Türkiye Sise Ve Cam Fabrikalari A.S. (SISE) Earnings Call Transcript & Summary

Hello, and welcome to Sisecam First Half 2024 Consolidated Financial Results Audio and Webcast Call. Throughout the call, all participants will be a listen-only mode and afterwards, there will be a question-and-answer session. Please note, this call is being recorded, and a replay option will be available for full year after the event. Today, I'm pleased to present Sisecam CEO, Mr. Gorkem Elverici. Please begin your meeting.

Thank you. Good afternoon, ladies and gentlemen. Now I'd like to welcome you to the review of our 2024 First Half Year Earnings Results Webcast. As I say everyone is welcome, so we love welcome today and together with our CFO of Gokhan Guralp and our IR Director, Hande Ozborcek. I would like to hand over to our CFO, Mr. Guralp for the review of full year results.

Thank you very much, Mr. Elverici. Good afternoon, ladies and gentlemen. I would like to thank you all for joining us today. In today's webcast, we will be first going to go through our 2024 first half financial and operational results, by presenting business like individual performance. Afterwards, we will be providing details regarding our cash position and capital allocation. Operational and financial review will be followed by SiseCam's report to sustainability value we will update you about the recent developments. As always, we will be pleased to take your questions at the end of the presentation. Please be reminded that the presentation and the Q&A session may not contain some forward-looking statements. Our assumptions and projections are based on the current environment and thus may be subject to change. Before we start presenting our company's 2024 first half results, it is necessary to note that portion to Capital Markets Board decision, our company is subject to IAS 29 inflationary accounting provisions starting from 2023 year-end. Thus, 2024 first half and comparative 2023 first half financial results stated in this presentation contains the financial information prepared and audited in accordance with Turkish financial reporting standards by the application of IAS 29, inflation accounting provisions and are highly expressed in terms of the purchasing power of the Turkish lira as of June 30, 2024. At the end of the operational and financial review section, you may see a display of our key financials with our IAS 29 impact. while delivering our audited figures, we will provide our unaudited key financials with the impact of IAS 29 as well. Slide 4 displays our key financial results. As can be seen on the first graph, we ended the reporting period with TRY 86 billion top line. In volume terms, sales ran back to a rather normalized rate, particularly in our domestic operations and overperformed the levels recorded in the same period of the prior-year across almost all business lines, excluding Glassware. In spite of efforts to drive growth through strategic pricing and sales mix product prices continue to move in a declining trend on the back of the subdued demand and lower energy pricing environment. The discrepancies between the inflation rate and the changes in the value of reporting currencies in international operations relative to Turkish lira caused by the implementation of inflationary accounting as far as risk affected the revenue growth. Accordingly, consolidated revenue growth stayed behind the inflation risk recorded at [ 72% ] based on period and consumer price index -- indices and [indiscernible] by 17%. Excluding the impact of IAS 29, consolidated revenue grew by 41% year-on-year in Turkish lira terms. While navigating an extremely challenging environment characterized by limited global macro growth and escalating growth geopolitical tension, we continue to execute our investment plan. During the reporting period, we brought a new glass packaging furnace online in Eskisehir completed the [indiscernible] process of our glassware furnace and ignited in the same period. To meet the demand in our production regions as well as in our expanded catchment areas through international operations, we were on aligning our sales mix with the evolving reference of our plant industries through dynamic environment management techniques. These efforts led to an improvement in total cost of resource. However, this improvement didn't suffice to offset the inflation rate inflation. Additionally, deriving indirect labor costs given wage increase in market against the continuous elation in the purchasing power combined with the decline in global per product prices negatively affected our gross profit margin. As a result, our gross profit margin up plus 3% compared to 28% in the same period last year. Excluding the impact of IAS 29, gross profit margin came down by 400 bps year-on-year to 29%. Operating expenses, which are composed of 2/3 savings and marketing expenses and 1/3 general administrative expenses rose by 5% year-on-year, primarily due to increase in indirect labor costs. More specifically, transportation costs included in the selling and marketing expenses account for near report or set of our consolidated operating expenses. This is because our [ incoterms ], [ SR ] class prefer us to deliver the orders to this final delivery point rather than collect them from our facilities. This sales model results in a higher proportion of selling and marketing expenses in our overall OpEx and leads to elevated normal figures compared to similar scale of scale company operating under the exports transport. Additionally, indirect labor costs recorded under general administrative expenses represent nearly [ 30% ] of our consolidated OpEx. This is attributed to our extensive operations with production facilities in porting countries and it present in Class 1 countries, including its sales offices. Despite a 5% nominal increase in OpEx, our OpEx revenue ratio ended up at 25% higher than the previous year. This is because the year-on-year change in consolidated revenue was less than the inflation rate of the Turkish lira. This discrepancy is due to a combination of inflation and change in the value of important currencies for international operations as well as declining product pricing environment. Depreciation expenses to revenue ratio of 8%. EBITDA for the period amounted to TRY 7.8 billion resulted in an EBITDA margin of 9%, down from 22% in the prior year. This decline was primarily due to lower reported net other income from main operations and net income from investments largely... [Technical Difficulty]

[Operator Instructions]

Hello, can you hear me?

Yes, I can hear you now. Yes, would you like to restart and go again? You'd like to start where you were? Okay, please go ahead.

Hello. Can you hear us?

Yes, I can hear you very well.

Okay. Okay. I continue from the parts where we lost -- we have been lost, okay.

Yes, I think if you were -- you got lost it from Slide 4. Perhaps you can start from there.

I am continuing with Slide 4, yes. Can I continue?

Yes, please. Go ahead.

Okay. We are on Slide 4 in EBITDA section. EBITDA for the period amounted to TRY 7.8 billion, resulting in an EBITDA margin of 9%, down from 22% in the prior year. This decline was primarily due to lower reported net other income from main operations and net income from investments largely impacted by fluctuation in FX rates on trade receivables and payables and on fixed income securities investments. As you may recall, in the first 6 months of 2023 Turkish lira depreciated by 40% against the basket of hard currencies based on prior period and FX rates, whereas this year, the depreciation was only 16%. Excluding the impact of IAS 29, consolidated EBITDA decreased by 19% year-on-year with a margin of 15%. Current on net income was TRY 4.9 billion, down by 54% year-on-year, resulting in a net profit margin of about 6% downwards 450 bps from the previous year. We recorded a monetary gain of TRY 7.5 billion, up from TRY 4.8 billion due to an increased portion of debt used for working capital and tangible asset investment financing. This year, we recognized nearly TRY 1 billion deferred tax income compared to a deferred tax expense of TRY 5.4 billion in the first half of 2023. The shift from a deferred tax expense to income was due to a change in accounting methodology with implementation of inflation accounting effective from the end of June on the statutory tax accounts as well. Deferred tax assets related to investment incentives were utilized to offset income tax for 2023. However, the change in accounting methodology led to a lower profit before tax, resulting in additional deferred tax assets in 2024. The effective tax rate for the period was 15%. Net income for the period with and without IAS 29 impact was TRY 5 billion and TRY 6.4 billion, respectively. The limited increase in the exchange rate related to the inflation and substantial in both production and operating costs have not only narrowed Turkish companies competitiveness in export markets, but also coupled with the subdued demand as well as a decline product price trends have [ queues ] our profit margins.

Ladies and gentlemen, sorry to let you know that we speak line got disconnected again. And we're trying to connect the speaker line shortly. The management are back.

Okay. I continue the limited increase in the exchange rate. Yes. Okay. The limited increase in the exchange rate relative to the inflation a substantial rise in, but production and operating costs have not only narrowed Turkish companies competitiveness in export markets, but also coupled with the subdued demand as well as declined product price trends helps [ fuse ] our profit margins. It is not worth that situation has been intensified by Turkey's annual inflation rate of 72% and the Turkish lira annual depreciation of 26% based on period end rate against the hard currency bucket. Moving on to Slide 5. We will review the segmental breakdown of our consolidated top line and EBITDA. Our portfolio of operations sales remained balanced over the years, yet a significant role of chemicals business line. Challenge of it being a pure [ Heartland ] play was further supported following our acquisition of a controlling stake in U.S. Natural soda operations in 2021. Chemicals business line led in both revenue and EBITDA contributing 23% to the former 48% to the letter. Architectural Glass operations was the second highest platform of 15 production lines in Turkey, Europe, India, Russia as well as a line in Asia, it's partnership with Saint-Gobain. This segment contributed 22% of total revenue and 30% of EBITDA. Among our 5 core business lines, glass packaging was the third largest contributor accounting for 18% of both consolidated revenue and EBITDA. In contrast, glassware operations contributed minimally to both consolidated top line and EBITDA this year. Industrial glass operations had a negative impact on that of the consolidated revenue and EBITDA levels. This was primarily due to difficulties in passing through cost increases in our LTA-based Autoglass operations with OEM clients and local currency depreciation, leading the cost inflation considering the pure hard currency nature of Auto Glass operations. Energy segment, which includes our electricity trading operations contributed 11% of total revenue, but at a minimal impact on EBITDA. On Slide 6 and 7. We aim to present the key takeaways regarding the first 6-month performance of our main business plans individually. This will provide a concise summary of how our Glass and Chemicals operations have performed in comparison with the prior year from both operational financial perspectives. In the first half of the year, our Architectural Glass business line...

Ladies and gentlemen, so sorry to let you know that the speaker line got disconnected again. And we will connect speaker line shortly. Thank you. Management are back.

Can you please listen to me. I do see that you have a problem on your side because you are calling different numbers, but we are always being halted we are losing the line. Is it something that you can manage this time because my CFO will start again, but we don't want to lose this line anymore.

Just to let you know, we can only investigate this after the call. And we do have other participants on the line as well, you are the only line that got disconnected. We cannot -- I cannot.

And you're the only one speaking. Okay, thank you.

Yes, I will -- we will investigate. Yes, please continue if you want to continue this call.

Yes. The management is ready.

Please go ahead.

Okay. So this is going to be okay, so we are back again. We would like to apologize for the technical breakdowns we are experiencing right now. So we will retry it for the last time. And if there's still issue that's not happening unfortunately due to [indiscernible], we will need to just reschedule the event for the earliest possible time, most probably for tomorrow. So let's try it once more. Otherwise, we will inform you all through the announcements we will be making for the updated back. So Gokhan, please go ahead.

Okay. I am starting with Slide 6 and 7 -- on Slide 6 and 7, we aim to present the key takeaways regarding its first 6-month performance of our main business lines individually. This will provide a concise summary of our glass and chemicals operations have performed in comparison with the prior year from both operational and financial perspectives. In the first half of the year, our Architectural Glass business line demonstrated the silence despite ongoing economic uncertainties, including widespread inflation limited client access to external financing and geopolitical tensions. We successfully navigated these challenges through strategic initiatives aimed at sizing opportunities in both construction and renovation markets domestically and internationally, leading notable improvements in operational performance. Total production reached 1.37 million tons, marking a 15% increase year-on-year. This growth was driven by the introduction of a new auto glass production line and strategic inventory balancing. Turkey remained our primary production hub contributing 62% of our [ let ] glass output, while EU-based facilities accounted for 22%. Production from Russia and India made up the remaining share. The combined production utilization rate improved to 83% from 78% in the same period last year. Sales performance also showed positive trends with consolidated sales volume rising by 16% compared to the prior year. Turkey led with 60% of the total sales volume and a 20% increase in sales supported by heightened renovation activities and 2 additional import restriction measures effective from November 2023 and January 2024. Exports surged by 42%, driven by market expansion in Latin North America, which client portfolio expansion and the relation of logistic issues from last year's earthquakes. The EU region experienced a 13% increase in sales volume with growth driven by resident renovation activities despite a general downturn in new construction. The EU share of consolidated sales rose to 23%. Sales from Russia and India grew by 9% year-on-year, maintaining a combined share of 17% of consolidated sales. Pricing pressures persisted throughout the first half of the year. Euro-based product prices declined by an average of 17% across all regions due to the available low-cost products, decreased energy pricing and subdued market demand. As a result, revenue from the business plan decreased by 11% year-on-year to TRY 18.5 billion and EBITDA margin fell to 12%. Industrial glass business line, which includes Automotive glass in Encapsulation and Glass Fiber experienced a mixed performance with growth and challenges across its subsegments. Automotive glass and capsulation operations, which constitute measure of the division's revenue saw a 4% year-on-year increase in sales volume. This growth was driven by the continued recovery in automotive industries and order book aligned third from OEM clients. Auto Glass replacement channel contributed 15% to the division's revenue in the reporting period supported this positive performance. In our glass fiber operations, we recorded 16% surge in sales volume compared to the same period last year, thanks to [indiscernible] portfolio extension and acquisition of new customers in export markets. However, pricing pressures remain a consistent challenge between both domestic and regional markets facing downward price interest due to intense competition and low-cost imports. Glass fiber operations have a relatively limited impact on Sisecam's consolidated performance contributed 11% to the industrial glass business line revenue. As a result, the revenue recorded by the business line decreased by 1% year-on-year to TRY 9.6 billion, yet it had a negative EBITDA margin of 5%. Sales are foremost vast mix in our glassware business line. Domestic sales remained flat year-on-year due to mainly lower performance in the retail wholesaler channel, which accounts for 50% of domestic operations in unit terms. Contributing factors included a slowdown in new business openings, high interest rates and difficulties accessing credit. Meanwhile, targeted marketing strategies such as Ramadan and Mother's Day promotions effectively boosted sales in national retailers and store channels. The HORECA sector perform as expected seasonally and customized B2B campaign provides a [ lift ] despite a general sluggish global beer industry. International sales varied by region. And in the reporting period with a 5% decrease in sales volume compared to the prior year. EMEA region saw increased sales with markets such as Egypt, Iraq and Morocco, benefiting from successful campaigns. Conversely, Russia faced constraints, although HORECA and B2B channels remained active. Overall sales were limited by declining consumer spending on nonessential products and overstock retailers. The broader European market also paid challenges with cost of living issues impacting retail channel sales, though the growth in the discount sector partially offset these declines. Production levels remained stable throughout the first 6 months, reflecting a cautious approach amid ongoing uncertainties. The decline in consolidated sales volume was limited to 3% year-on-year. Pricing strategies were adjusted dynamically in response to regional inflation and production costs, mid- to high-teen price increases particularly in the domestic market were implemented to address cost pressures and sustain revenue. Glassware business plan achieved a top line of TRY 11 billion, while the EBITDA margin decreased to 0.4%. In the first half of the year, we effectively leveraged our increased glass packaging production capacity and adapt our pricing strategies to sustain growth despite external challenges. Strong domestic performance and this item international sales underline this business lines ability to navigate to a complex luck economic environment and set a strong foundation for continued success in the remainder of the year. With an average capacity utility rate of 93% are glass packaging production capacity expanded achieving a total of 1.18 million tonnes, a 7% increase year-on-year. This growth was driven by the introduction of [ fifth ] Furnace Eskisehir plant in Turkey. The successful reignition of Furnace [indiscernible] plant in Russia and last year's capacity increase at Mina plant in Georgia. These enhancements, coupled with a low base allowed us to meet glass packaging demand efficiently. The production mix was balanced with Turkey base facilities contributing 57%, Russia, 41%; and Georgia the remainder. Sales performance mirrored these positive production trends with consolidated sales volume growing by a robust 10%, supported by strong domestic demand and strategic market adjustments. [ 20% ] year-on-year surge in domestic sales was driven by increased demand in non-alcoholic beverage sectors. Despite challenges in international markets, including weaker demand in Europe and competitive pricing pressures, we achieved a solid volume right of 5% in international operations. This growth was particularly notably in Russia, where the negative impact of higher taxes on [ bike ] and champagne were offset by increased demand for beer. Thanks to higher mobility, a shift in consumption preferences and the existing can shortage. The implemented strategic price increases to address cost pressures, resulting in a moderate rise in average per ton price. While prices were slightly elevated compared to the full year 2023, they remain below the levels of the same period last year due to ongoing competitive dynamics and limited consumer appetite. As a consequence, glass packaging business line reported TRY 15.8 billion revenue, a decrease of 13% year-on-year and 9% EBITDA margin. Lastly, Chemicals segment, which includes Soda Ash and Chromium Chemicals operations achieved net external revenue of TRY 19.8 billion and an EBITDA margin of 18%. In the first half of the year, the business line experienced a complex and evolving market environment for both Soda Ash and Chromium Chemicals characterized by mixed demand trends, regional variations and ongoing pricing pressures. In Mainland China, which is a net importer, Soda Ash demand improved towards the end of the first quarter and continue to strengthen into the second quarter. This growth was driven by increased activity in electric vehicle and solar glass projects, although the region face supply constraints due to maintenance work and low capacity utilization. Conversely, demand in Europe remains weak and subdued in other regions. However, we saw strong domestic growth driven by high tenant demand from the flat glass and glass packaging industries. As a result, our consolidated Soda Ash sales volume increased by 1% year-on-year -- year. Despite temporary tightness in some regions, pricing for Soda Ash continued to be under pressure compared to the elevated price levels of the prior year through which the market moved start from the peak of 2022 that the energy price had skyrocketed and the seller market conditions were very visible in global sense. The normalization trend led to approximately 30% lower average global USD prices year-on-year. Despite slower domestic sales due to currency and interest rate challenges Chromium Chemicals operations benefit from the end of logistical constraints and a recovering sector outlook resulting in significant growth in sales volume, especially in international markets. This growth was driven by an expanded client portfolio and favorable market conditions. Pricing remained relatively stable with lower energy costs offsetting fluctuations caused by changes in the sales mix. Although sales prices decreased year-on-year, the pricing environment remained balance, reflecting a recovery from the prior year's volatility. Moving on to Slide 8. With our production facilities located in 14 countries, diversified operations portfolio and wide range of products, we continue to cater to our clients across the globe. In the first half of 2024, international sales correspondent to 61% of our top line. Export revenue 56% of which was recorded on sales to Europe stood at USD 492 million, including revenue generation of Sisecam facilities located in the region. Europe accounted for 31% of our top line. U.S. market exposure through sales from U.S. Soda Ash facility as well as exports stood at 12%. Accordingly, our developed market exposure came in at 43%. On Slide 9, our strong liquidity position was sustained in the reporting period. Following the eurobond issuances executed by our fully-owned subsidiary Sisecam [ indiscernible ] and the tender of USD 328 million worth Sisecam 2026 notes in the second quarter, we ended the reporting period with USD 2.1 billion cash and cash equivalents. This totally includes nearly USD 100 million financial investments, primarily consisting of a Turkish corporate eurobond and the eurobonds from was from Turkish and foreign financial maturing in 2024 and the subsequent 2 years. Outstanding debt increased to USD 4 billion with a term structure of 75% long term to 25% short term. The interest rate structure comprised of 98% picked to 2% variable with 80% of debt denominated in hard currency. A hard currency share of cash and cash equivalents, including financial investments stood at 88%. Our net debt position amounted to USD 1.9 billion, resulting in a leverage of -- leverage ratio of 2.6x. While this leverage is slightly above our comfort zone for high capital expenditure period, it remains within the limits of our covenants. On the other hand, based on non IAS 29 results, which provide a more accurate data to follow the trend in our business operational performance and final position, reporting period and net debt indicated a leverage ratio below 2x. Our net loan FX position was TRY 927 million, which [ USD 465 million ] long in U.S. dollar and [ EUR 298 million ] short in Euro as of the end of June. Moving on to Slide 10. We recorded TRY 10.8 billion CapEx compared to TRY 13 billion in the prior year. The distribution of CapEx across business lines is as follows: glass packaging business line led the capital expenditures with a 35% share of the total. Key investments include the greenfield asset project in Hungary and the payments for the plant thought process in Turkey scheduled for this year. Architectural Glass segment's capital expenditures accounted for 27% of the total. The investments primarily focused on the new greenfield flat glass facility and furnace as well as a new pattern glass furnace in Tarsus. Chemicals segment represented 12% of total CapEx with investments aimed to operational efficiency and maintenance at our plants in Turkey and USA. We ended the reporting period with a cash inflow from operating activities of TRY 7.4 billion compared to TRY 17.8 billion in the prior year, mainly due to lower reported net profit for the period and a significant reduction in adjustments on tax expenses given the accounting methodology change on statutory tax statements. One adjustment for the monetary gain on cash and cash equivalents, we record a negative free cash flow of TRY 21.2 billion. On Slide 11, you may see our key financials without the impact of IAS 29, which we have already bought you through at the beginning of this webcast, while we were providing details on our audited financial results. Yet, we would like to add that our total assets and total debt to equity have grown by 23% and 6%, respectively, compared to 2023 year end. In the following section, we will update you with some key developments in our sustainability agenda. On Slide 13, we may have a quick look to our 2030 sustainability strategy. Moving on to Slide 14. We would like to share with you some key developments from the first and second quarters of 2024 that support our Sustainability agenda. We have the global suppliers, Sisecam Global Supplier Summit with the team united to collaborate where we met with our partners. The summit prominently future the team of sustainability. The sustainability focus station comprehensively cover topics such as supporting and disclosure requirements related to sustainability, digital solutions and a critical role of supply chain collaboration. We have rejoined Glass for Europe, the trade association representing the flat glass sector in Europe. Glass for Europe brings together multinational companies and thousands of SMEs across Europe to represent the entire building glass value chain. In addition, during the emerging markets corporate day organized by Barclays in June 2024, we engaged with 13 investors across 4 sessions. At this event, we shared Sisecam's Sustainable Strategy 2030 and 2050 targets, ongoing projects related to these target development for 2022 and 2023 performance on ESG platforms, key components of our glass decarbonization road map and the anticipated environmental benefits of our U.S. Soda Ash projects with the investors. The 15th European Society of Glass Technology Conference took place in the United Kingdom from July 15 to 19. At the sustainable sessions of the conference, our teams presented all sustainable Sisecam glass recycling with each fundamental requirements and recycled glass integration fundamental research for optimal batch composition. In April 2024, we became a member of the European industrial aliens on small modular reactors, a platform established by the European Commission to support the deployment of the first small module reactor units in Europe by the earliest 2030. We are pleased to announce that our 2023 sustainability report team together for a sustainable future has been published on our corporate website. In this 11th edition of our report, we will find detailed information about projects and solutions we have implemented under Care for -- or Care for Next strategy. Our GRI compliance sustainability report includes third-party issuance for environmental and social parameters. I would like to share highlights of the prominent projects and progress made in 2023 as featured in our report. Moving on to Slide 15. While Care For Next Strategy with extreme main focus areas, got Sisecam Sustainable Transformation. In 2023, under our protect depleted pillars, which focuses on energy consumption, reduction of greenhouse gas emissions, water management, wealth management and renewable energy usage we achieved the following. We completed our work identifying the risks and opportunities related to climate change based on the framework of the tax force on climate-related financial disclosures. We kicked off our low-carbon road map project for our glass production processes. We became a member of the European clean hydrogen alliance, European solar photovoltaic industry alliance, [indiscernible] Europe and [indiscernible] Enegy platforms. As of 2023, our installed renewable energy capacity has reached 10-megawatt power through solid energy investments in Turkey and Italy. In 2023, water consumption per unit of production decreased by 25% compared to 2020, reaching 3.5 cubic meter per ton. Sisecam Environmental system set back 198,000 tons of glass colors. On Slide 16, in 2023, under our empowering society pillars, which focuses on equality, diversity and inclusion, talent management, operational health and safety and the dissemination of glass heritage to future generations, we achieved the following: our female employee ratio reached to 23.6%. While we provided approximately 477,000 hours of training to our employees, the average training hours per employee was 35.9%. We offered 1,179 hours of training to 480 employees on diversity and equal opportunities. To expect and consolidate our track aimed at improving employee health and well-being under a single brand, we established Sisecam [ Life ] brand. We implemented the virtual reality project in our plants in Bursa and [indiscernible], allowing employees on the production line to experience work instructions in a safer environment before going out into the field and to organize on-site training for each plant. In line with our mission to protect cultural heritage and pass our large legacy to future generations, we launched the [ Gorilla ] collection for the 100th anniversary of Republic of Turkey. On the last slide of today's call, in 2023, under our transforming life pillar, which focuses on digitalization, the development of supplier in terms of sustainability, sustainable products and value-added partnerships we achieved the following. In 2023, we spent approximately TRY 275 million on our R&D project allocating 63.5% of our expenditures to sustainability projects. In 2023, the share of our sustainable products in total revenue was 16.2%. In 2023, the ratio of local procurement in the last -- in the total procurement budget was 79.1%, while the ratio of local source raw material was 86%. The ratio of our suppliers who have accepted the Sisecam's supplier code of contact has reached to 64%. As part of our robotic process automation initiatives, we increased our total workforce gain to 138 full-time equivalents, with a 43 full-time equivalents gain. As part of our operational excellence efforts, we implemented a total of 160 operational excellence projects and involved 3,200 employees in these initiatives. By the end of 2023, the completed projects resulted in a total savings of USD 60.5 million. Please be reminded that 2023 sustainability report is accessible on our website. And thank you. We may now start the Q&A session.

Thank you. [Operator Instructions] The first question is from Ali Dhaloomal from Bank of America.

I have a few questions. I mean the first one I mean, can you give us a bit of sense about the outlook? And when do you expect really things to turn around in terms of ability to pass through cost inflation to customers, especially in the auto glass business, but also maybe the other businesses like the glass packaging, I mean in the market that you consider to be a bit challenging and also in the glassware segment. And then linked to that, I mean, you were -- I mean, in the past, you used to guide for net leverage to be capped at 2.5x. Then recently, you were saying that through the cycle, you expect net leverage to go to up to 3x. So I was wondering if this guidance is still holding? Or if you will now stick to the incurrence covenants of 3.5x that you have? And also, I mean, linked to that, are you considering any initiatives to mitigate the pressure that we have seen in terms of leverage? I mean -- and in terms of cash flows, whether, for example, postponing all this CapEx that you are planning for this year and next year that are quite sizable or maybe asset monetizations. I mean just I mean, we would love to get a sense of how you -- I mean, you're thinking about mitigating any pressure in the next 12 months or so?

Thank you, Ali. This is Gorkem. So I believe we already provide the outlook, but in my words, let me try to recap especially what we believe is upcoming. So as you started by asking for auto glass, let me provide the insights, especially for the European car market, which is the main market for Sisecam in this production, both for the exported cars from Turkey being sold to European market plus catering to the European car OEMs. So the outlook seems to be a little bit milder. But there are two different aspects we have to consider on that perspective. The first one is how would be the market? Second one being what would be the pricing environment? So including ourselves, we know that all the main suppliers to the OEMs are renegotiating the prices together with the escalation. You know that we have been successful in repricing most of our models with the OEMs, and we will continue to do that, especially considering the cost inflation which is happening everywhere, but mainly coming from especially the Turkish cost inflation, coupled with valued Turkish lira. So this is one of the main dimensions around the pricing and the margin generation. But for the outlook of the auto glass market, even if it is turning to be a little bit milder I believe we will need to see at least a couple of more months given the 2 consecutive quarters to be able to say something concrete that the market is back on track. So this especially holds for impact the rest of the businesses. So for glass packaging, we know some of our competitors are taking their cold repairs to earlier periods. And for some what they announced that lower profitability generating asset [ rookies ], are considering to shut down. So -- and so the market is trying to balance itself being also cautious about what will be the demand outlook coming from the market. So this has been a -- we are all extreme about the cycle. But this time, this cycle has been a little bit different from the other ones coming with some different drivers than the past. So especially the energy pricing, if we go back to 2 years due to the energy pricing environment, you may remember that all of the goods prices, they are at historical high combined with historical high energy prices. So the market is now moving back to the reality, but unfortunately, the cost inflation, coupled with the softened demand conditions are creating pressures on the project margins of all the industrial players. It's not specific to glass itself even. So for all the industrial producers, more or less, that's the same story happening. But for sure, the management teams are here to find the right solution. So if you may remember when we were having the year-end webcast for 2023, we try to give the color of how we will be managing our CapEx cycle. So our CapEx cycle is heavily dependent on the EBITDA generation performance of the company. And we already promised to the Board that we will be aligning ourselves, especially for the speed of the CapEx and delaying or, if necessary, cancel it. And as you mentioned, on the like radical end disposing some of the assets considering how the EBITDA generation performance is going, when we compare with the budget itself. So we have already shortened our CapEx spend, as you can see from the end of 6 months numbers. For sure, we continue to stick to our internal guidance together with the internal limit. So Sisecam is not -- by heart we don't want to stay on the lower end of our internal limits. So the company is taking all the necessary precautions, including both the OpEx and CapEx to rebalance itself with the royalties. But as you might guess, when you're in a business like glass itself, which is a continuous production business. And you have a huge number of employees that you're employing all around the world, coupled with the cost inflation will start to happen from one night to the other. But for sure, all the necessary actions are being taken. And we believe in the upcoming quarters, we will see the results of them and continue to align ourselves with the market reality for both OpEx and CapEx. So I hope this is helpful enough. So if you have any further questions, please let me know.

Our next question comes from the line of [ Lorenzo ] from JPMorgan.

Just following up on Ali's question. Could you please give a little bit more color and numbers around what kind of EBITDA margins would you expect or EBITDA level would you expect for the rest of the year? Given the large drop in Q2 to roughly 6%. What kind of -- so second question, what kind of CapEx are you budgeting for this year? And also if you're rebalancing the CapEx spend given the performance year-to-date? And then on separate note, could you give any guidance or your view on the outlook for Soda Ash prices for the rest of the year and potentially into 2025 as well?

So for the second half, as I mentioned, balancing our sales both for OpEx and CapEx. We are trying to improve the margin generation performance of all the individual businesses. So considering both the spend side, and also on the pricing side. So linked with this, I cannot say unfortunately that all the businesses themselves are in a position that can be in a position to improve the pricing environment beyond the cost inflations that are happening. So we are at least trying to increase the price aligned with the cost inflation. But in some of the businesses, we believe we can go beyond and that will not be only coming from creating a better environment, but doing better cherrypicking of the portfolio. So and I believe that will be mainly important for glass packaging and flat glass. And for glassware, the thing is that, unfortunately, this is the business that when there are some issues in the market for around the payment performance. This is one of the main first industries to push the brake. And unfortunately, that is what we are seeing both in Europe and Turkey and in the surrounding Mediterranean region at least. So for sure, we are directing our efforts to go with higher portfolios to some other geographies where we have improved pricing position. And for Soda Ash itself, we already increased our prices on a blended basis around like $15 to $20 moving into Q3. But for sure, each and every day, we're looking for opportunities to continue to improve the pricing environment. But as you know, as their long-lasting relationships with larger corporate and capacity that was had to be coming to the market, but not coming to the market for a long time, which is happening from China. Demonstrating to the market has been the double impact but now I can say that we are starting to see that this new huge capacity has been digested by the market. And also, I believe the most important thing is that demand and supply players are adapting ourselves to the new reality. So that has been a large negotiation ticket, I should say, on the customer side for some time. And now as the market is balancing itself, I believe that will not be the case anymore. So the margin generation for the second half should be beyond first half and that is what all the teams in the company are dedicated to and directed by [ myself ]. But for 2025 I believe it's still a little bit early because when we were entering the year, it is a common shared belief and acceptance, I should say, that you'll start to improve its demand starting from Q2, which didn't happen, unfortunately. Now we are seeing some small movements that's creating a little bit of positive impact on the market, but having an experience like Sisecam for the last 90 years, I believe they are still very early signals for us to say that now it will be much more concrete year next year. So moving closer to especially entering Q4 I believe, and especially seeing the pricing environment for the next year still starting with Soda Ash, we will be in a better shape to share with you how the market would look like. So our expectation is that at least it will not continue to smoothen further. And it should be a turning point the upcoming months, but as the drivers are a little bit different this time, and they're very differentiated actions coming from the market players, we will need to have a better understanding from the market but Sisecam is not to use the margins and levels like this. So we will do each and everything to get back to the levels that we are used to.

If I can just follow up on that. Usually, the CapEx spend per year is roughly 900 million -- in dollar term $900 million, $1 billion. And first half of the year was $330 million. Is it fair to expect that the second half of the year will not see $600 million, but lower because of the EBITDA performance or you're still budgeting to another $600 million to get to this?

I can easily say, let's say, give us say at level lower than $1 billion of CapEx spend. For the second half, it should -- it can be a little bit higher due to the payment schedule, especially of the larger projects we have, but we are already working on them rebalancing aligned with the EBITDA performance. So we will need to see, especially for the larger projects that we are carrying out what would be the updated payment schedule, and we will provide updates about the in the coming webcast.

Thank you. And sorry, just last question from me. Given the spike in leverage and the performance, do you expect any pressure on the rating side from the rating agencies? I don't know if you already had any discussions with them on this?

So we are already in continuous discussions with them. And until now, we haven't even received any signals about this. And I believe this is mainly due to this not happening only to Sisecam itself, but both industry-wide and industrial-wide thing that is going on in the market right now. But for sure, we don't want to link ourselves with the rest of the players. So we will continue to improve our position in each and every quarter.

Our next question comes from the line of [ Erica Ive ] from MetLife.

I would like to go over a moment to CapEx. You guided -- just to be specific, you guided at the beginning of the year CapEx between $700 million and $800 million. Shall I deduct from what you said that most of it is committed and so you will stick with this guidance?

So it's a pleasure on our side, and we have to correct ourselves. We didn't have a guidance, at least on our side, and apologies if we created a misunderstanding that we will have a CapEx around $700 million to $800 million because I know that for the internal budgeting, it was beyond this. Most probably, it is excluding U.S. spend. But for our CapEx, how we manage our CapEx. The investment was roughly around [ $10 billion ] for the upcoming 5 to 6 years' time, working the internal [ G ] balance sheet based on the speed of the CapEx. So when we are -- we have a performance aligned with our budgets, then we make a replacement in our portfolio of CapEx. So when U.S. is a little lower. We could have easily taken it to the other CapEx spend to reconsider their time to market. But as of now, our performance is lower than we expected for our internal purposes also, we already limit ourselves. So I cannot comment around to the 700 and 800. But I can easily say that we will be staying at lower than $1 billion by the end of the year. And as I mentioned, we are updating our payment schedules and rebalancing ourselves with the EBITDA performance and the expected EBITDA performance then we will be in a better shape to share with you the updated figures.

And given that you stressed before that you will do what you can in order to rebalance performance, are you also considering suspending dividend payments given that I can see that also this quarter, you paid yourself dividend?

So there are differentiated levers that we can use for that purpose. For sure, dividends is one of the levers that is always being considered, especially considering the environment. But as of now, there has not been any concrete decisions made on this. And whenever that has been decided to do something a little rather different than what we used to do. For sure we will announce -- we will provide you updated information through the formal announcement media.

Understood. And in terms of leverage, as well, maybe, yes, my colleagues said 3 times that you were looking on EBITDA in terms of a high CapEx period. I got it down to 2.5x and 1.25x in -- during the low CapEx cycle. So considering -- well, the last year performance then in the considerable amount of CapEx. Do you expect it to get to 3x leverage or higher than that?

So we already shared that our operational levels that we feel are much more comfortable is around 2.5x. And our internal limit is 3.5x. So Sisecam, when you look at Sisecam's sales [indiscernible] of how we manage our balance sheet, we are not in a position that we feel ourselves pretty happy also. So that's why I'm very [indiscernible] in sharing with you that we will do the necessary rebalancing so that we stay and go back to levels that where we feel ourselves much more comfortable. And whatever is required to just linking with the realities of the business performance, plus the CapEx requirements to make the business much more shine in the upcoming years, there will be the right balance and the optimization, and we will each and every day working to continue to improve that optimization cost. So for sure, Sisecam has never continued to grow its business, as we shared with you before, by diluting the margins and grow only for the sake of growth. So this mentality has never changed in Sisecam and we'll never see. So I can very openly share with you that.

Understood. In terms of 2025, I know that the CapEx is also sizable in 2025. Is it committed? Or could you be -- could you postpone it?

Which part is committed?

The 2025 CapEx, yes.

So nothing has commented on our side. So we can -- and if you're talking about contractual commitments that we might have for anything that we discussed with our long-lasting suppliers there's always a way how to postpone them and most of the time to cancel them.

So you don't envisage to that who get to [ $900 million, $1 billion ], if the current trading environment remains as such?

I believe it might be better to sit down to have a much more detailed discussion on that because we have to link ourselves with your numbers, what I'm hearing from you and provide you further details so for anything that we can provide you in further details for sure, we will share with also with our other investors in a more detailed one. But as I mentioned, as we continuously reschedule ourselves, and we have not even completed our strategic plan and budgeting for 2025, it is too early, starting from here to commit for something that we will be doing or we will never be able do it.

Helpful. And then if I may also ask, going back to Soda Ash prices and glass prices I had a call with your Investor Relations in Q1 and she gave me some levels that has been observed. Do you reckon now -- well, first of all, in terms of glass, European glass price, are we at the level -- have you seen basically a further reduction quarter-on-quarter? And also, do you expect prices to continue reducing in the second half or to remain stable and therefore the EBITDA margin improvement will be driven by basically volumes?

So the price of [indiscernible] at level -- lower levels. In fact, they increased in most of the regions, especially for flat glass with the exception of German. And for the Glass Packaging market, the increase is a little milder than it is in Flat Glass. So we don't expect prices to go to lower levels unless there was something unexpected occurs especially on the focal tensions that are happening almost everywhere, and in surrounding regions of Europe. And for the pricing region, the pricing to happen in the market as there is a cost inflation almost the were there. For sure, the prices should improve so that the company stay to be at a profitability that they are used to. And this is a must for all the industry to be able to do their cold repairs and continuity investment. So otherwise -- so there is an anticycle. So there's always up and down. Nobody knows how long, but everybody knows that there will be up and downs in glass business as always. And when the market is high, there will be no capacity for the markets that the glass industry is keeping to that they will be able to utilize. So the market always balances itself like it happened in each and every cycle. As I mentioned, as the driver is a little bit different this time, especially the very different market conditions after pandemic trying to be digested and understood by the market players on both sides is being realized a little bit different this time, but they will know the down cycle and upper cycle never ends forever. So we will see the markets to come back to meaningful levels. The only thing is that we need to understand with the initial signals when this will start to happen, so that by the new capacities and doing the right moves so that we get the most out of the market when we are at the upper end of the cycle.

Our next question comes from the line of Ece Mandaci, from Unlo Securities.

I have a follow-up question regarding the pricing environment and volume growth. First half, there was a base effect, of course, as you have mentioned, particularly for the Architectural Glass segment. So for the second half, should we continue to see growth in Turkey operations, exports as well as international locations? That's my first question. And second is about the price gap between the Turkish glass price and international sides also including the recent -- not the recent maybe 1 month ago, there was the energy price increase after that, was there an increase in the turkey prices flat glass prices? And how was the gap after this energy price hike between Turkish operations and international markets European prices. So how do you expect this capability continue or is there a sustainable gap between the 2 pricing? And will the growth in volumes be sustainable for the rest of the year? Thank you.

So as I mentioned, there are 2 dimensions, volume and the pricing environment. As of now, we are not experiencing major problems in the volume. So the main issue is that costs and the pricing environment. So for this, I believe it belongs more to the energy market analysts to comment on this. because we are one of the players for sure, we are trying to understand what is upcoming and in our sales with those royalties and for some markets like Turkey, unfortunately, even if you understand what's going on when there's a softening demand in the market unfortunately, you read it first and try to balance yourself to some extent, but that doesn't happen at the major levels that you should be trying to answer to what's happening in the market. So for Turkey, as we shared with you during the presentation, the cost inflation is beyond 70%. And when you look at both the currency devaluation and coupled with the pricing environment, especially in hard currencies, unfortunately is not in a position to pay off. So normally, what happens in markets that are emerging markets is, when there's a softened demand in the market, which we that economy is not performing very well, the currency devalues so that you're in a more competitive position to export. And unfortunately this time, we start the game that's happening in Turkey. When this is the case, we are trying to rebalance ourselves together with the capacities and the pricing environment that is happening in Turkey and in the other geographies we are operating in. And to play with the volumes, you need to be in a position to see that the market, that the players pricing elasticity. And unfortunately, the market is not very price elastic as of now. So there's not that much meaning in playing with the volumes as of now because even if you play with the prices to provide something further, unfortunately, demand is what it is right now. So I don't believe that there will be a part from so I will always keep the caveat of saying that unless something abnormal as of now happen because for the last 3 or 4 years, we are very much used to seeing very abnormal things happening at the same time. But the thing we need to understand, I believe, just a very quick recap for a minute what has done in the last 2 years. When the dispute between Ukraine and Russia started the energy price goes to -- went to incredible levels and that's the product pricing. So just to give you an example, the normal flat glass prices in Europe is roughly around EUR 3.5. So then at the lower end, it goes down to EUR 3 when at the upper end, it goes to EUR 4. So we have sold glass around EUR 8.5 to EUR 9, given announced EUR 10 to EUR 10.5. So the energy prices turned to be milder. Now in Germany, the prices are as low as 2.8 and there is -- that's coupled with cost inflation. And when those things were happening that especially the OpEx part it was like just to give you an example, so we much discussed stands for like personal spending. So for nonlabor personal spending, it went as low as to like 6%, 7%, which was roughly on average 12% to 13%. Now the cost inflation is coming with -- when the markets are not able to absorb with the pricing environment, and they are as high as 20%. So this is the main thing happening for all the industrial all the sectors I should say, especially for the companies that has production hubs in Turkey because when the currency is not devaluing [indiscernible] and when you look at the hard currency risk focus of those costs, there rocket high. So what each and every company like ourselves are trying to do is trying to rebalance yourself so that you align yourself that the market reality is that the short term but keep the business alive noting that the types will turn and there will be a higher cycle we will be experiencing in quite some time. I cannot say in a couple of months but most probably starting from a couple of quarters, the market should be back because it has already been a lengthy cycle. So that is why we are trying to make the necessary fixes on the short term, but keep the business mid- to long-term strategy align and be one of the most strong players in the market when the markets start up again. So this is in a nutshell what I can share with you for the pricing environment linked with the energy markets for you know our strategy, we always try to create golden circle or triangles in our business, especially for business like glass packaging and flat glass, so that we have a good pricing power in the markets that we are operating in. But whatever strength you have in the market like our market share in Turkey, which is more or less beyond 65% in each and every segment almost. There is an amount that the market can digest. So we have always been able to translate to cost inflation for so long as I'm with the company for 11 years as of now. We have always been very successful in translating the cost increases and we are doing as of now at the maximum extent, but it will be putting too much to say that ever we are able to do it 100%. So this is mainly demand linked pricing environment is linked with the cost inflation. So that's why, together with OpEx and CapEx, we will rebalance ourselves further so that standardized are upper, we will be in a better position. I hope this a little lengthy description of what the market looks like gives you a better understanding, is for your question. And the other questions raised by our other participants and some other participants may have in their mind.

Our next question comes from the line of Cemal Demirtas from Ata Invest.

Thank you for the presentation. My first question is again related to the price cost and the currency impact on your margins. We see around 5.6% EBITDA margin post inflation accounting results. And historically, again, based on your historic numbers or nominal numbers you have around [ 5.9% ]. I would like to understand the level, the sustainable levels for you going forward. Could we still assume that pre-inflation accounting like 20% levels will be ahead in the future. I know it's very difficult to predict, but in terms of vision because you made mergers, you merge all your companies, more efficiency we were expecting. So I would like to see that side from the long-term perspective. And related to very short-term you are expecting some recovery in the margins, right, in the third quarter, as I understand from your presentation. And should we assume that there's a gradual improvement because already part of your numbers are -- the quarter is to be completed very soon and maybe you have also some color. I would like to understand what could be the good driver for that. The price side, the cost side or the currency side, we already see. It doesn't have any positive impact, it's still putting pressure...

Cemal, apologies to interrupt. But do you believe there is anyone around the world to comment on but where do we expect this coming from currency there?

No, no, no, exactly. It's very difficult. But what I'm trying to understand is it's a very difficult thing, just any -- because for the third quarter, it's difficult to -- I totally agree with you. It's very difficult to major given idea. But at least in our minds, for the Turkish companies, we are still seeing some pressure between the cost side and the currency side. So when look at historical figures. In second quarter, it was high and in the third quarter, we see further pressure at least from the outside. So in your internal cost efficiency, all those sites maybe because of your -- like the earlier years, you had hedges now and afterwards, the prices went down on the cost side. So could we see any improvement on that side that will help your margins in the third quarter? I don't know if my question is clear.

That's why I try to sum up before your question what the market is going through. So you cannot place that much with the volumes, as I mentioned, that the market is not price elastic. So for the currency, unfortunately, I cannot comment because for especially the investment banks and investment houses. You can easily look at what they forecasted for the end of 2024 at the end of 2023. And some what they are forecasting now. So and I don't believe we are in a position to say that as the industrials are experiencing, especially export-oriented industry in Turkey are facing issues the current -- the currency [ BLB, DVL ] or so on, that's too much. Well, our management mentality until now has always been to play with the drivers or link yourselves with the drivers that you can play in. So it is the volume. The volume is going already huge. So we are not losing that much volume, especially when you compare with what it was last year and what is the maximum. So I believe we are in pretty good shape in volume side. Pricing environment when you link it with the other drivers of cost inflation plus currency. Unfortunately, as the demand is not strong in the market, you cannot translate what you should be translating to go back to the levels that we feel ourselves comfortable. So I don't believe, as of now, there is anyone that can comment or comment on inflation accounts linked EBITDA margin generation. I believe that too much. But what we link ourselves with, which is the management EBITDA, which is the nominal at that we have been following and sharing with you. And we lost almost like 8 to 10 points in differentiated businesses. And so we went down to 15% and so this is not an area. We feel is as comfortable, we feel ourselves comfortable on the [ north ] of 20, as we always shared with you. So the management is doing everything to get back to 20 and beyond. But unfortunately and to improve the margin levels, starting from this quarter, which almost 2 months has already passed, I should say. And the thing is that I cannot say whether it will be a radical increase or a gradual one. It's totally dependent on the market conditions, especially macros improving, but I can say that at least 51% it seems that macros all around the world will not be coming back too radically. I mean this is the case. Unfortunately, the pricing environment follows this. So most probably, it will be a gradual one, but we will not link ourselves only with the pricing environment. So the levers we have in our hands is to better optimize the OpEx and CapEx spend. So we are working on that.

And the follow-up question. Thank you for the great explanation. You did the best as much as you can with this question. I know it's very difficult to answer for sure. My question is, again, you have a big structure, and this -- the inflation accounting side. When we start with the inflation accounting, there are many questions to be asked. One side, is the inflation accounting which we use the Turkish financial reporting standards, which we understand a little, not little bit but the medium now right now, but the statutory account side, the ex financials, it was still until a week ago, it was uncertain. But I would like to understand as Sisecam overall, do you have any numbers that shows that you are going to pay higher tax or lower tax because of inflation accounting on the statutory side. It's really -- it's an important question. Because the starting point with the inflationary accounting was that Turkish companies are paying tax for the money, which they didn't earn so that was the basic starting. But lately, there were discussions for most -- some companies, it's creating ex financial expense and some others, it will not have any. What is the case for you? Or if I am sure you have more knowledge on that. So could you give us some idea on that side, at least from Sisecam's perspective?

Cemal, as I mentioned, it's not that easy, and it will be much more confusing to try to go into the details of what might be expected by the margin generation after the inflation accounting because you have to consider that each and every day is changing the legislation around this also because there are some incentives we are using due to the investments we are making. So on one side, there are the incentives that are coming. And then there are the everyday updated tax regulations, where even a minimum tax level is trying to be introduced to the market. So only these drivers, the incentives due to the investments or a minimum tax level to be paid considering the size of Sisecam could change all the picture. That's why we are referring from providing any guidance. So we are not trying to keep you in the dark. But whatever we commit as of now, the -- how we try to manage our company and we don't feel that's a very responsible way to attack when the things in the market are not stable, and we don't have enough information to comment on something that is especially around inflation accounting. So we for sure, we know the details of what has been discussed in the market, especially by the regulators. And we are each and everyday doing some risk calculations for upsides and downsides that can happen to us. That's why I'm very openly sharing with you inflation accounted after inflation accounting margin guidance or trying to target for yourself might be very much misleading because it can lead to numbers that you hit due to reasons that are not coming from your management and you may be underperforming only due to the regulations changed over a night. So we believe that's been a discussion we did with the management team. So we will stick to the nominal levels of EBITDA margin the management margin, as we call it, to target for ourselves because for that, there are the levers that the management can manage. For the others, unfortunately, we have to balance ourselves with the ever-changing realities. And this is not the way how to manage your business, especially for the long run.

Exactly, exactly. Yes, it was very helpful. I know it's a very difficult situation. But again, you always have some just catalyst of watch and your nominal perspective will help even for you and for us, we are all following, and we don't have enough data to see what's the trend on that side. So I thought to land, I hope or wish we will be leaving this inflation accounting by 2027. That's my hope, at least for all of us. Thank you very much again.

So almost 2 decades ago. So the TV's pretty experienced in using the inflation accounts even myself. I was doing it by that time. The thing is that we don't want to keep you in the dark for sure, but we don't want to give you the wrong direction of the light. So as the numbers are huge, as you can see in our Q2 numbers, that might be very misleading. So I believe for all of us, for the investors, the shareholders yourselves, as the management team for ourselves it is much more reasonable to continue to stick to the levers of the business for the mid- to long term and try to rebalance ourselves with the realities of the short term because if you concentrate too much on short term, especially including things like inflation accounting, you may take some actions that might not be the best options for the mid- to long term. But when we're talking about right balancing ourselves, for OpEx, CapEx is the pricing environment, the demand environment and the business performance itself for sure, they are directing things to go after and to optimize ourselves. So thank you for your comment.

Thank you. Our next question comes from the line of Evgeniya Bystrova from Barclays.

Thank you very much for the presentation and for such lengthy call and for answering all of your questions. I will try to be quick. So I have one follow-up on the CapEx. Obviously, you said that you can't maybe share a direct guidance, but maybe could you please share which projects you could postpone or which projects in terms of investments, you're still planning to go ahead with this year and maybe next year? And also a related question to that, what is your status in terms of receiving the permits for the Pacific project in the U.S. This is my first question.

Sure. And I will try to be as quick as possible. So the major projects that we call them, which are the glass packaging in Hungary. One first supply [ plus ] energy and flat glass line in Turkey and Tarsus and the capacity increase for soda ash and the 4 major projects that we are carrying out together with the already announced coating investments that we are making. So they are the 5 I should say major investments that are ongoing. So for the -- as of now, we have not decided to cancel any of them. We have already slowed them a little bit based on the market expectations and the expected capacity that will be required. But we're already in the heart of our strategic planning period for next year and upcoming 5 years time. So I believe that by the end of October, we will be in a better shape to understand the market demand and balance equilibrium so that we will decide whether we will further slow down or, if possible, to speed up some of those major investments. So apart from those major investments, I can say that we pushed the brakes on each and everything. So for anything that is a part of our routine, they are not there anymore. And even for things that might be delayed for a couple of years, we have already deleted them from our investment list. We will try to stick to our major projects for sure constraint their speed and the market. And for U.S., I can say that we will be roughly around mid next year to start to construction. So it will take roughly around 3 years to -- so even for this year, considering where to come with a differentiated approach by -- with a phased approach, or more big bang approach, but it will be phased, but the time period will be less. So I can easily sum up by saying that we are looking at if there are any demand drivers in the existing markets that has taken some of the expected demand come for good or is it only the cycle effect that the market will be back quite some time. So for the businesses, which are more or less linked around glass business, we know this cycle story by heart and like almost 1.5 years ago or 2 years, I should say, the market was killing us because we didn't have enough capacity. Now we have to slow down the CapEx, and it is the reality of our business, and that is what we are most experienced. As I mentioned, this time it's a little different by the drivers and considering the pricing alignment demand, cost inflation and the currency itself, this is a little bit new normal. And for sure, we are linking ourselves very quickly with these realities. So at the beginning of the year, we will be in a better shape to share with you whether we have further slowed down any of our investments or not hoping, but we further postponed or even decided to cancel. But canceling those major investments, I believe, is too much as of now because still for the demand levels in the market is not in a position that the demand has gone and will never be back, but the timing might differ, so we are trying to make the right balancing based on that. But for any of the investments, if we see that the demand has gone for good, [ semi ] will be there. But in all of those investments, we are in the leading position, so most of the time rather than the competitors, we will be in a position to be first to the market when the demand is back to the market. So as we are in a good shape, I believe it will create also a further delay in our competitors to consider to come up with additional supply to the market, which is also a type of a risk management tool that we are using.

Just a quick follow-up. Did you say that you will be able to start construction in the middle of next year. So it means that you will -- you expect to resolve the necessary repairment?

Based on the expected speed of the permitting because for the major part, I can say that we have gone through a long growth on that. So the public announcement is already being started. So there will be the formal processes to follow. So the -- even there is a chance that it might be the end of first quarter, but we don't want to push especially when the U.S. is going through an election period. We believe the end of first half is a much more realistic time and we will continue to update you on the progress on that side for sure.

You also mentioned capacity additions in Soda Ash as one of the key 1 of your 5 key investment projects. Does it -- is it Pacific? Or are you referring to the Pacific or [indiscernible].

[indiscernible] so in Turkey for synthetic [indiscernible] so it will be 175,000 addition to the already existing capacity, which will come at improved cost environment. So that will help us when the markets are back because it will take at least 2 years time. So we believe it is a better way to get prepared, especially from our cost champion synthetic production that happens in Turkey and Mersin.

Okay. And my other question is about the cash balances that are -- could you maybe share what are the cash balances that are held by the U.K. company by Sisecam U.K.?

We cannot comment on that, but we already shared the main purposes why we initiated the U.K. business, especially before trading and finance purpose. We believe that this is a very important for Sise, especially for international businesses to help for better cost environment for financing and to better optimize our operations in Europe and also for the larger international business, both on trade and finance. But for the cash balances as of now, we will not be able to share. But I can only say that U.K. will play an important role in the upcoming future of Sisecam, where it will help us to be much more closer to especially the financial market and also create a better understanding of Sisecam in those markets by providing further details. So although we have it mainly for finance and trading purposes, we have some plans moving forward for our investor relations to be much more active in those markets also so that you will have some much more frequent discussions rather than only some online discussions that you have.

Thank you. There are no further questions. I will turn the conference back to you, Mr. Elverici. Please go ahead.

So first, I would like to start by apologizing again for the technological issues that we have faced, and we will guarantee it will not happen again or to do our best on our side. And I would like to also a personal thanks for your interest in the details of the businesses. So we all know that, unfortunately, we are running through the downside of the cycle as of now. And this is not the environment that as the company and the management itself is feeling to stay for a long time. So we will continue to take each and every action to get back to the levels that you are all used to coming from Sise. And although it is -- I think that has been seen for each and every company in our competition in our geographies. This is not an excuse for the management team of Sise, not to go back to the level -- so we will push -- continue to push all the buttons to get back to the levels that you are used to. And we hope to see you and meet with you in the conferences and also have the next webcast with better results. And hopefully, for a much more promising demand and supply balance that's happening almost there everywhere, around the world. So thank you for your attendance and hope to see you in the year-end results conference.

Thank you, ladies and gentlemen. This now concludes our presentation. Thank you all for attending. You may now disconnect.