www.metgraf.com.tr ALK M ALKAL K MYA ANON M fi RKET Printed in March 2008
ALK M ALKAL K MYA ANON M fi RKET ANNUAL REPORT 2007
Mr. Vedat Kora, born in 1923, and within the 1946-1947 term he has graduated from the Faculty of Science of Istanbul University as Chemical Engineer with M.Sc. degree. He began his career as chemical engineer in the Turkish State Monopolies ( Tekel ) and then, he resigned and started as an entrepreneur to the production of various chemicals in a small factory. In 1963, he established a partnership with Essex Interore Chemicals ( Exxon ) of America, and the new company core of Alkim Alkali Chemical Corporation was born. Alkim, which was built upon these rationalistic and sound foundations, is now competing with the global giants of chemistry. Mr. Vedat Kora acquired patent rights for many processes and techniques developed by himself for the production of various chemicals used as raw materials in the basic sectors such as paper, glass, detergent and textile production. H. VEDAT KORA M.Sc Chemical Engineer 1923-1975 We lost our leader H. Vedat KORA, whom we will always remember with deepest respect and love, on 30 th January 1975, by an airplane disaster at his most efficient and successful age, while he was working as President and CEO in Alkim and leading the company to a bright future with his high knowledge.
ALK M Board of Directors Dear Shareholders, Welcome to our Ordinary General Assembly Meeting where we shall discuss the activities we carried out in the fiscal year of 2007. As explained in detail in our Activity Report, we produced and sold 267.204 tons of refined sodium sulphate, 18.372 tons of light type sodium sulphate, and 87.782 tons of salt during the fiscal year starting on January 1, 2007 and ending on December 31, 2007. A net profit of YTL 13.330.226.46 was derived from these operations. While we sustained our ordinary operations in the fields of sodium sulphate and salt production in a successful manner, magnesium compounds were produced in 2007 for the first time in the history of our company at our Cihanbeyli Plants located by the side of the Lake Tersakan. Similarly, real and actual steps were taken for production of potassiumcontaining fertilizers at our Cihanbeyli Plants during the last months of 2007, and trial productions of leonite element were carried out. These activities represent very important steps taken by Alkim for putting at disposal of domestic economy a major part of the minerals that are available in lakewater. Another important aspect of these steps is that all the research and development activities were carried out and completed by the staff of Alkim using its own technical capabilities. R&D activities have reached their final stage for our mining field of glauberite element located in Ankara - Çay rhan with a total reserve of 200 million tons. Feasibility studies were commenced for the Integrated Sodium Sulphate Plants that shall be established in the said region, and that shall be the third largest facility of our company with an annual production capacity of 150.000 tons. To be used for production of leonite-containing fertilizers that have rather important areas of use at greenhouses, this plant is being integrated to our sodium sulphate plants located at the Lake Bolluk, Cihanbeyli. This investment shall also be completed soon. In summary, Alkim Alkali Kimya Anonim fiirketi has left another successful, productive, and profitable operating year behind. We believe that investments to be made in Çay rhan sodium sulphate plants based on the high morale and sound equities of our company in 2008 would be completed as soon as practically possible with the approval and support of our valuable shareholders, and that our company would improve its global position further in the field of sodium sulphate production. We wish to thank all of our shareholders, and extend our respect to the General Assembly. Board of Directors Alkim Alkali Kimya A.fi.
HEAD OFFICE Address: nönü Caddesi No:13 34437 Taksim - STANBUL Phone: + 90 212 292 22 66 Fax: + 90 212 252 76 60 Email: alkim@alkim.com Website: www.alkim.com
1. INTRODUCTION 1.1. THE PERIOD COVERED BY THE REPORT : 01.01.2007-31.12.2007 1.2. TRADE TITLE OF THE COMPANY : ALK M ALKAL K MYA ANON M fi RKET 1.3. BOARD OF DIRECTORS a) Below are the names, surnames, and titles of the members of the board of directors as well as the committee of auditors who were elected pursuant to Articles 9 & 13 of the Articles of Association of the Company: Name and Surname Position Profession Term in Office M. Reha KORA Chairman M.Sc. Mechanical Engineer 30.03.2006-30.03.2008 A. Haluk KORA Deputy Chairman M.Sc. Mechanical Engineer 30.03.2006-30.03.2008 Ferit KORA Deputy Chairman Economist 30.03.2006-30.03.2008 Hüseyin A. KORA Member Physics Engineer 30.03.2006-30.03.2008 Mithat KORA Member Lawyer 30.03.2006-30.03.2008 Özay KORA Member Economist 30.03.2006-30.03.2008 Tülay ÖNEL Member Public Relations 30.03.2006-30.03.2008 Hüseyin ÜNER Member Retired Financier 30.03.2006-30.03.2008 Nihat ERKAN Member - General Manager Political Sciences 30.03.2006-30.03.2008 Yüksel KADIO LU Auditor Chartered Accountant 30.03.2007-30.03.2008 b ) Limitations of Authority Limitations of authority are specified in the Turkish Commercial Code as well as in the Articles of Association of the company. 1.4. AMENDMENTS TO THE ARTICLES OF ASSOCIATION None. 1.5. CORPORATE CAPITAL AND SHAREHOLDING STRUCTURE a) The Company owns a capital of YTL 24.725.000. b) Number of Shareholders of the Company * Our company went public at the end of February 2000, and its shares are currently traded at the Istanbul Stock Exchange. Following the public offering, number of the shareholders of our company, which was initially 11, increased with participation of 66.357 individual investors, 362 employees of Alkim companies, 74 domestic corporate investors, and 8 foreign corporate investors. c) Daily stock prices of our share certificates can be found at the bulletins issued by the Istanbul Stock Exchange under the code 'Alkim'. d) Dividends distributed during the last three years * In 2004, a total amount of YTL 10.206.087 was distributed as follows. YTL 2.285.506 was distributed from the net distributable profit of the period as the first dividends; YTL 4.889.469 YTL was distributed as the second dividends; and YTL 3.031.112 was also distributed from the extraordinary reserves. * In 2005, a total amount of YTL 9.679.137 was distributed as follows. YTL 2.581.702 was distributed from the net distributable profit of the period as the first dividends; YTL 4.244.319 YTL was distributed as the second dividends; and YTL 2.853.116 was also distributed from the extraordinary reserves. * In 2006, a total amount of YTL 11.898.402 was distributed as follows. YTL 2.103.094 was distributed from the net distributable profit of the period as the first dividends; YTL 7.227.503 YTL was distributed as the second dividends; and YTL 2.567.804 was also distributed from the extraordinary reserves. f) Our shareholders who hold a share in excess of 10% of our corporate capital: Cihat KORA YTL 3.677.843,75 14,88% M.Reha KORA YTL 2.905.187,50 11,75% Hüseyin A. KORA YTL 4.945.000,00 20,00 % 1
1.6. DETAILS OF THE SECURITIES ISSUED Our company has issued no security or bond so far. 1.7. SECTOR OF THE COMPANY, AND POSITION OF THE COMPANY IN THE SECTOR The main field of operation of our company is to produce sodium sulphate and sodium chloride (i.e. salt) at the lakes and underground mining fields for which we hold longtime operation licenses as per the Mining Law. Following completion of research activities in 2007, magnesium was registered as the third mineral to the operating license we hold for our Cihanbeyli Tersakan Plants for production of magnesium-containing compounds from lakewater. PRODUCTION OF SODIUM SULPHATE Our sodium sulphate plants are located in Konya-Cihanbeyli, Afyon-Dazk r, and Ankara-Çay rhan regions. With the enormous mineral reserves as well as longtime operating licenses, these mines cover considerably large areas. This kind of lake operations conducted to produce chemical substances, like those of Alkim, are available in a small number of countries in all over the world. Alkim is the 6th largest producer of sodium sulphate in the world, and is a member of the European Chemical Industry Council ( CEFIC ) as well as the Sodium Sulphate Producers Association ( SSPA ). Sodium Sulphate ( Na 2 SO 4 ) is one of the basic raw materials used in detergent, glass, paper, textile, and chemical industries. This substance is used for production of all kinds of detergents (except for liquid detergents) at the rate of 16 to 40%, and constitutes 3% of glass paste used in glass production industry. Sodium sulphate is also used by paper production industries for production of cellulose, for painting of textile products, and for production of various chemical substances. At our Tersakan-Bolluk plants located in Konya - Cihanbeyli region and our Ac göl plants located in Afyon-Dazk r region, production activities involve gathering of lakewater containing chemical substances (i.e. a solution) at large production pools (i.e. salting method); concentration thereof at the said pools, and picking through special methods and shipment thereof to our sodium sulphate plants for processing purposes. Although gallery-type mining operations were carried out at our underground sodium sulphate fields located in Çay rhan region, our R&D activities were also sustained for realization of underground solution mining operations in the year 2007, which were initiated in cooperation with the Polish Chemkop Company in 2005. Production pools of our company (i.e salinas) cover an aggregate area of 18 square kilometers. At the mining plants, we have a large number of (i.e. about 120) fully owned heavy construction equipments of all kinds, excavation machineries, loaders, dozers, heavy tractors, excavators of normal and boggy type, trucks, light duty trucks, vans, and other similar vehicles and machineries of general and special service type. We have the complete and full property of extremely valuable mining equipments, vehicles, devices, plants, warehouses, silos, various service workshops, administrative buildings, personnel houses, and etc. which are available at our mining enterprises. Alkim has a total annual production capacity of 330.000 tons for finished refined sodium sulphate products, of 900.000 tons for crystal sodium sulphate, and of 25.000 tons for light type sodium sulphate. Our plants received ISO - 9002 quality assurance certificates in 1996, and thereafter adopted TS - EN - ISO 9001 : 2000 Quality System Management standards, which stand for the ultimate point achieved in terms of quality systems. Among permanent customers of Alkim are the Turkish Bottle and Glass Factories as well as all the domestic manufacturers of detergent products. At foreign markets, detergent factories located in all the neighbor countries such as Romania, Bulgaria, Greece, Syria, Lebanon, Egypt, Saudi Arabia, Libya, Tunisia, and Israel are our direct and permanent customers. Alkim searches for and implements the most advanced, most productive, and most effective methods at all times for the purpose of offering the best quality to its customers. Ac göl Sodium Sulphate Plants located by the side of the Alkali Lake Ac göl as well as Bolluk Sodium Sulphate Plants located by the side of the Lake Bolluk are the plants which are the largest end the most modern sodium sulphate plants with an annual production capacity of up to 330.000 tons, and which are operated using the Recompressed Vaporization Technologies and DCS Automation System. Thanks to the cogeneration units, these plants have reduced their energy costs to a minimum level by meeting their own electricity and steam requirements since 1999. Being a mining and chemical company, Alkim has been exporting its products since 1960s. Export activities currently constitute about 20% of the total turnover of the company. The entire volume of production of our sodium sulphate plants which run at their full capacities is sold to both domestic and foreign markets. Alkim conducts its sales at both domestic and foreign markets through its own initiatives, and does not employ any separate sales and marketing company for this purpose. 2
PRODUCTION OF SALT As known, our company has made legal applications, and obtained licenses for production of salt at our mining fields upon adoption of the Law No. 4683 which nullified the former Salt Law. Investments in salt production operations started in 2002 following receipt of the licenses for salt production plants, and construction works of salt production pools were completed at our Konya - Cihanbeyli Plants in 2004, and at our Afyon - Ac göl Plants during the period of 2005 and 2006. Upon completion of salt production pools, activities were commenced for production of healthy and quality salt in a natural lake environment free from impacts of environmental pollution at our Ac göl plants located in Afyon - Dazk r region and at our Tersakan-Bolluk located in Konya - Cihanbeyli region. Our plants at Konya Cihanbeyli region have an annual production capacity of approximately 40.000 tons on an overall salt production area of 750.000 square meters. Our Ac göl plants at Afyon - Dazk r region own preliminary vaporization pools with a total area of 1.3 million square meters used for production of raw salt; and our production fields have reached a total area of 2.8 million square meters. Consequently our annual production capacity has increased to approximately 150.000 tons. The investment in a refined salt production facility with an annual production capacity of 50.000 tons, which was initiated at our Ac göl plants, was completed in 2007, and we carried out the first trial production of refined salt in October. Magnesium compounds and leonite-containing fertilizers Our Cihanbeyli plants successfully completed the trial production activities for magnesium - potassium sulphate- and leonite-containing fertilizers which were carried out at the Lake Tersakan for a while. At the same plants, magnesium chloride solutions were also produced in considerable tonnages using purely natural methods. Being used as an ice dissolvent at highways and municipalities, this chemical substance shall provide our company with new sales tonnages and extra turnovers starting from 2008. Raw Salt Heaps of Alkim PAPER INDUSTRY - ALK M KAGIT SANAY ve T CARET ANON M fi RKET Our paper production plants seated on an area of 50.000 square meters in Kemalpafla Organized Industrial Zone, zmir, which are the most modern ones of Turkey, are capable of competing with many plants in Europe thanks to the excellence of its technological infrastructure. Converted into a separate judicial entity under the title Alkim Ka t Sanayi ve Ticaret A.fi. on 30.06.1999, our paper production company is a subsidiary of Alkim Alkali Kimya A.fi. with a share of 79.9% owned therein. Within scope of the capital increase effected on November 2, 2000, the increased portion of 20% was offered to the public, and said portion of shares is currently traded at Istanbul Stock Exchange under the code 'Alka'. The total capital of Alkim Paper Company was increased to YTL 52.500.000 as a result of the capital increase effected on 19.10.2004, and Alkim Alkali Kimya A.fi has a share of YTL 41,962,500 in the said capital. INSURANCE SERVICES All the factory buildings, production and storage areas, management buildings, facilities, fixed and mobile construction machines, fixtures, finished and semi-finished product stocks, transportation vehicles and other vehicles as well as domestic and foreign transportation activities and other relevant activities and operations of Alkim Alkali Kimya A.fi and Alkim Ka t Sanayi ve Ticaret A.fi represent a huge insurance portfolio. Therefore, our board of directors adopted a resolution on September 24, 2002 for incorporation of an insurance company which would act as a corporate insurance agency for our own insurance deals. On November 4, 2002, "Alkim Sigorta Arac l k Hizmetleri Ltd fiirketi" was established in Istanbul with an initial capital of YTL 20 Million which was contributed by Alkim Alkali Kimya A.fi and Alkim Ka t San. ve Tic. A.fi on equal basis. 3
Koralkim Power Plant 4
2. OPERATIONS A. INVESTMENTS 1. DEVELOPMENTS ON THE SIDE OF INVESTMENTS The main field of operation of Alkim Alkali Kimya A.fi is to produce sodium sulphate. Alkim occupies the second rank in Europe, and the sixth rank in the world among producers of sodium sulphate. Alkim is a member of the European Chemical Industry Council (CEFIC) as well as the Sodium Sulphate Producers Association (SSPA). Alkim produces raw materials using the salification method at the lakes for which the company has a mining license. Our sodium sulphate production pools cover an area of approximately 18 square kilometers, and our preliminary vaporization pools cover an area of approximately 7 square kilometers. Furthermore, raw salt is produced at our salt production pools of approximately 2.8 square kilometers. The company has made huge investments so far, and shall continue to make investments for the purpose of processing lakewater chemicals available in these pools in a productive and rational manner. Alkim produces refined sodium sulphate with the purity of 99% at the plants established in an integrated fashion with the state-of-art technologies for processing of raw materials. Investments are now ongoing which are required to operate these plants in a productive and rational manner. DAZKIRI - ACIGÖL PLANTS a) Open Field Plants Repair and maintenance works were carried out for the sets and roads of preliminary vaporization and production pools available at our Ac göl plants. 500 meters of energy transmission lines were laid down in addition to the existing ones at salt (sodium chloride) pools. Two pools were constructed at the Crystal Cleaning Rotation and Ore Enrichment Unit, each having an area of 1.000 square meters and capable of storing 1.500 cubic meters of solution; and lateral surfaces thereof were covered with wooden materials. A salt washing unit was established with a capacity of 15 tons per hour at the stock field for raw salt. Two pools were established at the unit, each having a volume of 1.000 cubic meters for storage of the solution that is used for washing of raw salt. A modern automation system was installed at the locations where all kinds of vehicles such as construction machines, trucks, light duty trucks, motopumps, and etc. are available at the open field plants. This system enables computerized control and tracing, at diesel fuel consumption points, of a 15-ton tanker which is operated as a mobile fuel oil station. Ac göl - Production Pools 5
b) Koralkim Plants Refined Salt Production Unit A refined salt production unit was established within scope of the K-2 Process. For this unit which is capable of producing refined salt at the rate of 5 tons per hour, or mechanical refined salt at the rate of 8 tons per hour; raw salt feeding, melting, post-vaporization thickening, centrifuging, fluid bed drying, and packaging systems were added to the K-2 Process. Production lines were integrated to the existing PLC Automation and Control System. Bulk Sodium Sulphate Conveyance System For shipment of sodium sulphate in bulk, a portal crane was installed by the side of railway junction line, which shall be used for transfer of containers on railway cars (each having a capacity of 25 tons of refined sodium sulphate) between railway cars and trucks. For the sake of worker's safety, a spreader apparatus was also installed to link containers to the crane which has a lifting capacity of 40 tons. 6
C HANBEYL - BOLLUK and TERSAKAN PLANTS Sodium Sulphate Factory in Bolluk Rehabilitation works were carried out, and certain units were installed at our Bolluk Sodium Sulphate Factory in 2005 and 2006 because production costs were high due to employment of old-fashioned production methods, and quality of products was inferior then that of refined sodium sulphate. Production method employed at the Factory was changed to the evaporation method which enables production of refined sodium sulphate with the purity of 99.8%. The Cogeneration System, which was available at our Dazk r - Koralkim Sodium Sulphate Plants, was also established at our Bolluk Plants for the purpose of producing, at the lowest possible cost, the steam and electricity which is required for the 4-Stage Evaporation and Vacuum Vaporization Process. In this regard, an autoproducer license was obtained, and an energy and steam plant was established. This plant includes a dust coal-operated steam boiler with a fluid bed as well as its premises, a demineralised water unit, a steam turbine, and electricity switching systems. 350 kwh of electricity is currently produced using the steam produced at the boiler equipped with a fluid bed, which was installed with a capacity of 15 tons of hot steam per hour (at 380 C and 30 bars), at the KKK Turbine (485 kva) that was transferred from our Dazk r - Koralkim Plants, and commissioned by our own staff. Activities are currently ongoing for commissioning of the EET Steam Turbine which was imported from Germany. Since coal is burned at the steam station, an electrostatic filter was added to the system in order to meet the environmental requirements. PLC Automation Control Systems were employed within the Process and at the Energy & Steam Plant. Each stage of the production process is supervised through computerized systems. Thanks to the Process which was designed and installed with a physical production capacity of 90.000 tons of refined sodium sulphate per year, production of refined sodium sulphate has been continuing at a daily capacity of 240 tons since 2007. Fertilizers Production Plant, and Magnesium Chloride Filling and Transfer Tanks Our activities regarding production of potassium-containing fertilizers, which are totally imported to our country at present, have been continuing for a long period of time. The fact that potassium-containing fertilizers would be produced using the raw material derived from domestic resources increases the strategic importance of our activities further. As a result of the R&D activities conducted at the Lake Tersakan, we have secured a resource for the raw material to be used at our potassium- and magnesium-containing fertilizers production plant which is now under construction. We have obtained all the necessary production permits for this fertilizers production plant which is under construction in a fashion integrated to our Refined Sodium Sulphate Plants in Bolluk. Magnesium chloride, magnesium sulphate, potassium sulphate, and leonite (potassium - magnesium sulphate) shall be produced in the form of chemical fertilizers at this plant. Investment activities are under way so that the plant shall be commissioned in the second half of 2008. Sodium Sulphate Plants in Bolluk 7
LAKE TERSAKAN LAKE BOLLUK 8
The underground glauberite mining field located in Çay rhan has a reserve of approximately 200 million tons, and covers an area of 90 square kilometers. ANKARA - ÇAYIRHAN PLANTS The Solution Mining Method Ankara - Çay rhan'da Tenardit - Glauberit'in iç içe oluflturdu u Avrupa'n n en büyük yer alt Sodyum Sülfat maden At our mining field located in Çay rhan, Ankara which has the largest underground tenardite- and glauberite-containing sodium sulphate reserve of Europe, operations were carried out until recently using the underground mining methods, and it was failed to make a remarkable progress in achieving an economic level in mining operations using this method. Only approximately 67 million tons of pure sodium sulphate can be derived from 200 million tons of glauberite mineral. Various activities regarding the solution mining method, i.e. one of the recent technological advancements, and results obtained therefrom have made it mandatory to handle the existing mining field on a pilot scale for the purpose of putting the available reserves at disposal of domestic economy. As known, a sodium sulphate solution is obtained at varying concentrations depending upon certain factors such as time, heat, and surface when natural sodium sulphate minerals are exposed to water, and this solution is used for production activities using the solution mining method. As a result of laying down of nested pipes in the wells to be drilled at the mining field in Çay rhan, especially at the areas which contain extremely dense glauberite, and application of pressurized water and & air, a degree of dissolubility would be achieved in the wells, and the solution so obtained would be taken from well tops, and used for production of minerals. This would ensure processing of underground minerals available in a solid form which would, in turn, make considerable contributions to the domestic economy, and mining operations would be carried out totally under the ground without any harm to environment or nature. There is no country in the world where underground sodium sulphate mineral is converted into a solution as such, and then put at disposal of economy. In other words, Alkim shall be the pioneering company of the world in this regard upon implementation of the said important project. If this investment is realized, Alkim shall give a new dimension to the domestic approaches to mining operations. Activities are conducted in cooperation with TUB TAK due to the necessities regarding strategic confidentiality and due to the fact that TUB TAK is the most influential scientific organization of our country, and all the findings and data are shared with TUB TAK. R&D activities have reached their final stage for our glauberite mining field in Ankara - Çay rhan which has a total reserve of 200 million tons. Feasibility studies were started for the Integrated Sodium Sulphate Plants that shall be established at the said region with an annual production capacity of 150.000 tons. TOTAL VALUE OF THE AFOREMENTIONED INVESTMENTS Images from the R&D activities conducted in Çay rhan 9 Total value of all the investments made in the year 2007 is YTL 8.029.556,54.
B. DETAILS OF COMMODITY AND SERVICE PRODUCTION ACTIVITIES 1. FEATURES OF PRODUCTION UNITS a) Description of Production Units Dazk r Koralkim Plants Our Dazk r - Koralkim Plants have two units called K1 (Crystallization Unit No.1) and K2 (Crystallization Unit No.2). The only raw material used at these plants is the glauber salt obtained from the Lake Ac göl which is located 2.1 kilometers far from the plants. Glauber salt is allowed to precipitate in our pools located in the lake under cold weather conditions of winter seasons, and is then processed through a gradual evaporation process at our plants to produce refined anhydrous sodium sulphate with the purity of 99.5%. These plants are equipped with an energy production plant to meet their own steam and electricity requirements as well as with all kinds of technical, administrative, and social infrastructure facilities, various auxiliary units, and all the support systems which are required for a chemical plant of the same size. All the plants of Alkim Kimya are operated through computerized control systems. Pressurized steam produced at the energy production station of our plant passes through the turbine to produce both the steam required for the process and the electricity required for the entire plant. The maximum capacity of our steam turbine (i.e. our electricity generating power) is 3.5 MWh. As a result of considerable investments made for the purpose of producing granule sodium sulphate, i.e. a mineral demanded by some international detergent manufacturers, we have become able to produce such product with a particle size of 250 to 750 microns using the special technology at K2 unit, and this capability provides us with considerable benefits. Our products are offered for sale in 1-1.5 ton bigbags, in 50 kg sacks, or in bulk depending upon demands of our customers. Productivity of the evaporation units owned by has been improved further thanks to employment of certain methods and techniques. The overall productivity has been increased to the maximum level by means of a thermocompression system located in front of the first unit, and an additional low vacuum balancing systems located at the last unit. Koralkim Sodium Sulphate Plants have a daily production capacity of 700 tons on average. During the period of 01.01.2007 to 31.12.2007: Net working days at K1 unit (except for shutdowns) Net working days at K2 unit (except for shutdowns) 307 days 288 days Total production volume of these units is 190.222 tons. Following quantities are consumed for the said production volume: Quantity of crystal consumed 593.831 tons Quantity of coal consumed (former boiler) 1.143 tons Quantity of dust coal consumed (new boiler) 43.555 tons Overall quantity of electricity consumed by all the plants is 21.436.548 kwh Quantity consumed at the turbine 18.291.758 kwh Quantity purchased from TEDAfi 3.144.790 kwh Cihanbeyli Plants, and Bolluk Sodium Sulphate Factory Established using the technologies and know-how of Alkim, Cihanbeyli plants produce refined sodium sulphate products from raw sodium sulphate which is obtained from mining operations carried out at the Lakes Tersakan and Bolluk. These plants also produce light type sodium sulphate, i.e. a raw material used at a part of the detergent industry. Provisions of the Regulation on Implementation of the Law No. 4683 regarding Amendments to the Mining Law and Nullification of the Salt Law have allowed us to produce salt (NaCl) at our mining fields. Our company has begun producing salt after obtaining an operating license as well as a producing license for salt. At Bolluk Sodium Sulphate Factory During the period of 01.01.2007 to 31.12.2007 Net working days 313 days Production volume of refined type sodium sulphate 70.307.477 kgs Quantity of crystal consumed 195.962.42 kgs Quantity of dust coal consumed 21.683.970 kgs Total quantity of electricity consumed 7.166,349 kwh 10
b) Production Activities C HANBEYL PLANTS Sodium Sulphate Production Activities Tersakan - Bolluk Plants Ordinary lake operating activities are carried out at twelve production pools which cover a total area of 6.167.000 square meters. Product: Sodium Sulphate (Na 2 SO 4 ) Light type Sodium Sulphate 19.261 Tons Tuvenan Sodium Sulphate 19.993 Tons Crystal Sodium Sulphate 183.040 Tons Refined Sodium Sulphate 70.307 Tons Mixture Sodium Sulphate 2.300 Tons Salt Production Activities In 2007, 31.701 tons of raw salt were produced at Tersakan Plants. ACIGÖL PLANTS Our Ac göl plants represents the most important investment of our company in terms of sodium sulphate production, capacity, quality, and sales and export activities. Ac göl Plants At our Ac göl plants, there are sodium sulphate production pools of total 5.880.000 square meters, and preliminary vaporization pools of total 7.600.000 square meters. Our salt production pools cover an overall area of 2.800.000 square meters, and preliminary vaporization fields used for production of salt cover an overall area of approximately 1.325.000 square meters. In 2007, our Ac göl plants produced 555.352 tons of Crystal Sodium Sulphate (Na 2 SO 4.10H 2 O) In 2007, 75.843 tons of raw salt were produced at the salt pools of Ac göl plants. A part of raw salt produced passes through washing units located near the salt stock field to produce washed raw salt. In 2007, 5.969 tons of washed raw salt were produced. KORALK M PLANTS Following quantities are produced at Koralkim Plants which are equipped with the most advanced technologies of the world, and which produce products of the best quality: Granule 22.654 tons Refined Sodium Sulphate 167.568 tons Total - Sodium Sulphate 190.222 tons Refined Salt 1.196 tons Dried Salt 985 tons Total Salt Production 2.181 tons In 2007, the total volume of refined sodium sulphate products sold from our Koralkim sodium sulphate plants was 197.057 tons; and out of this volume total 30.357 tons were exported. c) Overall Capacity Rates Sodium Sulphate Total sodium sulphate production capacity of the company is 330.000 tons; i.e. 230.00 tons of refined ( including granular) sodium sulphate at Dazk r Koralkim Plants, and 80.000 tons of refined sodium sulphate and 20.000 tons of light type sodium sulphate at Cihanbeyli Plants. (Tons) 2005 2006 2007 Capacity 275.000 275.000 330.000 Production 244.388 249.484 282.090 Capacity Usage %89 %91 %86 11
ALK M KA IT SANAY VE T CARET A.fi. Alkim Ka t Sanayi ve Ticaret A.fi was first established within the body of Alkim Alkali Kimya A.fi, but converted into an independent entity on 30.06.1999. 20% of the shares in our paper production company was offered to the public on 02.11.2000, and its shares are currently traded at Istanbul Stock Exchange with the code ALKA. Our high-grade paper pulp and enamel paper production plants, established with an installed production capacity of 55.000 tons per year, have reached a technological superiority and productivity, which enables the company to compete with the largest paper production plants of Europe thanks to the technology investments that were made for the last ten years starting from the first day of its incorporation. As of the end of 2007, our paper production plant has reached an annual production capacity of 90.000 tons as a result of the cogeneration investment; increase of the capacity of the gas turbine to 5.5 MW; increase in the production capacity achieved by means of an increase in the speed of paper machinery to 700 meters per minute; and many other investments which were started in 2000. Alkim Kâ t Sanayi ve Ticaret A.fi is one of the most reputed producers of Turkish paper industry thanks to its advanced technological infrastructure and efficient planning strategies as well as a versatile range of products. We would like to state proudly and gladly that Alkim Ka t has broken the production and sales records in 2007 where the paper production sector suffered from many challenges as a result of fluctuations in prices quoted for both cellulose, i.e. the basic raw material, and for finished paper products. Productivity of our production activities was improved further this year thanks to the dedicated and considerable efforts of our directors and all members of our staff. Quality of our paper products has undisputedly occupied the first ranks not only in our country but also in Europe. Our turnover and tonnage figures accurately and visibly reflect said positive and successful results. An overall turnover of YTL 90.772.366 was derived from a total sales volume of 68.090 tons of paper products. In 2007, Alkim Ka t earned a profit of YTL 6.368.000. 12
ALKIM Insurance Agency Inc. (01.01.2007 31.12.2007) Activity Report Alkim Sigorta Arac l k Hiz. Ltd. fiti. was established on 04.11.2002 with an initial capital of YTL 20 Million contributed by Alkim Alkali Kimya A.fi and Alkim Ka t San. ve Tic. A.fi on equal basis. The General Assembly appointed Mr. Nihat Erkan as the company's manager in charge of corporate deals and trasactions. In 2002, this company received authorizations from Anadolu Sigorta and Koç Allianz Sigorta A.fi to act as an insurance agency. The company currently acts as an authorized insurance agency of Koç Allianz and Anadolu Sigorta. The company is seated at the Head Office of Alkim. The company has begun producing insurance policies in regard of building, machinery breakdown, fire, content, commodity, transportation, vehicle, traffic, and own insurances as well as group individual accident and health insurances for Alkim Alkali Kimya A.fi, Alkim Ka t San.ve Tic. A.fi, and Sodafl Sodyum San.A.fi. as well as its other customers subject to issuance of said policies by the head offices and district directorates of insurance companies. With a portfolio size of YTL 125 Million, Alkim Sigorta Arac l k Hiz. Ltd. fiti maintains its position as a large corporate agency in the insurance sector. Distribution of portfolio as of the end of 2007 ALK M K MYA A.fi ALK M KA IT A.fi OTHER ENTITIES AND INDIVIDUALS TOTAL YTL 39,5 Million YTL 65,3 Million YTL 20,2 Million YTL 125 Million 13
2. ACTIVITIES REGARDING PRODUCTION OF COMMODITIES AND SERVICES a) Developments in Production of Sodium Sulphate The rise of living standards in the world, especially in the Middle East, leads to use of washing machines to a greater extent, and consequently to the consumption of considerably higher quantities of detergents. Said rise in consumption of detergents also leads to an increase in use of sodium sulphate automatically. Percentage of sodium sulphate used has increased from 15-20% to about 45-50%. Alkim has reached huge capacities in production of sodium sulphate by means of respective investments for the purpose of meeting the said rise in demand, maintaining its global position, and making access to new markets. b) A comparative table regarding production activities Production quantities of sodium sulphate and salt are shown in the following table with a comparison to those of the preceding year. Quantity (in tons) Dazk r 2006 2007 Crystal 635.566 555.352 Refined Sodium Sulphate 220.090 190.222 Light Type 2.694 - Raw Salt 84.461 75.843 Tuvenan - - Washed Raw Salt - 5.969 Dried Salt - 985 Refined Salt - 1.196 Quantity (in tons) Cihanbeyli 2006 2007 Tuvenan 21.347 19.993 Light type 26.688 19.261 Raw Salt 23.475 31.701 Refined - 70.307 Mixture - 2.300 Crystal - 183.040 c) Average selling prices of sodium sulphate and salt products over years Selling prices of sodium sulphate has begun rising starting from the second half of 2007 based on the supply and demand equilibrium. It is expected that this rise shall continue in 2008. Unfortunately, sale prices of salt decreased in 2007 relatively. The salt market had become complicated due to import of huge masses of salt on the one hand, and privatization of the Great Salt Lake on the other hand, which was followed by offering, in consideration of lower prices, of stocks of hundreds of thousands tons of commodity by private companies for the purpose of overcoming their cash problems after taking transfer of said stocks. The prices started gaining equilibrium as a result of decrease in the said stocks starting from the last quarter of 2007. 3 - SALES ACTIVITIES a) Below is a summary of our sodium sulphate sales volumes with a comparison to those of the preceding year Dazk r 2006 2007 Total Refined and Granular 223.690 tons 197.057 tons Light Type 2.694 tons - Raw Salt 57.213 tons 58.050 tons Washed Raw Salt - 3.137 tons Dried Salt - 927 tons Refined Salt - 406 tons Cihanbeyli 2006 2007 Light type 26.700 tons 18.372 tons Raw Salt 52.448 tons 25.262 tons Refined - 67.939 tons Mixture - 2.208 tons All the factories of Turkish Bottle, Glass, and Detergent Industry meet their sodium sulphate requirements from Alkim, and our sales to this corporation are carried out based on annual contracts. Our domestic contractual sales volume represents 90% of our overall volume of domestic sales. Detergent sector has the highest share in our domestic sales. A demand burst has occurred for sodium sulphate both in Turkey and in the Middle East since detergent producers have increased quantity of sodium sulphate ( which is the cheapest raw material when compared to other imported inputs ) in their formulations for the purpose of decreasing their production costs. For this reason, our existing plants are operated at their full capacities on the one hand, and our efforts are maintained at the highest level to benefit from our sodium sulphate reserves in Çay rhan for the purpose of meeting the increased demand of the domestic market for sodium sulphate on the other hand. In short, our company acts in a manner which is appropriate for fulfillment of the responsibilities assumed by a global company in the sodium sulphate sector. Our foreign sales are carried out on the basis of cash against documents, cash against goods, or cash through letters of credit depending upon status of countries of destination as well as customers. Majority of our foreign customers is comprised of detergent manufacturers. In general, we sell our products directly to customers. However, we employ our agencies for sales to Greece, Israel, Syria, Lebanon, and other similar countries. 14
Alkim-Ac göl Integrated Sodium Sulphate Plant
CONSOLIDATED BALANCE SHEETS AT 31 DECEMBER 2007 AND 2006 (Amounts expressed in New Turkish lira (YTL) unless otherwise indicated) Notes 31 December 2007 31 December 2006 ASSETS CURRENT ASSETS 61.091.626 58.712.245 Cash and cash equivalents 4 9.744.305 6.973.394 Marketable securities- net 5 5.351 384.836 Trade receivables- net 7 25.438.728 24.108.996 Leasing receivables- net 8 - - Due from related parties- net 9 230.857 371.881 Other receivables- net 10 2.839.844 2.957.218 Biological assets- net 11 - - Inventories- net 12 22.219.510 23.260.394 Receivables from construction contracts in progress- net 13 - - Deferred tax assets 14 - - Other current assets 15 613.031 655.526 NON-CURRENT ASSETS 102.379.977 103.740.799 Trade receivables- net 7 21.548 23.247 Leasing receivables- net 8 - - Due from related parties- net 9 - - Other receivables- net 10 - - Financial assets- net 16 14.313 14.313 Positive/ negative goodwill- net 17 - - Investment property- net 18 - - Property, plant and equipment- net 19 100.954.744 102.180.851 Intangible assets- net 20 626.411 789.688 Deferred tax assets 14 762.672 732.393 Other non-current assets 289 307 TOTAL ASSETS 163.471.603 162.453.044 The consolidated financial statements prepared as at and for the year ended 31 December 2007 have been approved and signed by the Board of Directors on 6 March 2008. The accompanying notes form an integral part of these consolidated financial statements 17
CONSOLIDATED BALANCE SHEETS AT 31 DECEMBER 2007 AND 2006 (Amounts expressed in New Turkish lira (YTL) unless otherwise indicated) Notes 31 December 2007 31 December 2006 LIABILITIES CURRENT LIABILITIES 21.615.688 27.204.347 Financial liabilities - net 6-2.138.552 Short-term portion of long-term financial liabilities - net 6 10.594.376 13.527.226 Lease liabilities - net 8 203.590 225.020 Other financial liabilities- net 10 - - Trade payables- net 7 8.768.369 8.782.771 Due to related parties- net 9 566.973 392.665 Advances received 21 268.533 227.046 Construction progress billings- net 13 - - Provisions 23 188.664 929.014 Deferred tax liabilities 14 - - Other liabilities- net 15 1.025.183 982.053 NON-CURRENT LIABILITIES 9.323.130 10.058.706 Financial liabilities - net 6 4.650.065 6.198.048 Lease obligations- net 8 361.292 681.718 Other financial liabilities- net 10 - - Trade payables- net 7-664.064 Due to related parties- net 9 - - Advances received 21 - - Provisions 23 2.768.799 2.514.876 Deferred tax liabilities 14 1.542.974 - Other liabilities- net 15 - - MINORITY INTEREST 24 17.877.999 16.626.613 SHAREHOLDERS' EQUITY 114.654.786 108.563.378 Share Capital 25 24.725.000 24.725.000 Treasury share - - Capital Reserves 26 38.594.844 38.594.844 Share premiums - - Profit from share cancellations - - Revaluation fund - - Revaluation fund for financial assets - - Inflation adjustment to shareholders' equity 27 38.594.844 38.594.844 Profit Reserves 27 13.678.517 12.355.311 Legal reserves 27 10.086.704 8.323.364 Statutory reserves - - Extraordinary reserves 27 3.591.813 4.031.947 Special reserves - - Property sales gains and investments shares To be added to capital - - Cumulative translation adjustment - - Net profit for the year 18.230.111 11.170.067 Retained earnings 28 19.426.314 21.718.156 TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES 163.471.603 162.453.044 Provisions and contingent assets and contingent liabilities 31 The accompanying notes form an integral part of these consolidated financial statements. 18
CONSOLIDATED STATEMENTS OF INCOME FOR THE YEARS THEN ENDED 31 DECEMBER 2007 AND 2006 (Amounts expressed in New Turkish lira (YTL) unless otherwise indicated) 1 January - 1 January - Notes 31 December 2007 31 December 2006 Net sales 36 142.463.444 119.244.537 Cost of sales 36 (104.258.100) (88.136.734) Service income- net 36 - - Other revenue 36 - - GROSS PROFIT 36 38.205.344 31.107.803 Operating expenses 37 (14.383.719) (14.682.760) NET OPERATING PROFIT 23.821.625 16.425.043 Other income 38 6.726.754 8.324.837 Other expenses 38 (578.144) (1.527.377) Financial expenses 39 (5.675.344) (9.086.428) OPERATING PROFIT 24.294.891 14.136.075 Gain/ loss on net monetary position 40 - - (Profit)/ loss attributable to minority interest 24 (1.251.386) 426.793 PROFIT BEFORE TAX 23.043.505 14.562.868 Taxes on income 41 (4.813.394) (3.392.801) NET PROFIT FOR THE YEAR 18.230.111 11.170.067 EARNINGS PER SHARE 42 0,7373 0,4518 The accompanying notes form an integral part of these consolidated financial statements. CONSOLIDATED STATEMENTS OF INCOME FOR THE YEARS THEN ENDED 31 DECEMBER 2007 AND 2006 (Amounts expressed in New Turkish lira (YTL) unless otherwise indicated) Inflation adjustment to Total Share shareholder s Legal Extraordinary Retained Net profit shareholder s capital equity reserves reserves earnings for the year equity 1 January 2006 24.725.000 38.594.844 6.832.832 4.565.239 24.551.593 7.930.893 107.200.401 Dividend payment - - - (3.386.408) (6.420.682) - (9.807.090) Transfers to retained earnings and reserves - - 1.490.532 2.853.116 3.587.245 (7.930.893) - Net profit for the year - - - - - 11.170.067 11.170.067 31 December 2006 24.725.000 38.594.844 8.323.364 4.031.947 21.718.156 11.170.067 108.563.378 Dividend payment - - - (2.567.804) (9.570.899) - (12.138.703) Transfers to retained earnings and reserves - - 1.763.340 2.127.670 7.279.057 (11.170.067) - Net profit for the year - - - - - 18.230.111 18.230.111 31 December 2007 24.725.000 38.594.844 10.086.704 3.591.813 19.426.314 18.230.111 114.654.786 The accompanying notes form an integral part of these consolidated financial statements. 19
CONSOLIDATED STATEMENTS OF INCOME FOR THE YEARS THEN ENDED 31 DECEMBER 2007 AND 2006 (Amounts expressed in New Turkish lira (YTL) unless otherwise indicated) Cash flows from operating activities: 1 January - 1 January - Notes 31 December 2007 31 December 2006 Net profit before taxation on income 23.043.505 14.562.868 Adjustments to reconcile net profit to net cash generated from operating activities Depreciation and amortisation 19, 20 9.357.801 8.552.918 Provision for employment termination benefits 23 712.023 668.857 Interest income 38 (629.760) (467.853) Interest expense 39 1.046.729 1.362.886 Loss from sales of property, plant and equipment - net 38 115.196 244.228 Taxes paid (4.042.109) (3.137.556) Profit/ (loss) attributable to minority interest 24 1.251.386 (426.793) Exchange (gains)/ losses on borrowings (3.380.634) 672.544 27.474.137 22.032.099 Changes in assets and liabilities Change in marketable securities 5 379.485 (136.656) Change in trade receivables 7 (1.328.033) (5.267.289) Change in due from related parties 9 141.024 1.006.709 Change in other receivables 10 117.374 (691.250) Change in inventories 12 1.040.884 2.218.463 Change in other current assets 15 42.495 186.927 Change in other non-current assets 18 (65) Change in trade payables 7 (678.466) (1.376.230) Changes in due to related parties 9 174.308 (153.113) Changes in advances received 21 41.487 41.203 Changes in short-term provisions 23 1.060 - Changes in other short-term liabilities 15 43.130 10.942 Employment termination benefits paid 23 (458.100) (477.840) Net cash flows generated from operating activities 26.990.803 17.393.900 Cash flows from investing activities Interest received 629.760 467.853 Purchases of property, plant and equipment and intangible assets 19-20 (8.471.556) (14.598.078) Proceeds from sales of property, plant and equipment 387.943 862.592 Net cash used in investing activities (7.453.853) (13.267.633) Cash flows from financing activities (Decrease)/ increase in financial liabilites (3.131.467) 3.071.805 (Decrease)/ increase in lease obligations 8 (341.856) 906.738 Interest paid (1.154.013) (1.345.643) Dividend paid (12.138.703) (9.807.090) Net cash used in financing activities (16.766.039) (7.174.190) Net increase/ (decrease) in cash and cash equivalents 2.770.911 (3.047.923) Cash and cash equivalents at beginning of the year 4 6.973.394 10.021.317 Cash and cash equivalents at end of the year 4 9.744.305 6.973.394 The accompanying notes form an integral part of these consolidated financial statements. 20
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2007 AND 2006 (Amounts expressed in New Turkish lira (YTL) unless otherwise indicated) NOTE 1 - ORGANISATION AND NATURE OF OPERATIONS Alkim Alkali Kimya A.fi (the Company ) was established in 1948 as Alkali Madencilik Limited fiirketi. Since 1963, the Company has continued its operations as Alkim Alkali Kimya A.fi. The nature of the operations of the Company is the mining of ores and the production and distribution of all kinds of chemical materials in domestic and foreign markets as disclosed in the articles of association. The nature of the businesses of the Subsidiaries is as follows: Subsidiaries Country Nature of business - Alkim Ka t Sanayi ve Ticaret A.fi. ( Alkim Ka t ) TurkeyKa t ürünlerinin üretimi ve sat fl - Alkim Sigorta Arac l k Hizmetleri Ltd. fiti. ( Alkim Sigorta ) Turkey Sigortac l k The Company and its subsidiaries ( the Group ) are registered in Turkey. The Company and its subsidiary Alkim Ka t, are publicly quoted companies and 29,18% (2006: 22,44%) of the Company's shares, 20,00% (2006: 20,00%) of Alkim Ka t shares are quoted on the Istanbul Stock Exchange ( ISE ) (Note 25). The address of the registered office is as follows: Gümüflsuyu Mahallesi nönü Caddesi No:13 34437 Taksim- stanbul NOTE 2 - BASIS OF PRESENTATION OF FINANCIAL STATEMENTS 2.1 Accounting Standards The Group maintains its books of account and prepares its statutory financial statements in accordance with the Turkish Commercial Code, communiqués issued by the CMB and Turkish tax legislation. These financial statements are based on the statutory records, which are maintained under the historical cost convention with adjustments and reclassifications for the purpose of fair presentation in accordance with CMB Communiqué XI/25 Communiqué Regarding Accounting Standards in Capital Markets ( Communiqué ) dated 15 November 2003. Financial statements and notes to the financial statements are prepared in compliance with the formats required by the CMB announcement dated 10 December 2004. Other than the financial assets and liabilities carried at their fair values, consolidated financial statements are based on historical cost convention and prepared in terms of New Turkish Lira ( YTL ). 2.2 Financial reporting in hyperinflationary periods CMB declared by referring to the announcement dated 17 March 2005 that the application of inflationary accounting is not required for the companies which continue the operations in Turkey and prepare the financial statements in accordance with Communiqué; effective from 1 January 2005. 21