Good afternoon, ladies and gentlemen, and welcome to Ülker's earnings conference call on the 30th of May, 2024. Please note, at this time, participant lines are on listen-only mode. The format of today's recorded call will be a presentation by Ülker's management team, followed by a question and answer session. Without further ado, I would now like to pass the line to Ms. Beste Taşar. Please go ahead. Thank you, Michael. Hello, everybody, and welcome to Ülker Bisküvi first quarter 2024 operational and financial earnings webcast. Here with me in the room are CFO Fulya Banu Sürücü for evaluating our first quarter results. I'm leaving the ground to her for her starting comments. Fulya Hanım. Beste, thank you so much. Thank you. Good afternoon and good morning, and thank you everyone for joining Ülker's first quarter results webcast. On behalf of our CEO, Mete Buyurgan, couldn't attend the call today due to a very unexpected last minute travel plan, and he apologizes for that. Let me start sharing with you that all financial figures are reported using TAS 29 financial reporting in hyperinflationary economies, unless stated otherwise, but all our figures and numbers are per inflation accounting. I'm very pleased to share that 2024 is off to a solid start with a track record of strong results operationally and financially. Solid top-line growth, effective pricing, and cost management, coupled with our agile way of doing things, we delivered very solid results, which I will be sharing on the coming slides soon. To accelerate our strategy of snacking leadership and sustainable long-term growth, we continue to invest in our most beloved iconic brands and capabilities. In this quarter as well, despite a very challenging and operating environment, we were able to maintain our very strong market share position, and we had a very successful Eid and Ramadan period with a lot of activities that supported our leadership position. As you all know, Ülker has a very strong sustainability journey that started almost 10 years ago, and you can see some of the awards we received in this quarter related to sustainability, which couple of them is we won the gender awards in supporting female farmers in Ivory Coast, and Ali Abi Project won special responsibility awards that are the news related to our sustainability in this quarter. As you all know, we have come a long way to reach operational excellence in Ülker, you see some KPIs on the operational excellence page, such as net loss, overall equipment efficiency, implementation of IoT systems, and lost time accident rates, which are all really favorable. On our footprint, strong performance all around the world. On the next page. We were able to increase our revenue almost in all regions throughout the world that we operate. Turkey grew on revenue 16.9%, EBITDA grew 14.2%, Turkey exports 4.3% and 7.2% in terms of EBITDA growth. Central Asia revenue growth of 1.5%. There is a decrease in EBITDA growth of by 22.2%. Middle East grew by 1.33% in revenue and 6% EBITDA decrease year-on-year. North Africa grew 67% and 69.6% revenue and EBITDA growth respectively. You can see the revenue growth breakdown of our region geographically, you also see the net revenue by division. Revenue breakdown is 36.4%, 30, 68% domestic, and 32% international revenue breakdown. Net revenue by division shows that 68% of the revenue is from domestic, you see the region breakdown of 13% Middle East, 3% North Africa, and CA making up approximately 4% of our total region, no breakdown, and 11% export. Global market share and NPD, you see the strong market share across all of our categories, 34% in Turkey and 28% in Middle East. You see that we are number one in Turkey in biscuit, chocolate, and cake. All these figures are very strong market leadership positions. Revenue contribution of NPD make up a significant amount in our numbers. As of Q1, 11% of the domestic revenue and 7% of the international revenue is through new product launches. In summary, despite very challenging, highly volatile environments, we stay agile and focused in dealing with short term as well as executing against our long-term growth strategy very successfully. Financial performance, as you can see, we delivered very strong rates, our financial performance as of Q1. You see the total volume growth of 15%, a very healthy, very strong volume growth that we delivered at 15% versus the prior year. Revenue grew by 13% and gross profit grew by 18%, higher than the revenue growth. Gross profit increase and revenue increase show that we implemented sound pricing strategies, including both pricing and revenue growth management, we balanced the need to offset the inflation and maintain solid volume growth, as you can see from our numbers, volume, revenue, and gross profit. EBITDA, we were able to reach 20.6% EBITDA numbers, which is in line with the prior year, adjusted with inflation numbers. Net income, we were able to reach TRY 2.2 billion net income. A slight decrease versus the prior year, mainly driven by deferred tax increase. Excluding deferred tax increase, in fact, our net income also increases by 11%. Net Debt EBITDA, we continue to reach very healthy Net Debt EBITDA numbers. As of Q1, we are below 1.5. When we take a look at volume and revenue contribution by category, we see that our core categories, biscuits, chocolate, and cakes, demonstrate more resilience and lower elasticity than the broader food and sector universe. You can see how these factors are reflected in the figures of snacking sales volume and sales value. Total snacking sales volume increased by 17% in Q1 2024, and out of that 17%, biscuits contributed 11%, chocolate contributed 24%, and cake contributed 26% to the volume growth. You can see the breakdown of how much of these categories make up our total sales volume. Biscuits making 51%, chocolate 40%, and cakes 8% of our total volume. In terms of snacking sales volume, total snacking sales volume increased by 13%. 5% is from biscuit increase, chocolate is 18%, and cake is 73%. On the next page, you see the regional breakdown of our total revenue growth, profit, and EBITDA. Total revenue grew by, on the domestic side, 17%, whereas it grew by 5% in international markets. Gross profit increased by 18%, whereas it increased by 17% in international, and 14% and 11% in EBITDA in domestic and international businesses, respectively. Very healthy growth and very healthy numbers. In the international operations EBITDA percentage development, you can see the numbers. We were able to increase the Middle East and North Africa EBITDA margins from 20.7% at year-end to 22.4% in the Middle East. In North Africa, we were able to increase the EBITDA margin to 14.4% and 14.2%. Slight decrease in Central Asia, mainly due to economic conditions in Kazakhstan and the strong investment in marketing activities to boost our brands further. On the remaining part of the year, we expect it to recover. As you all know, having a stronger balance sheet is one of our key priorities that we set a while ago, and you see the results demonstrate that we continue strengthening our balance sheet further and further. Our Net Debt EBITDA reaches to 1.4 times, so we are below 1.5. Our total FX hedge number makes up 65% of the total open position is hedged via cross-currency swaps and forwards. You can see the net working capital days and net working capital. Huge focus within the organization with all departments shows that we were able to reach 82 days, almost a 10-day decrease versus the prior year, mainly driven by effective management of inventory and AP, mainly. As you know, we have also kicked off the Eurobond financing. CMB approved our application in the total amount of $550 million. Eurobond financing is in progress, and we are currently working with the most reputable business finance business partners. The financing is in progress and continues. We also wanted to share with you our management guidance for 2024 and also 2024 priorities. We think that we will end the year with TRY 85 billion in terms of net sales, and we should be able to reach 18.5% EBITDA margin on a full-year basis. As we have shared again in the last broadcast meeting, I want to again emphasize the 2024 priorities. That is still valid for Q1 as well. Inflaionary challenges, they still continue, and the proactive actions we are taking. Price versus volume, as I have shared a couple slides before, that we are trying to balance pricing, cost management, and the volume per inflation impacts and the other impacts. That happen in the environment. Investment in brand and innovation. We will continue to strengthen our iconic brands and continue with innovation, digitalization and acceleration of AI adoption. Supply chain operations, modernizing and making that our supply chain operations get stronger and stronger. Always portfolio optimization, making sure that we have the best portfolio to meet the needs of our customers and consumers. I think that's all for Q1 2024. Thank you, Fulya. We are open for questions. Thank you very much for the presentation. We will now be moving to the Q&A part of the call. If you have any questions and you are dialed in via the telephone, please press star two. That's star two on your keypad for any voice questions. If you are dialed in via the web, you may also ask a voice or a text question. Thank you very much. We will take first question from Miss Evgenia Bistrova from Barclays. Please go ahead, ma'am, your line is open. Hi, can you hear me? Yes, please go ahead. Hi, good afternoon. Thank you very much for the presentation. Congrats on results. I have few questions and I would like to go one by one, if I may. My first question is, I noticed that your free cash flow was negative in the first quarter, so I was wondering, is this related to working capital outflow? Also following up on that, I can see increase in receivables to related parties. Could you please explain this and how that impacted your free cash flow? Yes. Thank you so much for the question. In fact, this change is mainly primarily attributable to an increase in trade receivables in line with the sales growth. Seasonality in sales is driven by Ramadan periods, affecting month of casing of gifting sales led to an increase in receivables. There is no significant variation in cash conversion days compared to prior years. This is just a seasonality impact, and which we expect to recover over the coming months and quarters. Mainly related to the increase of sales and very effective use of Ramadan period. Okay, got you. Also on your guidance for 2024, you expect TRY 85 billion in total revenue. What is the real growth rate implied in this forecast? Also could you please share what are your inflation and FX assumptions for this guidance? Would you say that the growth will be mainly achieved through Turkey operations or it's a balance between Turkey and international operations? We assumed around 45% inflation, which is in line with the expectations of the market as well. The growth will come mainly from domestic export and international businesses on a valid basis, like it happened in prior years and in Q4 2024. We believe that we will be able to reach this net sales number by the end of the year. What is the growth rate that you're implying in your forecast in real terms year-over-year? Just give us a second. Yeah, sure. Well, it is not comparable inflation basis numbers. We can get back to you later on that. Okay. Also related question. I noticed that your Middle East EBITDA decreased. Could you please explain what were the drivers of that and what are you expecting for the rest of the year? It is mainly due to higher marketing spending to boost and support our brands and brand equity in the region. We expect it to recover due to just the seasonality over the coming periods and over the coming quarters. We expect it to recover and to increase in terms of EBITDA margins. Okay. My final question, very quick one, if I may. This new IFC loan, was it already reflected in the debt balance in the first quarter? As of Q1, it is not reflected. It will be because we have received this in April. It will be reflected as of Q2 numbers. Okay, perfect. In that debt sheet. Okay, understood. Thank you very much and also congrats on the CMB approval. Looking forward to see what you're going to do. Thank you very much. Thank you. Great. Thank you very much. Our next question comes from Miss Hanzade Kılıçkıran from J.P. Morgan. Please go ahead, ma'am, your line is open. Fulya, thanks very much for the presentation. I have a follow-up question on international margins and the weakness in MENA. Not only MENA, but Central Asia was also weak in terms of EBITDA generation. However, you reported an improvement in the international margins. Can you please elaborate what happened? What is causing this margin improvement in the international side while the most profitable markets are seeing decline in EBITDA? Second question is about your hedging position. Can you please remind us your latest hedging position, and will there be any change in your position in the rest of the year? Thank you. Mm-hmm. Again, thank you for the question. Regarding to your first question, Turkey export contributes to the international segment. That's the main driver of the increase. Regarding to your second question, as of Q1, our hedge position is 65%. We do not want to be below 60%. That's what our policy. Again, we monitor how the effect rate fluctuates, and definitely by year end, we do not want to be below 50%, 60%. That's our policy. It will not change significantly. Thank you very much. Thank you. Thank you very much. Next question comes from Mr. Cemal Demirtaş from Ata Invest. Please go ahead, sir. Thank you for the presentation. Congratulations for good results. My first question is about the trends so far in the second quarter. When we look at the first quarter, it looks like, the trend was upbeat. Your margin guidance is a little bit conservative, possibly, but I would like to understand how that goes in the second quarter so far. The other question is about the Eurobond issue. At which stage are you in that? Again, for the following years, what's your strategy ahead? Thank you. Cemal Demirtaş, thank you for the question. Regarding the two questions. Regarding Q2 volume, yes, we had a very successful Q1 volume growth, and April was also very strong. Demand towards our product in the market continues. There are two months to go to close the Q2. As of today, I cannot give a clear guidance related to volume growth for Q2, but definitely, once the Q2 results are out, we may revise our full year's numbers as well. I can tell you this, so far so good. The positive momentum continues, but we'll get the actual numbers once we issue our Q2 results. Regarding your second question, Eurobonds, we have already established finance business partner groups. We have our legal counsels. We have already started working with them a while ago. The process is in good shape. We definitely want to refinance our Eurobonds financing sometime within this year, and hopefully, as soon as possible, and capture any opportunity while the markets are supportive. CMB approved our numbers. Total number was $550 million, below than what is outstanding as of today, which also shows our commitment to decrease leverage, and maintain the decreased leverage numbers further. Was there any other question, Cemal Demirtaş? About, again, your guidance, Topbanu, I guess you mentioned your year-end inflation expectation. Could you give us the average also? If we put, for instance, 40 for the year end, the average comes to around 55%. Maybe in your assumption, because when we make the comparison, we might need that. Any average number you can share as an assumption in your numbers? In fact, 45 was average. Sorry, 45 was year end. Year end. Yes. Any number for average could you share? Maybe we can ask later. We did not calculate it. Just based on the year end, 45%, that's how we calculated our numbers forecast. Mm-hmm. Okay. About this inflation accounting issue, I voiced this several times, but I understand the Capital Markets Board is limiting the disclosure of IFRS- Right 29. I will continue to tell that even to the Capital Markets Board that for more transparency and for transition, it was needed for sure. Now it's making, not in your case, but in many cases, it's making the job very difficult, not only for locals, but also for international investors and analysts. That, I would like to highlight it again, because they can limit it, of course, by the board, but at least I would have expected from the companies to defend this, that for the transparency, I think there should be better conditions. That's just a quick comment of me. Thank you very much. Cemal Demirtaş, thank you. I understand your point of view, We are restricted by CMB regulations, That's how we need to show our numbers. Thank you. Thank you. Thank you very much. Just a reminder, once again, star two for any additional voice questions. In the meantime, we'll take a couple of text questions. The first text question came from Alekin Dasos, a retail investor. First of all, congratulations on the strong Q1 results. Is it possible for you to provide insight into the sales volumes for the second quarter? Will the 16% growth achieved in the first quarter be maintained? Thank you. I think I have already answered this question. Okay, thank you very much. We will be moving to the second text question. Might have already been touched on. You had very strong volume growth in the first quarter of the year. What's the major reason for such a big volume growth? Should we expect the same growth for the whole year? Thank you. The main reasons, let me break it down, is mainly driven by Turkey domestic numbers and international and TR Turkey export numbers. The main driver is coming from Turkey. As I have shared a couple minutes ago, we started Q2 again very strong. I cannot share any numbers right now. May is not closed. We have a June, and we have another holiday season, where gifting products may not be consumed as much as during the Ramadan period. We have to wait and see. The strong momentum continues, but I cannot clearly state any number as of right now. We will see the actual numbers once we issue the Q2 results. Okay, thank you very much. We have a voice question from Ogur Bagci from Finans Güneşi. Please go ahead. Your line is open. Thank you very much for the presentation. I would like to ask about the commodity prices. There's a fluctuation happening in the cocoa prices and oil prices. As far as I know, there's a hedge policy going on you. I want to ask, is there a pricing power occurring due to increased cocoa prices? Do you gain an advantage in the market due to the commodity fluctuations? Thank you for the question. As you have also stated, we have a hedge policy for commodities. In terms of cocoa, we have a hedge policy of being hedged for the next 12 months. As of today, I can tell you that 2024 numbers are already hedged in terms of quantity and price. It's pretty much the same. We have a similar hedge policy for the other key raw materials that we procure, like wheat, sugar, and oil, and nuts as well. As of today, I can tell you that we do not have any issue in terms of pricing and quantity for these raw materials. We're continuing with this hedge, being proactive in the market and being in a competitive edge in the market. Okay. Thank you very much. Okay. Thank you very much. Thank you. We have a follow-up question from Miss Evgenia Bistrova from Barclays. Please go ahead. Yes. Thank you very much for allowing me to ask another question. Just quick follow-up. Obviously you mentioned that you can't say what the Q2 volumes will be, but if you look at the year in general, what would you say is the seasonality in terms of volumes, sales volumes, or demand, throughout the year from quarter to quarter? Well, the demand for our products continue in a very strong momentum. As I have also shared during my presentation, that the demand to our products are very resilient and very low price elasticity in terms of when you compare it with other products in the food sector. Ülker being the number one market leader with a very high brand equity, we take the leverage advantage of this throughout the years, and looks like we are going to get that advantage in 2024 as well. I cannot state any number, but I can only share with you that the strong momentum will continue, and the Q1 results in terms of volume growth is great. Yeah. Thank you very much. In terms of seasonality, do you maybe expect any quarters to be even stronger or weaker because of, I don't know, holiday season or Ramadan or something else? Q2, Q3, Q4 might be more challenging than Q1. They might, if inflation, we do not know exactly how inflation will shape. There might be some political stability in the region. Whereas, Middle East and all our key markets. These will be the drivers. What I can tell you that Ülker Bisküvi is ready for each scenario. We have couple scenarios to make sure that we meet our targets. As of today, growth momentum will continue, but depending on these drivers, it may change. The remaining of the quarters might not be as strong as Q1, but we will do our best to make sure that we'll meet the targets that we met in Q1. Thank you. Thank you very much. We have a follow-up question from Miss Hanzade Kılıçkıran from JP Morgan. Please go ahead, ma'am. Thank you. Fulya Hanım, I have a follow-up question on margin guidance. You are guiding around 18.5% EBITDA margin for the full year, versus over 20% realized in the first quarter. Do you think that this is a conservative guidance, or do you see a major headwind in the rest of the year? I just made a rough calculation on your guidance about the real growth, and it looks like that on the revenue side, you are still looking for around 5% growth. Apparently you look for, I think, good consumption in the rest of the year or strong pricing. I'm trying to understand whether margin guidance is conservative or not. Thank you. Thank you for the question. It may be conservative, but we just wanted to be on the safe side because there are a couple things that are really unknown, like, inflation expectation. Of course, we have a guidance. We see how the market reacts and the market expectations. We cannot rely on that 100%. There are a couple things that are unknown: inflation, key drivers, macros on globally and locally, and then the political stability. Based on all these taken into consideration, we think that we are comfortable that we will be able to reach 18.5%. Depending on how these key drivers will move, this might be also a conservative EBITDA margin. We will see. Thank you. Thank you very much. We have a follow-up question from Cemal Demirtaş from Ata Invest. Please go ahead, sir. Thank you. My question is about the volume and the pricing side. I see that in real terms, the volume growth is higher than the value growth. Did we see specific price declines in real terms? Could we expect this to continue, or because of the cocoa price and other cost pressures, should we expect some increase in the prices? Cemal, when you look at the quarterly consolidated financials, volume is in quantity. It grew by 15%. Revenue grew by 13%. Gross profit grew by 18%. I think gross profit number exactly shows how we blend pricing, cost, and mix, and all the other things that impact these two numbers. Product mix, channel mix, they all impact this. I think gross profit margin 18%, volume increase 15%, revenue increase 13%. This shows a very healthy mix of pricing, costing, cost management, product, and channel mix. Do we expect it to continue? I think we were able to demonstrate that in the last 10 quarters, it all continued. In the last 10 quarters that we operated. Definitely our objective is to make sure that it continues. That's how we base our plans. We will see. Depending on the variables and the factors that I have just shared with you, the results might change. That's why we ended up with 18.5% EBITDA margin. Okay. Thank you. Thank you very much. Our next question comes from Kayahan Demirak from Ak Yatırım. Please go ahead, sir. Your line is open. Mr. Kayahan Demirak from Ak Yatırım, your line is open. Please go ahead. Hello, do you hear me? Yes, we can hear you. Please go ahead. I'm not sure my voice is coming to you. Yes, we can hear you. Yeah, I'm sorry because I'm not working at the Ak Yatırım. I thought the line was confused, so I'm very sorry I joined the call late. I'm also sorry if this question has been answered already, but I have a question on the working capital side. It seems that your receivable terms, particularly in the domestic market, seems elevated. Do you see this as a part of a seasonality, or do you expect those to remain elevated? This is mainly seasonal. This is mainly related to higher sales in all channels. We expect it to recover over the coming quarters. Okay. For the whole year, do you expect cash conversion from EBITDA to remain strong compared to last year? We should expect some deterioration this year related to further investment in the working capital? Here I can share that we have a huge focus on working capital, you see the improvement. You have seen the improvement every quarter in the last 10 quarters, you see the improvement this quarter as well. What I can tell you is instead of committing and sharing with you an exact number, I can tell you that we are committed to optimize our working capital further and further, and making it more efficient and effective. That's what we are committed. The numbers will come eventually. Okay. Thanks for the call and the opportunity to ask questions. I'm sorry about the outside noises and late reply. Thank you. Thank you very much. Thank you. Thank you very much. Our final text question comes from Mr. Murat from Tacirler Asset Management. Thank you for the presentation and all the support until now. Congratulations for good results. Can you mention also the risks? In recent years, currency appreciation affected you negatively. It looks like you won't be affected by currency this year. You also hedged the commodity. Are there any other risks we are not aware of, and you did not mention? Yes, you are right. We hedged currency. Volatility is not a nightmare anymore. We are hedged, and in terms of our commodities, we are also safe. From those perspectives, I do not see any further risk unless there is a very big volatility. If US dollar FX goes to 50 tomorrow, this may definitely impact the numbers. Anything that is very unexpected might impact us. Other than that, we are exposed to the same risks like inflation, macros, and political global risks that may come as unexpected. We definitely incorporate all these items into our forecast, but any big deviation in those items might definitely impact us favorably or unfavorably. In terms of what I can see right now, there is no big risk in terms of FX and commodities. As I have shared, unless something comes up very unexpectedly or unless there is a huge fluctuation in one of those FX or commodity prices at an unexpected rate. Okay, thank you very much. It looks like we have no further questions at this point. I'll pass the line back to the management team of Ülker for the concluding remarks. Thank you, everybody, for joining our call. Hope to see you in our second quarter's webcast results. Thank you, everyone. Look forward to hearing back from you. Thank you very much. This concludes today's conference call. We'll now be closing all the lines. Thank you, and goodbye.