Release Date: April 03, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Exceeded targets in terms of revenue and EBITDA growth and profitability.
- On track to reach share of new economy and FX revenue share targets.
- Net debt to EBITDA at the group level is below midterm targets, providing comfort for further investment increases.
- Positive progress in non-bank CapEx-to-revenue ratio, indicating a focus on capital allocation efficiency.
- Strong performance in bank and financial services businesses despite macro volatility.
Negative Points
- Challenges due to hyperinflation and a devastating earthquake in the eastern part of Turkey.
- Midterm targets have become obsolete with the introduction of inflation accounting and need to be revised.
- Tire reinforcement business, Kordsa, was slow due to fierce competition.
- Revenue growth was impacted by the performance of natural gas power plants and the adverse effects of the earthquake.
- Inflation-adjusted consolidated net income decreased, reflecting the challenges of operating in a hyperinflationary environment.
Q & A Highlights
Q: Do you expect any tariff increase for natural gas and electricity in the remainder of the year?
A: N. Orhun Kostem, Head of Finance at Haci Omer Sabanci Holding AS, mentioned that there is potential for electricity and natural gas tariff increases, especially on the household side, due to subsidies. However, the rate and timing are uncertain and tied to the economy administration's midterm program. There were no increases in 2023, but there could be scope in 2024.
Q: When do you expect the IPO of Enerjisa Ãretim to take place?
A: N. Orhun Kostem explained that there is no definite time for the IPO of Enerjisa Ãretim. It will be a joint decision between joint venture partners and will depend on market conditions and demand. The value of the business has been growing, and favorable market conditions with significant demand, especially from foreign institutional investors, are needed for a successful IPO.
Q: Can you please explain the capacity expansion plans in Enerjisa Generation for 2024 and 2025 and how much EBITDA is targeted?
A: Cenk Alper, CEO of Haci Omer Sabanci Holding AS, stated that Enerjisa Generation plans to reach 5 gigawatts by 2026, which means investing in an additional 1.2 gigawatts from the current 3.8 gigawatts. EBITDA margins are expected to be similar to those in 2023, but this will depend on how prices evolve.
Q: At what level do you expect spot prices to stabilize in 2024?
A: N. Orhun Kostem suggested that electricity prices, currently around $60, might remain at that level for the rest of 2024. However, for the long term, a sustainable level of pricing could be around $80. In 2022, prices surged to $120 due to the Russian invasion of Ukraine, but neither extreme is sustainable.
Q: How much CapEx will be required by Enerjisa Enerji in the earthquake zone in 2024? Could this also limit the earnings recovery in 2024?
A: Cenk Alper mentioned that the size of the investment in the earthquake zone will depend on city planning. Investments will likely increase in the earthquake region compared to other regions, but it will be dependent on the development of the cities. N. Orhun Kostem added that investments done there will continue to be part of the regulated asset base, and an additional TRY8 billion of CapEx is expected in the next three years, which should not negatively impact earnings.
Q: How much dividend income do you expect in 2024?
A: N. Orhun Kostem referred to the appendices of the presentation, which detail the announced dividends company by company. The total expected dividend income is TRY9.4 billion.
Q: What weight is the banking sector plan to have in net asset value, along with investments in new economies?
A: N. Orhun Kostem indicated that the capital allocation plan aims for a more balanced NAV contribution from major business units. The weight of the bank has decreased and is now more or less even with the energy piece. Going forward, the contributions from materials and mobility as well as digital should disproportionately improve to achieve a more balanced NAV.
Q: Can you provide closing remarks?
A: Cenk Alper thanked participants for joining the earnings call and highlighted the company's continued investments in the new economy, improved governance structure, solid financials, and commitment to sustainability. He also mentioned the company's focus on improving the portfolio with high returns and thanked employees for their efforts. Lastly, he extended holiday greetings for Bayram and Easter.
