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

Ladies and gentlemen, thank you for standing by. I'd like to welcome you to CCJM's 2024 Year-End Consolidated Financial Results Audio and Webcast Call on the 28th of February 2025. [Operator Instructions] Without further ado, I'd like to pass the line to the CEO of CCG, Mr. Gorkem Elverici. Please go ahead, sir.

Thank you. Good afternoon, ladies and gentlemen, and welcome to our 2024 year-end earnings results webcast. I hope everyone is well since we last spoke. And today, I'm together with our CFO, Gokhan Guralp; and our IR Director, Aandralberte. I would like to hand over to our CFO, Mr. Guralp, for the review of our 2024 full year results.

Thank you very much, Mr. R. Good afternoon, ladies and gentlemen. I would like to thank you all for joining us today. In today's webcast, we will be first walking you through our 2024 year-end financial and operational results by presenting business line individual performances. Afterwards, we will be providing details regarding our cash position and capital allocation. Operational and financial review will be followed by Sejang's approach to sustainability, where we will also update you about the recent developments. As always, we will be pleased to take your questions at the end of this presentation. Please be reminded that the presentation and Q&A session may 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 year-end results, it's necessary to remind you that pursuant to the Capital Markets Board decision, Turkish corporates, including our company, are subject to IAS 29 inflationary accounting provisions since the end of 2023. 2024 full year financials and comparative 2023 results that we presented in today's call contain the financial information prepared and audited in accordance with Turkish Financial Reporting standards by the application of IAS 29 inflation accounting provisions and are expressed in terms of the purchasing power of the Turkish lira as of December 31, 2024. At the end of the operational and financial review section, you may see a display of our key financials without IAS 29 impact. While reviewing our audited figures, we will provide our unaudited key financials without 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 185.6 billion consolidated revenue. Over performance relative to the previous year's volume sales persisted notably in our Sural glass and glass packaging business lines. While Chemical segment sales performance remained unchanged compared to the volumes delivered in 2023, Glassware and industrial glass business units experienced a decline on the same basis due to the cyclical nature for the former and seasonal variations and lighter product deliveries request of OEM clients for the latter. The increase in product pricing, on the other hand, was pertinent to regions where signs of better demand at client industries level were evident. Consequently, our sales teams exerted maximum effort to pass through the rise in costs by meticulously monitoring the demand trends from various perspectives, including but not limited to the product category and regional dynamics. Based on 2023 year-end data, the annual increase in CPI index came in at 4.8%, while our reporting currency depreciation against hard currency basket stood at 16.3%. This gap between the inflation rate and the change in the value of reporting currencies in international operations relative to the Turkish lira continued to adversely affect our revenue growth. Accordingly, our consolidated top line moved by 15%. On the other hand, an annual growth of 29% was recorded in our consolidated revenue based on with our IAS 9 figures. Our profitability was marked by a decline that was largely driven by a series of interconnected developments. Although we managed to keep the gross profit margin throughout the year around 23%, which was also the main record in the last quarter of 2023 from a year-on-year perspective, it went down by 500 basis points. Increased direct labor costs as of a high inflation environment, elevated production overhead and the inflationary accounting practices that resulted in slow-moving inventory values were experienced throughout the year. This was particularly pronounced in our glassware and industrial glass business lines. These operations naturally entail high inflation levels with the supplying to retailers and wholesalers and dealing with substantial backlogs for its OEM clients long-term projects. Higher inventory days outstanding intensified the cost of goods sold compounded by the implementation of IAS 29. Prolonged inventory holdings are susceptible to inflated costs, yet the pass-through mechanism remains limited by contractual obligation and market dynamics. Consequently, net realizable value calculation necessitated the recognition of inventory impairment provisions due to costs exceeding market prices, thus creating an additional dilutive impact. Meanwhile, thanks to the higher capacity utilization in the majority of our glass operations, especially for the region with improving demand conditions, our total cost of goods contracted by 10% in Turkish lira terms compared to 2023 index figures. The decline in eSDolicyificly reduced the value of our Europe-based operations and affected our export revenues. Additionally, with nearly 50% of our cost of goods sold priced in Turkish lira, yet only contributing 40% to our consolidated revenue, between the inflation rate and the depreciation of Turkish lira has exerted a dive effect. Consequently, the overall gross profit margin saw a downturn compared to 2023. Excluding the impact of IAS 29 on the other hand, our gross profit margin came in at 29% Operating expenses, which are composed of 2/3 selling and marketing expenses and 1/3 general administrative expenses rose by 2% year-on-year. Please be reminded that our in terms as our clients prefer us to deliver their orders to the final delivery point rather than collect them from our facilities. This sales model results in a high proportion of selling and marketing expenses in our overall OpEx and leads to elevated nominal figures compared to similar scale of a company operating under the exports [ principle ] While indirect labor costs recorded under general administrative expenses and accounted for 29% of our consolidated OpEx went up by 22% on a year-on-year basis due to the impact of high inflation environment. Transportation costs that composed 33% of our OpEx contracted by 13%, thanks to effective supply chain management. However, despite a minor nominal increase in OpEx, our OpEx to [indiscernible] revenue ratio came in at 25%, up by 400 basis points on a year-on-year basis. This was because annual change in consolidated revenue led Turkish lira inflation rate. As a company with 60% of regulate production capacity and meet of synthetic soda is production based in Turkey and generating 41% of its revenues from its domestic market with a significant export capacity, Turkey [ represents ] the largest share in terms of operational expenses. Our regional breakdown of the profit and loss statement underscores division significant in our consolidated figures. This discrepancy between the inflation rate and the depreciation of Turkish lira against a basket of hard currency adversely affected the region's results. Inflation-driven increases in operational costs were evident, but could not be entirely transferred to domestic market operations. While export prices followed by a follow on work trend, the value of such sales but only subject to 16% appreciation throughout this year. Consequently the region's OpEx-to-revenue ratio increased from 18% to 24% in 2024. Depreciation expenses to revenue ratio stood at 8%. EBITDA for the period amounted to TRY 13.9 billion with an EBITDA margin of 7%, down from 21% in the prior year. At this point, we do in to see the detailed provides on the impact of inflation IAS 29 of our [indiscernible] items, profit cost items included as auto in our financial statement. Not of this if we were to report an adjusted EBITDA figure by excluding IAS 29, impact, disfigures TRY 31.4 billion, accounting for its dilutive effect of TRY 17.5 billion. The decline in EBITDA margin was also in relation due to lower reported net other income from main operations and net income from the investments largely impacted by fluctuation in FX rate on trade receivables and payables and all fixed income securities investments. As you may recall, in 2023 period and Turkish lira depreciation against the hard [indiscernible] 60%. The depreciation was only 16% on the same basis. Lower gains from FX protected deposits as we [indiscernible] only in the second quarter of 2024 and notably lower gains from investment property valuation due to inflation accounting have also contributed to the next slide. Excluding the effect of IAS 29, consolidated EBITDA recorded a TRY 25.7 billion transit into a margin of 15%. [indiscernible] on net income was TRY 5 billion, down from TRY 25 billion and resulted in a net profit margin of 3% versus 2023. We record a monetary gain of approximately TRY 16 billion up from TRY 6 billion due to an increased version of debt used for working capital and capital expenditures financing. This year, we recognized TRY 2.6 million deferred tax income compared to a deferred tax expense of TRY 3.4 billion in the prior year. The shift from a deferred tax expense to income was due to a change in accounting tools with the implementation of inflation accounting effective from the end of Q1 on the secured accounts. Deferred tax assets related to reinvestment in countries where we utilized to offset income taxes for 2023. However, the change in accounting [indiscernible] to lower profit before tax, resulting in additional deferred tax assets in 2024. Net income for the period with IAS 29 was TRY 13.4 billion. Moving on to Slide 5. We will review this plan to break down of our consolidated top line and EBITDA. Our portfolio of operations has remained elevated over the years with glass operations generating 2/3 of our top line, yet the significant of this chemicals business line, which is a hard [indiscernible] further supported with a full consolidation of operator soda production facility in the U.S. in 2021. Chemicals [indiscernible] emerged as the largest contributor to our consolidated revenue and EBITDA in 2024 with 23% share in the former and 51% in the latter. Our secured large business line was the second highest performing in our portfolio as well as the largest performer among our glass business in terms of its top line and EBITDA generation capacity. The business unit with its lifting active production lines in Turkey, Europe, India, Russia as well as a line in Egypt with partnership with [indiscernible] throughout the year generated 22% of our consolidated revenue and 33% of our consolidated EBITDA. The last [indiscernible] business line with its nine production facilities and 25 is located in Turkey, Russia and Georgia, while ranked as the third largest contributor accounting for 20% of our consolidated revenue and 27% of our EBITDA. From our last sale operations with [indiscernible] in fixed facilities, [indiscernible] of which located in Turkey and the remaining in Bulgaria, Russia and Egypt, we generated 13% of our consolidated revenue. However, the business plan had a value impact on our EBITDA, given negative EBITDA profitability due to unfavorable demand dynamics leading to higher days of enteric outstanding and any exposure to high inflation. Industrial glass business line, accounting for 11% of our consolidated revenue contributed negatively to our EBITDA generation due to difficulties in passing through cost increases in our LTA-based autoglass operations with a young clients and local currency depreciation, lagging cost inflation considering the cure hard currency nature of auto glass operation, which focuses major to segmental performance. Energy plans perform was resulting from our electric trading operations came in with 9% contribution to total revenue, but created a slight decline in EBITDA. On Slide 6 and 7, we aim to present the key takeaways regarding the full year performance of our main business lines in the region. This will provide a [indiscernible], summary of how large chemicals operations have performed in companies from an operational and financial perspective. Throughout 2024, the architectural business glass retail plant demonstrated [ CPaT ] [indiscernible] economic challenges including persistent inflation and cost constraints financing access of client sectors. This decides attribute through strategic efforts targeting the construction and innovation markets across multiple regions. And approach to inventory balancing and production optimization continue to be maintained in order to effectively respond to fluctuating market demand. Production levels so increase year-on-year with 85% capacity utilization rate and total output reaching approximately 2.8 million tonnes. [indiscernible] partial role, contributing approximately 63% of the total lector output, thanks to the introduction of a new automated production bank. The European Union region contributed to 25% consolidated production, with Russian and Indian operation solvency remaining 16%. Geographical diversification enables the business plan to mitigate region specific challenges and capitalize on the its market dynamics. Consolidated sales volumes experienced a robust uplift increasing by 11% year-on-year. Turkey but the primary driver accounting for 61% of total sales volume buoyed by domestic demand, thanks to the organization efforts, particularly in earthquake affected areas, mobility in renovation projects and strategic import protection measures. Export channels also keep with 23% increase in rolling [indiscernible] bolstered by new client acquisition in Latin and North America and the alleviation of previous logistic constraints. In the European region, sales volume shop resales despite a sluggish construction market driven by renovation activity and 3.3% year-on-year. The region's share in the overall sales volume stood at 21% is competition and macroeconomic headwinds per system. Meanwhile, Indian and Russian operations collectively reported a 19% sales volume increased driven by post COVID retail production in India and stable demand in Russia accounting for 18% of total sales. Despite the challenging pricing environment characterized by a bundle of low-cost imports and decreasing energy costs, particularly in Europe, the business plan managed navigate tracing adjustments. Notably, with 8 years rise in euro-based average product prices, thanks to adaptive pricing strategies in these [indiscernible] market conditions the annual price construction at 7%. The business units focused on regional diversification, capacity optimization and strategic market position enables it to overcome significant luxury economy and industry-specific challenges drive by aligning with the broad organizational objectives. As a result, revenue from the business line decreased by 9% year-on-year to TRY 41 billion, and the EBITDA margin came in at 11%. Industrial glass business line encompassing automotive lot encapsulation and glass [indiscernible] operations encountered a dynamic landscape that impacted its financial and operational performance. The automotive license encapsulation subsegment, which significantly influences the business line financial metrics recorded mixed results. Despite a robust start in the first quarter, with a 5% year-on-year sales volume growth, driven by recovery in Turkey automotive in lastly a increased demand from OEM. The subsequent quarters trade challenges attributed to seasonal variations and larger product deliveries per OEM requirements. Full year volume sales by [indiscernible] as recorded 3% decline compared to 2023. Nevertheless, the also replacement the last channel consistently contributed maintaining each share at 15% of the automotive glass and encapsulation revenue. And in the glass fiber subsegment, directed notable 30% year-on-year sales volume increased in the first quarter given successful portfolio expansion and customer acquisitions in export markets. However, as the year progress, sales volume growth moderated and the domestic market pace persist on pricing challenges future into competition from low cost in or triggering strategic responses included antidumping investigation initiated in the third quarter to protect local producers. Performance in the export market was adversely impacted given weakening cost advantage. Full year sales volume indicated an 8 increase on a year-on-year basis. As a result, revenue recorded by [indiscernible] decreased by 10% year-on-year to TRY 20.5 billion and it had a negative EBITDA margin of 9%. The large state was quite mixed marked by global economic challenges to political fluctuation and weakening consumer sentiment leading to increased in savings tenders for the larger business. These factors collectively [indiscernible] by domestic and international operations throughout the year. Consumer sentiment becoming more focused on essential product purchase every day and a challenging [indiscernible] environment headwinds fade in the domestic market. strategic marketing efforts during key events like Ramadan, Mother's Day and holiday work exploited to mitigate such unfavorable dynamics resulting in minimal underperformance of domestic volume sales for area and national retailers and store channels, channels over the year. However, the retail and reseller channel to which approximately half of the domestic sales are in a experience due to clients being discouraged from increasing inventories given high interest rates and constrained [indiscernible]. Sales to the Turkish mark contracted by 9% year-on-year. Internationally, the business line negated fluctuating demand across various regions. The European remain sluggish, particularly in retail channels, all the [indiscernible] growth in discounting markets. Export growth was notably driven by enhanced production capacity [indiscernible] plant operational from second quarter, leading to a reallocation of robust customers. Despite chairman such as geographic tensions and changing import regulations in the EMEA region International sales saw a mix performance with most of the declines in [ Orica ] and B2B channels and minicam sales volume declined to 6%. Throughout the year, the glassware business and implemented price adjustment to pass through regional inflation and cost of production changes. While the unit sales volume experienced a high single-digit increase on a year-on-year basis, the average price to a up by 7% in USD terms, demonstrated effective pricing adjustments. And [indiscernible] TRY 2.3 billion net external revenue, 8% lower compared to the prior year, which had a negative EBITDA margin of 4% due to the higher days of demand outstanding. In [indiscernible] support production marked exceeding [indiscernible] for our glass packaging business team delivered by strategic capacity enhancement at key facilities. Annual average capacity utilization rate was consistent maintain it around [ 94% ], with a total production reaching 2.5 million tonnes, an increase of 9% from the previous year. First and special remain primary production at 56% and 41% of total output, respective. The operationalization of the fifth [indiscernible] capacity additions in Georgia were significant contributors to this growth. Consolidated sales volume exhibited a notable increase culminated in a 10% year-on-year base. Turkish Domestic sales led the growth with 18% higher volume filed by increased non-icolic beverage consumption and new customer acquisition, resulting from strategic capital allocation in addition to the domestic demand, bolstered by wage increases. However, export long Turkey sales has been a lot a decline in sand due to weak demand in Europe and geopolitical challenges in the Middle East and Africa. Russia's performance was underpinned by a strong demand for glass packaging in the beer sector driven by launch of new beer brands, better consumer center and growth in domestic reason. A medium-term supply constraint as well as a shift in consumers recurrences away from premium iconic leverage given the stripping of excise tax rate, online and campaign sectors also impacted the volume sales performance. Accordingly, International sales moved up by 5% in volume terms year-on-year. Throughout the year, price alone were implemented to reflect changes in production costs and inflation. Turkey experienced low double-digit price increases by [indiscernible] 1 week single-digit adjustment in local currencies. Variations were observed in average price per tonne in USD terms due to regional market timings and product mix. These operational results translate into TRY 38 billion net external revenue, 4% lower compared to the prior year. The business lines profitability margin came in at 10% level in EBITDA terms. Lastly, our chemicals business line. The year began with mixed outlook for soda estimate, showing signs of recovery in China, thanks to increased activity in the electric vehicle and solar glass sectors. However, demand remained soft in Europe and stable in other regions. Throughout the years, our short edge production and sales volumes experienced variances driven by strategic responses to market dynamics. Annual production stood at 4.6 million tonnes with a capitalization rate of 90%, marking a decrease of 2% on a year-on-year basis. Despite a general trend of ore supply and decline in prices, reflecting the high base [indiscernible] with slower coming activity and capacity expansion, especially in Asia, we managed to maintain year-over-year volume sales performance in line with the annual change in our Domestic sales in Turkey was robust throughout the year, supported by strong demand from the net plan packaging industries. However, international sales were challenged by the European demand and local cost logistical constraints, such as put in Bosnia affecting the [indiscernible] transport issue. Despite the obstacles, strategic alignment and enhanced market penetration, particularly in the Middle East and Africa, most export performance. Economy and chemicals segment continued its export rate [indiscernible] from late 2023 and sustained growth throughout the year, which led to 27% higher sales volume over year-over-year. This was largely driven by strong international performance, especially in South America and India despite the domestic challenges related to currency locations and high interest rates. This segment benefited from an expanded client portfolio and EBITDA's growing sector outlook. Pricing pressures persisted across but soldering chemicals due to oversupply and reduced energy costs. Sodas prices showed minus quarter-on-quarter improvements, but remains 23% lower over year-over-year, reflecting the elevated price levels [indiscernible] 2023. [indiscernible] chemical space decline in average last prices per tonne due to composite pressures and changing market finance. Result of this chemical bill TRY 43.2 billion revenue, a decrease to transport or some 24% year-on-year and 16% EBITDA margin. Moving on to Slide 8, with our pacing facilities to cater in supporting countries diversified operations for fire and white range of products, we continue to cater to our clients across the globe. Despite the significant challenges caused by the disparity between Turkish lira inflation and relevant currency depreciation, which still adversely affects our competitive in export markets and rotor export revenue, we successfully maintained a 59% share of internet sales in our consolidated top line in 2024. Export revenue, 53% of which was generated from sales to Europe stood at USD 962 million. Including revenue generation of [indiscernible] located in the region, Europe accounts for [ 49% ] our top line. We lie exposure to sales from U.S. natural shortage operations as well as exports stood at 12%, according to our developed markets exposure came at 41%. On Slide 9, you may see the details on our liquidity position. Following the Eurobond issuance will be executed by our fully owned subsidiary, Sisecam it has totaled some of USD 1.5 billion and retender of USD 328 million worth Sisecam 2026 in the second quarter of 2024. We ended the year with USD 1.7 billion cash and cash equivalents, including USD 142 million finance losses of which USD 98.4 million on investments primarily for Sisecam Turkish corporate Euro and Eurobonds from Turkish and for final maturing in 2025 and 2026. Gross debt stood at USD 3.7 billion with a term structure of 74% of long term to 26% of short term. 28% of lost debt is denominated in hard currency, 93% of remaining balance in it. The interest rate structure from price of 92% to [ 80% ] variable. The high [indiscernible] share and cash equipment included financial investments stood at 75%. Our net debt position amounted to USD 2 billion translated into a net leverage ratio of 5.2x. On the other hand, based on non IAS 29 results, this provides more excuse tester to follow the strength in our business operational performance and financial position. 2024 year end net debt and full year EBITDA figures indicate a net leverage ratio of 2.8x, which is slightly above our comfort loss, yes, we can deliver of our [indiscernible]. As a final note, TRY 31.4 billion adjusted to IAS 29 impact EBITDA figure net leverage of 2.3x. This ratio is significantly below the colon threshold, serving as a solid team to manage multipresence evaluation of our company's platformance. As of 2024 for the end, we had a net short FX position of TRY 14.1 billion with USD 110 million and EUR 387 million. Moving on to Slide 10. We recorded TRY 30.1 billion CapEx compared to TRY 30.3 billion in the prior year. the distribution of CapEx and cost business plan is as follows. Our regas segment, capital expenditures accounted for 35% of the total investments, which are primarily focused on enfiles facility and term as well as the new patent last furnace in Turkish. Last packaging business line and 30% share in total CapEx are exposed in [indiscernible] and the payments for the cost process in Turkey as the main from bonus. Large ware segment contributed to 9% of total CapEx, mainly in relation with cost repair undertaken in SCC last year facility. Chemical segment represented 8% of total CapEx with investments addressing to improve operational actions and maintenance of our plant in Turkey and USA. In December 2024, we achieved a significant milestone towards global leadership in shortage industry by acquiring full ownership of our ongoing natural shoulder edge investments in the U.S. Our stake in [indiscernible] has increased to 100%. And our direct ownership in the booming operational facility has increased to 51% for total amount of USD 285 million. Cash payments in relation to this transition was executed on January 2 2025. Given the current market conditions in Europe and for we are accelerating the cost pay of or not a steady flatline the limit in February 2025, traffic efficiency managed the production sales in [indiscernible] and boost profitability. Additionally revealed suspend production factories dominated line as of March 2025. These actions are projected to contribute EUR 87 million to EBIT, thanks to increased capacity utilization of other list in Europe. We note reporting period with a cash inflow from operating activities of TRY 31 million compared to TRY 38 million in the prior year prior year, mainly due to lower reported net profit for the period and line adjustments, including the monetary loss on cash and cash equivalents being called a negative free cash flow of approximately TRY 21 billion. On Slide 11, you may see [indiscernible] key financial health impact of IAS 29, which we have already walked you through at the beginning of this last while we were providing details from our audited climate results. Yet we would like to add that our total assets and total accretive have grown by 38% and 21%, respectively compared to 2023 [ unit ]. In the following section, we will update you with some key developments in our sustainable agenda. On Slide 13, our chair for next attainment strategic rights, [indiscernible] sustainable transformation with three key focus areas. We continue our efforts to achieve the 2030 and 2050 growth set between the primary provide [indiscernible] strategy, which we announced in 2022. Moving on to Slide 14. After deliver conduct among the companies listed on the Board can book, Sisecam has maintained its place in this sustainability index for period of January to December 2024. As a result of the comprehensive evaluation conduct by vicinity, which used in the bid sustainable to index assessment our scores is A-. Additionally, in 2024, we published our 2023 sustainability report, which has been prepared using the GRI adage, continuing EBIT practice we have all since 2030. Moreover, for corporations in the report, we received a data validation services from an independent organization. This practice not only contributes to our transparency, but also provides an apportion to understand and assess the broader real impact and outcomes of our sustainable format and supporting. Furthermore, we have already started the activities for sustainability reporting for 2024. Our 2024 sustainability report to be published in transfer prepared in accordance with to sustainability reporting standards. Moving on to Slide 5, we would like to share with you some key developments in 2024 that supports our sustainability agenda. Recently introduced plant of -- but initiated 2024 year. Operating with a pole-based open innovation model, this initiative will enable the integration of innovative solutions, Europe environment from the brand production models and cutting-edge technologies into all production processes. We believe it will make significant contributions not only to Sisecam but also to the industry as a whole. In addition, we conduct able to risk assets, which to identify inelegant manage potential risks related to motor usage and available throughout our operations. We also carried out project is accounted in Sanofi at the company's level and establishing a data collection and in large process for the entire Sisecam [indiscernible]. We had the Sisecam global supply summit from the key is to color grade where are the net VR partners. The comment future with teams of sustainability. This sustainability focus session compliance covered topics such as reporting and disclosure requirements related to sustainability, resolution and the critical role of supply chain collaboration. On Slide 16, to enhance our coloration and sharing network, we continue to lead our memberships. In this context, we have rejoined the Trade Association Glass for Europe, which represents Europe's flat last sector. Last [indiscernible] Europe brings together multinational companies and thousands of SMEs across Europe to represent the entire building plus value chain. Additionally, we have become a number of business and sustainable development can there. In April, 2024 we also became an [indiscernible] of Europe in industrial areas on small module reactors platform established by the European Commission to support the development of the first man in Europe by the early 2030, we aim to monitor Internet and enhance our environmental social and governance priorities, aligning them across our entire value chain. Thus, we have revised our responsible supply chain policy, which ensures that we need with our suppliers and business partners within the framework of universal ethical principles. Supply electrifications are accepted through the Sisecam supplier portal, and we expect our suppliers to her to the same principle to respect human rights and a responsible towards the third parties in accordance with the Sisecam supply for the contact and decision young product contact the person to hold suppliers except in the supplier product contract reached 62.2% in 2024. As part of the supply castable development program launched in 2024, we have started sustainability-oriented suppliers. The 15th European Society last Technology Conference took place in United Kingdom in mid-July, as the sustainable session of the conference our Sisecam team presented sustainable at Sisecam, glass recycling with [ fundamental ] requirements and this lab integration, fundamental research for optimal batch composition. Additionally, in June 2024, as part of the Barclays Emerging Markets Corporate base even organized by Barclays, we engaged with a total of 30 investors across four sessions. At this event, we shared set on sustainable strategy to target ongoing projects need to be started developments for 2022 and 2023 performance on [indiscernible] platform, key components of our Glass to carbon emission road map and the anticipated requirement of before so de investment with the investors. Thank you. We may now talk to the Q&A session.

Thank you. We'll now be moving to the question-and-answer section. [Operator Instructions] Our first question comes from Evgeniya Bystrova from Barclays.

So I have -- I mean, I know you asked to limit questions to just one maybe two smaller questions. So my first question is about CapEx. What's your outlook for 2025? What are your plans regarding that? Any color will be very useful. And maybe connected to that question is -- so regarding your U.S. operations and given that you've taken over the Pacific project. Could you please provide any updates regarding what is the timing on that project, potential CapEx? And also if there will be any changes to planned technology used for that project? I know that previously you were planning to use solution mining. So now with we sort out of the project of Sisecam Group, what will be the technology used there. Thank you very much.

Thank you. So for the CapEx, you know that we have last year also shared that we are doing a [indiscernible] investments management. And for this year's target, the CapEx will be limited with the EBITDA at maximum. So the spend on the CapEx will be 100% linked to the maximum level EBIT. So we already made a very slow start to expand, especially in the first quarter. Based on the performance of the budgets for each respective part, we will see the amount of CapEx that can be used for the coming period. So rather than giving the time number, I believe this serves the purpose best. And coming to U.S., to share with you a lot that even the most pro probably by the end of today, obtaining the environment impact for the approval that will be helping us that we will be coming through to the end of the currency process. But for sure, once everything is completed, we will also inform old markets based on it. And this will give us opportunity that within the upcoming 3 to 4 months' time, we can keep off with the construction -- for the technical part, there are no changes that as expected. So we will stick to the solution line. And we already as the solution line within our application process approved by [indiscernible].

Maybe just a quick follow-up. So you said that your CapEx will be 100% linked to EBITDA generation. So shall we assume that basically whatever you generate in EBITDA will be also going spend on CapEx. Is that what you're saying?

You're right. And there is a very strict prioritization. So the ongoing large greenfield programs are the only prioritized ones. But for sure, their fees will be linked to two things, the generation performance and the market condition.

Our next question comes from Cemal Demirtas from Ata Yatirim.

My question is very much related to the outlook in -- especially in the fourth quarter, we see that margins remain under pressure. Maybe it's one of the lowest level we had seen. Of course, we have inflation accounting impact, but where do we send now? Do you expect some recovery during the year? Or should we assume that this trend will continue in the first half of the year in terms of pricing and the margins?

So this has shorter and the longer version. So if it is major markets, I will stick to a rather short term one. So in the porting margin as you're coming very much this is provided by each respective segment, especially in [indiscernible] due to a couple of differentiated reasons, the margin erosion was even what we experienced in the other statement, especially for the major business lines, if I may call, considering chemicals last angles passaging. The margins are expected to be at least as part of meaning better performance when we compare with the last quarter. And as you have always seen that the company has been able to push up the world to some extent. And together with this, we have already announced in almost each [indiscernible] segment increased pricing levels. And what's the most important thing is that, rather than especially the Turkish geography, European market is the key for the pricing and the margin environment. And for -- after a very long time, we have been able to both announce and implement price increases in flat plus in European region, which we have already down to some extent in glass packaging and chemicals segments. So just to give you a brief outlook, we can say that the demand seems to be very mildly positive compared with the last quarter. But as I keep on making the same remarks again and again, this doesn't continue for constitute 2 quarters. I believe it is still too early to say that demand is picking up, but considering the timing and the period of the cycle. There are expectations in the market that, especially through to midyear in the European region. The demand will pick up to some extent, but we will see rather some as one or a strong growth. So I believe all the geophones and the trust administration and their discussions and especially -- the ongoing per quarter, we'll also fail the way to understand the market's confidence and you return the demand to us, whether to the amount [indiscernible].

As a part of this question, do you have any sense of the inventory levels in the region it's a low inventory or higher in terms of the cycle. So in order to associate with the outlook, do you have any major in the sector that you can calculate the inventory levels just roughly as a perspective related to that question?

So for the details, during the meetings with the IAS teams, they can provide to further dispute and specific answers to the questions you might right. But starting from the early days of the prices, you can really see that the company has been managing the stock levels based on the production, the demand and the max levels [indiscernible]. So only to be linked with this we have already seen that we improved productivity and to optimize our production footprint. Just to give you an example, although we were implementing a price increase. We also couple this with taking the hole of Northern Italy plus line to an earlier time. So we will continue to stick not to increase the inventory levels anyway further than their DR spending. And there as teams are putting all the efforts to direct metrics to differentiate it out so that we could -- where we are standing. But when you look at our inventory to sales percentages, you can see the levels that we are in Europe at the nominal level, are very much comparable to our ordinary course of business.

Our next question comes from Erica [indiscernible] from MetLife.

The first one is just to go back to CapEx in 2025. So to understand better, when you say the link with EBITDA, does this mean that if we generate, let's say, let's assume TRY 500 million of EBITDA, you will spend TRY 500 million in CapEx. Shall I think in these terms? And then also notice in working capital, you had a sizable working capital inflow this year. How much are working capital as well? Shall we -- in terms of change movement shall we expect for 2025?

So you're perfectly right on your assumption. So we are directly linking based on the EBITDA that has been already being generated. And the other dimension that I shared with you is the speed of the investments -- are for sure linked very much with the supply and demand balance and demand improvements that we are seeing in the market. So there is a differentiated answer for each with the fields we have based on its respective market conditions. But your main assumption is 100% as well. And based on the working capital, as we have shared with you, this is one of the -- it's not the main concentration area that we have. So we are very much coming to improving the cash conversion cycle. So we have been already kicked off through to the end of last year, I should say, a specific program, where there is specific targets for both improving the balance sheet KPIs and also the P&L KPIs bid margins. So the heart of this improvement program is very much directed into our net debt-to-EBITDA levels plus the working capital that is being consumed by the company. So what we are consuming as of now, with the levels are almost is higher than our ordinary course of business due to numerous reasons. But due to the business realities of our industries, as you know, by part, the levels have been roughly around 30% in the ordinary course of the business. But considering the cycle continues to extend, our main target is to try to get the working capital, first to the ordinary course of levels and to find additional room to improve our position.

If I may also squeeze in relation -- the question relation to what aspire in Ukraine. Would you benefit from the reconstruction. Would you potentially supply glass to Ukraine?

So there will be an additional demand, meaning that for all the market players, there will be an additional demand generated mean pricing improvement, tough capacity utilization. So we will need to see how the expansion will be eased and then what are the things that are in place. But for sure, for the overall European market, I should say, there will be a benefit for most of the players, especially one in the proximity and [indiscernible].

Our next question comes from Igor Fedorov from ING Bank.

I think my questions actually been already asked it. Well, just shortly, how would you see your leverage in the end of the this year. And how you do see like free cash flow for like -- well, for this year in terms of like quarter-by-quarter, should we expect like a huge negative free cash flow generation as it goes in 2024? Or if there will be decent improvements on this side? Thank you.

So rather than providing quarter-by-quarter numbers, I can say that linking CapEx spending to maximum to the EBITDA levels and improving the margins are mainly directed on improving our net debt-to-EBITDA position both on the nominal and after the inflation accounting figures. As you perfectly note, there are lots levels that first, that we are useful. Second, that we plan, so this has been happening as our CFO has talked to you so very much detail due to the -- especially due to the inflation accounting interest rate usage against TL devaluation. So with this new normal and understanding the new reality in TL to be a little value position for some time. We immediately linked to our realtime based on this, and we plan in our strategic planning and budgeting purposes to improve our net debt to EBITDA. So those levels are not ones that we are used to. So even earlier across, as I said, and especially design program has been initiated, improve debt-to-EBITDA and working cash flow consumption.

Okay. Thank you. Our next question comes from Gustavo Campos of Jefferies.

So yes, thank you for the presentation. I first wanted to ask about your covenant calculations, should we use the 2.3x net leverage for the IAS 29, 5.2x net leverage? And what is your covenant limit? Like I'm just trying to understand the methodology here a bit better with the banks.

I will continue with your questions and try to answer your question also. [indiscernible] count which means there isn't any restrictive application. But by the way, of course, there are several restrictions but the slight inflationary comment with the application of that accounting method, we didn't consist in EBITDA calculation, the monetary gain loss in part coming from the BDA. And without having the impact, we reached a -- to 2x. But as you know, we are looking at the net debt credit cost without application of inflationary [indiscernible], which is for us, the comment is around 2.8x. And on the other hand, unification of the inflationary accounting, the impact coming from EBITDA items are reflected to mostly gain of accounts if we have this monthly gain of impact to EBITDA, which we are pointed EBITDA after gross net debt to EBITDA is not 2.3x. But as management, we are focusing on 2.8x, which is non-IAS expectation.

Okay. So just to confirm here, 2.8x is your like incurrence covenant net leverage and you use a non-IAS 29 net leverage like methodology. Is that it?

Yes, sure. .

Okay. Just a quick follow-up here. Like where do you expect net leverage to go like into 2025? Like let's use like net leverage currently at around like 2.3%. Where do you expect it to be at the end of the year. If you could give any outlook in perspective, it would be very helpful.

As our CEO [indiscernible] EBITDA generation, and this will also road net for us in net debt section because we are focusing on also working capital in order to decrease the net debt. On the other hand, by limiting the CapEx with the EBITDA generation that we go into 2025. The net debt level will be counting across [indiscernible]. By the way, we try to keep and our main aim to keep leverage around 3.5x as it is common in our bond.

Okay, understood. And Last -- a quick question here. You have 22% of your debt in Turkey denominated in Turkish lira, right? Are you expecting to pay down this debt to avoid paying such hefty interest expenses in this coming year? Or should we expect your total debt to this Turkish lira debt to remain in the capital structure. Any guidance there would be very helpful.

Just to quickly answer based on the market expectations and the restrictive environment conditions exposure, we are doing the necessary swaps to increase the total cost of financing on a site available opportunities.

I'm sorry. So one, could you repeat what you said? And two, are you seeing like we should expect...

As we have done before for the CR portion or any other respective currency year expected cross-currency swaps to for sure optimize our finance costs.

Right, right. Okay. I see here like you paid around like $0.5 billion in interest expenses in 2024. Should we expect that amount to be somewhat lower because of your hedges or because you might reduce some of your debt. Is that a correct assumption?

For sure, we are trying to improve all of our cost base, starting with the finance cost while trying to improve the pricing and the margin environment. So you can make anything based on the quarter will be the financing costs. And in the system, we have four left. So if you excuse us -- we will take the next four questions and then complete the call. Please, let's go ahead.

Okay. Thank you. Our next question is from Antonio John Segura from BC Securities.

I wanted to ask about the EBITDA without the inflation accounting figures because from what you showed EBITDA without inflation accounting, increased 40% on a quarterly basis. So I just want to understand what flows driver behind this increase of 40% Q2 of [indiscernible] Turkish basis.

Let us give me to go over your consumption. So that's in business because apart from some specific segments, on the overall, there has not been movement on the overall margin parters. So our expectation is that we would attempt in the mine, but it's a nominal on for concessions but this has not been a for the last quarter.

Okay. Thank you. It looks like we have a follow-up from Evgenia Bystrova from Barclays.

It's actually a follow-up the covenant question. As far as I remember, in your bond documents, you have a covenant of 3.5, as you also mentioned. And as far as you remember, it should be calculated based on reported audited financials I would assume those include IAS 29 adjustment. So could you please provide a comment on that? Because you said that you base your covenant calculations excluding IAS 29. So I just want to understand how it works. Thank you.

Yes, sure. You are right. in bond postpaid increment. The government is the cost business based on have Turkish carting standard, which is also including application of installation accounting. Also, according this account this 2.5x, yes, you are right. By the way, as management, we are following the results without explication of inflationary accounting. That's why I mentioned that 2.8x as late from nonexecution of inflation accounting or management [indiscernible].

Sorry, 2.8% is your internal target or it's a covenant on banking facilities?

2.8% is resulted from the financial statements applied noninflation accounting. So -- that's why 2.8% is still above the confidence on that we have as management but still is below the bond comes our business as mentioned at 3.5x.

Just to provide additional clarity for management purposes, we stick to before the inflation accounting numbers so that we can compare years against years and the performance and keep track of. But for sure, as I mentioned at the beginning part, this is not an area that we feel as comfortable or we believe that we can even go up to this year's specific programs and the budget or budget in systems are perfectly desired and are being on assets to improve the net debt to EBITDA. So the clarification we were trying to provide was for management purposes. It is easier to track and manage the business before the inflation accounting numbers. so that we can keep a track for the overall operations of the wider there. I hope we can be able to provide you what our perspective is on.

From our perspective, it would be much easier as well without inflationary counting. But you also mentioned 2.3% as your net leverage without inflation accounting and now you're saying 2.8%. I'm just confused. Could you please clarify that?

No. That was an additional information to provide. This is something that has been widely discussed as of now, whether this additional income should be included to EBITDA format and the standards might be changed to include those numbers. We are just trying to provide all the [indiscernible]. It is hard for yourself. Not easy for the company's management also to keep a tap many different way of describing the numbers I should state, but just to provide further clear to you, our CFO has provided after inflation before inflation and including the additional income what the net debt to EBITDA looks like -- so we are keeping a track of that and managing and trying to improve the net debt-to-EBITDA, looking on each and every differentiate perspectively.

Okay. Thank you. We also have a follow-up from Erica Eve from MetLife.

I would like to know what is the dollar amount of your gross debt position and cash position as at year-end?

USD 3.7 billion or gross debt.

In cash?

Cash is equivalent to USD 1.7 billion, so net debt is equivalent to USD 2 billion.

Okay. Okay. USD 2 billion. So basically repeating, USD 3.7 million goes back to USD 1.7 million cash. And [indiscernible], we had USD 2 billion of net debt. Thank you very much. And EBITDA, do you have also the amount of EBITDA because it's quite difficult, obviously, with this accounting in Dollars.

With the application of IFRS 9, the EBITDA amounting to around USD 400 million.

Okay. Perfect. And then also going back to the cash flow generation. Now if I take TRY 500 billion of EBITDA, is it first statement, deducting interest paid of around TRY 450 million. I don't know if it's fair assumptions there. Then you have left TRY 50 million. Then you got tax. So let's say that your breakeven and then you got a small as well relative a bit...

Sorry to interrupt, but for the sake of time and for the details that we will need to go through. If you will excuse I will encourage you to reach our IR department so that we provide you all the further [indiscernible] all the dimensions that you might require.

We do. But just to brief then to summarize, you basically expect to see generate a negative free cash flow.

Okay. If you can on a high-level basis, provided, let us try to come with a quick answer.

Thank you. We have a follow-up from Eagle Federal from ING.

On the debt side, on the international debt capital markets, do you have any plans for the considering any new issues for this year? So this is like the key question and might be like a suggestion from my side, well, well, we are like, of course, different analysts from across different sectors like credit and equity. But maybe -- well, to make a little bit our lives a little bit easier, especially on the back of this especially accounting system. Maybe your IR department company like make some homework in terms of like producing some kind of maybe U.S. dollar eliminated or equal an account team. So it would be like a really clear and well, transparent financials. So we could have excluded a lot of like a necessary question, so it would be really clear, especially if you have like more export revenues and why not to report in -- or at least to provide some information, a little bit detailed in the U.S. or euro-denominated figures. So it would be really healthy and really well useful for us.

Thank you to your constructive comments, and we will do what is required. It's inflationary accounting, unfortunately now that this life is easy, but we will guide at least to make our life easier so that you can keep a threat. So for the transparency, this is one thing where we keep at the heart of all our IR and finance activities. So we will try to also link you to get you further details from an we can improve. Second thing, as of now, there are no plans to come to the debt markets within this year or sometime soon, but scaling the plans pursue to the right channels, we will give the market. Okay. Thank you. And with this question, I believe we can sum up our call. So in the name of the overall team, I would like to thank you all for your interest and your DCO questions. And we will try to, as we did in this call, provide you with further details so that each and every investor or analyst can easily understand what are the reasons of the outcomes financials are happening and how the management of the team is fighting and managing that. So thank you to all of you and for to see you soon in the after we call.

This concludes the call. Thank you, and have a nice day.