Earnings Release • Aug 19, 2024
Earnings Release
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As required by the Capital Markets Board, our H1 2024 financials have been adjusted to account for the effects of inflation pursuant to TAS 29 ( "Financial Reporting in Hyperinflationary Economies"). For this reason, all financial statements presented herein, including comparative data from earlier reporting periods, have been restated in accordance with TAS 29 to account for changes in the overall purchasing power of the Turkish lira. The resulting figures are indicative of the Turkish lira's purchasing power as of 30 June 2024.
| (TRL million) | 1H23 | 1H24 | % |
|---|---|---|---|
| Net Sales | 1,353 | 1,281 | -5 |
| Gross Profit | 636 | 713 | 12 |
| EBITDA (BNRI)(1) | 371 | 395 | 6 |
| Net Profit/(Loss) before Tax | 312 | 186 | -40 |
| Net Profit/(Loss) | 219 | 149 | -32 |
| Net Working Capital | 924 | 1,212 | 31 |
| Net Financial Debt | 610 | 738 | 21 |
| Free Cash Flow | -208 | -559 | n.m. |
| Gross Profit Margin | 47% | 56% | |
| EBITDA (BNRI) Margin(1) | 27% | 31% | |
| Net Profit Margin | 16% | 12% |
* All figures and tables in this report include IFRS16 impact.
(1) BNRI: Before non-recurring items
2024 H1 gross profit was up by 12% compared to 2023 H1 and amounted to TRL 713 million. The company's gross profit margin also improved significantly in 2024 H1, reaching 56%, or 900 basis points above its 2023 H1 figure. Excluding the effects of TAS 29, gross profit doubled, reaching TRL 787 million, while the company's gross profit margin increased by 1,200 basis points to 65%.
Even with the challenges of higher costs and operating expenses caused by inflation both in Turkey and globally, Adel's 2024 H1 EBITDA before nonrecurring items still managed to grow by 6% compared to the 2023 H1 figure and weighed in at TRL 395 million. Its BNRI EBITDA margin also saw a healthy increase of by 400 basis points and reached 31%. Excluding the effects of TAS 29, there was a substantial 82% growth in BNRI EBITDA, which reached TRL 468 million, while the BNRI EBITDA margin expanded notably, increasing by 500 basis points to 39%.
As of end-June 2024, Adel's net working capital requirement was TRL 1,212 million. Through effective balance sheet management, the company managed to keep the year-on-year increase in NWC to 31%, well below every posted rate of inflation. That said, Adel's net working capital/net sales ratio, which was 68% at end-June 2023, weighed in at 95% as of end-June 2024.
Net Financial Debt/EBITDA(BNRI)*
The company's as of end-June 2024 net financial debt was up by 21% year-on-year and weighed in at TL 738 million as of end-June. When accrued interest is excluded from the analysis, the year-on-year increase in net indebtedness was 9%.
By actively pursuing early collection of trade receivables through targeted payment campaigns, Adel managed to reduce its average net working capital requirement. The decrease in the NWC requirement proved advantageous in two ways: it not only lowered the company's financing costs but also ensured that the YoY increase in net financial debt was less pronounced than the increase in net working capital.
Adel's Net Debt/EBITDA (BNRI) ratio, which was 0.4% at end-2023, increased slightly to 1.1 as of end-June 2024.
* The Net Debt/EBITDA (BNRI) ratio is calculated on the basis of the previous twelve months' EBITDA(BNRI) figures.
As of end-June 2024, Adel showed a negative free cashflow of TRL 559 million. This is TRL 351 million less than what it was at end-June 2023.
Financial risks: The risks to which the company is exposed on account of its core business activity and chosen financial instruments broadly include interest rate risk, currency risk, liquidity risk, and credit risk. The company acknowledges the inherent uncertainties and volatilities that give rise to these risks and therefore develops and adheres to policies and procedures designed to ringfence and reduce them.
Interest rate risk: Owing to the cyclical nature of its business, the company requires large amounts of working capital during the first nine months of the year and is therefore highly sensitive to movements in credit interest rates. Interest rate trajectories are influenced by the interplay of geopolitical risks and the evolving dynamics of the country's macroeconomic indicators. Financial statements reflect this. The company generally finances its net working capital requirement (NWC) from its own equity resources when possible but also by borrowing
when necessary. To address its liquidity and interest rate risks, the company closely monitors the maturity profile of its loans and takes proactive measures when needed. These measures include restructuring short-term debt into longer maturities, issuing bonds, discounting receivables to expedite their collection, and diversifying funding sources through alternative financial instruments.
The company's reputation for prudent financial management enables it to secure financing at rates that are consistently below prevailing market rates. Prudent financial management will remain the cornerstone of the company's borrowing policy as it moves forward. We will prioritize maintaining a robust balance sheet that can adequately support our ongoing operations and future growth.
Currency risk: The company's commercial operations expose it to currency risk because its FXdenominated liabilities exceed its FX-denominated assets. To
reduce the impact of exchange rate movements on its costs, the company hedges its currency risk exposure through the use of derivative contracts. The company's risk management policy mandates hedging at least 50% of FX exposure. As of 30 June 2024, the company held no unhedged FX risk.
Credit risk: Most of the orders for the company's goods are received during the first quarter of the year. These orders are generally manufactured, filled, and delivered by the fourth quarter. The company utilizes a variety of payment methods such credit cards, direct debiting, the Vinov digital payment platform, and postdated checks to streamline collections and mitigate credit risks associated with order-fulfillment. Firstquarter promotional campaigns that incentivize credit-card use significantly reduce both collection risks and NWC. The company uses secured-payment systems to cover any remaining dealer receivables and obtains letters of guarantee to protect itself against any otherwise unsecured risks.
| (TRL million) | 31 December 2023 | 30 June 2024 |
|---|---|---|
| Cash and equivalents | 990 | 89 |
| Short-term financial investments | 164 | 292 |
| Trade receivables | 148 | 759 |
| Inventories | 768 | 841 |
| Other current assets | 211 | 160 |
| Current Assets | 2,281 | 2,141 |
| Financial investments | 1 | 1 |
| Tangible assets | 695 | 686 |
| Right of use assets | 168 | 136 |
| Intangible assets | 99 | 82 |
| Other non-current assets | 38 | 49 |
| Non-Current Assets | 1,001 | 954 |
| Total Assets | 3,282 | 3,095 |
| Short term borrowings | 973 | 973 |
| Short term portion of long term borrowings | 326 | 44 |
| Trade payables | 174 | 172 |
| Other current liabilities | 286 | 375 |
| Current Liabilities | 1,759 | 1,564 |
| Long term borrowings | 89 | 102 |
| Long term provisions | 48 | 40 |
| Non-Current Liabilities | 137 | 142 |
| Equity | 1,386 | 1,389 |
| Total Liabilities & Equity | 3,282 | 3,095 |
| (TRL million) | 1 January 30 June 2023 |
1 January 30 June 2024 |
|---|---|---|
| Revenues | 1,353 | 1,281 |
| Cost of sales (-) | -717 | -568 |
| Gross Profit | 636 | 713 |
| Operating expenses (-) | -386 | -438 |
| Other Operating Income /Expense (net) | 28 | -1 |
| Operating Income | 278 | 274 |
| Income /(expense) from investment operations | 5 | -32 |
| Financial income/(expense) | -57 | -122 |
| Monetary gains / (losses) | 86 | 66 |
| Income/(Loss) Before Tax from Continuing Operations | 312 | 186 |
| Tax income/(expense) | -93 | -37 |
| Net Income/(Loss) | 219 | 149 |
| EBITDA (BNRI) (1) | 371 | 395 |
| Profitability Ratios | 1 January 30 June 2023 |
1 January 30 June 2024 |
| Gross Profit Margin | 47% | 56% |
|---|---|---|
| Operating Profit Margin | 21% | 21% |
| Net Profit Margin | 16% | 12% |
| EBITDA (BNRI) (1) Margin | 27% | 31% |
| Market Capitalization as of June 30th (TRL thousand) | 4,163,949 | 11,588,063 |
(1) BNRI: Before non-recurring items
This document contains forward-looking statements concerning future performance and should be regarded as the company's good faith assumptions about the future. Such forward-looking statements reflect management's expectations based on currently available information at the time they are made. Adel's actual results are subject to future events and uncertainties that may significantly affect the company's performance.
The financial information provided below does not include the effects of TAS 29 and is provided for analysis purposes only. These figures are not compliant with the financial report for the period 01.01.2024- 30.06.2024 and have not been subject to independent audit.
| (TRL million) | 1H23 | 1H24 | % |
|---|---|---|---|
| Net Sales | 755 | 1,209 | 60% |
| Gross Profit | 402 | 787 | 96% |
| EBITDA (BNRI) (1) | 257 | 468 | 82% |
| Net Profit/(Loss) before Tax | 199 | 299 | 50% |
| Net Profit/(Loss) | 154 | 262 | 70% |
| Net Working Capital | 481 | 972 | 102 % |
| Net Financial Debt | 355 | 738 | 108% |
| Free Cash Flow | -114 | -483 | a.d. |
| Gross Profit Margin | 53% | 65% | |
| EBITDA (BNRI) (1) Margin | 34% | 39% | |
| Net Profit Margin | 20% | 22% |
* All figures and tables in this report include IFRS16 impact.
(1) BNRI: Before non-recurring items
| Yasemen Güven Çayırezmez CFO |
Pelin İslamoğlu Reporting and Investor Relations Manager |
Fatih Çakıcı Accounting Manager |
|
|---|---|---|---|
| Investor Relations Unit Manager |
Investor Relations Unit Officer |
Investor Relations Unit Officer |
|
| E | [email protected] | [email protected] | [email protected] |
| T | +90 850 677 70 00 | +90 850 677 70 00 | +90 850 677 70 00 |
| F | +90 850 202 72 10 | +90 850 202 72 10 | +90 850 202 72 10 |
www.adel.com.tr
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