So from the production and logistics side, we don't have any issues in our territory. We have access to goods and services from other factories and from logistics wise. Having said that, obviously, we will be investing in our brand, investing in our people in the region to boost our business in the region in the upcoming months and quarters. That's the answer. I hope it explains your questions, Evgeniya.

The next question comes from Mr. Cemal Demirtas from Ata Yatirim.

Thank you for the presentation. And first of all, I would like to say that we are very, very disappointed with results. You gave some reasoning, but I want to further elaborate the reasons behind this 12% EBITDA margin, could we assume it as a like temporary thing or some other specific reasons that help us to clarify our expectation for the following year because with this picture, we have less visibility at least on our side. And most of the investors are not only like unhappy with the [ message ], but also being more nervous where -- about why the company is really heading to. That might be quarterly changes for sure. I can understand that. But what really happened in fourth quarter. I see some discounts in the fourth quarter, unlike the year-over-year at least 50% increase year-on-year. What was the specific reason for that because the slowdown didn't come all of a sudden. We see the market conditions and we don't see that much digress, if it's not specific to confectioner, maybe you can just mention because we are also following the FMCG market. So my basic question is really, is this a temporary thing? Are you as shocked as we are from the investors because 50% of the company is owned by the minority shareholders, like the investors. So it will be very helpful to give some relief about the following. I know that you don't give guidance for the next year at this moment, but at least should we assume that with the cost balances. Are you going to be able to maintain 16%, 16.5% level as last year at least? Or this 12% means anything else, anything that may sustain in the future. I'm just not voicing my opinion. Believe me, most of -- many investors are just following Ulker closely. And over the last several months, maybe the performance was weak. And now I understand the reason at least the short term because that must be because this company value shouldn't be at this level when we look at the fundamentals and the size. But I don't know if it's going to happen now or in the future, some clarification or visibility is needed. And again, my question is what was the effect of the cocoa price or other cost sides and what was the discount -- big discount at this stage, year-end closing kind of things. And of course, is it temporary or should we remain cautious because it will definitely have impact on the view of the investment community. Thank you very much for listening at least my criticism and questions.

Thank you, Cemal bey for the -- for sharing your thoughts and the questions. So the short answer to your question is, indeed, it is temporary. So looking ahead, while Q4 environment was challenging, we see it as a market-driven event rather than an erosion of our competitive position for sure. We are adapting our commercial strategies to the current consumer reality, focusing on the product mix and the affordability, and we remain confident in the fundamental strength of our brands and our ability to navigate this environment effectively in Q1 and onwards in 2026. So as now we have almost finished the -- we finished 2 months, and we are now 11 days past in March. We are cautiously optimistic about Q1. And we can say that we have made a good start and we will be announcing our Q1 results in May and -- which you will now then understand that this is a kind of temporary result which we -- you have seen in Q4.

And maybe as a follow-up related to the cost side, last year, the cocoa price -- increase in cocoa prices was the issue being asked. I know the company structure, but that was the reason. And now the cocoa prices are coming down. Did it have any impact on the transition period on your cost because I'm trying to find some -- the reasoning about this temporary thing. Maybe could you comment more on the cost side, production cost side? And -- because you're linked to the other companies, the sales companies. So the cost side, could we assume that, that side is stabilized, especially in the cocoa side or you're hedging possibly your positions? Any comment on that, too.

Thank you. So obviously, cocoa has been a roller coaster in the macro environment, which all the companies and all the relevant parties are following very closely. While we are pleased to see a correction in cocoa prices, the P&L benefits are not immediate. Our response will be strategic and disciplined to that, which we have done in 2025, and we will continue to do in 2026. We will not chase spot prices down, but we will instead focus on preserving our profitability through our established pricing strategy and disciplined and by effectively using our strong innovation capabilities to adapt to the new cost environment that we have. First, regarding the impact on our P&L, it's crucial to understand that there will be a significant lag effect as we all see in other competitors in the market from their public statements as well, including the big players you follow. The benefit of today's lower spot prices, we believe, will not be immediate in the market. Our fundamental pricing strategy is built on a cost plus basis with the primary goal of preserving our profitability in all pricing actions basically. And we will keep up this discipline. But from the portfolio perspective, we will continue to provide affordable options, relevant options in line with the consumer trends, that following the trends, macro and micro in the market. So we feel confident that we have a strong, robust portfolio plan for 2026.

Next question is from Mr. Ivo Kovachev from J O Hambro.

Yes, sir, thanks for the detailed presentation. Yes, we are a bit disappointed as our colleague just shared with all of us. I think what we are missing here in this picture is the -- both the cost side, which we just discussed, but also the reasons for the sales drop. And to my mind, I immediately see 2 very simple, perhaps stupid reasons, but I wanted to comment on that. One is clearly this move to these special drugs and injections GLP-1, people try to target obesity problems. Do you think that has any effect on your sales? That's one thing. And the second thing is, obviously, we went through a period of this Dubai chocolate, the green thing, right? It was fashionable for a bit. It was crazy, expensive, right? And maybe now it is not anymore. So does this have some effect? Why is this sales drop? That's what I'm trying to understand.

Let me answer the question. So the drop in the sales in the Q4 as we explained, is for mainly two reasons. The first one is the softening demand in Turkiye in the chocolate market, which is the -- one of the biggest categories that we have in our portfolio. And from the mix side, also the -- a more profitable part of our portfolio. We have seen in the market a decline of 7.5% in volume, which we have seen the first time in many years, in the chocolate market. This is also based on the base impact of Q4 of 2024. As you're rightly said, Dubai was a case in -- starting in October in 2024, which the wave of Dubai has slowed down. So that's why Q4 of 2025 competing with Q4 of 2024, which we had a high Dubai base. This was one of the explanations why we had seen a drop in the chocolate market, which we see as a kind of normalization, basically. But since it was a huge increase in Q4 of 2024 as a base of Dubai, we have seen shocking decline of chocolate in the Q4 of 2025, which we see as a kind of base correction. That's why, as I said earlier, we anticipate this as a kind of temporary change in the market. Now that the market is stabilized, we anticipate that this is temporary. The second reason, as we explained, is the Middle East and especially coming from Saudi Arabia, with significant market contraction, almost 5% in volume and value so which led this kind of contraction in the Q4. As I said, this, we find as temporary. We don't see this impact of the other reasons you mentioned in the market like GLP-1 and so forth. So as I said, we see those as kind of temporary. Now we believe that the markets are stabilizing and we are cautiously optimistic that Q1 onwards, it will get to the track. And we can say that we had a good start to the year. I hope it explains your answer to your question, Ivo?

Thank you, sir. Even I, frankly, if I have to share that even I buy less chocolate nowadays, or I try to buy less, okay? Which is not easy man, but okay.

Our next question is from Mr. Ali Kerim from Gedik Investment.

Just a question on your raw material inventory. When will the inventory that you bought in the first half of 2025 run out, and you will be able to price in the new basically lot. That's the question that I have.

Please stand by. The team is reconnecting shortly.

Can you hear us now?

Yes, we can hear you. Thank you for reconnecting. If you can, please, Mr. Ali, please once again repeat the question about inventory, from Gedik Investment.

Sorry Michael, just one question. Did you hear my answer to Ivo?

No. To Ivo, yes, we heard the Ivo's answer. Ivo confirmed that he's fine with the answer. And then we moved on to the next question from Mr. Ali Kerim, about inventory. I will let him maybe repeat the question once again.

The question is, when will the inventory that you bought during the first half of the year run out and you will be able to operate on new inventory in the next cycle. That's the question.

So the significant inflation in the global cocoa prices, which increased the value of our own hand stock is definitely an effect. And secondly, softer-than-expected sales in the fourth quarter also played a role in increased inventory balance basically. This is what I can say. Additionally, we started to -- there is Ramadan impact as well. We started to produce and pileup inventories for Ramadan gifting sales earlier than previous year because every Ramadan, the Ramadan is coming 10 days prolonged impact. This has another impact on higher inventory balance in year-end. So all of these are in line with our plan. So we don't see any kind of surprises in that in terms of inventory buildup, Ali Kerim. So hope it answers your question.

Well, actually, what I'm trying to find out is will you be able to operate on the lower cocoa cost, which is down now from last year.

Thanks. So as you know, us and all the major players in the market in such a kind of critical raw material, we obviously work with some cover. And based on the current strategy that we have, we as per our budget and planning, we will have step-by-step move to the lower price -- cocoa prices in the upcoming period. So obviously, we don't disclose the precise timing of that one. But in the upcoming months, step by step, it will be also reflected in our portfolio as per the inventory.

Our next question comes from Ms. [ Erica Ives ] from MetLife Investment.

I got two quick ones. One is, again, on cocoa inventory, sorry purchasing. I know that you hedge in advance in your purchasing, so shall I expect a delayed benefit by 6 months at least. I mean can you remind me how far advanced you purchase cocoa. And the second one would be your Middle East total revenue exposure. You have a direct exposure, I think, of 10% of total revenue. But then you have also exports from Turkiye and just I'm wondering whether this -- within these exports, you have some exposure, you export basically to Middle East. That's all I have.

Yes. [ Erica ], thank you very much for your two questions. Let me start from the first one. As I said earlier, answer to Ali Kerim basically, so obviously, we work with some buying and hedging strategy in such a critical raw material as cocoa. So step by step, we will see the new price impact in our portfolio. As you can naturally anticipate we cannot disclose the precise timing of that but by the time over the upcoming period, we will start -- we will start to use lower and lower prices throughout the time period on cocoa purchasing. In terms of the Middle East revenue exposure, so Middle East, as I explained earlier, makes 10% of our total net revenue by region. Looking at the breakdown of the revenues. And we have many countries in this region. And currently, we don't see a significant disruption in our business in those countries. So -- and we currently have a decent level of stock in the market, in our distributors as finished goods. So currently, in the consumer reach, we don't see an issue. We provide our products in those markets. Having said that, we closely follow up the situation, the conflict in the region, depending on how long the issue prolongs -- we will -- we are closely following that up. So currently, we did a very scrutinized risk assessment in all the countries. And as you know, we are supplying those regions through our factories in our region. We have 13 factories in the region. Two factories in Saudi Arabia, one factory in Kazakhstan, one factory in Egypt and 9 factories in Turkiye. Currently, in most of the countries, we don't have issues of logistics. There are only four countries that are -- we have -- we see some short-term disruption in the sea logistics, Bahrain, Qatar, Kuwait and United Arab Emirates. Having said that, even in these four countries, we have decent level of stock in the market for the short term. And by the time -- so as also we have been working logistics-wise, alternative solutions, which is as mitigation actions, we are following that up. So we are cautiously optimistic that this conflict does not prolong for a long time and the situation goes back to normal. But for the worst case, we also have mitigation plans in place. Having said that, all in all, this -- for the very worst case it won't have any -- very significant impact in our business. This portion of the business in our portfolio.

And just to have a sense how much of your total inventory passes through the Strait of Hormuz in general?

No inventory from this region. So that's why I can confidently say that from the inventory side, we are not affected from the logistics challenge ongoing in this region. We have a local production in MENA region, as I said. In Saudi Arabia, we have 2 factories. One in Egypt also. So that's why from an inventory perspective, from the key raw material procurement perspective, we don't have any issues.

I'll be moving to a couple of text questions. The first one is from [ Joe Kattar ] from Global Gate Capital. Can you please give us any insights on cocoa hedging strategy?

So let me give it to Fulya to give an answer to that one.

Thank you for the question. As you can imagine, and as we have shared in previous webcasts, we do not rely on spot prices. Those -- I mean always hedges for key materials and like FX numbers as well. But as our CEO has shared, we do not disclose any numbers, we do not disclose because it changes by the way. There is not a fixed policy because it changes and depends on the conditions and situations. But I cannot disclose any number, any timing and it can also change. But you can -- we can assure you that there is always -- I mean, our primary objective is cost predictability and supply security and we plan and make our plans according to that. So no surprises from that perspective. That's all I can share. Everything is going in line with plan.

Next question has come from Mr. Antonio Can Sokmen Segura from BCP Securities. Can you give us more color on EBITDA margins across your product lines and geographies, especially in Saudi Arabia? And can you comment on which raw materials have pressured margins, especially with copper prices being weaker versus 2024?

We -- we do not -- again, thank you for the question. We do not disclose EBITDA by category. So that's why I cannot share it with you right now. Raw material pressure. It's the same as Turkiye. There is no difference, but key raw materials procurement are -- I mean, cocoa is from Ghana and Ivory Coast. Sugar and -- these are mainly procured locally. And oil, we have also contracts with Besler, which is another system company under Yildiz Holding. So from that procurement of key raw materials, which are very highly critical, we do not have any issue or any disruption or we do not see any risk for both Turkiye and MENA regions.

Our next question comes from Mr. Pierre Lejeune from Allianz Global Investors. What are your expectations for the 2026 net leverage?

Thank you for the question. So again, we do not like working capital and like net debt -- we do not set a target. But all I can share is we can -- we will continue to have a healthy balance sheet. And in order to have a healthy balance sheet, key KPI -- one of the key KPIs is net debt to EBITDA. We'll continue to strengthen our balance sheet. And we do not disclose any target, but you can feel very comfortable that we will continue to have a very strong balance sheet.

Thank you very much. It looks like we have no further questions at this point. I'll be passing the line back to the management team for the concluding remarks.

Thank you for joining our call. And if you have any follow-up questions, please reach out to me or to my team. Have a good day.

No, thank you very much for your participation. So as I said earlier, so despite of the challenging context, we are determined to grow powered by the strong close action plan that we had in 2026 in the light of our 5H Happiness Growth compass. Thank you very much.

Thank you very much. This concludes our conference call. We'll now be closing all the lines. Thank you, and goodbye.