Quarterly Report • Aug 6, 2024
Quarterly Report
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Ford Otomotiv Sanayi A. Ş. 1 January – 30 June 2024 Interim Report
According to Article 10 of our Articles of Incorporation, all affairs and management of Ford Otosan shall be conducted by the Board of Directors composed of at least 8 members, the total number of the members shall be even, and shall be elected for a period not exceeding three years in accordance with the provisions of the Turkish Commercial Code and regulations of the Capital Markets Board. Save for the mandatory provisions of the Corporate Governance Principles of the Capital Markets Board with respect to the independent members of the Board of Directors, the General Assembly may replace the members of the Board of Directors at any time as deemed necessary. Two of the elected board members shall meet the qualification of independence stipulated in the Corporate Governance Principles regulations of Capital Markets Board.
In our Ordinary General Assembly Meeting held on April 3rd, 2024, the number of members of our Board of Directors was defined as 12, including 2 Independent Members. Our Board of Directors that would be serving until Ordinary General Assembly Meeting to audit 2024 accounts are as below:
| M. Rahmi Koç | Honorary Chairman |
|---|---|
| Y. Ali Koç | Chairman |
| James Kieran Vincent Cahill | Vice Chairman |
| Johan Egbert Schep | Member |
| William R. Periam | Member |
| Levent Çakıroğlu | Member |
| Haydar Yenigün | Member |
| John Davis | Member |
| Fatma Füsun Akkal Bozok | Independent Member |
| Prof. Dr. Katja Windt | Independent Member |
| Güven Özyurt | Member – General Manager |
| Josephine M. Payne | Member – General Manager |
In accordance with Capital Markets Board's Communique II-17.1. on Corporate Governance;
Fatma Füsun Akkal Bozok and Prof. Dr. Katja Windt have been elected to the Audit Committee membership. Fatma Füsun Akkal Bozok has been elected as the chairman, and Haydar Yenigün, William Richard Periam, Prof. Dr. Katja Windt and Saibe Gül Ertuğ as the members of the Corporate Governance Committee which also fulfills the duties assigned to the Nominating Committee. Fatma Füsun Akkal Bozok has been elected as the chairman, and Haydar Yenigün and William Richard Periam as the members of the Early Determination and Management of Risk Committee. Fatma Füsun Akkal Bozok has been elected as the chairman, and Haydar Yenigün and James Kieran Vincent Cahill as the members of the Remuneration Committee.
Ford Otosan's shareholder structure as of June 30th, 2024 is as follows:
| Company Name | Value of Share (TL) |
Number of Share |
Share Capital (%) |
|---|---|---|---|
| Koç Holding A.Ş. | 135,631,304 | 13,563,130,447 | 38.65 |
| Vehbi Koç Foundation | 2,880,501 | 288,050,137 | 0.82 |
| Koç Holding Retirement and Support Fund Foundation | 3,259,202 | 325,920,231 | 0.93 |
| (1) Temel Ticaret A.Ş. |
2,355,885 | 235,588,500 | 0.67 |
| Koç Group Companies | 144,126,892 | 14,412,689,315 | 41.07 |
| Ford Motor Company (2) | 143,997,037 | 14,399,703,676 | 41.04 |
| Publicly Held | 62,786,070 | 6,278,607,009 | 17.89 |
| Total Nominal Capital (TL) | 350,910,000 | 35,091,000,000 | 100 |
(1) At the Extraordinary General Assembly meeting dated September 29, 2022, Temel Ticaret ve Yatırım A.Ş. approved the partial demerger and transferred all of its shares in Koç Holding A.Ş. to Family Danışmanlık Gayrimenkul ve Ticaret A.Ş which 100% owned by Temel Temel Ticaret ve Yatırım A.Ş.
(2) Ford Deutschland Holding GmbH: 100% owned by Ford Motor Company.
In the first 6 months of 2024, Turkish automotive market witnessed a 3% growth with total sales reaching 598,016. In this period, despite last year's strong basis, PC and MCV sales experienced an increase of 7% and 29%, respectively, while the LCV and Heavy Trucks segments shrank by 28% and 9%. This performance can be attributed to i) the increase in the base price for the SCT-exemption applied to disabled individuals, ii) pull-forward domestic demand in the pre-election period, iii) the General Safety Regulation (GSR) compelled market to adopt competitive pricing strategies, iv) the increase in availability of MCVs, which had been limited due to the dominance of PCs in the market in the previous year, v) lower LCV availability in the market.
Turkish automotive industry sales were as follows in 1H24.
| 1H24 | 1H24 | Change, % | |
|---|---|---|---|
| Passenger Car | 462,955 | 431,372 | 7% |
| Light Commercial Vehicle | 59,575 | 82,976 | -28% |
| Medium Commercial Vehicle | 55,451 | 43,021 | 29% |
| Heavy Commercial Vehicle | 20,035 | 22,305 | -10% |
| Total (3) | 598,016 | 579,674 | 3% |
(3) Covers all passenger and commercial vehicles excluding buses and midibuses.
Source: Automotive Distributors' Association (ADA) and TAİD
While PC industry share increased 77.4% (1H23: 74.4%), LCV industry share decreased to 10.0% (1H23: 14.3%).
| The share of PCs in the total industry | ||||||||
|---|---|---|---|---|---|---|---|---|
| 1H24 1H23 2023 2022 2021 2020 2019 |
||||||||
| 77% 74% 76% 72% 73% 77% 79% |
Source: ADA
In the first half of the year, share of import vehicles in both PC and LCV increased YoY, and reached to 70% and 68% respectively. In total, the share of import vehicles was 69%.
| Share of import vehicles | PC | LCV | Total |
|---|---|---|---|
| 1H24 | 70% | 68% | 69% |
| 1H23 | 66% | 49% | 62% |
| 2023 | 68% | 54% | 65% |
Source: ADA
In 1H24, Ford Otosan maintained its 3rd rank with a market share of 8.2% (9.7%)(4) in total industry. Ford Otosan's retail sales decreased by 13% to 49,217 (56,457) units compared to the same period of last year. In the passenger car segment, while retaining our profitability focus our market share reached to 3.3% (3.2%). We maintained our undisputed leadership in the commercial vehicle segment with 25.6% (29.3%) market share. Our market share was 18.1% (29.1%) in light commercial vehicles, 34.1% (29.7%) in medium commercial vehicles and 24.3% (29.2%) in heavy commercial vehicles.
(4) Data inside the paranthesis represent 1H23 numbers throughout the report.
In 1H24, our total production volumes increased by 1% to 313,619 (310,114). In the second quarter of the year, there were production suspensions due to the Ramadan and Eid al-Adha Holidays in Turkey and the Easter Holiday in Romania.
The capacity utilization rate was 81% in Gölcük Plant, 82% in Yeniköy Plant, 59% in Eskişehir Plant and 90% in Craiova Plant. The total capacity utilization rate was realized as 84% (94%). Our production volumes by model were as follows.
| Plant | Model | 1H24 | 1H23 | Change, % |
|---|---|---|---|---|
| Gölcük | ||||
| Transit | 83,625 | 82,172 | 2% | |
| Custom | - | 75,043 | N/A | |
| Yeniköy | ||||
| Courier | - | 45,623 | N/A | |
| New Custom | 100,757 | - | N/A | |
| Eskişehir | ||||
| Ford Trucks | 6,668 | 10,348 | -36% | |
| Craiova | ||||
| Puma | 82,204 | 96,928 | -15% | |
| New Courier | 40,365 | - | N/A | |
| Total | 313,619 | 310,114 | 1% | |
According to the European Automobile Manufacturers' Association (ACEA) (www.acea.be), while the passenger car market grew by 4.7%, the light and medium commercial vehicle market grew by 12.9% in 1H24 YoY in Europe, our largest export market. The growth in the heavy commercial vehicle market was 2.5%. As a result, despite the strong base effect of the previous year, the commercial vehicle market grew by 11%.
| 1H24 | 1H23 | % | |
|---|---|---|---|
| PC (5) | 6,690,606 | 6,388,608 | 4.7% |
| 1H24 | 1H23 | % | ||||||
|---|---|---|---|---|---|---|---|---|
| CV (5) | 1,228,386 | 1,106,717 | 11.0% | |||||
| 1H24 | 1H23 | % | 1H24 | 1H23 | % | |||
| LCV & MCV (5) | 1,018,619 | 901,981 | 12.9% | HCV (5) | 209,767 | 204,736 | 2.5% |
(5) Including 26 markets in Europe and UK.
In the first half, Ford Otosan's export figures increased by 3% YoY and reached to 259,824 (253,337) units. Export revenues showed a slight increase of 1% YoY, reaching TL 187.2 (186.1) billion, due to a 3% YoY growth in volume.
Domestic wholesale volumes were down 17% to 49,559 (59,456) units in 1H24. Due to the decrease in the sales volume and lower pricing environment in the market, our domestic sales revenues declined by 19% YoY to TL 54.2 (67.1) billion.
Total sales volumes were down 1% to 309,383 (312,793). Total Revenues decreased by 5% to 241.4 (253.2) billion TL. The share of exports in sales revenues was 78% (1H23: 73%).
Capital expenditures were TL 13.3 (12.4) billion including capitalized R&D spending.
TL 4.2 (2.4) billion pre-capitalization R&D expenditure was made for various product development projects. R&D projects are carried out in line with product programs and the number of R&D engineers is 2,356 (December 31, 2023: 2,298).
As of June 30th , 2024, Ford Otosan had a total of 24,315 employees: 5,159 salaried and 19,156 hourly. (December 31, 2023: total 23,701 employees: 5,338 salaried and 18,363 hourly). Ford Otosan continued to have the highest employment rate in the Turkish automotive industry. Our hourly employees are part of the Collective Bargaining Agreement signed on January 18, 2024 between Turkish Metal Union and Turkish Employers' Association of Metal Industries (MESS) and valid in between 1st September 2023- 31st August 2025.
In 1H24, Ford Otosan experienced a dilution in profitability due to
Gross Profit stood at TL 24.6 billion, exhibiting a 26% YoY decline primarily due to 1) the 17% decrease in domestic volumes combined with competitive pricing environment in 1H24 and 2) the impact of inflation accounting on inventories and its subsequent influence on the cost of goods sold. Net Other Income also witnessed a YoY decline of 98%, amounting to TL 96 million (vs TL 6.0 billion in 1H23) (impact of sharp TL depreciation in 1H23 on operations vs strong TL in 1H24), leading to a 51% YoY decrease in Operating Profit to TL 13.7 billion. In this period EBITDA and EBITDA excluding the currency impact were TL 19.2 billion and TL 19.1 billion, respectively, experiencing declines of 41% and 29%.
During the first half of 2024, a monetary gain of TL 10.6 billion (1H23: TL 6.8 billion) was included into the Profit Before Tax, resulting in a total of TL 15.5 billion, down 37% YoY. On the other hand, TL 5.3 billion Tax expense (one-off impact of earthquake tax payment in 1H23) turned to TL 166 million Tax income and as a result the Net Income realized as TL 15.7 billion, indicating a YoY drop of 19%.
Margins: Gross 10.2% (-3.0 pps YoY); EBITDA 8.0% (-4.9 pps YoY); EBITDA excluding other income 7.9% (-2.7 pps YoY); Operating 5.7% (-5.4 pps YoY); PBT 6.4% (-3.4 pps YoY) and Net 6.5% (-1.2 pps YoY).
€521 million and TL 1.3 billion loan repayments were made in 1H24 where €830 million and TL 3 billion were borrowed in new loans. Total debt level was TL 84 billion as of June-end, up from TL 80 billion at the beginning of the year. Cash balance as at the end of the period is TL 17,855 million (December 31, 2023: TL 18,990 million).
Ford Otosan continues to follow financial risks very closely and maintains prudent policies. The main policies regarding various risks are summarized in the Note 2 of the financial statements.
| Balance Sheet, Million TL | 30.06.2024 | 31.12.2023 | YoY Δ |
|---|---|---|---|
| Current Assets | 136,599 | 128,378 | 6% |
| Current Liabilities | 115,932 | 117,418 | -1% |
| Property, Plant and Equipment - Net | 76,155 | 71,345 | 7% |
| Total Assets | 278,439 | 270,684 | 3% |
| Total Liabilities | 191,106 | 179,618 | 6% |
| Shareholders' Equity | 87,333 | 91,066 | -4% |
| Summary Income Statement, Million TL | 30.06.2024 | 30.06.2023 | YoY Δ |
| Total Revenues | 241,404 | 253,194 | -5% |
| Export | 187,215 | 186,066 | 1% |
| Domestic | 54,189 | 67,128 | -19% |
| Gross Profit | 24,639 | 33,339 | -26% |
| Operating Profit | 13,669 | 28,160 | -51% |
| Financial Income / (Expense) | -9,771 | -10,201 | -4% |
| Profit Before Tax | 15,537 | 24,738 | -37% |
| Net Income | 15,703 | 19,397 | -19% |
| Other Financial Data, Million TL | 30.06.2024 | 30.06.2023 | YoY Δ |
| Depreciation & Amortization(6) | 5,554 | 4,608 | 21% |
| EBITDA(6) | 19,222 | 32,768 | -41% |
| (6) EBITDA (excluding other income/expense) |
19,127 | 26,802 | -29% |
| Capex | -13,251 | -12,367 | 7% |
| Cash Flow Statement, Million TL | 30.06.2024 | 30.06.2023 | YoY Δ |
| Beginning Balance of Cash & Equivalents | 18,952 | 20,778 | -9% |
| Net Cash from Operating Activities | 3,725 | 37,197 | -90% |
| Net Cash Used in Investing Activities | -13,224 | -12,300 | 8% |
| Net Cash Used in Financing Activities | 13,037 | 2,628 | 396% |
| Monetary Gain/(Loss) on Cash & Equivalents | -4,683 | -4,199 | 12% |
| End of Period Balance of Cash & Equivalents | 17,833 | 44,426 | -60% |
| Financial Ratios | 30.06.2024 | 31.12.2023 |
|---|---|---|
| Current ratio | 1.18 | 1.09 |
| Liquidity ratio | 0.68 | 0.69 |
| Net Debt / EBITDA(7) | 1.92 | 1.19 |
| Current Assets / Total Assets | 0.49 | 0.47 |
| Current Liabilities / Total Liabilities | 0.61 | 0.65 |
| Total Liabilities / Total Liabilities and Equity | 0.69 | 0.66 |
| Return on Equity (7) | 65.8% | 67.2% |
| Margins | 30.06.2024 | 30.06.2023 |
| Gross Margin | 10.2% | 13.2% |
| EBITDA Margin | 8.0% | 12.9% |
| EBITDA Margin (excluding other income) | 7.9% | 10.6% |
| Operating Margin | 5.7% | 11.1% |
| PBT Margin | 6.4% | 9.8% |
| Net Margin | 6.5% | 7.7% |
(6) Straightline expenses related with embedded lease in Türkiye and Romania operations are included.
(7) The EBITDA and Return on Equity figures are based on a rolling 4-quarter basis.
The Board of Directors resolved that in accordance with Capital Markets Board's Communique II-17.1. on Corporate Governance; Fatma Füsun Akkal Bozok and Katja Windt have been elected to the Audit Committee membership. Fatma Füsun Akkal Bozok has been elected as the Chairperson, and Haydar Yenigün, William Richard Periam, Katja Windt and Saibe Gül Ertuğ as the members of the Corporate Governance Committee which also fulfills the duties assigned to the Nominating Committee. Fatma Füsun Akkal Bozok has been elected as the chairperson, and Haydar Yenigün and William Richard Periam as the members of the Early Determination and Management of Risk Committee. Fatma Füsun Akkal Bozok has been elected as the chairperson, and Haydar Yenigün and James Kieran Vincent Cahill as the members of the Remuneration Committee.
BNP Paribas, Citigroup Global Markets Limited, HSBC Bank plc and Société Générale have been mandated for selling our Company's bonds to qualified investors outside Turkey within the format of "Rule 144A" and/or "Regulation S". In this context, it was arranged a series of investor meetings in the UK and the USA with the participation of our Company's Senior Executives from April 15th, 2024.
| Shutdown Date Production Commencing Date | ||
|---|---|---|
| Gölcük Plant | 28 July 2024 | 12 August 2024 |
| Yeniköy Plant | 28 July 2024 | 12 August 2024 |
| Eskişehir Plant | 28 July 2024 | 15 August 2024 |
| Craiova Plant | 2 August 2024 | 20 August 2024 |
Expectations for the total industry volume for 2024 were revised upwards due to the strong demand expected in the market throughout the year. Other items have not been changed.
| 2024 Guidance |
|||
|---|---|---|---|
| 2023A | 2024 Old Guidance | 2024 New Guidance | |
| Total Industry Volume | 1.278 K | 800 K- 900 K | 1,000 K- 1,100 K |
| Ford Otosan: | |||
| Retail Sales Volume | 114 k | 100 k – 110 k | 100 k – 110 k |
| Export Volume | 492 k | 560 k – 610 k | 560 k – 610 k |
| Turkey | 312 k | 350 k – 380 k | 350 k – 380 k |
| Romania | 180 k | 210 k – 230 k | 210 k – 230 k |
| Wholesale Volume | 610 k | 660 k – 720 k | 660 k – 720 k |
| Total Production Volume | 590 k | 650 k – 700 k | 650 k – 700 k |
| Turkey | 399 k | 400 k – 430 k | 400 k – 430 k |
| Romania | 191 k | 250 k – 270 k | 250 k – 270 k |
| Capex (fixed assets) | € 900 mn | € 900 – 1,000 mn | € 900 – 1,000 mn |
| General Investments | € 96 mn | € 170 - 190 mn | € 170 - 190 mn |
| Product Related Investments | € 804 mn | € 730 - 810 mn | € 730 - 810 mn |
FORD OTOMOTİV SANAYİ A.Ş.
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