Ülker Bisküvi: Announces Q2 and H1-2016 Results

Istanbul / TR. (yh) Ülker Bisküvi, flagship of Turkish Yildiz Holding by both sales volume and profitability, reported its second quarter and first half 2016 earnings results.

Sales Volume (Ton)*

Sales volume was up by 2.5 percent in Q2-2016 over Q2-2015;

• On a like for like basis**, consolidated volume increased by 5.0 percent
• Share of International operations reached 42.6 percent including other (26.5 percent excluding other)

Sales Revenue (TRY million)

In 2Q2016, sales revenue was up by 4.2 percent and reached TRY 974 million;

• On a like for like basis, consolidated revenue increased by 9.1 percent
• Share of International operations reached 28.9 percent including other (25.3 percent excluding other)

Ebitda*** (TRY million)

Ebitda elevated by 10.3 percent to TRY 134 million vs TRY 121 million in 2Q2015

• On a like for like basis, consolidated Ebitda increased by 20.0

Net Profit (TRY million) – Equity Holders

In Q2-2016, net profit was up to TRY 87 million on the back of better operational performance

(*) Financial figures in Q1-2015 and H1-2015 are restated following the acquisition of Istanbul Gida, FMC, and Hi-Food
(**) On a like for like basis stand for excluding dairy sales from Q1-2015 + 1H2015 restated figures
(***) Excluding extraordinary income/(expense)

Consolidated Financial Results

Consolidated sales volume increased to 161K tons in the second quarter over the comparable period. The higher volume mainly resulted from the higher biscuits sales at international operations and pick up in chocolate sales both in Türkiye and international operations. At the end of H1-2016, sales volume reached 313K tons.

Excluding other sales, consolidated confectionery sales volume increased by 3.6 percent in Q2-2016 and remain flat in the H1-2016 versus comparable period.

On a like for like basis, consolidated sales volume expanded by 5.0 percent in Q2-2016 and slightly declined by 0.4 percent in H1-2016.

Share of international operations sales volume reached 42.6 percent in Q2-2016 (26.5 percent excluding other) and 39.4 percent in H1-2016 ( 26.1 percent excluding other), higher than 41.4 percent and 40.0 percent realized in both 2Q and H1-2015.

Consolidated biscuit sales volume was up by 5.0 percent in the quarter with the support of international sales.

Consolidated chocolate sales volume was up by 6.0 percent on the back of favorable branded product sales as our efforts intensified in this portfolio. Both our Türkiye and International operations displayed a strong performance in the quarter, whereas cake sales were down by 8.2 percent in Q2-2016 due to lower non-branded international figures.

Consolidated revenue for the second quarter of 2016 was 974 million, representing a growth of 4.2 percent YoY. In H1-2016, the revenue growth was 3.4 percent and attained 2.0 billion TRY.

The growth both in the quarter and in the half is basically due to higher unit prices in Türkiye and mix impact.

Excluding other revenues, total confectionery sales revenue reached 927 million TRY, representing a growth of 9.3 percent in Q2-2016 vs Q2-2015. In H1-2016, the revenues excl. other grew by 8.1 percent and parked at 1.9 billion TRY over 1H15.

On a like for like basis, the revenue growth was 9.1 percent in the second quarter of 2016 and 6.7 percent in the first half of 2016 over the comparable period.

Share of international operations sales revenue reached 28.9 percent in Q2-2016 (25.3 percent excluding other) and 28.9 percent in H1-2016 ( 25.7 percent excluding other).

Gross profit increased by 10.9 percent to 234.2 million TRY In Q2-2016 on the back of mix impact, and carry on price increase, and improvement at the both Türkiye and international operations.

Gross margin expanded by 1.4 pp and reached 24.0 percent in Q2-2016, whereas the growth was 1.8 pp on like for like basis. In H1-2016, the gross margin reached 24.0 percent, a betterment of 1.0 pp over Q2-2015 and 1.1 pp on a like for like basis.

Consolidated adjusted Ebitda (excl. other operating income/expense) for Q2-2016 was TRY 133.6 million compared to TRY 121.1 million in the same period of 2015.

Adjusted Ebitda margin reached 13.7 percent in Q2-2016, implying a 0.7 pp widening over Q2-2015 reported figure and 1.2 pp improvement on a like for like basis. In H1-2016, Ebitda margin reached 13.5 percent. The improvement at the Ebitda margin was mainly due to effective pricing policy and Efficiencies gained from investments.

Net Foreign Exchange loss amounted 1.8 million TRY in the second quarter due to weaker TRY against foreign currencies. As of June 30th, 2016, the Company’s net debt totaled 656 million TRY compared to 651 million TRY in December 31, 2015 after dividend and acquisition payments.

Net income for Q2-2016 totaled 87.2 million TRY and 178.0 million TRY in H1-2016, representing a growth of 22.0 percent and 45.8 percent, respectively.

Türkiye Operations Financial Results

Sales volume eased up to 93K tons in the second quarter over the comparable period. The slightly higher volume mainly resulted from the strong sales growth in chocolate category, while softer sales volume in Biscuit + Cake limited further growth.

In H1-2016, our Türkiye sales volume came down to 190K ton implying a contraction of 1.7 percent.

In Q2-2016, chocolate sales volume was up by 6.1 percent on the back of favorable branded product sales as our efforts intensified at this portfolio. This result carried H1-2016 chocolate sales volume to 69K ton, rising 2.8 percent vs 1H15.

Biscuit sales volume contracted by 2.1 percent to 46K tons in Q2-2016 and 4.2 percent to 94K tons in H1-2016. Branded biscuits sales in Türkiye in the second quarter started to pick up which had an important role in margin expansion.

Our Cake sales in Q2-2016 decreased by 4.8 percent to 13K tons over Q2-2015, and carried H1-2016 volume to 26K tons, implying a decline of 3.7 percent.

Türkiye’s sales revenue for the second quarter of 2016 was 693 million TRY, representing a growth of 10.7 percent year on year thanks to mix impact and price adjustments.

In H1-2016, sales revenue in Türkiye reached 1.4 billion TRY, an increase of 7.6 percent over the comparable period.

Chocolate sales revenue in Q2-2016 hiked by 16.0 percent to 378.5 million TRY, and 11.3 percent to 768.9 million TRY in H1-2016 over the comparable period. Price per ton increase realized at 9.3 percent for Q2-2016 and 8.4 percent for H1-2016.

At the end of Q2-2016, sales revenue from Biscuit category realized at 232.9 million TRY and 471.2 million TRY in H1-2016, representing a growth of 5.3 percent and 3.5 percent, respectively. Price per ton increase was 7.5 percent in Q2-2016 and 8.0 percent in H1-2016 vs pervious year same terms.

Sales of secondry and PL brands in biscuits considerably lowered in the second quarter.

Share of chocolate in Türkiye sales revenue increased from 52.2 percent in Q2-2015 to 54.7 percent in Q2-2016, while Biscuits share dropped from 35.3 percent to 33.6 percent.

Gross profit elevated by 17.0 percent to 165,5 million TRY in Q2-2016 thanks to mix impact and some favorable raw material prices despite the fact that minimum wage increase weighted on cost side and also the benefits enjoyed from the investments. In H1-2016, gross profit increased by 8.0 percent to 330.0 million TRY.

With the higher growth at the gross profit line over net sales, gross profit margin in the second quarter expanded by 1.3 pp to 23.9 percent, whereas maintained at 23.4 percent in H1-2016 compared to same periods of previous year.

In the second quarter of 2016, Ebitda grew by 10.2 percent and reached 102.4 million TRY. With this figures, Türkiye operations reached an Ebitda margin of 14.8 percent, easing only 0.1 pp.

Ebitda in H1-2016 realized at 198.8 million TRY, increasing by 14.8 percent versus 1H15. Ebitda margin enhanced by 0.9 pp and reached 14.1 percent on the back of effective cost management.

International Operations Financial Results

Sales volume increased to 69K tons (34K tons excluding other) in the second quarter over the comparable period. The higher volume mainly resulted from the strong biscuit sales in Egypt.

Drop in other sales is resulted from the divesture of dairy operations, which lowered overall other exports.

On a like for like basis, consolidated sales volume expanded by 13.9 percent (excluding other) in the quarter and 5.0 percent in the first half 2016 vs comparable periods.

Biscuit sales volume expanded by 20.8 percent to 26K tons in Q2-2016 and 9.9 percent to 50K tons in H1-2016. Branded biscuits sales in the second quarter displayed a strong performance.

In Q2-2016, chocolate sales volume was up by 5.1 percent. This result carried H1-2016 chocolate sales volume to 13K ton, an increase of 4.7 percent vs 1H15.

Our Cake sales in Q2-2016 decreased by 28.4 percent to 2K tons over Q2-2015, and carried H1-2016 volume to 4K tons.

International sales revenue for the second quarter of 2016 was 281.6 million TRY including other, representing a contraction of 8.9 percent year on year. Excluding other, confectionery sales revenue reached 234.0 million TRY, implying a growth of 5.3 percent thanks to mix impact and price adjustments.

In H1-2016, sales revenue reached 571.7 million TRY including other, declined by 5.8 percent over the comparable period, whereas rose by 4.6 percent to on a like for like basis.

At the end of Q2-2016, sales revenue from Biscuit category realized at 146.3 million TRY and 307.2 million TRY in H1-2016, representing a growth of 7.3 percent and 13.5 percent, respectively.

Chocolate sales revenue in Q2-2016 hiked by 10.2 percent to 76.1 million TRY, and 12.5 percent to 150.5 million TRY in H1-2016 over the comparable period.

Gross profit contracted by 1.5 percent to 68,7 million TRY in Q2-2016. On a like for like basis, gross profit enhanced by 21.7 percent thanks to mix impact and better operational performance at Hi-Food and FMC. In H1-2016, gross profit increased by 6.6 percent to 144.6 million TRY (Like for like growth was 22.3 percent).

Gross profit margin in the second quarter expanded by 1.9 pp to 24.4 percent (LFL expansion of 3.3 pp), whereas enhanced by 3.0 pp to 25.3 percent (LFL expansion of 3.7 pp) in H1-2016 compared to same periods of previous year.

In the second quarter of 2016, Ebitda grew ahead of net sales with a growth of 10.7 percent and reached 31.2 million TRY. With this figures, Ebitda margin reached 11.1 percent, an improvement of 2.0 pp (LFL expansion of 4.2 pp) In Q2-2016.

Ebitda in H1-2016 realized at 69.3 million TRY, increasing by 17.9 percent (LFL growth of 52.8 percent) versus 1H15. Ebitda margin parked at 12.1 percent.

Message from CEO of Ulker

Mehmet Tutuncu, Chief Executive Officer of Ulker, commented about the performance of Company:

«Ulker once more delivered strong and improved results in the first half 2016. The company’s consolidated sales momentum has accelerated to 2.0 billion TRY and Ebitda growth of 15.6 percent in an excess of top line growth, carrying the consolidated Ebitda margin to 13.5 percent.

«We managed to build a momentum and continue to drive top line while enjoying historic high margins and net profit.

«Ulker’s net profit for equity holders also increased by 46 percent over the same period, rising to TRY 178 million from TRY 122 million.

«Our sustained growth demonstrates the strength of our brand, the quality of our innovations and how well our people are executing our strategy. Creating consistency across the value chain in order to achieve efficiency and our shared objectives is essential for sustaining this kind of growth. The progress we have made in the first half allow us to reconfirm our outlook for the full year.

«The financial and operational successes we have achieved by the end of the quarter indicate that Ülker has a solid foundation for sustainable and profitable growth. The operations reached a solid and strong base where we aim to enjoy further top line growth and market share improvements in the years to come.

«While we are in investing in sustainability, we are also targeting to maximize shareholder value by managing intangible assets including our human capital, brand and reputation value, and innovation culture».