Earnings Release • Oct 30, 2024
Earnings Release
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As required by the Capital Markets Board, our 9M 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 September 2024.
| (TRL million) | 9M23 | 9M24 | % |
|---|---|---|---|
| Net Sales | 2,965 | 2,341 | -21% |
| Gross Profit | 1,433 | 1,203 | -16% |
| EBITDA (BNRI)(1) | 901 | 620 | -31% |
| Net Profit/(Loss) before Tax | 763 | 303 | -60% |
| Net Profit/(Loss) | 448 | 201 | -55% |
| Net Working Capital | 1,371 | 1,719 | 25% |
| Net Financial Debt | 826 | 1,174 | 42% |
| Free Cash Flow | -467 | -928 | 99% |
| Gross Profit Margin | 48% | 51% | |
| EBITDA (BNRI) Margin(1) | 30% | 26% | |
| Net Profit Margin | 15% | 9% |
* All figures and tables in this report include IFRS16 impact.
(1) BNRI: Before non-recurring items
Net profit decreased to TRL 201 million in the first nine months of 2024, compared to TRL 448 million in the same period last year. This decline was driven by factors impacting both gross profit and EBITDA margin, as well as by a substantial increase in financing costs due to increasingly higher interest rates. Excluding the effects of TAS 29, net profit weighed in at TRL 337 million.
9M 2024 gross profit was down by 16% compared to 9M 2023 and amounted to TRL 1,203 million. The company's gross profit margin also improved significantly in 2024 9M, reaching 51%, or 300 basis points above its 2024 9M figure. When we exclude the effects of TMS 29, our gross profit shows a remarkable 1.3-fold increase, reaching TRL 1,261 million. Similarly, our gross profit margin shows a substantial improvement, rising by 300 basis points to 60%.
Turkey's inflationary environment and the associated rise in costs and operating expenses impacted BNRI EBITDA, which declined by 31% year-on-year to TRL 620 million. The BNRI EBITDA margin also decreased, falling by 400 basis points to 26%. Excluding the effects of TMS 29, BNRI EBITDA increased by 12% to TRL 691 million while the BNRI EBITDA margin decreased by 500 basis points to 33%.
As of end-September 2024, Adel's net working capital requirement was TRL 1,719 million. Through effective balance sheet management, the company managed to keep the yearon-year increase in NWC to 25%, well below every posted rate of inflation. That said, Adel's net working capital/ net sales ratio, which was 46% at end-September 2023, weighed in at 73% as of end- September 2024.
Net Financial Debt/EBITDA (BNRI)*
The company's as of end- September 2024 net financial debt was up by 42% year-on-year and weighed in at TL 1,174 million as of end- September.
Adel's Net Debt/EBITDA (BNRI) ratio, which was 0.4% at end-2023, increased to 2.9 as of end- September 2024.
-928 -467 Free Cash Flow (TRL million) Sept. 2023 Sept. 2024
As of end- September 2024, Adel showed a negative free cashflow of TRL 928 million. This is TRL 461 million less than what it was at end-September 2023.
Financial risk: 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 September 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 September 2024 |
|---|---|---|
| Cash and equivalents | 1,079 | 330 |
| Short-term financial investments | 178 | 40 |
| Trade receivables | 161 | 1,317 |
| Inventories | 836 | 714 |
| Other current assets | 230 | 67 |
| Current Assets | 2,484 | 2,468 |
| Financial investments | 1 | 1 |
| Other receivables | 1 | - |
| Tangible assets | 757 | 743 |
| Right of use assets | 183 | 136 |
| Intangible assets | 107 | 81 |
| Other non-current assets | 42 | 81 |
| Non-Current Assets | 1,091 | 1,042 |
| Total Assets | 3,575 | 3,510 |
| 985 | ||
| Short term borrowings | 1,060 355 |
138 |
| Short term portion of long term borrowings | ||
| Trade payables | 190 | 202 |
| Other current liabilities | 312 | 177 |
| Current Liabilities | 1,917 | 1,502 |
| Long term borrowings | 97 | 421 |
| Long term provisions | 52 | 38 |
| Non-Current Liabilities | 149 | 459 |
| Equity | 1,509 | 1,549 |
| Total Liabilities & Equity | 3,575 | 3,510 |
| (TRL million) | 1 January- 30 September 2023 |
1 January- 30 September 2024 |
|---|---|---|
| Revenues | 2,965 | 2,341 |
| Cost of sales (-) | -1,532 | -1,138 |
| Gross Profit | 1,433 | 1,203 |
| Operating expenses (-) | -677 | -735 |
| Other operating income /expense (net) | 21 | -8 |
| Operating Income | 777 | 460 |
| Income /(expense) from investment operations | 6 | -18 |
| Profit/loss shares from investments accounted through equity method |
-1 | - |
| Financial income/(expense) | -131 | -251 |
| Monetary gains / (losses) | 112 | 112 |
| Income/(Loss) Before Tax from Continuing Operations | 763 | 303 |
| Tax income/(expense) | -315 | -102 |
| Net Income/(Loss) | 448 | 201 |
| EBITDA (BNRI) (1) | 901 | 620 |
| Profitability Ratios | 1 January- 30 September 2023 |
1 January- 30 September 2024 |
|---|---|---|
| Gross Profit Margin | 48% | 51% |
| Operating Profit Margin | 26% | 20% |
| Net Profit Margin | 15% | 9% |
| EBITDA (BNRI) Margin (1) | 30% | 26% |
| Market Capitalization as of September 30th | 12,294 | 9,849 |
(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- 30.09.2024 and have not been subject to independent audit.
| (TRL million) | 9M23 | 9M24 | % |
|---|---|---|---|
| Net Sales | 1,634 | 2,117 | 30% |
| Gross Profit | 934 | 1,261 | 35% |
| EBITDA (BNRI)(1) | 617 | 691 | 12% |
| Net Profit/(Loss) before Tax | 535 | 419 | -22% |
| Net Profit/(Loss) | 410 | 337 | -18% |
| Net Working Capital | 870 | 1,458 | 68% |
| Net Financial Debt | 553 | 1,174 | 112% |
| Free Cash Flow | -278 | -776 | 180% |
| Gross Profit Margin | 57% | 60% | |
| EBITDA (BNRI) Margin(1) | 38% | 33% | |
| Net Profit Margin | 25% | 16% |
* All figures and tables in this report include IFRS16 impact.
(1) BNRI: Before non-recurring items
| Yasemen Güven Çayırezmez CFO |
Pelin İslamoğlu Kayol 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 | 0850 677 70 00 | 0850 677 70 00 | 0850 677 70 00 |
| F | 0850 202 72 10 | 0850 202 72 10 | 0850 202 72 10 |
www.adel.com.tr
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