Ladies and gentlemen, welcome to Ülker Bisküvi First Quarter 2023 Financial Results Conference Call and Webcast. I will now hand over to Beste Tasar, investor relations officer. Madam, please go ahead. Thank you. Hello, everybody. This is Beste. Welcome to Ülker Bisküvi's first quarter financial and operational results webcast. Here with me in the room are our CEO, Mete Buyurgan, and our CFO, Fulya Banu Sürücü. I leave the ground to our CEO, Mete Buyurgan, for the opening remarks. Mete Bey. Thank you, Beste. Good morning, good afternoon, everyone. Welcome to our first quarter call. I'd like to give you an update on our business and strategy at the very beginning of the presentation, but I think we should first remember the circumstances, especially in the last eight to 12 quarters, such as pandemic, supply chain breakdowns, logistic crisis, and almost inflation everywhere. It was very difficult, like two, three years, I must say. If you are going to look for the first quarters at the same time, we had run our business in the right direction despite all those challenges. As in the first quarter, as you may know that we had a devastating earthquake which impacted Turkish cities and millions of people in our home country, Turkey, but also it was impacting some neighborhood countries at the same time. Again, despite all those crises, we did well, we did great in the last quarter and in the last two, three years. I can say we are here in front of you with this very outstanding start to the year. If I may talk about a little bit on the earthquake. As I mentioned, it was a very devastating earthquake. When we heard that earthquake has been happened, at the same day, we were in the field. We sent lots of food stuff to support the impacted people in the region. We had tried to resolve the problems, transportation problems, logistic problems, accommodation problems of our employees in the region at the same time. We keep investing in the region, and we are very visible. We are going to be very visible at the end of the year of this year with lots of different activities. If we come back to the first quarter, I must say that we had a robust top-line growth driven by effective pricing and effective product category mix management and channel mix management. Our growth rate was significant. Gross profit margin, we are almost 3% above prior year, which is showing the quality of our growth in a great way. EBITDA, we reached TRY 2 billion EBITDA, which is again, a pretty exceptional EBITDA margin of 23.2%. As far as I remember, it is the highest EBITDA which we achieved. I must thank our low-cost operating model reaching to this EBITDA level because our low-cost operating model is giving us lots of agility, lots of flexibility at the same time. We are enjoying the profit of our business model actually. Refinancing completed successfully. One of the most important tasks in the first quarter was to refinance our loan structure. It was done very successfully thanks to our finance team, sustainability teams. It is also very important for us because this is the first sustainability-linked loan of Ülker, which is great. I would like to thank again our banks, our partners who are supporting our business for many years. We keep our presence strongly in international markets. If we look at our geographies, Fulya is going to give some details, but as a summary part, I must say that especially Turkey growth and also Central Asia growth is quite successful. In Central Asia, we keep growing in the last two, three years actually, in fact, in a consecutive way. We gain market share. We become very strong market player in most of the Central Asia countries. Keep focusing on our executional strategy towards our vision of Ülker, brand equity, investing on brand equity, developing our capabilities, with a lens of growth and expansion is also our successful areas, which we had good results in the first quarter. We keep our strong market leadership in snacking category in our home country, in Turkey. We keep our strong macro snacking leadership in the industry. 23.2% consolidated EBITDA margin and 72% top-line growth, which are really promising. If we look at the numbers more deeply, our revenue has been reaching about TRY 10.1 billion, with a 72% growth, as I mentioned. EBITDA level is also TRY 2.3 billion, which is the growth of 88%. I would like to mention or stress that our EBITDA and gross profit margins growth is higher than net revenues, which again shows our quality of growth. Also we are getting the benefit of our diverse procurement strategies at the same time. Very importantly, net debt/EBITDA ratio keeps declining. Right now it is almost two, which is again, very healthy. Our gross margin has been reached to 34.3%, which is in a great shape as of first quarter. If you look at the P&L deeply, I emphasized most of the important topics like EBITDA, net sales, and others. I would like to get your attention to net income position at the same time. We are again, unlike our previous quarters, we had reached a high net income level at the same time. Those are the very quick updates. Fulya Banu, our CFO, will continue to the presentation with some detailed information. Fulya? Thank you, Mete Bey. I'm very happy to share our strong Q1 performance results to go through details one by one. Two consecutive quarters, we delivered net income positive, and all KPIs are very strong. Snacking sales volume and snacking sales value on page eight. Snacking sales volume slightly down by 2.5%, mainly driven by biscuits and offset by chocolate and cake volume increases versus prior year's quarter. However, our snacking sales value increased almost by 74%. Biscuits 57.6%, chocolates 88.5%, and cake 81.1% increase versus prior quarter. Let me take you through on domestic and international businesses. Let's start with domestic operations. We have a very strong number one position, and we continue to sustain this number one position in Turkey. Biscuits 39% market share, chocolate 40% market share, number one and number one, and cake 20% market share with number two position. You can see on the page that we were able to keep our market share positions versus last quarter of last year. You also see on the second page that new product development sales contributed 11% of our total domestic sales in Q1 2023, which also highlights the big importance we give to innovation. Let me take a look on the two key results in terms of sales, gross profit, and EBITDA. First, I'd like to highlight that on each quarter, gross profit margin increased, versus prior year on each quarter of 2022, and the momentum continues. In Q1 2023, we were able to increase our gross profit margin by 5.8% versus prior year in Turkey only. When we take a look on sales volume, it's pretty much flat. Snacking sales increased by 90% and gross profit increased by 5.8%, reaching to 32.4% gross profit margin. This translates to 23% EBITDA margin, which is 3.3% higher versus prior year. Again, our effective pricing management, mixed management, and thanks to our low-cost operating model, helped us to reach these outstanding results in terms of gross profit and EBITDA. The picture does not change when we take a look on our international businesses. Solid growth in our key markets. We kept our number one position in Saudi Arabia, Egypt, and a very strong number two position in Kazakhstan. Biscuits number one in Saudi Arabia, number one in Egypt in biscuits, and we became number two chocolate in Central Asia, in Kazakhstan. Again, new products contributed 5% to our international sales. When we take a look at our numbers, snacking volumes slightly down versus prior quarter. Snacking sales increased by almost 50% versus prior year. Gross profit, we were able to keep our very healthy, strong gross profit margin in our international businesses around 38%. We were able to increase slightly our EBITDA margin, reaching to 23.5%. In Saudi Arabia, we were able to increase our sales by 20% and kept the EBITDA margin. In Egypt, successful pricing activities executed and very good fight against inflation. Inflation increases surpassed the product prices, which also led to EBITDA margin increases. In Central Asia, great success story. You will also see on the coming pages how our EBITDA margin evolves over the years significantly. On the acquisitions update part, you see with all these acquisitions, we were able to sustain a very healthy portion of our EBITDA margins on foreign currency denominated. As of Q1, 35% of our EBITDA is foreign currency denominated. The latest acquisition, Önem Gıda acquisition, that happened on the last quarter of 2021, contributes 390 basis points to our EBITDA margin. All the numbers would have been 4% lower if we did not acquire Önem, which also shows that it was a great and a very important acquisition that we included in our portfolio. On page 18, you see our EBITDA% development in all our international businesses. North Africa region, it increased to 15%. As I have shared, we were able to surpass the product inflation prices to product pricing. Successful pricing activities in product and mix management delivered 15% EBITDA margin in North Africa. Same in Middle East. Saudi Arabia, healthy growth on revenue. Flat volume versus prior year delivered approximately 25% EBITDA margin. On Central Asia, our EBITDA margin almost tripled since 2017. On a steady basis, it all increased over the years. The expansion growth, and the profitability is a great success story in our Central Asia region. On balance sheet highlights, I am very happy to share that our net debt/EBITDA, in terms of covenant calculations, decreased to 2 as of March 2023. It is on a decreasing trend versus prior year, where we ended up as around 2.3. In terms of working capital, we ended up the year with 97 days. Now it is 96 days. Taking the business cycling seasonality effect, we were able to decrease it by another 1 day. In terms of hedges, 48% of the open position is hedged by the end of Q1. As I have also shared, this is another important treasury policy we have executed and taken in 2022, which will continue in this format. The instruments we have used is cross-currency swaps and forwards. The maturity breakdown of our loans are 49 short-term, 51 long-term as of Q1. We also like to share our full year guidance. We realized TRY 28.2 billion by the end of 2022 with 19.4% EBITDA margin. Our full year expectation is TRY 40 billion for net sales and 19% EBITDA margin as our initial guidance for 2023. On the next page, we also like to highlight our EBITDA growth and EBITDA margin growth over the years. Which shows that we were going to end up the year in terms of revenue with TRY 40 million and TRY 7.6 billion EBITDA, reaching to 19% for 2023. We have a very successful, both operational and financial, great performance by the end of Q1, we believe that it will continue throughout the 2023 as well. Thank you so much. Back to Beste. Yeah. Thank you everyone for listening us. We are happy to hear your question. Ladies and gentlemen, we will now start our question and answer session. If you wish to ask a question, please press star one one on your telephone keypad. Thank you for holding until we have the first question. The first question comes from Hanzade Kilickiran from JPMorgan. Please go ahead. Hello. Thank you very much for the presentations and congratulations for very successful results. I'm trying to understand the margin drivers, particularly in Turkey. You have an outstanding EBITDA margin. How much price increase have you done in the first quarter? Since you have not also revised your year-end numbers guidance, is it reasonable to assume that because of a limited lira depreciation in the first quarter, you may have one of high EBITDA margin, or this is very sustainable in the remainder of the year? Hanzade, thank you for the question. Regarding your first question about the drivers or the margin, as I mentioned in my previous part, product mix, category mix, and channel mix were quite important. They are the biggest pillars. On the other hand, we didn't have any price increase in the first quarter. However, we had some price increases in the last quarters of the last year, so previous quarter, I must say. We are getting the benefit of that increase at the same time. Also, as mentioned again, the low-cost operating model is giving us multiple impacts in terms of EBITDA and gross margin growth. They were the biggest drivers of the increases. Regarding your second question about the stability of this profitability, of course, the profitability is on very higher side. On the other hand, we started to observe in Turkey especially, a little bit in European countries and in Turkey, I must say, we are observing some, or we are experiencing some slowdown in demand by the consumers in every category. It's not only snacking, but also other FMCG categories as well. We are also observing some slowdown on the retailer businesses, especially discount part. We are very confident on our yearly targets and our year-end targets. On the other hand, there will be some small decrease on the profitability for this quarter and the third quarter, I must say. Okay. I understand. Your guidance could be met, and if not exceed, on the EBITDA margin because of this very strong first Q. Yeah. Even though that would be. Right. Definitely. Because we are going to support the demand by some volume promotions and so on in this quarter and the third quarter. That is why the margin is a little bit dilutive, but as guidance, we are stick with our guidance target, and we are very confident on that. As you may see on the screen, it's going to be minimum 19% EBITDA margin again. Okay. Thank you, Mete Bey. I have a final question about Turkey. I presume that you may see some sort of extra sales because of the aid efforts, the earthquake zone, because confectionery items became the key tool to send to the area. Have you also observed some sort of support on your sales because of the earthquake? It could be temporary. There is not too much impact because we had, in February, especially the same month of the earthquake, we had sent a lot of trucks, almost 30 trucks, big trucks, free of charge product to the region. There is not an impact on sales, actually, due to the demand of that area. Okay, there is no amount impact as well. All right. Thank you very much, Mete Bey. Thank you. Thank you. The next question comes from Ece Mandacı from Unlu Securities. Please go ahead. Hi. Thank you very much for the presentation. I have two questions. One is on your slide, on the presentation, page 24. You have shared your volume guidance for 2023. Just thinking about the snacking volumes, how much growth or decline should we assume or you're expecting for 2023? Secondly, when I look to your EBITDA margin performance on a country basis, there is a significant growth in Kazakhstan and Egypt on a year-over-year basis. When we look at the consolidated EBITDA margin performance, we are seeing a much lower increase on a basis points basis on a year-over-year basis. Is there the effect of lower margins in the exports from Turkey? Is there any dilutive effect from there? It would be great if you can share your views on the EBITDA margin performance going forward on a country basis. Thank you. Excuse me. For the volume expectation of this year, as I mentioned, it seems there will be some slowdown we are experiencing in the last April and May right now. There are multiple impacts. On the other hand, we are observing these trends in many other markets, in Europe, Central Asia, Middle East, North Africa, in many markets. We are believing that this will be not for a long time. We are expecting a flat volume impact versus last year at the end of this. This quarter, the second quarter, we are going to observe some 4%, 5%. We may see 4% or 5% growth decline in terms of volume due to slowing demand in the big countries. Your second question in terms of EBITDA margin. North Africa, Middle East, and Central Asia, their EBITDA margin increased significantly. When you take a look on our EBITDA margin shares, North Africa makes up 1.9%, Middle East 16.3%, and Central Asia 3.6%. The rest is coming from Turkey- Turkey, it increased by 3.23% on a consolidated basis. That's the number that you see. It's just mainly simple math. Hope that helps. Thank you very much. Sorry. Can I continue? Sure. Yes, please. Go ahead. Can you hear us, Adrian? Can you hear me? Yeah, we can hear you. We can hear you. Please ask your question. When I look at your international margins, EBITDA margins, I wanted to clarify myself. There's a Turkey bit increase to 23.5% as of first quarter 2023. I think the growth in Africa, Central Asia, under the international segment is much higher on a year-over-year basis. There could be some possibility that exports from Turkey is diluting the overall numbers for international EBITDA margin, I mean. There is some dilution a bit. Of course, there is a bit dilution from export of Turkey, but in consolidated terms, there's some profit stayed in Turkey, some profit is over in the respectful markets. Overall, they're in a great shape. Yes, you are right. There is some small impact of dilution. Going forward for these regions, for Egypt, for example, or for Kazakhstan, should we assume still margin improvement on a year-over-year basis in second quarter, third quarter, or the quarters ahead? Definitely. You may see the slide 19, on page slide 19. Central Asia, for example, is growing every year almost, steadily. We are expecting the same EBITDA margins as it is in the first quarters, both for North Africa and Central Asia. Okay. Thank you. Thank you. Thank you very much. The next question comes from Antonio Luiz Gomes from Ninety One. Please go ahead. Hi there. Thank you for your time. I just wanted to get a little bit more color, firstly on your working capital line, particularly the related parties, receivables, and payables. There was a big increase in the quarter which led to a cash outflow, which negated your increase in EBITDA. I just wanted to understand why has there been a large step up in your related party working capital? Thank you for your question. It is mainly driven due to the sales increases, and reflected to our accounts receivable increases. Seasonality, sales increase, product mixing. Other than that, there is no other specific reason of increase on those receivables. Especially, Antonio, you may know that first quarter is one of the peak season for us, and we had also gifting sales, gifting shipments, Ramadan, Eid all day, gifting candies and chocolates. It's not a direct apple-to-apple analysis in terms of quarters. This is a normal increase due to the sales increasing, in fact. Okay. That makes sense. Yeah, it was still expressive despite a historical increase on the seasonality. Yeah. your related parties. That's why. As a percentage of sales, it went from around 14, 15% in Q4 of LTM sales to something like 17, your receivables and related parties. Yes. Everything else was more stable. Your receivables, your inventories, your normal payables. In fact, your normal payables- Yeah Went down a little bit. That was it. Just a note, related parties are our sales companies. This is directly the sales companies which we are invoicing all our products through those sales companies. This is a normal trade receivable increase due to the volume growth of gifting sales, basically. Okay. That makes sense. Thank you. My final question was regarding your sensitivity to any further Turkish lira volatility. You're coming into an election this week, so I was just wondering what your view is on that and what the impact would be of any further depreciation on the lira on your leverage and your EBITDA. Yeah, depending on the election results, there might be some movements on the Turkish lira. In any case, we are taking the proactive actions. As of today, 48% of our open position is hedged. Just to take a mitigating action in case there will be an increase. We have also set up our capital strategy very clearly to preserve cash, as making the cash as the highest priority throughout the year and throughout the next following three years as well. Whatever the result will be or whatever the Turkish lira depreciation or appreciation will be, we are ready and we are taking proactive actions. We have flexible models to protect the company's profitability. Antonio, I think the last three year performance of Ülker, despite a very high devaluation, inflation, how we keep our EBITDA margin, gross margin and EBITDA levels in an increasing way is a great proof of how we are managing the company in those circumstances. Great. Thank you for your time. Thank you. Thank you. The next question comes from Daniel Satkiewicz from Barclays. Please go ahead. Hi. Thanks very much for the call. You've seen leverage come down again quarter-on-quarter. I was just wondering whether you actually have a medium term target for where you'd like leverage to be. Could you also just give us some idea of where we should expect CapEx for this year? Thanks. Thank you for the question. We ended up the net debt/EBITDA at 2. Our objective is to keep and sustain these levels to be around this level, around 3 throughout the year and over the coming years as well. In terms of CapEx, there is no additional CapEx rather than the routine business requirements, maintenance and routine business requirements. No additional and incremental CapEx for this year. Thanks. Thank you. The next question comes from Dmitry Ivanov from Jefferies. Please go ahead. Hello. Thank you very much for the presentation. May I please ask a question about your debt maturity profile? I think you disclosed that approximately just below 50% of the debt is short-term. I think in dollar terms, it's just approximately $650 million USD. As you disclosed, as you mentioned, you already utilized syndicate EBRD facilities for $330 million. I just wonder, just to understand, how do you plan just to meet the rest of the short-term maturity this year? It's still, if I calculate it correctly, approximately $300 million in maturities this year. Do you plan to utilize cash or do you plan just to extend maturities on this debt? Any color on this short-term debt apart from syndicate and EBRD would be very helpful. This is my first question. Maybe I'll stop here. Thank you. Thank you for the question. This table on page 21 is the picture as of March 31st, 2023. Even though we had all the contracts signed in February and March, we utilized our refinancing and completed on April 20th. By the end of second quarter, you will see that this will be shifted to long-term, and almost all of them will be long-term by the end of June. 90, 95% of it. This short-term is just the phasing, because we completed refinancing on April 20th, finalized it just after we closed the quarter one. You can assume that most of them are long-term, which will be due on April 2026. Just to confirm, the new maturity profile of syndicate in EBRD is a bullet repayment, so there is no amortization between April and the 2023 and April 2026. It's a bullet repayment- Yeah of both EBRD and syndicate. No. There is none. All of our syndication loan will mature by the end of April 2026. Understood. Just to clarify, because I think it's just important. After the reporting date, you took care of all the short-term maturity. Basically, there was some other short-term bank loans on the balance sheet, but these loans were either repaid or extended. Basically at the end of the next quarter, all the debt will be long-term debt on this chart. That's correct. Just to con- They are already classified to long-term at the end of April. Understood. That's how you will see by the end of Q2. Yeah. Thank you. Understood. Thank you. Maybe one more question on acquisitions. I remember back in 2020, you were discussing potential acquisitions, including acquisitions of your distribution, not your, but holding company, distribution companies, Horizon and Pasifik. Is it still on the table? Are you still looking at acquisitions and what's your plan strategy when it comes to M&A? This will be very helpful. Thank you. It's not on the pipeline right now. Metin, anything you'd like to add? No, it's not on the pipeline right now. We don't have any project right now. At least for within this year, actually. Any others? Understood. Thank you very much. Apologies, last one on this working capital, just to confirm, this increase in receivables in Q1, as you discussed, was like a one-off. Should we expect some reversal in working capital in this quarter and the next quarter? Any kind of guidance on the working capital reversal will be helpful for us. Last final question from me. We look at working capital on an all KPIs perspective, accounts payable and inventory. You see that it decreased by one day from 97 to 96 days. Working capital is a high focus and a high priority for us. Our focus is to decrease it further over the coming quarters. There might be some seasonality impacts. This is on our radar, on our focus. If there will be any increases, it will be due to seasonality, and it will be very temporary. As of today, I'm comfortable that we were able to decrease it by another one day, despite some seasonality increases like giftings and so others. Okay. Thank you very much. Thank you. The next question comes from Anjali Doshi from Nuveen. Please go ahead. Thanks so much for the call today. I think most of my questions are answered, but I just wanted to drill down a bit more on the free cash flow dynamics and outlook for this year. Just to confirm with regard to the CapEx question, what's sort of the level of CapEx to sales that we should sort of assume for this year, and I guess going forward? If you can provide some color on that. Expected CapEx is around 1.5%-2% of our net sales for this year. That's how you can assume, which is pretty much in line what we had in prior years as well. Okay, great. The working capital. To clarify also on the working capital, if I heard correctly just from the prior question, but is your target to get to 95 days for this year, or do you think you can even reduce it lower? Our objective is to reduce it lower, but we have not set up a clear working capital base as of today. Our objective is to decrease it further and further over the coming quarters. That's all I can share right now. Okay. Excellent. I guess just one other question in terms of looking at the components within the cash flow statement. One of the big changes that we saw last year was a change in non-trade receivables from related parties, which I believe is to the parent Yıldız Holding. That non-trade receivable increased by some, I guess, TRY 649 million, and there was a further increase, about TRY 163 million, in this quarter. Can you just clarify what the nature of that non-trade receivable is and what we can expect in terms of directionality for that through the remaining quarters of this year? That's mainly non-cash related. The increases mainly FX increases related. If you need any further details, we will be able to help you if you have any other detailed questions. That's all I can say. It's mainly driven by FX increases, non-cash. Okay. All right, great. Thank you so much for your time. Go ahead. Thank you. Ladies and gentlemen, there are no further questions. Dear speakers, back to you for the conclusion. Thank you everybody for joining our call. Hope to see our second quarter results. Thank you. Ladies and gentlemen, this concludes today's webcast call. Thank you all for your participation. You may now disconnect your lines.