Ülker Bisküvi Sanayi A.S.

Hello everybody, welcome to Hülker Bisküvi's second quarter operational and financial webcast. Here with me in the room, our CEO Mr. Özgür Kolukfaki and our CFO Mrs. Fulya Banu Surucu. Now I leave the ground to our CEO for the opening remark and operational performance. Özgür Bey.

Yes, thanks Beste. Good afternoon, good morning and good evening everyone. And thank you for joining Hülker Bisküvi's second quarter 2026 earnings webcast. The first half of the year was characterized by a demanding consumer environment, increased promotions, elevated promotional activity, and continued geopolitical volatility in some of our international markets. Against this backdrop, our key priorities remained consistent, protecting the strength of our brands, maintaining consumer affordability, preserving market leadership, and managing the business with financial discipline. There are clearly areas of pressure in our reported financial performance, particularly around revenue and margins. At the same time, we are encouraged by the resilience of our volume performance, the contribution from our international operations and new product launches, and the continued strength of our market positions. Also, net income delivered the quarter's standout result with 45.5% year-on-year increase. Today, I will first walk you through the key highlights and operational performance. I will then hand over to our CFO Fulya for a detailed review of the financial results and balance sheet. I will come back at the end to discuss our updated outlook for the remainder of 2026. So, we will structure today's discussion around four areas. I will begin with the key messages from the quarter and some of the initiatives supporting the long-term strength of our business. I will then cover our operational performance, including our geographic portfolio, revenue mix, and market positions. Our CFO Fulya will take you through the financial performance in detail, including the regional P&L, category dynamics, and balance sheet. Finally, I will return to discuss our revised guidance and the key priorities for the second half of the year. Let me start with the key highlights from the second quarter. To start with the six key messages that we believe best characterize the quarter. First, volume remains resilient. Consolidated volume increased by 1.3% year on year to approximately 163,000 tons. This is important because it demonstrates that even in a highly promotion-driven and affordability-sensitive environment, consumers continue to engage with our brands, with international operations leading at 6% growth, confirming strong and sustained consumer demand across all geographies. Second, our reported revenue declined by 11.4% to 27 billion TL. We should view that performance in the context of IAS 29 inflation accounting. Softer value growth in Turkey due to not having a price up parallel to inflation to remain competitive, less favorable category mix, significantly higher promotional intensity and higher cost base, mostly due to cacao related lag effects. So the volume and revenue trajectories should not be interpreted in isolation. Accelerated promotional activity across the Turkish market and an exceptionally high quarter to 2025 pace, volume integrity was preserved throughout. Third, our international operations continue to provide meaningful volume support, with international volumes increasing by 6% in the quarter. We see this as an important validation of the geographic diversification we have built over time. Fourthly, despite the pressure at the operating profit level, net income increased by 45.5%, almost 46%, year-on-year to 1.4 billion TL. Our CFO will explain the breach in more detail. Fifth, our balance sheet remains robust. with covenant basis net debt to EBITDA at 1.17 times. We continue to manage liquidity, ethics exposure, and working capital carefully. Net debt over EBITDA stood at 1.17 times covenant basis, reflecting a well-managed leverage profile that provides UKER with ample financial flexibility to pursue growth investments while maintaining a robust and credit-worthy Capital Structure. Ülker has its number one position with a 34% market share in one of the most promotional quarters the Turkish confectionery market has seen. It is a powerful testament to the enduring strength of our brand equity and unwavering loyalty of our consumers. So, while the environment remains demanding, the underlying message for us is one of consumer Strong Brand Positions and Disciplined Execution. We are deliberately prioritizing the long-term health of our franchises rather than pursuing short-term value growth at the expense of affordability or market position. Innovation remains one of the most important structural growth drivers of Ülker. What you see on this slide is a broad pipeline of product launches across both our domestic and international businesses. Our approach to innovation is not simply to increase the number of SKUs. We are focused on innovations that address specific consumer occasions, price points, and changing preferences. In Turkey, where affordability has become increasingly important, innovation allows us to offer consumers attractive products across different formats and pack sizes while maintaining the strength of our core brands. At the same time, we continue to premiumize selectively where consumer demand supports it. Internationally, we are leveraging both our established ülke brands and strong biscuit platforms such as Nekvitiz to expand our presence across consumption occasions and Geografis. This is particularly valuable in the current environment. When markets become more promotional, having a broad portfolio becomes a competitive advantage. It allows us to manage the balance between volume, pricing and mix rather than relying on a single product architecture. Innovation also helps us respond to changing consumer preferences without comprising our grant proposition. And importantly, this pipeline is already contributing meaningfully to the business rather than representing only future potential. On the next slide, you can see that new products are generating a meaningful share of our current snaking revenue. So although the current operating environment is challenging, We continue to invest behind the portfolio and maintain a healthy innovation engine which we believe is essential for sustainable growth over the medium term. The commercial relevance of that innovation pipeline is visible here. New products represented approximately 9% of total snaking revenue in the second quarter. The contribution was particularly strong in Turkey at 10%, while new products presented around 6% of international snaking revenue. We consider this as an encouraging result for several reasons. First, it shows that consumers are responding to the products we are bringing to market. Second, innovation is helping us defend our chef presence and brand relevance at a time when both retailers and consumers are extremely focused on value. Third, new products give us another lever to manage category and price point architecture. That is especially relevant in chocolate. The chocolate category has been working through an exceptional cacao cost cycle and consumers have naturally become more price sensitive. Our response has therefore been broader than simply taking price. We are using innovation, tech architecture and targeted promotional activity to maintain affordability and consumer engagement. The same principle applies internationally, where consumer behavior and competitive intensity differ materially from one market to another. The contribution from MPD therefore gives us confidence that our portfolio continues to evolve with the consumer. Going into the second half, our priority is to maintain that innovation momentum while remaining very disciplined around execution, pricing, and return on investment. Innovation is ultimately valuable only when it contributes to sustainable revenue, brand equity and profitability, and this is the framework through which we can continue to manage our pipeline. Alongside commercial execution, we continue to invest in the long-term relevance and trust of our brands. During this quarter, Ülker supported a number of initiatives across education, sports and community engagement. These included our support for the Minister of National Education's children's project, our partnership with the Turkish Basketball Federation, our involvement with the National Paralympic Committee of Turkey, and our participation in the Ethnosport Culture Festival. For us, these activities have a clear strategic rationale. Dürker is a brand that has been part of the consumers' everyday lives for generations, maintaining that position requires more than product availability or advertising. It requires continuing to build relevance and emotional connection across different generations of consumers. Support, education and community initiatives give us platforms to reinforce that connection in an authentic way, which is true to our brand purpose. These investments also support our broader corporate reputation and employee brand. We remain dissident around how we allocate resources, but we believe maintaining strong consumer and community engagement is an important part of protecting the long-term value of our Dulker franchise. The same long-term approach applies to our people. Our business operates across multiple geographies and increasingly complex consumer and cost environments. Strong execution Therefore, it depends on having the right leadership capabilities throughout the organization. During the period, we continued our leadership development architecture through programs such as Leader Shift, which is a composition of owning the shift, leading the shift, and driving the shift, covering different management levels. We also continue our Future Talent program and employee referral initiatives while strengthening healthcare coverage and employee well-being programs. Our well-being activities reach more than 1,800 employees through 74 initiatives. Why is this relevant for investors? Because navigating markets like the ones we are operating in today requires speed, accountability, and strong local decision-making. Pricing decisions, promotional architecture, working capital management, and category execution increasingly need to happen quickly. Our investment in people and leadership, therefore, directly supports our ability to execute the strategy. We believe building leadership today improves organizational resilience of tomorrow, and that remains an important part of our long-term agenda. Moving on to our digital roadmap, I want to address a crucial driver of our future operational excellence, our AI transformation. For us, AI is not just another industry buzzword. It's a strategic lever to enhance our core business. Over the last quarter, we have transitioned from the vision phase to structured focus execution. We have consciously avoided a scattergun approach. choosing instead to build a discipline foundation that ensures every AI investment we make is directly linked to shareholder value. Regarding the Q2 updates, the foundation we established our first AI steering committee, creating the necessary governance to oversee these initiatives. This is what we have done. Crucially, we activated a cross-functional task force. AI cannot exist just in one function. We have completed a comprehensive inventory of potential initiatives across all functions and through that process the steering committee has selected four high-impact priority areas of transformation. We have already initiated the review of potential technology partners and we are currently in preliminary meetings. This is a collaborative effort. who be aligned with the broader expertise of Pledis leadership and the technical power of Yildiz Tech, our main parent company. We prioritize four main domains across our AI focus. First is RGM, revenue growth management, to drive smarter pricing and promotional mix. Second, supply chain management to optimize our inventory and logistics in a volatile environment. Third is field sales optimization and segmentation to increase our agility and effectiveness at the point of sale. And the last one is financial and strategic planning to improve our agility in forecasting and budgeting. These are not just tech projects, these are core business processes where data-driven decision making will directly improve our margin profile and top line efficiency. Let me now move to the operational performance and begin with our geographic footprint. Before looking at the financial performance by geography, I would like to spend a moment on our volume performance, because we believe this provides an important perspective on the underlying health of the business, and volume is a true KPI for us, which is a reflection of share of growth. Four of our five geographic business areas delivered positive volume growth in the first half. Starting with our international markets, Türkiye Exports was the strongest contributor with volume growth of 11.4% versus the last year, the same quarter. In Central Asia, volumes increased by 5.6% despite a highly competitive environment and elevated promotional activity, particularly in Kazakhstan. The Middle East delivered 4.6% volume growth, even as consumer demand remained relatively cautious and regional geopolitical developments continued to affect market conditions. In North Africa, volumes increased by 4.4%, supported by solid commercial execution and continued consumer demand. Turkey domestic was softer, with volumes declining by 1.7% year-on-year. However, we think it's important to look beneath that headline number. The domestic market remained highly promotion driven and affordability sensitive, and there was also a meaningful shift in category mix. Bisküvi remained relatively resilient, while chocolate continued to normalize. From our perspective, the key takeaway from this slide is the breadth of volume resilience across the portfolio. International markets are continuing to grow volume, Turkey exports are performing particularly strong and even in our domestic market we have been able to protect our leading competitive position despite a difficult consumer backdrop. This is important because our priority in the current environment is not to maximize short-term price realization at the expense of the consumer. We are deliberately balancing affordability, volume, market share and profitability. We believe maintaining consumer engagement and scale today gives us a stronger platform to improve revenue quality and distribute margins as category mix, cacao costs and market conditions progressively normalize. This slide provides another perspective on the diversification of the business. In the first half, Consolidated revenue reached approximately 63.3 billion TL, with 71% generated domestically and 29% internationally. Domestic revenue was approximately 44.8 billion TL, with international revenue of approximately 18.5 billion TL. Within the international business, the Middle East remains our largest international region, while Turkey exports North Africa and Central Asia provide additional diversification. We view this portfolio structure as strategically valuable. Turkey remains the core of UK. It is our largest market, our strongest brand platform and the center of significant part of our manufacturing and innovation capabilities. At the same time, our international operations provide access to markets with different demographic profiles. category penetration levels and economic cycles. The first half is a good example. While the consumer environment in Turkey was particularly promotion intensive, international operations have support consolidated volumes. International markets are not immune from volatility, as we have seen in the Middle East and Central Asia, but the portfolio gives us multiple growth engines rather than a reliance on a single geography. Over time, we believe this combination of a very strong domestic franchise and scalable international platforms remains an important competitive advantage for users. Perhaps the clearest demonstration of the strength of our brands is our market share position. Based on Nielsen data through June 2026, our relevant category positions translate into approximately 34% share in CTA, 27% in the Middle East, 13% in North Africa, and 14% in Central Asia. For us, market share is particularly important in the current environment. A period of elevated inflation and intense promotions can create a temptation to optimize purely for near-term price realizations. We have taken a more balanced approach here. We want to protect profitability, but we also want to maintain consumer affordability Brand Strength and Shelf Results. That's why we have been selected with pricing and active with promotions. The consequence is that value growth can lead volume growth in periods such as this one, in this quarter. But the benefit is that we preserve the consumer demand and consumer connection. Our 34% position in Turkey during one of the most promotional quarters is therefore an important indicator of underlying brand health. Similarly, maintaining strong positions across our international markets demonstrate that this strength of our portfolio travels beyond Turkey. Going forward, we will continue to balance three priorities, market share, profitability, and brand equity. We do not believe those objectives are mutually exclusive or the medium term. Even if there can be temporary trade-offs, quarter to quarter. With that, let me hand over to our CFO, Fulya, to take you through the financial performance in more detail.

Thank you, Özgür Bey. Good morning, good afternoon and good evening everyone. Thank you so much for joining our webcast meeting call. So moving into financial performance, I would characterize this quarter as a period of resilient volume, but challenging top line and margin dynamics. Our consolidated volume increased by 1.3% year on year to 163,000 tons, which is important given the challenging and demand environment. Revenue declined 11.4% to 27 billion TL with inflation accounting adjusted numbers. And gross profit is at 6.6 billion TL with gross margin at 24.6% versus 27.2% last year. EBITDA came in at 2.8 billion corresponding to a 10.4% margin compared with 14.6% a year ago. So, inflation accounting continues to create a challenging year-on-year comparison. Fast category mix shifts, promotional intensity, and some demand-sensitive difficulties create some challenges and decreases on net total revenue. But despite this pressure and very challenging environment at the operating level, net income increased 45.5%, reaching to 1.4 billion TL and net income margin increased to 5.1% from 3.1%. So overall, in Q2, we continued to grow volume while profitability was affected. by a difficult operating environment, but we delivered a strong improvement at the bottom line. So, when we take a look on the first half numbers, volume remained again resilient with 0.7% increase versus prior year. I believe that it's an important starting point because despite considerable volatility in our markets, the business continues to grow overall volume. Revenue declined 7.2% to 63.3 billion and gross profit is at 16.7 billion with the margin moving from 30.7% to 26.5%. First half net income is at 3.1 billion versus 4.3 billion last year. So overall, first half results reflected difficult operating environments, But the volume remains strong and we continue to manage the areas under our control with strong discipline. So when we take a look at the breakdown between domestic and international, we see different dynamics. In Turkey, revenue declined 13.1% by 13.1% to 18.6%. Turkish Lira, and Gross Margin at 24.1%, while Ebitda Margin was 12.7% compared to 16.1%. International Revenue was more resilient, climbing only 7.4% to 8.4 billion, and Gross Margin came in at 25.6%, which was 30.64% last year. So, the demand in Saudi Arabia region, highly competitive environment in Central Asia and the category mix shift and promotional intensity especially in the domestic market all impacted our numbers. So, while international operations provided better top line resilience, they experienced also profitability pressures during this quarter. So, when we take a look at the total first half numbers for international and domestic, we see that international diversification is helping. Our revenue resilience, all the profitability normalization remains a priority. Domestic revenue declines 9% to 44.8 billion TL, while gross margin is 25.1%, EBITDA margin is 14.2%. International revenue was better since the decline is only 2.8% to 18.5 billion TL, and international gross margin remains relatively healthy. remaining at 29.7%, although slightly below versus prior year. So our geographic diversification is providing better revenue resilience across different demand environments, but at the same time restoring profitability, especially international, remains a clear management priority for us. In terms of category mix, Snacking volume increased by 1.2% year-on-year from 143 to 145,000 tons, supported by international operations and new product launches. At the same time, snacking revenue declines by 9.5%. So, Softly Demand in Turkey's snacking market, a high comparison-based