YATIRIM FINANSMAN & ING POLAND TURKEY CONFERENCE 17-18 MARCH 2015 1
MAIN PILLARS OF CEMENT SECTOR IN TURKEY: HOUSING Urban Transformation: Government targets to demolish 6.5 Million housing units in earthquake-risk areas. TOKI (Housing Development Administration of Turkey) built 500,000 units in the past 10 years. Shopping Malls: 342 as of today, forecasted to reach 400 in 2016. INFRASTRUCTURE INVESTMENTS Public Investments: HPP Projects: +5,000 MW of hydro power in construction, due 2013-2015. Turkey utilizes less than 30% of the hydro potential. Nuclear Power Plants: Ground breaking in Akkuyu Nuclear Power Plants expected in 2Q2015, project demand to top 1 Million Tons in 4 years. Sinop Nuclear Power Plant due to start in 2016. Transportation: Main investment issue of the Government: Highways: Turkey s energy import bill in 2014 is USD 55B. More and modern roads decrease fuel consumption, enables more transportation. Marmaray inaugurated in 2014. Eurasia, another tunnel under the Bosporus will be ready by 2016. Construction continues in Gebze Bridge, a 2.7 km of suspension bridge project. UNEMPLOYMENT: 9.9% as of December 2014. Construction is known to be one of the best ways to create jobs directly and indirectly. EXPORTS 13.6 Million Tons of cement and clinker exports realized in 2014: 1.3 Millions sent to Libya, 1 to Syria (about twice that of 2013) and another 0.7 to Egypt. 2
CEMENT SECTOR OUTLOOK IN TURKEY: Growth: Domestic sales in 2014 grew 1.5% vs 5% forecast, slowdown in 4Q was the main reason. Domestic sales growth in 2015 is anticipated to be 3%. Developing Country Effect: Turkey s estimated per capita cement consumption in 2014 was 840 kg, envisaged to grow to 1,000 kg in the medium term. Industry Sweeteners: General elections in 2015, urban transformation due to earthquake risk, reciprocity & 2B laws. COGS: Average CIF petcoke prices in 2014 was USD 100.50/Ton CIF, last shipment for OYAK Cement Group companies is as low as 75. Electricity prices were elevated in April 2012 and October 2012 ; total raise was 25 to 50%, depending on the infrastructure of the region. Another raise is expected in 3Q2014. 3
All cement companies included, exports are cement + clinker Domestic market is expected to grow 3% in 2015, but gradually needs at least 15 Million Tons of yearly exports to keep CUR high. 4
TURKISH CEMENT INDUSTRY CLINKER CAPACITY 2014 Source: OYAK Cement Group, Company Releases Capacity, 2014, million tpa Clinker Share OYAK 10.3 15% As 4.3 6% Askale 5.4 8% Bati Group 2.4 3% Cimentas 4.1 6% Votorantim 2.6 4% Goltas 2.0 3% Heidelberg-Sabanci (Akcansa) 6.6 9% Limak 7.3 10% Nuh Cimento 4.4 6% Sabanci (Çimsa) 5.5 8% Sanko 4.7 7% Vicat 3.1 4% Other 7.8 11% TOTAL 70.6 100% OYAK Cement Group is the largest cement group in Turkey, 15% of total capacity. 5
TURKISH CEMENT INDUSTRY 2014 Black Sea Syria Iraq Integrated Cement Plant - 50 Grinding Facility - 19 Source: OYAK Cement Group Mediterranean Sea 6
Bolu Ankara: 1 Mil tpa Eren: 3.5 Mil tpa Source: OYAK Cement Group, Company Releases 2 brownfield and 1 greenfield investments were online in 2014 7
SHAREHOLDING STRUCTURE 48.67% 51.33% 8 OYAK Other
- 100% OYAK Company. - Acquisition completed on November 10th, 2014. - 1.8 Million tpa clinker & 3 Million tpa cement capacity. - ~30% market share in Aegean Region. - Cementing the capacity & market leader position of OYAK Cement Group. 9
Established in 2004 by OYAK, Adana, Bolu and Unye Cement Companies One of the biggest RMC companies in terms of capacity (over 40 concrete batching plants, 5 Million m³ capacity) and sales (Net sales of ~95 Million TRL in 2014) MARMARAY TUBE TUNNEL, ISTANBUL GEBZE SUSPENSION BRIDGE, IZMIT POZANTI HIGHWAY, ADANA PRESIDENTIAL SYMPHONY ORCHESTRA BUILDING, ANKARA EMAAR ISTANBUL 10
Net Margin Ranking, 2014 Dividend yield as of March 11th ISE CEMENT UNIVERSE 2014 RESULTS Net Margin EBITDA ROE Dividend Yield 1 Adana Çimento 32.5% 34.1% 18.8% 10.6% 2 Mardin Çimento 30.7% 37.2% 24.0% 10.6% 3 Bolu Çimento 30.2% 38.9% 30.3% 3.0% 4 Aslan Çimento 26.6% 35.7% 22.2% 1.8% 5 Ünye Çimento 25.3% 36.0% 21.4% 9.1% 6 Yibitaş Yozgat 24.5% 29.8% 24.5% 2.6% 7 Batısöke Çimento 20.6% 35.4% 13.6% n/a 8 Konya Çimento 18.3% 25.2% 16.8% n/a 9 Çimsa 18.1% 27.5% 17.0% 7.9% 10 Akçansa 17.7% 27.3% 21.7% 7.1% 11 Baştaş Çimento 17.1% 26.1% 13.7% 2.0% 12 Nuh Çimento 16.9% 24.6% 17.0% 6.2% 13 Afyon Çimento 16.8% 25.1% 24.3% 0.0% 14 Çimentaş 14.9% 20.2% 10.2% 0.0% 15 Batı Çimento 14.8% 27.4% 15.0% n/a 16 Göltaş Çimento 12.8% 24.5% 13.7% 0.0% 17 Bursa Çimento 10.7% 15.4% 17.0% 3.4% OYAK FOCUSES ON AFTER TAX PROFITS AND DIVIDENDS PAID TO SHAREHOLDERS (NET MARGIN) OYAK FOCUSES ON CAPITAL ALLOCATION AND ITS RETURN TO SHAREHOLDERS (ROE) OYAK FOCUSES ON OPERATIONAL GAINS AND FINANCIAL SOUNDNESS (EBITDA) In order to provide efficient social benefits for its approximately 290,000 members, OYAK aims to raise the maximum income from 50+ companies it owns. 11
OYAK CEMENT GROUP & GLOBAL PEERS Million TRL, 2014FY Net Sales EBIT EBITDA Net Profit EBITDA Net Margin Adana 440 129 150 143 34.1% 32.5% Mardin 196 62 73 60 37.2% 30.7% Bolu 330 119 128 99 38.9% 30.2% Ünye 241 70 87 61 36.0% 25.3% Aslan 235 71 84 62 35.7% 26.6% OYAK 1,441 450 522 426 36.2% 29.5% Lafarge 37,245 5,455 7,891 795 21.2% 2.1% Heidelberg 36,581 4,582 6,647 n/a 18.2% n/a Holcim 50,450 6,117 9,892 4,274 19.6% 8.5% Cemex 34,558 2,807 6,028-935 17.4% -2.7% Italcementi 12,273 658 1,824-142 14.9% -1.2% Cementir 2,749 302 558 n/a 20.3% n/a Buzzi Unicem (9M) 5,507 395 476 161 8.6% 2.9% Cimpor 7,552 1,302 1,873-44 24.8% -0.6% Titan 3,358 n/a 528 90 15.7% 2.7% Votorantim (9M) 8,503 1,775 2,292 806 27.0% 9.5% Total / Average 201,861 23,393 38,009 6,014 18.8% 3.0% 1 Eur: 2.9 TL, 1 USD: 2.2 TL, 1 CHF: 2.64 TL, 1 Breal: 0.89 TL 12
COST BREAKDOWN 2014 VS 2013 BULK CEM I-42.5, 2014 average Fuel prices pegged in USD, all others TRL BULK CEM I-42.5, 2013 average OYAK Cement Group procures ca 900,000 Tons of coal and petcoke every year, economies of scale bring about better prices. SALES BREAKDOWN (2014) Exports down to as low as 11%. Libya and Middle Eastern countries are top customers 13 Source: OYAK Cement Group
ADANA.IS MCAP: USD 212.34Mio Free Float: 58% Foreign Ownership in FF: 10.6% ADV: 0.56 USD Mio ADBGR.IS MCAP: USD 132.9 Mio Free Float: 9% Foreign Ownership in FF: 0.0% ADV: 0.04 USD Mio ADNAC.IS MCAP: USD 42.1 Mio Free Float: 49% Foreign Ownership in FF: 4.4% ADV: 0.93 USD Mio * As of Mar. 10th., last 3 months average 14
ADANA (A), ADANA (B) & ADANA (C) Adana shares on the ISE: Share Type Claim on Equity Claim on Dividends Free Float Voting Rights A 26% 54% 86% 2 B 25% 36% 15% 1 C 49% 10% 50% 1 Main Participations: OYAK Beton Ready Mix: 28% Omsan Logistics: 20% Adana Cement Free Port TRNC: 100% Cimsa Cement: 5.11% OYKA Paper & Packaging: 49% Adana Cement Inc TRNC: 100% Competitive Advantages: 2015 growth drivers: Nuclear power plant project expected to start in 2015. Cukurova Airport project expected to speed up, OYAK Beton is the concrete provider. PPP hospital projects in Adana & Mersin. Product diversification & alternative markets: White Cement: 350,000 Tons of capacity, whiteness +85%, Black Sea and Mediterranean Basins in focus. Ground Granulated Blastfurnace Slag & Slag Cement: Market gaining strength. Proximity to Iskenderun ports; exporting is always an option. 15
k Tons Source: Company Data Satisfactory domestic market, Middle Eastern exports gaining strength. 16
Operational results higher and net profit more than doubled Million TL 2010 2011 2012 2013 2014 2014 vs 2013 Domestic Sales 226.0 250.4 250.4 315.1 346.2 9.9% Exports 83.1 65.1 40.6 83.6 95.0 13.6% Net Sales 306.7 315.0 290.0 396.1 439.6 11.0% Cost of Goods Sold (-) 216.7 215.6 202.3 271.3 272.2 0.3% Operational Income 46.0 60.8 52.3 96.1 128.5 33.7% Net Income 102.2 77.1 88.5 67.7 142.9 111.1% EBITDA 67.6 82.1 73.0 116.7 150.1 28.6% EBITDA 22.0% 26.0% 25.2% 29.5% 34.1% Net Margin 33.3% 24.5% 30.5% 17.1% 32.5% Source: Public Disclosure Platform ADANA A 2010 2011 2012 2013 2014 Average Cash Dividends (Mio TL) 32 34 26 34 58 37 Payout Ratio 57.2% 82.2% 55.9% 93.2% 75.7% 73% Dividend Yield 9.2% 10.0% 7.7% 10.0% 10.5% 11% ADANA B 2010 2011 2012 2013 2014 Average Cash Dividends (Mio TL) 21 23 17 23 39 25 Payout Ratio 57.2% 82.2% 55.9% 93.2% 75.7% 73% Dividend Yield 9.3% 10.1% 7.7% 10.0% 11.0% 11% High pay out ratio policy prevails due to OYAK strategy ADANA C 2010 2011 2012 2013 2014 Average Cash Dividends (Mio TL) 6 6 5 6 11 7 Payout Ratio 57.2% 82.2% 55.9% 93.2% 75.7% 73% Dividend Yield 6.2% 6.7% 5.2% 6.7% 9.8% 8% 2014 Dividend yield = Gross Dividends for the year / MCAP 11 March 2015 Source: ISE 17
MRDN.IS MCAP: USD 201.0 Mio Free Float: 45% Foreign Ownership in FF: 10.1% ADV: USD 0.39 Mio. * As of Mar. 10th, last 3 months average 18
k Tons Source: Company Data All time record domestic sales despite shrinking exports 19
Competitive Advantages & Domestic Market: - The biggest capacity in Southeast Anatolia, fixed costs down, no major investment need in medium term. - Dam projects prevail, focus on Ilısu. - Region developing with residential construction, 3 new / renovated airports and irrigation channels - High dividend payout ratio and attractive yield in line with OYAK policy. Export Markets: - Middle East exports slowed down due to heavy competition from new capacity in Iran, Mardin is USD 5-10/Ton more expensive than other companies as it is regarded as a brand. - Reconstruction following a stability in Syria would substantially increase exports. 20
Highest domestic sales to date in 2014, exports down Million TL 2010 2011 2012 2013 2014 2014 vs 2013 Domestic Sales 110.2 123.4 135.7 134.7 168.1 24.8% Exports 138.5 135.6 76.2 76.1 37.3-51.0% Net Sales 236.8 250.5 201.8 198.5 196.0-1.2% Cost of Goods Sold (-) 130.4 138.0 138.7 131.0 122.8-6.3% Operational Income 85.3 88.2 43.8 69.6 62.1-10.8% Net Income 78.0 84.2 37.4 52.3 60.2 15.2% EBITDA 95.3 98.9 56.2 83.4 72.8-12.7% EBITDA 40.2% 39.5% 27.8% 42.0% 37.1% Net Margin 33.0% 33.6% 18.6% 26.3% 30.7% Source: Public Disclosure Platform MARDIN 2010 2011 2012 2013 2014 Average Cash Dividends (Mio TL) 71 75 34 50 56 59 Payout Ratio 90.9% 89.4% 92.1% 95.8% 93.2% 85% Dividend Yield 14.5% 15.4% 6.9% 10.3% 10.6% 15% 2014 Dividend yield = Gross Dividends for the year / MCAP 11 March 2015 Exceptionally high pay out ratio and dividend yield 21
BOLUC.IS MCAP: USD 296.6 Mio Free Float: 26% Foreign Ownership in FF: 13.70% ADV: USD 1.1 Mio * As of Mar. 10th., last 3 months average 22
k Tons Source: Company Data Increasing cement and ground slag sales, highly vibrant Marmara and Central Anatolian markets 23
Domestic Market: Unconventional cement types, tailor-made products for colossal projects: Eurasia Tunnel: Under water tunnel for vehicles, utilizing a special type of cement with low heat of hydration. Gebze Suspension Bridge: 2,800 m long, same unique cement type being used. GGBS: Ground granulated blast furnace slag, produced with Eregli Plant s high-end technology, a new and popular product among RMC producers, strengthening concrete and replacing cement partially. Western Black Sea region envisaged to keep vibrant with HPP and divided highway projects Ankara investment: 1 Million tpa clinker, operational in May 2015, totalling 75 Million Research and Development power house of OYAK Cement Group: First patent in Turkish cement industry; waste incineration system in operation. 6MW capacity of electricity production out of waste heat is operational. RDF (refuse derived fuel) facility operational since November 2012. Oil well (G type) cement lab built and license obtained in 2012. 24
Ongoing growth for the past 5 years, very high EBITDA margin Million TL 2010 2011 2012 2013 2014 2014 vs 2013 Net Sales 138.6 178.3 201.0 255.8 329.7 28.9% Cost of Goods Sold (-) 112.8 135.3 153.4 181.7 197.9 8.9% Operational Income 11.8 25.2 32.8 61.7 118.6 92.1% Net Income 13.9 20.1 24.6 44.6 99.4 122.8% EBITDA 19.0 34.2 41.8 70.9 128.3 81.1% EBITDA 13.7% 19.2% 20.8% 27.7% 38.9% Net Margin 10.0% 11.3% 12.3% 17.4% 30.2% Source: Public Disclosure Platform BOLU 2010 2011 2012 2013 2014 Average Cash Dividends (Mio TL) 11 18 21 0 24 25 Payout Ratio 81.1% 89.1% 88.8% 0.0% 23.7% 82% Dividend Yield 3.3% 5.3% 6.3% 0.0% 3.0% 6% 2014 Dividend yield = Gross Dividends for the year / MCAP 11 March 2015 Dividend pay out ratio down in 2014 due to Ankara investment, totalling 75 Million Euros 25
UNYEC.IS MCAP: USD 234.8 Mio Free Float: 8% Foreign Ownership in FF: 2.1% ADV: USD 0.11 Mio * As of Mar. 10th., last 3 months average 26
k Tons Source: Company Data New capacity in the region decreases domestic sales. 27
Competitive Advantages & Domestic Market: Biggest capacity in Black Sea Region, no significant competitors, isolated Black Sea market. One of the highest domestic cement prices of Turkey. Demand remains strong; 6th highest dam worldwide, Deriner, built with Unye s cement, more dam projects, roads and tunnels, power plant constructions forecasted to prevail in 2014. Artvin & Ayvalı dams are the new strong projects. Export Market: Russia still remains one of the biggest customer of Turkish cement companies with 1.1 despite the region s problems. Unye is closest to the region and is the most well known brand in Russia. Unye Cem SRL, the subsidiary in Romania, serves Romanian & Bulgarian markets. Unye spanning +700 km. sales market 28
Exports down due to tension in Black Sea countries Million TL 2010 2011 2012 2013 2014 2014 vs 2013 Domestic Sales 150.0 206.8 221.0 209.7 224.6 7.1% Exports 45.0 20.3 23.0 25.4 21.6-14.6% Net Sales 192.8 225.1 242.7 232.5 241.3 3.8% Cost of Goods Sold (-) 125.4 144.4 157.7 154.9 153.7-0.8% Operational Income 48.5 63.5 72.1 69.1 69.9 1.2% Net Income 46.0 52.3 59.0 55.1 61.0 10.7% EBITDA 61.4 77.7 87.9 85.8 86.8 1.2% EBITDA 31.9% 34.5% 36.2% 36.9% 36.0% Net Margin 23.9% 23.3% 24.3% 23.7% 25.3% Source: Public Disclosure Platform UNYE 2010 2011 2012 2013 2014 Average Cash Dividends (Mio TL) 45 47 54 51 56 47 Payout Ratio 98.5% 90.4% 91.9% 91.9% 91.8% 73% Dividend Yield 7.0% 7.4% 8.4% 7.9% 9.1% 9% 2014 Dividend yield = Gross Dividends for the year / MCAP 11 March 2015 Payout ratio and dividend yield above sector averages 29
ASLAN.IS MCAP: USD 1,126.1 Mio Free Float: 2% Foreign Ownership in FF: 0.7% ADV: USD 12.73 Mio * As of Mar.10th., last 3 months average 30
Chronology: The first cement plant of Turkey, established in 1910. 97.3% of shares sold by Lafarge to OYAK on December 30th, 2009. Cost control procedures effective immediately in the areas of RMC, administrative offices etc. Company eventually initiated OYAK Cement Group philosophy. (profit orientation, sound cash flow, high dividend pay out ratio etc) 2009 net loss 36 Mil, 2010 profit 1 Mil, 2014 profit 62 Mil. TRL Highlights: Exceptionally located just outside Istanbul, 40 km to Bosphorus, loyal customer base. 1.5 Million m2 of valuable land by the sea, some separate deeds in growing Istanbul (Kurtkoy, Yenibosna) Aslan owns a port of 153 meters, as deep as 26 meters, harbouring ships up to 60,000 DWT. 31
FURTHER COST CUTTING Aslan Cimento RDF (Refuse Derived Fuel) Facility: Operational since 2011, the facility makes use of industrial and municipal waste as an alternative fuel. The facility operates at a +25% heat replacement rate. WHR (Waste Heat Recovery) Facility: The company inaugurated WHR facility in order to obtain more than 25% electricity need out of waste heat, with a designed capacity of 7 MW.. RDF Facility 32
Domestic demand and local prices up in Marmara Million TL 2010 2011 2012 2013 2014 2014 vs 2013 Net Sales 126.6 134.4 137.7 176.2 234.9 33.3% Cost of Goods Sold (-) 95.8 95.9 98.2 119.2 144.4 21.1% Operational Income 4.1 22.0 25.2 46.6 70.7 51.7% Net Income 0.8 13.4 37.4 32.8 62.4 90.1% EBITDA 12.8 30.9 34.4 57.8 83.9 45.1% EBITDA 10.1% 23.0% 25.0% 32.8% 35.7% Net Margin 0.7% 10.0% 27.2% 18.6% 26.6% Source: Public Disclosure Platform ASLAN 2010 2011 2012 2013 2014 Average Cash Dividends (Mio TL) 0 16 33 30 53 17 Payout Ratio 0.0% 119.8% 88.4% 91.0% 84.2% 56% Dividend Yield 0.0% 0.7% 1.4% 1.2% 1.8% 1% 2014 Dividend yield = Gross Dividends for the year / MCAP 11 March 2015 All margins growing since OYAK acquired the company in Dec 30th, 2009 33
WEB SITE: www.oyakcimento.com Guney Arik Coordinator - OYAK Cement Group +90 312 415 6453 garik@oyak.com.tr 34