100% Happiness 2013 ANNUAL REPORT

Transcription

1 100% Happiness 2013 ANNUAL REPORT

2 Contents Key Financial Indicators In 2013, Ülker increased its consolidated sales by 17.3% and its operating profit by 39.5% Key Financial Indicators 06 Operational Indicators 07 Capital and Shareholder Structure 08 Production Facilities 09 Ülker s Share Performance on the BIST 10 Message from the Chairman 12 Board of Directors 15 Message from the CEO 16 Strategies 18 Current Economic Outlook, Global and Turkish Food Industries 20 Key Developments 22 Production and Capacity 25 Investments 26 Subsidiaries 30 Human Resources 33 Quality and R&D 38 Social Responsibility 42 Corporate Governance Principles Compliance Report 53 Risk Management 54 Investor Relations 55 Amendments to the Articles of Association Ordinary General Assembly Meeting Agenda 65 Subsidiary Company Report Results 66 Power of Attorney 67 Dividend Distribution Policy 68 Independent Audit Report Message from the Chairman 2013 was a year with innovation and achievements for Ülker. Current Economic Outlook, Global and Turkish Food Industries Global economy continued to grow in low gear in Production and Capacity Increasing capacity utilization rates Human Resources Ülker sees its employees as its biggest capital and most valuable asset. 30

3 70 years ago, launching its operations in a small workshop in Istanbul Eminönü with six-seven boilers, a small oven and three workers, Ülker is the world s giant brand in its sector today. With its innovative vision, Ülker always freshened its consumers trust as well as its products. Getting the outcomes of its investments in 2013, Ülker continues to give happier moments to more consumers in more locations while continuing to be among Turkey s most famous and most appreciated top brands.

4 2 ÜLKER BİSKÜVİ ANNUAL REPORT 2013 Increasing Sales Increasing sales volume SALES VOLUME BY CATEGORY (TonS) Biscuit Chocolate Cake , ,776 65, ,725 Biscuit Chocolate Cake , ,784 56, , % NET SALES BY CATEGORY (TL MILLION) Biscuit Chocolate Cake Other , ,748 Biscuit Chocolate Cake Other , , %

5 3 Increasing Profit Increasing profitability NET PROFIT (TL MILLION) NET PROFIT MARGIN (%) EBITDA (TL MILLION) EBITDA MARGIN (%) ADJUSTED EBITDA (Excludes Other Nonoperating Income & Expenses)

6 4 ÜLKER BİSKÜVİ ANNUAL REPORT 2013 Sustainable Profitability Successful results COMPONENTS OF EBITDA MARGIN IMPROVEMENT (%) 2013 EBITDA Margin 11.5 Better Cost & OPEX Management 2.5 Category Mix Effect 1.3 Distribution Restructuring EBITDA margin 4.3

7 5 Key Financial Indicators Strong financial structure Summary Balance Sheet (TL) Current Assets 2,128,504,531 2,258,514,250 Non-Current Assets 1,033,447, ,093,294 Total Assets 3,161,951,940 3,156,607,544 Short-term Liabilities 1,826,580,192 1,143,105,831 Long-term Liabilities 67,203, ,748,301 Shareholders Equity 1,129,829, ,451,288 Non-controlling interest 138,338, ,302,124 Total Assets 3,161,951,940 3,156,607,544 Summary Profit and Loss (TL) Revenue 2,748,370,545 2,343,232,826 Gross Profit 633,310, ,250,892 Operating Profit 312,603, ,166,175 Net Profit 188,648, ,968,003 Ratios Gross Profit Margin (%) Net Profit Margin (%) Earnings per share (1 TL Nominal) Operating Profit (TL million) Shareholders Equity (TL million) , , * ,097 *In line with the reporting prior to the new Announcement of Public Oversight. Ülker s operasting profit realized TL 313 million in 2013.

8 6 ÜLKER BİSKÜVİ ANNUAL REPORT 2013 Operational Indicators Increasing production capacity 2013 Total Production (Tons) 448,643 Biscuit Production Chocolate Production Cake Production 225, ,298 64, Total Sales (TONS) 478,725 Biscuit Sales Chocolate Sales Cake Sales 254, ,776 65,060

9 7 Capital and Shareholder Structure Solid future Ülker s shareholding structure as of December 31, 2013 is presented below. As of December 31, 2013, 39.81% of Ülker stock consisted of free-float shares. Share Value December 31, 2013, Share Ratio Share Value December 31, 2012, Share Ratio Yıldız Holding A.Ş. 166, % 151,778, % Dynamic Growth Fund ,308, % Yıldız Holding Subsidiaries and Ülker Family Members % % Free Float 136, % % Total 342,000, % 342,000, % CAPITAL STRUCTURE 48.82% Yıldız Holding A.Ş % Free Float 11.37% Yıldız Holding Subsidiaries and Ülker Family Members For Ülker Biscuits, 2013 was a year full of innovations and achievements. We make our investors happy with our corporate procedures and operational success while making our consumers happy with our quality products.

10 8 ÜLKER BİSKÜVİ ANNUAL REPORT 2013 Production Facilities Production facilities Hadımköy, Istanbul Factory Cake Established in 1992 Capacity: 45 thousand ton/year 27 thousand m 2 indoor area Gebze Factory Biscuit & cracker Established in 1997 Capacity: 59 thousand ton/year 41 thousand m 2 indoor area Ankara Factory Biscuit Established in 1969 Capacity: 109 thousand ton/year 86 thousand m 2 indoor area The biggest biscuit production factory of the Middle East region Topkapı, Istanbul Factory Chocolate Established in 1991 Capacity: 194 thousand ton/ year 68 thousand m 2 indoor area Silivri, Istanbul Factory Chocolate, chocolate covered biscuit Established in 1995 Capacity: 30 thousand ton/year 12 thousand m 2 indoor area Karaman Factory Biscuit, cake, cracker & chocolate Established in 1986 Capacity: 195 thousand ton/year 102 thousand m 2 indoor area Ülker branded other products Ülker ownership ratio: 44%

11 9 Ülker s Share Performance on the Bist Rising market value Ülker s shares are publicly traded on the BIST National Market under the ticker symbol ULKER.IS. Investors who sought a long-term investment with consistent returns continued to invest in Ülker. The Company s share price stood at TL as of December 31, At year-end, Ülker s market capitalization totaled TL 5,198 million, while the market value of its free-float shares had risen to TL 2,070 million. Company Reuters & Forex Code Bloomberg Code Industry Related BIST Index Ülker Bisküvi ULKER.IS ULKER TI Food NATIONAL MARKET BIST ALL BIST FOOD, DRINK BIST INDUSTRIAL BIST DIVIDEND BIST DIVIDEND 25 BIST NATIONAL BIST 100 BIST 50 BIST 30 As of December 31, 2013 Share Price (TL) Free-float Ratio (%) Market Capitalization (TL million) 5,198 Share Performance (%) TL (0.8) USD (19.0) BIST 100 and Ülker 19 ÜLKER BIST /2/2013 1/23/2013 2/13/2013 3/6/2013 3/27/2013 4/17/2013 5/8/2013 5/29/2013 6/19/2013 7/10/2013 7/31/2013 8/21/2013 9/11/ /2/ /23/ /13/ /4/ /25/2013

12 10 ÜLKER BİSKÜVİ ANNUAL REPORT 2013 Message from the Chairman An innovative world brand Achieved year-end results reveal the correctness of our strategies and the success in our practices. Dear Shareholders, Given that developments in the global economy and actions taken by central banks have played a significant role in shaping the current market environment. I believe it would be useful to first review the world s economy in 2013 before I move on to an evaluation of the Turkish economy and our business. The global recession experienced over the last three years entered a phase of recovery and improvement in 2013, increasing expectations that moderate growth will be achieved in the coming years. The acceleration in US gross domestic product (GDP) growth along with the positive signals in the European economy boost hopes for Looking back at the domestic environment, the Turkish economy posted stronger growth, as high as 4%, compared to other nations in the first nine months of 2013, right after we began the year with new goals and expectations. Although the US Federal Reserve s announcement that it would start to taper its liquidity injections from July onwards caused some fluctuations in financial markets, it did not lead to significant cash outflows from developing countries until the end of the year. The food and beverage industry in our country benefited from this positive market environment and posted its biggest growth in recent years.

13 was full of innovations and new achievements for Ülker Bisküvi. While our corporate efforts and operational successes pleased our investors, our high quality products made our consumers happy. Quality was the main theme we focused on throughout the year. In 2013, we did not limit the concept of quality solely to our products but evaluated all Company processes and results in different contexts and from different perspectives, and put a great deal of effort into doing our job in the best possible way. These intensive efforts throughout the year yielded favorable financial results: In 2013, our Company increased consolidated sales by 17% while operating profit rose 40%. We owe this success to our employees and their constant drive to achieve continuous improvements as well as to our customers consumption habits and their unwavering confidence in Ülker. Another important development in 2013 was the sale of Yıldız Holding s 20% stake in Ülker Bisküvi. In order for Ülker Bisküvi to reach a market capitalization it well deserves, to become included on well-known global stock market indices, and to increase the daily trading volume to a level acceptable for investors, Yıldız Holding sold its 20% stake in Ülker Bisküvi to 44 international investors on October 4, Following the block sale, Ülker Bisküvi s average daily trading volume increased fivefold when compared with the period prior to the sale. Further, Ülker Bisküvi was subsequently included in some of the most credible stock exchange indices and its market capitalization increased significantly. All of these developments clearly demonstrate that we made the right decision. In 2014, we plan to continue giving top priority to the quality of our products and all Company operations as we always do, while responding to our customers needs and demands in a faster and more effective manner. I believe that in the coming period our relationship with our stakeholders will further strengthen. We will continue to listen closely to the voices of our customers, stakeholders and employees, value their priorities, and achieve even stronger results than in previous years by operating in a high quality and competitive manner. Respectfully yours, Murat ÜLKER Chairman

14 12 ÜLKER BİSKÜVİ ANNUAL REPORT 2013 Board of Directors Murat Ülker Chairman A graduate of Boğaziçi University, Faculty of Economics and Administrative Sciences, Department of Business Administration, Murat Ülker began his professional career in 1982 and started work as Control Coordinator with the Group in He later attended various training courses (AIB and ZDS) abroad and worked as a trainee at Continental Baking Company in the US. Mr. Ülker also worked in the export business for two years in the Middle East. Subsequently, he analyzed about 60 factories and facilities operating in the biscuit, chocolate and food industries in the US and Europe over a period of three years. Mr. Ülker also participated in various IESC projects, and spearheaded many vertical integration related investments. After serving as Assistant General Manager for Enterprises, General Manager, Executive Committee Member and Board Member in various companies of the Group, Mr. Ülker was appointed Chairman of the Board of Yıldız Holding in Mr. Ülker speaks English and German; his hobbies include sailing and traveling with his family. He is married and has three children. Ali Ülker Deputy Chairman Ali Ülker graduated from Boğaziçi University, Faculty of Economics and Administrative Sciences, Department of Economics and Business Administration. He also attended various academic programs at IMD, Harvard and Wharton. Mr. Ülker took part in the De Boccard & Yorke Consultancy Company s Internal Kaizen Study (1992) and the IESC Sales System Improvement and Internal Organization Project (1997). He began his professional career in 1985 as a trainee in the Quality Control Department of Ülker Gıda A.Ş. Later, he served as trainee, Sales Executive, Sales Coordinator, Product Group Coordinator and Product Group Manager between 1986 and 1998 at the chocolate production facilities and at Atlas Gıda Pazarlama A.Ş. He then served as General Manager of Atlas Gıda Pazarlama in 1998, Deputy Chairman of the Consumer Group for Marketing and responsible for Chain Stores in 2000, General Manager of Merkez Gıda Pazarlama A.Ş. in 2001 and Deputy Chairman of the Organized Retail Food Group in In 2005, he was appointed Chairman of Ülker (Biscuit, Chocolate, Candy) Group. Mr. Ülker speaks English and German; his hobbies include fishing, watching movies, reading books, and playing basketball and billiards. Mehmet Tütüncü Board Member - CEO Mehmet Tütüncü was appointed Chairman of the Food and Beverages Group in As of October 2009, the Gum and Candy companies were incorporated into the Food Group; Mr. Tütüncü was appointed CEO for biscuit-chocolate-cake operations in September 2011, in addition to his other duties. Mr. Tütüncü began his professional career in 1981 as an engineer at the Ministry of National Education, Construction Department. From 1983 to 1987, he worked as a Local Industry Specialist at the Ministry of Industry and Trade. Between 1987 and 1996, he served as Production Manager, Business Manager and General Manager, respectively, at Best Rothmans Entegre Sigara ve Tütün Sanayi A.Ş. Mr. Tütüncü joined the Group in 1996 as Facilities Coordinator, and later served as General Manager of Ülker Bisküvi and Çikolata production facilities in 1998; in 2000, he became the Deputy Chairman of the Ülker Group. Mr. Tütüncü is a graduate of Gazi University, Faculty of Engineering, Mechanical Engineering Department. In 1987, he won the IRI scholarship and studied Production, Quality Control and Maintenance Procedures in Italy. He also holds a Master of Science degree in the field of Industrial and Organizational Psychology. From 1993 until 1994, Mr. Tütüncü attended the Business Administration Training Program at Boğaziçi University where he studied Marketing Techniques, International

15 13 Marketing, Factory Organization and Management. He also completed the Strategic Marketing Program at Harvard Business School and attended several training programs at IMD/Switzerland and Insead/Singapore. Mr. Tütüncü speaks English and is a member of TÜSİAD (Turkish Industrialists and Businessmen s Association). Mr. Tütüncü was born in He is married and has three children. Ahmet Özokur Board Member Ahmet Özokur studied Business Administration and Marketing at Indiana University, Department of Business Administration and at the European Business School. He began his professional career in 2004 as Executive Board Member at Hızlı Sistem A.Ş. In 2005, he was appointed General Manager of Datateknik, and he was promoted to the position of CEO of Datateknik Informatics Group within the same year. Post merger in 2006, Datateknik Informatics Group became a fully integrated group engaged in systems integration, distribution of computer components, software development and distribution, development of interactive applications, manufacturing and distribution of Expert branded products; it was a pioneering and innovative company in its sector. In 2008, with the restructuring of Datateknik Informatics Group under the umbrella of Yıldız Holding, Mr. Özokur was appointed Assistant to the Chairman. Within the same year, he was also appointed Project Leader at Yıldız Holding Real Estate Investment Group and Executive Member of Beta Marina İşletmeciliği A.Ş. Subsequently, Mr. Özokur also served as the General Manager of Sağlam Real Estate Investment Trust which eventually merged with SAF REIT. Mr. Özokur has an interest in aquatic sports. He is married and has two children. Mahmut Mahir Kuşculu Board Member Mahmut Mahir Kuşculu graduated from Istanbul Erkek Lisesi, and then from Istanbul University, Faculty of Economics. He went on to complete his postgraduate education in marketing in the US. From 1970, Mr. Kuşculu served as Executive Manager and Board Member in the family glass industry businesses, Tamcam A.Ş. and Arsal Cam Sanayii. He founded Kutaş Dış Ticaret ve Pazarlama A.Ş. in 1982, and Erdem Dış Ticaret A.Ş. in 1985, while also taking part in the management of these companies. Mr. Kuşculu has served on the professional committees of the Istanbul Chamber of Commerce and the Istanbul Chamber of Industry for 20 years; also, he has served as a Member of the Assembly of Istanbul Chamber of Industry for 15 years. Mr. Kuşculu is married and has two children. Cengiz Solakoğlu Board Member Cengiz Solakoğlu graduated from the Istanbul Academy of Economic and Business Studies in 1964, and began his professional career in sales at Beko Ticaret A.Ş. He was promoted to Regional Sales Manager in 1969 and to Sales Director in After serving as the General Manager of Beko Ticaret from 1977 to 1983, he was appointed General Manager of Atılım A.Ş., another Koç Group company. During his eight year tenure in that position, he pioneered the efforts to strengthen the Arçelik Authorized Dealer System. In 1991, Mr. Solakoğlu was appointed Deputy Chairman of the Consumption Group of Koç Holding; he was also a Member of the Executive Committee of the Group between 1996 and In 2002, he was appointed Chairman of the Durable Consumer Goods Group of Koç Holding. Having worked at the Koç Group continuously for more than 37 years, Mr. Solakoğlu retired due to the Group s policy of mandatory retirement at age 60. He is among the founders of the Educational Volunteers Foundation of Turkey (TEGV) and the 1907 Fenerbahçe Association. Mr. Solakoğlu was named a Leader of Civil Society by Ekonomist magazine in He is married and has two children.

16 14 ÜLKER BİSKÜVİ ANNUAL REPORT 2013 Board of Directors Alain Strasser Board Member Alain Strasser was born in After first graduating from the Departments of Mathematics and Philosophy in 1964, he obtained an MBA from E.S.C. in Paris in 1968 and a Masters in Economics from the same university in Until 1972, he was employed at Senegal s Dakar University as an instructor in management. His career in the private sector began when he held several positions at Unilever, mainly in France, in the sales and marketing departments. In 1982, Mr. Strasser, who had become an expert in homecare products, joined Tambrands, and there he served as Sales and Marketing Director for France ( ), General Manager for France ( ), General Manager for the United Kingdom ( ), European Division Deputy Head ( ), and International Head ( ). After the acquisition of Tambrands by Procter & Gamble, Mr. Strasser was appointed to Campell Soup Company in 1994 as President of Campbell Biscuits Europe. He was instrumental in the Campbell s acquisition of Danone s Liebig Soup and he served as the President of Delacre Biscuits and Liebig Soup until From 1998 to 2007, Mr. Strasser was employed by Artal, a Belgian private equity firm, as CEO of Harry s SAS, where he actively managed the company s restructuring and strategic partnership processes. Mr. Strasser is still a member on the Boards of several companies, including SSL in London; Mood Media and Benedicta in Galapagos; Alpina in France; and Mankattan in China. Mr. Strasser is married and has three children. Duran Akbulut Board Member (Independent) Born in the Suşehri district of Sivas in 1937, Mr. Akbulut completed primary school and junior high school there before moving to Istanbul. In 1959, he started his professional career and became a partner in the Goya retail chain. From the 1970s onwards, he served as Board Member at various Cankurtaran Holding companies including Esem, Roventa, Adidas; Chairman at Aymasan; and partner at Adidas and Esem for 28 years. He was a member of the Turkish Football Federation in 1983, as well as Board Member at Cercle d Orient from 1978 until 1994, which included two years of service as Vice Chairman. Since 1996, Mr. Akbulut has served as Chairman of Cercle d Orient. He is married and has two children. Prof Dr. Ekrem Pakdemirli Board Member (Independent) Born in 1939 in İzmir, Mr. Pakdemirli graduated from Middle East Technical University, Department of Mechanical Engineering, and received his master s degree from the same institution. He obtained his PhD from Imperial College in London. During his career, Mr. Pakdemirli has served as Assistant to the Undersecretary of State Planning Organization, Vice President of Dokuz Eylül University, Undersecretary of Treasury and Foreign Trade, Chief Advisor to the Prime Minister and Ambassador in the home office. From 1987 until 2002, he was the Member of Parliament for the province of Manisa for four terms, serving as Minister of Transportation, Minister of Finance and Customs, Minister of State, and Deputy Prime Minister. Between 2003 and 2008, Mr. Pakdemirli served as faculty member at Bilkent and Başkent Universities, and has been a faculty member of Istanbul Commerce University since Currently, he serves as Independent Board Member at Saf REIT and Sinpaş REIT, as well as Board Member at Albaraka Türk. Mr. Pakdemirli has had more than 500 articles and 10 books published to date. He is married and has five children.

17 15 Message from the Ceo Operational profitability 2013 was one of Ülker s best years ever in terms of sales and profits. Dear Shareholders, Achieving 4% growth in the first nine months of 2013, Turkey s economy once again outperformed that of other countries around the world. This solid domestic economic growth had a positive effect on the food and beverage industry in particular. As the sector leader, Ülker s own robust performance made a significant contribution to the 10% growth achieved in the Turkish food and beverage industry in was one of Ülker s best years ever in terms of sales and profits. During the year, our Company s sales increased 17%, and we closed the period with TL 2.75 billion in revenues. In 2013, Ülker s operating profit also hit a record high, significantly increasing by 40%, to TL 224 million, up from TL 313 million a year earlier. This positive change in the income statement stemmed from the increase in the Company s sales volume and revenues, thanks to its simple yet highly competitive business model. Operating profit also improved significantly thanks to our ongoing efforts to reach operational excellence. With our strong launching strategy, we continued to create few but strong brands. We focused on new product launches in We offered our consumers new tastes with Laviva in the chocolate category, with Dore and Saklıköy in the biscuits category and with Islak Kek in the cake category. The financial and operational success we had achieved by year s end was a gratifying result for our investors, who have invested in the future of Ülker. The Company s steady financial growth over the last eight quarters shows that a solid financial and operational foundation has been built to assure a sustainable and profitable growth trajectory. Our market shares continue to reflect Ülker s competitive strength in our categories. Creating alignment across the value chain to achieve efficiency and shared objectives is essential for sustaining this growth. Thanks to our commitment to being customer-focused, more competitive, more efficient and more innovative, we believe that we will continue to create significant value for all our customers and stakeholders. The results we have achieved also strengthens our faith and motivation to meet our 2016 targets. As in previous years, I hereby express my gratitude to our shareholders, business partners, employees and customers that we have always felt their support and contribution. Best regards, Mehmet TÜTÜNCÜ CEO

18 16 ÜLKER BİSKÜVİ ANNUAL REPORT 2013 Strategies Increasing brand investments Our competitive power in the categories we operate continues to be reflected in our market share figures as well. In the area of productivity, we aim to: Become the most productive company in all segments of the industry, Boost product quality through operational efficiency efforts and slash production costs, Achieve further efficiency and productivity in distribution channels and sales points by cutting sales costs. In brand investments, we aim to: Offer our powerhouse brands to consumers at reasonable prices, Ensure the continuity of our brand investments. Overall, we aim to: Increase our operating profit by achieving higher sales volumes and revenues in biscuit, chocolate and cake operations, Expand to become a strong regional player, Implement and maintain good corporate governance practices at the highest level, Achieve strong results that will satisfy all stakeholders. Profit Margin Management Decreasing average cost through opportunity purchases and effective raw material price management.

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20 18 ÜLKER BİSKÜVİ ANNUAL REPORT 2013 Current Economic Outlook, Global and Turkish Food Industries Expectation for positive growth In parallel to the developments in the global markets, in 2013 increasing trend started in the decreased food prices. In 2013, the global economy continued to grow at a slow pace. While the dynamics of growth began to change, risks remained. The growth rates in emerging markets, which have driven global economic growth in previous years, somewhat decelerated in According to projections in the IMF s October 2013 report, the world economy is expected to have grown 2.9% in 2013, with the highest contribution coming from developing countries with their projected growth rate of 4.5%. Meanwhile in 2014, the global economy is forecast to grow 3.6%, with most of the pickup in growth expected to be driven by advanced economies. US economic growth will most likely have an impact on global growth in As everyone is now convinced that the Federal Reserve will end asset purchases toward the end of 2014, some cash outflows from developing countries are expected. Europe s economy will likely demonstrate positive, though limited, growth in 2014 and the European Central Bank will possibly cut interest rates in the second half of the year. Although food commodity prices had previously been on the decline due to global market developments, they began to rise in By year s end, prices of dairy products, oils and cocoa had increased. Specifically, negative developments in cocoa and oil production and supply-demand imbalances led to an upswing in prices. The food price index averaged 212 points in 2013, a drop of 7% compared with the prior year. The UN Food and Agriculture Organization (FAO) forecasts that food prices will remain high in the coming period.

21 19 The Turkish Economy The Turkish economy has maintained positive growth since the last quarter of 2009, and it continued to grow steadily through third quarter While most developed economies experienced downturns due to global financial crisis, Turkey is ranked second among OECD countries as of end of third quarter of 2013, and emerged as the fourth fastest-growing economy among the G-20 nations. Rising domestic demand and increased government spending drove growth in the Turkish economy during the first and second quarters of the year; in the third quarter, an increase in private sector spending further contributed to the country s economic growth. Turkey s economic growth rates for the first three quarters were 3%, 4.5% and 4.4%, respectively. By the end of the first nine months of the year, the Turkish economy had grown 4%, proof that the IMF s target of 3.8% for the year, as well as the 3.6% target set in the government s Medium Term Fiscal Plan, were achievable. According to the Medium Term Fiscal Plan prepared by the Turkish Ministry of Finance, the country s growth rate for 2014 is projected at 4%. Looking back at the economy s growth drivers, exports made a relatively low contribution to Turkey s economic growth in 2013 when compared with the prior year. This was mainly due to the decline in foreign demand caused by the recession in Europe and the political uncertainty in the Middle East and North African regions, which are generally seen as alternative markets to Europe. On the other hand, a strong rise in consumer lending had a positive effect on domestic economic growth. As of third quarter of 2013, Turkish economy has been ranked as the second most rapidly growing economy among the OECD countries and has been ranked as the fourth most rapidly growing economy among the G-20 countries. As of year-end 2012, Turkey s annual inflation rate stood at 6.6%; however, due to the increase in foreign exchange rate and energy costs, inflation had spiked to 7.4% by the end of An analysis of the main consumer spending categories shows that inflation in the Food and Non-alcoholic Beverages category was 9.7% for the year. In its latest forecast, the Central Bank of Turkey expects a 6.6% inflation rate in 2014.

22 20 ÜLKER BİSKÜVİ ANNUAL REPORT 2013 Key Developments Increasing stock value Average trading volume of Ülker Bisküvi shares increased to TL 27 million between October 5 and December 31, Profit Distribution Policy On January 18, 2013, the Company s profit distribution policy for 2012 and beyond was established within the framework of Corporate Governance Principles. Dividend Distribution in 2013 The Ordinary General Assembly held on March 28, 2013 approved the distribution of TL 150 million in dividends, as well as the amendments to the Articles of Association, in accordance with the Capital Market Law enacted on December 6, 2013, and the Turkish Commercial Code. The Sale of Yıldız Holding s Stake On the morning of October 4, 2013, it was announced via Public Disclosure Platform that a block trade would be carried out with the price per share set at TL With investor demand having reached USD 1.3 billion, an amount nearly three times the USD 461 million issue, investors clearly demonstrated their confidence in the operations and future strategies of Ülker Bisküvi. As it was impossible to meet all the demand, the Company sold the shares to 44 foreign institutional investors. Between October 5 and December 31, 2013, the average daily trading volume of Ülker Bisküvi shares increased to TL 27 million, compared to TL 5 million from the beginning of the year to October 4, the date of the sale. On November 8, 2013, MSCI (Morgan Stanley Capital Index) included Ülker Bisküvi in the MSCI Turkey index, to be effective as of November 26, On December 18, 2013, Borsa Istanbul announced the inclusion of Ülker Bisküvi shares in BIST-30 for the period January 2 to March 3, Transfer of Shares Due to the liquidation of the Dynamic Growth Fund on July 15, 2013, all assets in the portfolio were transferred to participation shareholders in proportion to their existing shareholdings. As a result, 73,308,031 shares of Ülker Bisküvi San. A.Ş., which had belonged to the Fund, have been transferred to Yıldız Holding and its subsidiaries. With this transfer, Yıldız Holding, its subsidiaries and the Yıldız family increased their stake from 58.49% to 79.90%.

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24 22 ÜLKER BİSKÜVİ ANNUAL REPORT 2013 Production and Capacity Increasing capacity utilization Biskot Bisküvi, an Ülker subsidiary, produces biscuits at 20 different facilities at its Karaman Factory. Biscuit The Gebze Factory, which has manufactured biscuits and crackers since 2000, reached a capacity utilization rate of 88.9% in During the year, the factory manufactured 66,000 tons of products and recorded a net sales volume of 66,000 tons. The Ankara Factory is located on a 110,000 m 2 land parcel, of which 80,000 m 2 is covered space. In 2013, the factory s actual capacity utilization rate hit 89.9%, with three work shifts. The factory produced 103,000 tons of biscuits with net sales of 103,000 tons for the year. Biskot Bisküvi, an Ülker subsidiary, produces biscuits at 20 different facilities at its Karaman Factory, which had a capacity utilization rate of 69% in The factory produced 87,000 tons of biscuits and recorded net sales of 87,000 tons for the year. Main Brands Pötibör, Çizi, Krispi, Haylayf, Mavi Yeşil, Hanımeller, Biskrem, Krim Kraker, Probis, Çokoprens, As Kraker, İkram, Rondo, Altınbaşak, 9 Kat Tat, Halley, Kat Kat Tat, Çubuk Kraker, Ülker Kremalı, Dore, Saklıköy, Çokomel, Rulokat, Ülker Grissini

25 23 Within 2013, Ülker Çikolata produced 110,000 tons of goods at its Topkapı Factory. Chocolate As one of the affiliate of Ülker, Ülker Çikolata operates three facilities with a total covered area of 67,745 m 2. Ülker Çikolata produced 110,000 (2012: 100,000) tons of goods at its Topkapı Factory in 2013, with net sales totaling 112,000 (2012: 97,000) tons. The Company s 2012 capacity utilization rate stood at 57%. Ülker subsidiary Biskot produced 28,000 tons of goods and recorded a net sales volume of 28,000 tons; in addition, its Silivri facility produced 20,000 tons of goods with net sales of 19,000 tons. Main Brands Cocostar Smart, Alpella, Karsa

26 24 ÜLKER BİSKÜVİ ANNUAL REPORT 2013 Production and Capacity Cake Production in Esenyurt Factory was tons in Ülker produces cakes at its Esenyurt Factory, which was established in 1993 on a covered area of 26,000 m 2. The factory s capacity utilization rate was 91.2% in 2013; the facility produced 32,351 tons and had net sales of 35,000 tons. One of Ülker s subsidiaries, Biskot produced 30,000 tons of goods and recorded net sales of 30,000 tons in Main Brands Dankek, Kekstra, Ülker Ev Kek, Halk and Karsa

27 25 Investments Stronger sector position The consolidated total of expansion and modernization investments was about TL 78 million. In 2013, Ülker further reinforced its robust market position with new capital investments that included new installations in the factories, capacity increases, modifications to production lines, productivity upgrades, and improvements in hygienic conditions and warehousing processes. Ülker s capital expenditures aim to further solidify the Company s dominant market position, increase consumer satisfaction, improve product quality, and to make its cost structure more competitive by increasing operational efficiency. Throughout the year, Ülker invested in the installation of new facilities, capacity increases, renovations, modifications to production lines, efficiency increases, and improvements in the areas of hygiene and warehousing. The consolidated total of expansion and modernization investments was about TL 78 million.

28 26 ÜLKER BİSKÜVİ ANNUAL REPORT 2013 Subsidiaries Restructuring for the objectives Subsidiaries and Financial Investments (Current situation) Biskot Bisküvi Gıda Sanayi ve Ticaret A.Ş. Production Ülker Çikolata Sanayi A.Ş. Production İstanbul Gıda Dış Ticaret A.Ş. Marketing/Trade Atlas Gıda Pazarlama Sanayi ve Ticaret A.Ş. Marketing/Trade Birleşik Dış Ticaret A.Ş. Marketing/Trade Rekor Gıda Pazarlama A.Ş. Marketing/Trade G New Inc. Investment Godıva BelgIum BVBA Production Reform PazaRlama Marketing/Trade

29 27 Biskot Bisküvi Gıda and Ülker Çikolata Biskot Bisküvi Gıda Thanks to the merger of AGS-Anadolu Gıda San. ve Tic. A.Ş., a cakes producer, with Biskot Bisküvi Gıda San. ve Tic. A.Ş. at 2011 year-end, the Company attained a larger production volume. Biskot Bisküvi Gıda operates in a covered space of 111,549 m 2 and has approximately 5,000 employees; the Company is one of the most important industrial companies and employers in its operating region. In 2013, Biskot Bisküvi Gıda Sanayi ve Ticaret A.Ş. s production volume of biscuits, chocolates and cakes totaled 165,000 tons at the factories; the Company had a total production capacity 228,000 tons. Its product portfolio consists of petit-beurre biscuits, fingers, biscuits for babies, crackers, cream-filled biscuits, sandwich biscuits, wafers, cakes, chocolate-covered bars, chocolate wafers, chocolate-covered cakes, rulokat, çokomel, chocolate cream, special biscuits, chocolate eggs with toys, and giftable chocolates. Ülker Çikolata In 2011, Ülker acquired a majority stake in Ülker Çikolata, previously jointly held by Yıldız Holding. Ülker Çikolata produces solid chocolate, chocolate covered products, chocolate cream, giftable chocolates and powder cocoa under the. The Company is the market leader in its sector and operates the facilities located in Topkapı/Istanbul with a total covered area of 67,745 m 2. The Company has a total production capacity of 190,000 tons; its average capacity utilization rate was 57% for the reporting year. Currently, Ülker Çikolata produces 189 different products and 48 sub-brands.

30 28 ÜLKER BİSKÜVİ ANNUAL REPORT 2013 Subsidiaries İstanbul Gıda ve Birleşik Dış Tic. İstanbul Gıda İstanbul Gıda achieved 2013 with a double-digit growth compared to the the previous year. The Company achieved a comparable level of revenue despite having transferred its non-essential businesses such as dairy, beverages, and personal care to other companies under the Holding. With a strong sales and distribution network, İstanbul Gıda exports Ülker products to more than 80 countries in the Europe and the Middle East, as well as the Turkic Republics, Africa, the Far East, the US, and Europe. The Company closed the year near amount of the previous year in terms of sales amount. The Company s workforce numbered 80 employees as of year-end Birleşik Dış Tic was a year of success for Birleşik Dış Ticaret A.Ş. as the Company s strategy to focus on its main product categories of biscuits, chocolates, and cakes proved effective. As a result of the solid performance of its sales organization, the Company improved organizational and regional efficiency and boosted productivity. With a strong sales and distribution network, Birleşik Dış Ticaret exports Halk and Karsa branded Ülker products to countries in the Balkans and the Middle East, as well as the Turkic Republics, the US, Europe, Africa and the Far East. Rekor Gıda Rekor Gıda maintained its operations thereby increasing its sales and distribution network in 2013 compared to the previous years with the Halk, Ülker and Ona branded products. Quite a wide range of products and categories all over the country, the Company has 76 Traditional Channels and operates with two Modern Channels. As of year-end 2013, Rekor Gıda employed 83 personnel. Godiva Godiva Chocolatier Inc., in which Ülker Bisküvi has a 19% stake, is the owner of the Godiva brand, the world s leading brand of premium chocolate and chocolate coated products. In 2008, Yıldız Holding acquired Godiva Chocolatier Inc. for USD 850 million, the largest overseas acquisition by a Turkish company. Over the last five years, Godiva has truly been a success story. Since that time, Godiva has reached 32 thousand points of sale across the world, and has achieved more than 10% sales growth each year. The Company s 2013 revenue totaled USD 750 million. After entering new markets such as Australia, China, Indonesia, Korea, Macau, Saudi Arabia and Turkey, Godiva has become a true global brand with international sales rising to 52% of the Company s total, up from 43% five years earlier. In the coming years, Godiva plans to focus on further expansion in China, Middle East, Russia and Turkey. The Company aims to open 50 new stores every year and reach sales of USD 1 billion by the year 2016.

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32 30 ÜLKER BİSKÜVİ ANNUAL REPORT 2013 Human Resources Effective organization With the effective human resources practices, it is aimed to increase the competitive power of Ülker in domestic and foreign markets. In line with Ülker s vision to become a food and beverage company which always pleases its consumers, customers, employees and shareholders, and makes them smile, Ülker s global vision and an innovative and sustainable human resource management system, by: Developing and empowering employees, and reinforcing their loyalty to the Company, Establishing a highly competent, effective and flexible organization, Embracing a performance culture that reflects the Company s values. Ülker shapes its human resources practices in line with Yıldız Holding Values and Yıldız Holding Human Resources Strategies, which are expressed as: Our Customers Come First! ; We Are Number 1 in Quality! ; We Are Competitive! ; We Achieve Together! ; We Are Results Oriented! and We Are Driven By Change! The Company aims to increase its competitive advantages in both domestic and foreign markets via effective human resources practices, which aim to achieve superior quality in all business processes, high levels of motivation and loyalty among employees, and a culture of collaboration. As in previous years, the Company organized a series of events in 2013 to increase the level of motivation of the entire workforce, encourage social interaction among employees and foster their loyalty toward the Company: The Company held the Traditional Ülker Picnic to provide an opportunity for staff members and their families to socialize and spend time with each other in a fun-filled environment outside of work. The Company organized employee celebrations on special commemorative days, such as International Day of Persons with Disabilities, International Women s Day, and the like. Within the April 23 rd National Sovereignty and Children s Festival events, the Company enabled the children of employees to attend the April 23 rd Film Festival sponsored by Ülker. In support of the Brain Box initiative, the Company organized campaigns that focused on issues such as productivity, energy efficiency, occupational health and safety, quality etc.; then, Ülker rewarded and implemented the best ideas submitted by personnel. During the month of Ramadan, Ülker organized iftar (breaking the fast) dinners attended by employees together with senior management. A festive spirit was shared among personnel at the ceremonies organized to exchange greetings and well wishes. The Company organized sports activities (football, bowling and table tennis tournaments and swimming etc.) to encourage employees to enjoy themselves and socialize. Ülker organized special visits during major life events of personnel, including marriages, births and funerals. In addition, the Company celebrated employee birthdays with congratulatory greetings and small gifts.

33 31 Ülker renovated the libraries at the Company s factories and enriched the collections with local and foreign books and periodicals in order to support the cultural development of personnel and increase their access to knowledge resources. In addition, staff members received access to electronic resources (contracted services of Yıldız Holding) on company computers. The Company arranged price discounting with various companies (tutoring schools, driving courses, supermarkets, hospitals, gas stations, and the like) for employees, to enhance their social lives and help them meet their needs for basics such as food, health, education, and transportation. In 2013, Ülker employee teams participated and competed in football, table tennis and bowling tournaments organized by Yıldız Holding as part of the Yıldız Cup. In addition to the Prestige Club, which was established as a hobby and events group within Yıldız Holding, Ülker established a Photography Club, an Excursion Club, a Culinary Club, and a Diving Club. The Company encouraged employees to participate in these clubs and improve their skills in their respective areas of expertise by attending various training programs and taking club-related trips. Yıldız Holding declared 2013 as the The Year of Quality and carried out several different activities under the slogan, Our Goal is Zero Errors. Ülker factories also undertook various initiatives and events as part of this quality movement. Senior managers participated in these events, which included stand-up comedy performances and other shows. Ülker is committed to supporting its employees, viewed as the Company s most important capital and asset, not only to reach business targets and enhance competitiveness, but also for their own personal development. Support for the personal and professional development of staff members is given through training and development programs, so that they can maintain top performance in their jobs and help prepare Ülker, as well as themselves, for the future. Ülker offers personnel various training opportunities in a diverse range of topics that include: In line with the Human Resources Planning program, initiated across Ülker companies in 2011 and further enhanced with various measures in 2013, Ülker developed a backup system for managerial positions to ensure the continuity of the Company s success. In addition, the Company devised Individual Development Plans to ensure the career development of personnel. In order to create a feedback culture within the framework of the Human Resources Planning and Performance Management Process initiatives, the Company actively encouraged managers to provide feedback to employees. As a result, personnel became better prepared for career opportunities that may arise in the future at Ülker. Additionally, the Company first announced and shared information about new job openings to employees within the Group. With its superior quality standards, Ülker has created Happy Moments for the Turkish people since 1944; and the Company is committed to developing its human capital in line with its future goals and in keeping with the principle of continuity of service.

34 32 ÜLKER BİSKÜVİ ANNUAL REPORT 2013 Human Resources Rising motivation Breakdown by Age (2013*) (%) 7 45 and above Breakdown by Seniority (2013*) (%) 16.4 More than 10 years 50.7 Between Between 6-10 years and below 65 5 years and less Breakdown by Education (2013*) (%) 2.9 Associate Degree 5.8 Bachelor s Degree and Higher 39.3 High School 52 Primary School * The data refers to December 31, 2013.

35 33 Quality and R&D High standards in production Ülker Chocolate factory manufactures all of its products in compliance with Gold Product Standards. Biscuit and Cake Quality Assurance Ülker factories in Esenyurt, Gebze and Ankara manufacture biscuit and cake products at gold standard consumer specifications. From raw material to the end product, Ülker production always meets the prescribed requirements and standards. In addition, results of raw material analyses performed by accredited laboratories were requested from suppliers and regularly recorded in Within the scope of defined analysis methods and procedures, the Company also carried out routine process controls, critical control point (CCP) checks, shelf life analyses, scoring, as well as supervision of equipment, workplace and employee hygiene. In addition, Ülker conducts a 12-month shelf life analysis of the products. To set production standards of Ülker products, and to determine the differences in similar products manufactured by competitors, the Company carried out 21 consumer checks including field controls and benchmarking in 2013 on select products including Çay Saati Mozaik, Albeni Kaplamalı Kek, Alpella, 8 Kek Çikolata-muz Hindistan cevizli and Pötü Meyveli, Ülker Çizi, Hanımeller, Çokodamla, Rondo, Ülker Çubuk and Ülker Susamlı Çubuk, Ülker Halley, Ülker Çizi, Mavi Yeşil Limon Lifli, Ülker Çubuk Kraker, Çiziviç, Haylayf, Rondo Sade Kremalı, Fındıklı Gofret. Ülker provided training sessions to its own employees and the employees of its contractors on the topics of Quality, Food Safety, Occupational Safety and Health, Environment Management Systems and Energy Management Systems, and Allergenic Substances. Ülker always aims to meet consumer expectations at the highest level possible and to consistently increase customer satisfaction. Therefore, the Company continuously solicits consumer feedback and takes any corrective action that is required. In addition, inspections and analyses are conducted in collaboration with suppliers to prevent any quality-related problems at the source. To this end, the Company initiated the project for setting up the Food Quality and Safety Chain from the Supplier to Consumer (AIB - American Institute of Bakery), and conducted factory inspections on a weekly basis. To reach sustainable quality and ensure employee compliance with Ülker principles and values, Company personnel completed AIB Awareness and Internal Inspection trainings, and internal inspection teams were set up in the three factories. The teams carry out internal food safety inspections in all sections of the each factory on a monthly basis. In order to ensure food safety and quality standards of Ülker products from the raw material supplier to the end-product warehouse, food safety inspections were conducted at supplier premises, distributors and AIB/ Quality Units in various locations throughout the year. Ülker products were also checked through field visits by the sales team and all observations were reported to factory management.

36 34 ÜLKER BİSKÜVİ ANNUAL REPORT 2013 Quality and R&D High quality production Ülker consistently produces Delicious, Healthy and Trusted products of superior quality, in compliance with existing laws and regulations, and under stringent hygienic conditions. Accordingly, the Company holds the following quality certifications: ISO 9001:2008 Quality Management System (Esenyurt, Gebze, Ankara) ISO Food Safety Management System (Esenyurt, Gebze, Ankara) ISO Environment Management System (Gebze, Ankara) OHSAS Occupational Health and Safety Management System (Esenyurt, Gebze, Ankara) BRC (Achieved Grade: A) (Gebze, Ankara) IFS (Higher Level) (Gebze, Ankara). Biscuit and Cake R&D Ülker offers innovative products that appeal to traditional taste buds both in Turkey and around the world. The ethical principles of the Company s R&D practices are: To use scientific methods and techniques to research, locate and report facts; To show concern for humankind, the environment and the public good by adhering to existing laws and regulations as well as to the principles and goals of the Group; To always give priority to consumers needs and expectations; To ensure food safety-high quality-price-variety optimization in all products; To act according to the principle, We will never offer our consumers a product that we would not consume ourselves, or give to our children. Biscuit and Cake R&D Unit implemented numerous projects in The Company carried out many R&D related projects in rapid succession in line with corporate and consumer-focused strategies in a wide range of areas including new product development, current product improvement, cost cutting, quality enhancement, alternative raw material approval and technical/technological support. Ülker assessed these projects in terms of business, consumer and technology, and prioritized those that were most innovative. In order to continue to bolster its culture of innovation, the Company planned a variety of new R&D initiatives for the future. One of the key steps of the quality drive initiated in 2013 in line with Ülker s quality road map is the establishment of the specification center. For this purpose, the Company revised quality specifications of all product categories in terms of business, consumer and technology, and defined and launched new specifications. The Biscuit and Cake R&D Unit completed 138 projects in 2013; of these, 39 yielded new products and 18 resulted in significant improvements to existing products. The following products were rolled out as a result of Biscuit and Cake R&D activities: Saklıköy Klasik, Saklıköy Yulaflı, Saklıköy Fındıklı Kremalı, Saklıköy Sütlü Kremalı, Mini 8 Kek Çilekli, Mini 8 Kek Muzlu, Pöti Havuçlu Tarçınlı, 8 Kek Double Çikolatalı, Mini Pöti Çikolatalı, Çay Saati Islak Kek, Ev Kek Mozaik, Ev Kek Üzümlü, Atıştırmalık Probis, Çizi Mini, Dore Bisküvi, Mini çizi, Mini Biskrem, Mavi Yeşil Mısır ve Pirinç Çıtırı.