Anadolu Efes Birack Ord

Ladies and gentlemen, welcome to Anadolu FSS 9M2024 Financial Results Conference Call and Webcast. Our presenters today, Mr. Onur Alçuk, the CEO, and Mr. Gökçe Yanaşmayan, the CFO. All participants will be in a listen-only mode during the first part of this call. Following, you can submit your questions using the question box on your Web screen. If you have questions, we kindly ask you to write down your questions before the Q&A session begins. This will allow us to review and address them. Thank you. Unless explicitly stated otherwise, all financial information disclosed in this presentation are presented in accordance with EAS 29. Just to remind you, this conference call is being recorded and the link will be available online. Before we start, I would kindly request you to refer to our notes in our presentation regarding forward-looking statements. Now, I'm leaving the ground to Mr. Onur Alçuk, Anadolu FSC CEO.

Thank you, Alçuk. Lastly, welcome all. I would like to welcome all of you to our third quarter 2024 conference calls. It's been a dynamic quarter for Anul FS, marked with success in certain markets and, of course, headings in others. However, I'm pleased to share our B group has achieved six consecutive quarters of volume growth with a solid mid-single digit expansion in the third quarter of 24. In our soft drink operations, challenges continue, primarily due to the weakened purchasing power ongoing geopolitical uncertainties that have significantly impacted overall demand. But as a result, we saw a single decline in our latest consolidated volumes. Despite these volume contractions, we delivered a solid growth profitability, thanks to our effective revenue growth strategies, which helped, of course, offsetting cost increases. While we saw a strong improvement in gross profitability, rising operational expenses led to a slight dilution in our EBITDA margin. We are pleased to share that our consolidated net debt to EBITDA ratio remained below one this period, reaching a robust 0.6 times as September 3rd, 24th, within our targeted leverage range, actually. Additionally, we have once again achieved a net cash position in the beer group this quarter as well. Finally, in the life of these results recorded so far, we have decided to revise our guidance second time this year, which we will go through in the following slides. And when we look at the details of the beer operations, in the third quarter of 2024, our beer volumes increased by 5.7%, continuing a strong momentum seen in the first two quarters as well. Growth was supported by strong performance in Russia, Georgia, and Moldova. Turkey beer volume declined by 1.4%, while our international beer volume saw an impressive growth of 0.5%. Russia maintained a strong growth momentum from previous quarters, achieving a high single-digit growth, which highlights sustained strength of our business in Russia. In the CIS countries, increases in Georgia and Moldova operations have offset the decline in Kazakhstan, resulting in overall flat volumes. So when we deep dive into Russia, actually beer industry in Russia maintained its growth momentum with single digit growth in the third quarter, building on the positive momentum seen in the first half of the year. We observed a shift from other alcoholic beverages to our category, beer category, since the start of the year. Supported by new investments, of course, and innovative product introductions, which further boost market volumes. Despite intensified marketing efforts from competitors, I am once again pleased to report that we outperformed the industry, which means share gain, achieving high single-bid growth in the third quarter. We achieved this by focusing on our high-performing portfolio, staying committed to the commercial excellence, and executing effectively. As a result, this success allowed us to strengthen our positions in all segments except the value segment. Beyond our volume growth patterns, we maintained our leadership position across both value and volume metrics with additional share gains in each category. When we deep dive in CIS and Turkey, in CIS operations, Moldova and Georgia registered double digit growth. which is good news for us, supported by effective brand activations related to Euro24 and Olympics. In Moldova, one of our main brands, Kozel and Finch, continue to drive growth in this quarter in their segments, while Kozel leading the premium segments, Finch is leading the mainstream segments in Moldovan markets. In Georgia, Novembro, Carva and FS have maintained their leading positions within their segments. while Natakdari successfully increased its market share this quarter. On contrast, we observed a softer performance in Kazakhstan markets, recording at a slower pace than the previous two quarters, impacted by weak industrial dynamics. And during this period, we witnessed that the Efes brand increased its volume share, while Ruska has maintained its leadership position with 13% market share. I'm also so proud to share that Kazakhstan achieved its highest market share in the last four years, diverging from market dynamics thanks to its strong portfolio, regional focus, and effective sales and marketing initiatives. Overall, our CIS volume registered flat in this period. And when we come to Turkey, building on a high base from 23, as well as strong performance in, first off, Turkey by price increases implemented in the second half of the year, along with the weakening consumer purchasing power, as no minimum wage increase was implemented for this period, all of which impacted the total volume figures in Turkey. And let's briefly provide some information about our shopping operations as well. In the third quarter of the year, CCI's consolidated volumes declined by 9.2, primarily by Turkey and Pakistan operations. Turkey volume was down by 12.2%, influenced by the persistent high inflation, weakening consumer sentiment and the lack of minimum adjustments. International volumes posted a 7.1% decline. Iraq and Azerbaijan continued to deliver strong results, whereas Pakistan and Uzbekistan volumes declined by 22.9% and 6.5% respectively. In Pakistan, volumes were negatively affected by macroeconomic events and weak consumer sentiments, while Uzbekistan experienced volume decline mainly due to the high comparison base from the previous year and purchasing power decline after the introduction of the excise tax in the country. And let's move on to our financial results. We delivered a strong top-line performance. Growth during the period was driven by our beer business. and also supported by effective revenue growth strategies applied across all operations, such as price adjustments and a favorable mix addressing value generation. Meanwhile, despite profitable mix management initiatives, soft drink business recorded a decline, as mentioned. Despite strong growth profitability recorded in the periods, consolidated EBITDA margin was diluted due to the increase in OPEX per net revenue across both operations. Soft drink operations were negatively impacted by economies of scale, while our beer operations faced challenges in key markets, Russia and Turkey. As I mentioned in the previous call, margins continue to be pressured by the significant increases in raw material costs, transportation expenses in Russia. Meanwhile, in Turkey, higher trade marketing expenditures during the high season have led to an increase in operating expenses. Our consolidated net income was recorded at 5.6 billion TL. The degrees in the operational profitability, along with low recorded monetary gains compared to the same period last year, led to the decline in the bottom line. Pre-cash flow recorded at 5.4 billion TL at a lower level compared to the same period in 2003. The decline was due to high interest payments and increased capex in soft drinks. following the investments in new production capacities. Consequently, our consolidated net debt to EBITDA ratio remained at a healthy level at 0.6 times. That is highlighting our strong financial position. Now, our CFO Gokce will give the details on the financial metrics.

Thank you, Onur. Good morning, good afternoon to everyone participating in our conference call today. So, Onur talked about another FSS consolidated results. get into beer group results in more depth. So our top line expanded significantly in the third quarter. The beer group's consolidated revenue reached 25.1 billion, a 27.4% rise over the same period previous year. Our revenues in international beer operations have grown by 40%, primarily driven by increased volumes and price adjustments in Russia. The favorable product mix, however, has been key driver of our revenue growth for our Russian operation. Additionally, I have to mention our international year top line growth was positively impacted by the application of IAS 29 to 2023 figures. The deceleration in the inflation rate in Turkey from six months to nine months this year lowered the index revenue base for 2023, hence effectively boosting this year's growth rate for sales revenues. In the third quarter, Türkiye's BIR operations generated 7.9 billion TL in sales revenue, a growth of 6.4%. And in nine months 24, BIR Group's revenue increased by 9.6% to 69.9 billion TL. Third quarter beer groups gross profit increased by 20.9% to 12.2 billion, with a 262 bps dilution in gross margin reaching 48.8%. As we previously talked about, the main reason behind this is significant cost increases associated with raw material prices linked to foreign exchange in Russia. Although we have seen a slowdown in the gross margin contraction this quarter, this remains an ongoing challenge for this year. But as the top line increased strongly, so did the absolute gross profits. Consequently, the beer group's nine-month gross profit was recorded at 31.9 billion TL, with an almost flat margin of 45.7%. So, if we move to the next slide of, yes, beer. In third quarter, beer groups EBITDA increased by one point. In Russia, even though the OPEX over sales ratio increased year over year, improved commercial performance helped moderate the decline in EBITDA margin compared to previous quarters. However, in Turkey, this quarter, we've seen margin contraction driven by relatively weaker growth profitability along with high Europe expanding in the trade marketing. As a result, the beer group's nine-month EBITDA was reported at 11.3 billion TL with a margin of 16.2%. And the beer group's free cash flow grew from 2.1 billion to 4.3 billion. Significant growth is supported by working capital management, along with disciplined capital expenditure, despite increased interest expense. As of nine months, the beer group achieved a net cash position of 4.3 billion TL. And next slide, please. Here, let me start with a disclaimer. As Asta mentioned at the beginning, Andoyfe's financial statements are prepared in accordance with TAS 29, the standard for financial reporting in hyperinflationary economies. As a result, all financial information disclosed on this call and in our earnings release are in full conformity with TAS 29. However, financial information presented on this slide excludes the impact of TAS 29 and is presented solely for analysis purposes. Please note that these figures won't be aligned with another office's financials and have not undergone an independent audit. So excluding the impact of TAS-29, peer group revenue was 68.9 billion TL with a growth of 67% in nine months. Similarly, we have seen an increase of 40% in a big DA reaching to 13.2 billion TL in nine months, again, without the impact of TAS 29. And VA group net income, excluding the impact of TAS 29, was reported as 6.1 billion TL for the first nine months. So in the next slide, please, about cash and debt management. As of nine months, we had 64% of our cash in hard currency denominated in beer group and 59% of our cash in control of the OFS, which is pretty in line with our practice. And our net debt ratio is quite low for the OFS. It's 0.6% cash position. Next slide, please. Just an update about the numbers on hedges. Basically for 2024, We have completely hedged the aluminum exposure of Turkey and CIS. It's done. And for 25 exposures, 38% of our exposure have been already hedged. Regarding FX exposure, actually, no big news here. We have almost fully covered it for 2024. That ends my part of the presentation here. And now I hand over to Omer. Thank you. Thank you.