TÜRKIYE SISE VE CAM FABRIKALARI EARNINGS RELEASE
March 4, 2024
Şişecam (BIST-100: SISE) reported financial results for the fourth quarter ended December 31, 2023
M. Görkem Elverici, CEO of Şişecam, commented:
The world faced numerous challenges impacting economic stability in 2023. From supply chain disruptions to political tensions, trade disputes, and regional unrest, various factors hindered global growth. In addition to these global issues, Türkiye grappled w ith a significant tragedy at the start of the year- the devastating earthquake disaster. Overall, 2023 was characterized by a complex interplay of economic and geopolitical dynamics, underscoring the need for resilience and adaptability in navigating an ever-uncertain world.
We successfully managed the complexities of the year through collective strategic decisions, our commitment to collaboration and innovation growing on the advantages of One Şişecam transformation. Thanks to our dedication to sound financial practices and precise planning, we managed to weather storms of inflationary pressures, supply chain disruptions and market volatility. Our focus on executing strategic initiatives with accuracy remained unwavering throughout the year.
Our robust financial structure and prudent decision-making abilities strengthened our ability to capitalize on emerging opportunities while staying true to our core values and objectives. We finalized our partnership agreement with ICRON, a Turkish technology company that provides decision optimization services at operational and strategic levels. We aim to take our operational excellence and optimization approach to the next level with ICRON -ourfirst investment in software technologies.
We commissioned our first auto glass-specific float line in Lüleburgaz. We updated and modernized our furnaces in Georgia, Egypt and India with cold repair investments.
Our investments in flat glass, glass packaging and chemicals continued uninterruptedly. Construction is underway at Şişecam's TR9 float line in Tarsus - one of the world's top five largest capacity flat glass investments. Our glass packaging investments in Eskişehir and in Hungary and our soda ash investments in the USA are in progress.
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Looking ahead, we acknowledge that the global landscape remains dynamic in 2024. Economic recovery, technological advancements and geopolitical developments will continue to influence markets. Our proactive stance combined with our ability to adapt swiftly to changing circumstances will be pivotal in navigating the evolving landscape. While managing the effects of the risks that we might face in 2024, we will also continue to monitor the opportunities in existing and potential markets closely.
I extend my sincere gratitude for your continued trust and support in Şişecam. As we embark on our journey of growth and progress in 2024, we remain committed to transparent communication, prudent financial management, and the pursuit of progress.
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Important Notice Regarding the Accounting Principal Change
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Turkey has economic conditions that require reporting entities in the country to follow the methodology set out in International Accounting
Standards ('IAS') - 29 'Financial Reporting in Hyperinflationary Economies'. - Pursuant to the decision dated December 12, 2023, and numbered 10744 by the BRSA, banks, financial leasing, factoring, financing, savings financing, and asset management companies are not subject to inflation adjustments required under TAS-29 in their financial statements as of December 31, 2023.
- IAS 29 requires the financial statements of any entity whose functional currency is the currency of a hyperinflationary economy to be restated for changes in the general purchasing power of that currency. Comparative figures for prior period(s) should be restated into the same current measuring unit.
- According to IAS 29.3, hyperinflation is indicated by the characteristics of an economy, which include but are not limited to the followings:
- The cumulative inflation rate over three years is approaching, or exceeds, 100 percent. The general population prefers to keep its wealth in non-monetary assets or in a relatively stable foreign currency
- The general population regards monetary amounts in terms of a relatively stable foreign currency
- Pricing of credit compensates for the expected loss of purchasing power, even in short credit periods
- Interest rates, wages and prices are linked to a price index
- The consumer price index ('CPI') issued by the Turkish Statistical Institute was 36,08%, 64,27% and 64,77% in 2021, 2022 and 2023, respectively, thus IAS 29.3 is applied for reporting entities in Turkey.
- Pursuant to the Capital Markets Board Decision dated 28.12.2023 and numbered 81/1820, Sisecam is subject to IAS 29 inflationary accounting provisions, starting from its 2023-year end earnings disclosure. Thus, 2023 and comparative 2022 year-end financial results, stated in this presentation, contain Sisecam's audited financial information prepared according to Turkish Financial Reporting Standards by application of IAS-29 inflation accounting provisions.
- Non-monetaryassets and liabilities are restated
- Non-monetaryitems carried at current value are not restated
- Monetary items (ie cash, financial assets) are not subject to indexation and thus not restated
- All items in P&L are expressed by monthly indexation through consumer price index from the dates when the incomes and expenses accounted and up until the reporting date. Cost of goods sold, depreciation, and deferred tax items are subject to recalculation based on respective restated B/S items.
- Application of IAS-29 inflationary accounting provisions of Sisecam's financial figures is expected to continue until Türkiye's economic conditions no longer met the above stated IAS 29 criteria.
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Consolidated Summary Financial Results for 2023
Important Notice: Pursuant to the Capital Markets Board Decision dated 28.12.2023 and numbered 81/1820, issuers and capital market institutions shall prepare their annual financial statements ending on December 31, 2023, or later, in accordance with IAS-29 inflationary accounting provisions. Accordingly, this Earnings Release on 2023 year-end financial results and comparative prior period, contains Sisecam's audited financial information prepared in accordance with Turkish Financial Reporting Standards by application of IAS-29 inflation accounting provisions.
Summary Financials (TRY Mn) | 2022 | 2023 | YoY |
Revenue | 170,655 | 151,994 | -11% |
Gross Profit | 54,583 | 41,938 | -23% |
Gross Profit Margin | 32% | 28% | -439 bps |
Şişecam EBIT | 32,364 | 21,199 | -34% |
Şişecam EBIT Margin | 19% | 14% | -502 bps |
Şişecam EBITDA | 44,195 | 31,470 | -29% |
Şişecam EBITDA Margin | 26% | 21% | -519 bps |
Parent Only Net Income | 22,739 | 17,121 | -25% |
Parent Only Net Income Margin | 13% | 11% | -206 bps |
Capex | 12,900 | 20,991 | 63% |
Capex/Sales | 8% | 14% | 625 bps |
Adjusted EBIT | 25,330 | 17,942 | -29% |
Adjusted EBIT Margin* | 15% | 12% | -304 bps |
Adjusted EBITDA* | 37,161 | 28,213 | -24% |
Adjusted EBITDA Margin* | 22% | 19% | -321 bps |
Adjusted Parent-Only Net Income* | 18,513 | 17,131 | -7% |
Adjusted Parent-Only Net Income Margin * | 11% | 11% | 42 bps |
Analyst EBIT** | 21,947 | 10,456 | -52% |
Analyst EBIT Margin** | 13% | 7% | -598 bps |
Analyst EBITDA** | 33,778 | 20,727 | -39% |
Analyst EBITDA Margin** | 20% | 14% | -616 bps |
*Excluding one-off impacts
**Excluding other income/expense from operations, investing activities, investments in associates and joint venture
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Financial Highlights (2023 vs 2022)
- Revenue came in at TRY 152Bn, down by 11% YoY
- Gross profit was at TRY 42Bn, down by 23% YoY with a margin of 28%
- Adjusted EBITDA came in at TRY 28.2Bn, down by 24% with 19% margin
- Adjusted Parent Only Net Income came in at TRY 17.1Bn, down by 7% with 11% net margin
- Capex recorded at TRY 21Bn and Capex/Revenues stood at 14%
- FCFE had a negative balance of TRY 9.5Bn. WC/Revenue was at 29%
- Currency Sensitivity: TRY 10.7Bn Net Long FX Position, USD+EUR share in Gross Profit is 9% (50% in Revenue, 41% in COGS) in 2023
- Net Debt/EBITDA was at 1.3x
Segmental Analysis1
2023 | ||||
Segmental Breakdown of Revenue | 2022 | 2023 | YoY | Topline Drivers YoY |
Architectural Glass | 44,842 | 31,229 | -30% | -12% volume, -18% pricing, prod. mix, currency |
Industrial Glass | 13,937 | 15,835 | 14% | +7% volume, +7% pricing, prod. mix, currency |
Glassware | 17,434 | 17,576 | 1% | -2% volume, +3% pricing, prod. mix, currency |
Glass Packaging | 31,759 | 27,410 | -14% | -3% volume, -11% pricing, prod. mix, currency |
Chemicals | 43,568 | 39,431 | -9% | -1% volume, -8% pricing, prod. mix, currency |
Energy | 15,074 | 17,875 | 19% | +88% volume, -69% pricing, prod. mix, currency |
Other | 4,041 | 2,637 | -35% | |
Consolidated | 170,655 | 151,994 | -11% | |
*Based on Net External Revenue |
1reference to Appendixfor segmental breakdown analysis
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Segmental Analysis (cont'd)
2023 | |||
Segmental Contribution to Revenue | 2022 | 2023 | YoY |
Architectural Glass | 26% | 21% | -573 bps |
Industrial Glass | 8% | 10% | 225 bps |
Glassware | 10% | 12% | 135 bps |
Glass packaging | 19% | 18% | -58 bps |
Chemicals | 26% | 26% | 41 bps |
Energy | 9% | 12% | 293 bps |
Other | 2% | 1% | -93 bps |
2023 | |||
Segmental Breakdown of Adjusted EBITDA | 2022 | 2023 | YoY |
Architectural Glass | 14,298 | 6,553 | -54% |
Industrial Glass | 682 | 1,139 | 67% |
Glassware | 1,828 | 1,445 | -21% |
Glass packaging | 5,593 | 4,755 | -15% |
Chemicals | 12,776 | 11,122 | -13% |
Energy | 662 | 47 | -93% |
Other | 2,779 | 3,446 | 24% |
Total | 38,616 | 28,507 | -26% |
Elimination | -1,455 | -294 | -80% |
Consolidated | 37,161 | 28,213 | -24% |
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Segmental Analysis (cont'd)
2023 | |||
Segmental Contribution to Adjusted EBITDA | 2022 | 2023 | YoY |
Architectural Glass | 37% | 23% | -1,404 bps |
Industrial Glass | 2% | 4% | 223 bps |
Glassware | 5% | 5% | 34 bps |
Glass packaging | 14% | 17% | 220 bps |
Chemicals | 33% | 39% | 593 bps |
Energy | 2% | 1% | -115 bps |
Other | 7% | 11% | 443 bps |
2023 | |||
Segmental Adjusted EBITDA Margin | 2022 | 2023 | YoY |
Architectural Glass | 30% | 20% | -1,035 bps |
Industrial Glass | 5% | 7% | 230 bps |
Glassware | 10% | 8% | -204 bps |
Glass packaging | 17% | 17% | -43 bps |
Chemicals | 27% | 26% | -109 bps |
Energy | 3% | 0.2% | -256 bps |
Other | 35% | 55% | 1,950 bps |
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Operational Highlights (Q4'23 vs Q4'22) 2
Q4'23 vs Q4'22 | 2023 vs 2022 | ||||||||||||||||
Architectural | o Production down by 6% at 711K tons | o Production down by 15% at 2,563K tons | |||||||||||||||
o | 88% capacity utilization rate* | o 84% capacity utilization rate* | |||||||||||||||
Glass | |||||||||||||||||
o | Sales volume down by 4% (domestic sales down by 7%, | o Sales volume down by 12% (domestic and international sales down | |||||||||||||||
international sales up by 1%) | by 12% each) | ||||||||||||||||
Auto Glass, & | o | Sales volume** up by 9% | Auto Glass, & | o | Sales volume** up by 10% | ||||||||||||
Encapsulation | Encapsulation | ||||||||||||||||
Industrials | |||||||||||||||||
o Production was flat at 16K tons | Glass | o Production up by 1% at 63K tons | |||||||||||||||
Glass Fiber | o | 91% capacity utilization rate | o | 90% capacity utilization rate | |||||||||||||
Fiber | |||||||||||||||||
o Sales volume up by 27% | o | Sales volume down by 5% | |||||||||||||||
o | Production down by 5% at 565K tons | o Production down by 3% at 2,273K tons | |||||||||||||||
o | Sales volume up by 4% (domestic sales down by 8%, | ||||||||||||||||
Glass | o Sales volume down by 3% (domestic and international sales down by | ||||||||||||||||
international sales up by 13%) | |||||||||||||||||
Packaging | 6%, and 1%, respectively) | ||||||||||||||||
o | 90% capacity utilization rate (90% in Turkey and 88% in | ||||||||||||||||
o 90% capacity utilization rate (89% in Turkey and 91% in Russia) * | |||||||||||||||||
Russia) * | |||||||||||||||||
Glassware | o Sales volume down by 6% (domestic sales up by 7%, | o Sales volume down by 2% (domestic sales up by 10%, international | |||||||||||||||
international sales down by 14%) | sales down by 9%) | ||||||||||||||||
o | Production down by 4% | o | Production down by 4% | ||||||||||||||
Soda | o | Sales volume up by 13% (domestic sales | Soda | ||||||||||||||
o | Sales volume was flat (domestic sales down by 16%, | ||||||||||||||||
Ash | down by 2%, international sales up by | Ash | |||||||||||||||
international sales up by 2%) | |||||||||||||||||
14%) | |||||||||||||||||
o | Average USD/ton price up by 7% | ||||||||||||||||
Chemicals | o | Average USD/ton price down by 19% | |||||||||||||||
Chromium | o | Sales volume up by 56% at 33K tons | Chromium | o | Sales volume down by 6% at 100K tons (domestic | ||||||||||||
(domestic sales down by 8%, international | |||||||||||||||||
Chemicals | Chemicals | sales down by 9%, international sales down by 5%) | |||||||||||||||
sales up by 74%) | |||||||||||||||||
o | Average USD/ton price down by 17% | ||||||||||||||||
o | Average USD/ton price down by 37% | ||||||||||||||||
Energy | o | Sales volume, up by 104%, to 1.72Bn kWh | o Sales volume, up by 88%, to 5.6Bn kWh | ||||||||||||||
2 Glass and chemicals volume figures are based on metric ton * Actual output/effective capacity
** Auto Glass sales volume converted from m2 to tons, Encapsulation sales volume converted from units to tons
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Architectural Glass: 21% share in Revenue | 23% share in Adj. EBITDA | "Second Largest Topline & EBITDA Contributor in 2023"
Despite the challenging market environment in the shade of sticky inflation, Architectural Glass business line demonstrated resilience and adaptability in the low season construction market. The Architectural Glass business line maintained its inventory balancing strategies throughout the quarter given the seasonal downturn in demand as well as macroeconomic concerns.
Production was recorded at 711K tons, down by 6% YoY. Quarter-wise CUR stood at 88% with 63% of flat glass output produced by Turkey- based operations. Facilities in the EU accounted for 23% of the consolidated production volume. The remaining balance was composed of Russian and Indian operations.
Consolidated sales volume contracted by 4% YoY given weaker demand in the construction sector due mainly to global tightening policies limiting access to financing as well as the industry's low season dynamics.
Sales from Turkey including exports, 63% of consolidated sales volume, decreased by 2% YoY. On the domestic side, the market started to be resilient against imported goods flow with the depreciation of TRY and import protection measures that came into effect in November. Yet, local market flat glass consumption, mainly by construction and furniture industries, was curbed due to the cooler demand resulting from expeditious rise in interest rates and limitations in access to liquidity. Meanwhile, processors' export-oriented product orders have slowed down due to the tension in the Middle East region as well as low-cost imports targeting the white goods industry in the EU. Therefore, domestic sales indicated a volume decline of 7% YoY. On the export side, volume increased by 36% YoY thanks to improved competitiveness with further TRY depreciation as well as inventory optimization strategy through channeling more products to overseas markets. Going forward, exports have room to be stronger thanks to new wholesaler and processor client additions to our portfolio in Latin America particularly in Brazil, hence our enlarged catchment area, and Turkey's geographical position considering the significant upward movement in freight rates resulting from the Suez Canal blockage and the potential pressure it has put on the flow of low-cost imports.
Recent communiqués on i) additional 5% customs duty on imported float, laminated, security and solar glass products ii) lower deductible VAT on imports, included in trade surveillance list, which leads to an increase in VAT liabilities of importing entities, might indirectly trigger sales volume growth.
Sales from European operations went down by 10% YoY. Although the new construction market continued to decelerate due to rising inflation and subsequent monetary tightening, the contraction has lost its momentum particularly compared to the first half of the year. The share of the continent in consolidated sales volume was recorded at 21% (vs. 22% in Q4'22).
Although there was a contraction in India facility's sales performance stemming from the recent cold repair process, thanks to the steady vitality in Russia, aggregate sales volume of Russian and Indian operations was down by a mere 2% YoY. Accordingly, those two regions accounted for 16% of the consolidated Architectural Glass sales volume.
Abundance of low-cost products and sluggish demand continued to put pressure on the pricing environment. Meanwhile, a year-long downward trend in energy prices led to the elimination of respective surcharges on the product prices. Accordingly, EUR-based product prices came down by 28% YoY on average across all regions.
Architectural Glass segment's annual sales volume performance was down by 12% in 2023 compared to the prior year, while its net external revenue was TRY 31.2bn, down by 30%.
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Industrial Glass: 10% share in Revenue | 4% share in Adj. EBITDA
Industrial Glass business line, consisting of automotive glass, encapsulation & home appliances and glass fiber operations, generated TRY 2.8Bn net external revenue with an annual increase of 82%.
Automotive glass and encapsulation sub-segment, generating circa 87% of the division's topline, recorded a sales volume growth of 9% YoY thanks to mainly accelerated demand of OEMs in Europe as well as change in sales mix in relation with ongoing projects. Auto Replacement Glass ("ARG") channel, which entered in our portfolio of operations in 2019, continued to support the business line's outperformance with its 10% share in consolidated automotive glass & encapsulation revenue.
Triggered mainly by additional spot sales in Turkey despite low demand, Glass Fiber sales volume went up by 27% YoY. Meanwhile per ton prices stayed depressed mainly by the high stock levels of local distributors, industrial customers' tendency to avoid stockpiling due to macroeconomic conditions. The pricing environment in the surrounding region was also weak due to especially excess supply with the presence of low-cost imports in EU. The share of Glass Fiber in Industrial Glass segment topline was 10% in Q4'23.
Industrial Glass segment's annual sales volume performance for Auto Glass, & Encapsulation was up by 10% and Glass Fiber sales volume performance was down by %5 in 2023 compared to the prior year, while its net external revenue was TRY 15.8bn, up by 14%.
Glass Packaging: 18% share in Revenue | 17% share in Adj. EBITDA | "Third Largest Topline & EBITDA Contributor in 2023"
With a quarterly average CUR of 90%, Glass Packaging consolidated output decreased by 5% YoY. Share of Turkey-based facilities in total production increased by ~200 bps to 58%, while Non-Turkey operations composed the remaining balance. In addition to the cold repair at Kirishi (Russia) facility, the lower production was mainly the result of inventory optimization strategies implemented partially in both Turkey and Russia.
Backed particularly by the rise in international sales, Glass Packaging business line ended the quarter with 4% higher sales volume YoY. Domestic sales, corresponding to 37% of consolidated sales volume (vs. 42% in Q4'22) contracted by 8% YoY due to client industries' tendency to carry low inventories given high financing costs. Weaker demand from both the wine and food industries due to low harvest levels has also contributed to the decline in domestic sales. Meanwhile, triggered by the mineral water and beer categories, sales to domestic non-alcoholic and alcoholic beverage segments increased YoY. Exports from Turkey, having 18% share in overall sales, soared by 37% YoY.
Although regular low season trend was visible and the export capabilities remained limited due to the sanctions in Russia, increased sales to alcoholic beverages sector thanks to especially newly launched local brands in the beer segment following the ownership change, heightened tax on imported wines from 12,5% to 20%, and additional exports to CIS countries stimulated the growth. As a result, non-Turkey operating regions recorded 5% sales volume growth in Q4'23.
Reflecting the changes in costs through dynamic pricing models, product price adjustments were put in place in Turkey. Meanwhile, per ton TL prices moved slightly north in export markets given fierce competition in MEA region with aggressive pricing of European manufacturers while turning their attention to the region following a slowdown in Europe, and low consumption tendency in USA considering monetary tightening.
Glass Packaging segment's annual sales volume performance was down by 3% in 2023 compared to the prior year, while its net external revenue was TRY 27.4Bn, down by 14%.
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Türkiye Sise ve Cam Fabrikalari AS published this content on 04 March 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 05 March 2024 14:32:06 UTC.
