ARÇELİK A.Ş. — Annual Report 2017

Feb 6, 2017

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Arçelik

2016 12-Month Financial Results

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2016 Q4 Key Developments

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• Strong sales in domestic MDA market both in sell-in and sell-out

• Slowing growth in European MDA market at retail level

• First signs of growth in S. African market in comparison with the same period of 2015

• Negative impact of increasing steel and panel prices on gross and EBITDA margin

• Finalization of the acquisition process of Dawlance, the leading appliance company in Pakistan

• Decreasing cash and increasing leverage following the acquisition

• Spinning off Turkish operations under the roof of Arçelik Marketing Company (December 30)

• Hitting the target of working capital over sales ratio

• Depreciation of TRY

• Strenghtening USD in global markets

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2016 Q4 Sales Performance

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Key factors impacting revenues

Turkish Market POS Cash Register

Strong sales in domestic MDA market both in sell-in (+11% in Q4) and sell-out (+7% in Q4)

Negative effect of the deadline extension for merchants with turnover up to 150 K TL until the end of 2017 (Sales value down 30% in Q4)

International Growth FX Impact

Slowing end-consumer demand in West Europe, around 20% unit market shrinkage in December in the UK

Depreciating TRY against EUR and GBP

Consolidation of Dawlance

Despite the fact that Q4 is not a strong quarter (as majority of sales is in refrigeration), consolidation of Dawlance has positively affected quarter sales by 2%

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2016 Q4 Margins

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Key factors impacting margins

Raw Material Costs

FX Impact

POS Cash Register

Sales & Marketing Expenses

Project Expenses

Increasing sheet metal and large size panel prices

• Negative impact of USD and EUR based raw material prices, following TRY devaluation

• Devaluation of EUR and GBP against USD

• • Devaluation in EGP

Service fee of almost 400.000 units of POS cash registers on the field, contributing to the topline and more to the profit

Though still higher compared to 2016 Q3, decreasing share of sales & marketing expenses compared to the same period of 2015

Costs related with getting the consent of bond-holders within the process of partial spin-off of Turkish operations, and with Dawlance acquisition (TRY 22 million)

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2016 12-Month Market Performance - Turkey

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Market
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• Growth in MDA and air conditioner markets

  • Despite flat sales in Q3, a yearly unit growth of %5,4 in MDA market

  • Thanks to the high performance in first half, a growing A/C market around 9%

• Shrinking TV market (around 7%), where chains and import brands selling through these chains lost power.

• MDA and A/C figures are based on BESD data.

• The data for TV is based on retail panel.

• Above market-average growth in all major product groups (MDA, TV, A/C)

  • Outperforming unit growth (~%6) in MDA market

Arçelik A.Ş.

• Highest unit market share gain in TV market (Unit market share above 28%)

• Above 20% increase in unit sales for A/C

• POS cash register sales increasing 6% in unit terms, compared to 2015

• Based on company sell-in unit sales.

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2016 12-Month Market Performance - International

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Market
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• (West Europe: 3,2% – East Europe: %4,8)

• UK has recorded the highest unit growth in West Europe despite the slowdown in Q4

• Around 25% unit growth in Romania, supported by the VAT incentive

• Positive growth in Russia and Ukraine, which were negative in 2015

• A decreasing S. African market (down 5%) in 2016, following the 2% decline in 2015

• Arçelik Group continuing to strenghten its position in international markets

• Beko continues to lead the European MDA free-standing segment

Arçelik A.Ş.

• Beko is among the the Top 3 Winners in terms of market share gain in built-in segment

• Around 10% increase in built-in sales, Beko becomes the leader in B/I in the UK

• Around 50% increase in Grundig MDA sales, targeting the premium segment

• Undisputed market leading positions with local brands such as Defy and Arctic

• Thai refrigerator plant, which became operational in 2016 Q1, reached a production

volume around 100.000 units

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2016 12-Month Market Figures

Beko Unit Market Share in Europe (%) (MDA 6)

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10 %
9 Total Free-standing Built-in
8
7
6
5
4
3
2
1
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
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Turkish MDA6 Total Market – Monthly Sell-in Figures (MDA 6)

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mn units
0,9 25%
0,8 20% 20%
0,7 17% 15%
15%
0,6
11%
0,5 9% 10%
7%
0,4 5% 5%
3%
0,3
0% 0% 0%
0,2 -2%
-5%
0,1 -7%
0,0 -10%
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
14 15 16 YoY
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Market Unit Growth in Europe (MDA 6)

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January-December 2016
W. Europe
France
Germany
Italy
Spain
UK
E. Europe
Poland
Romania
Russia
Ukraine
S. Africa
-10% -5% 0% 5% 10% 15% 20% 25%
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Turkish Market by Product Group (MDA6)

000 Units	**12M 2016 **	**12M 2015 **	Change
Refrigerator	2.040	1.976	3%
Freezer	648	571	14%
WashingM.	2.122	2.026	5%
Dryer	93	82	13%
Dishwasher	1.573	1.483	6%
Cooker	995	951	5%
Total	7.470	7.090	5%

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Trends in Parity and Raw Material Index

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EUR/USD Development Raw material Market Price Index
105
1,6
100
1,4
95
1,2
90
1,0
85
0,8
80
0,6
75
0,4
70
0,2
65
0,0
60
Annual Average EUR/USD
Annual average RM price index (market)
Raw material price index for appliances category
8
Jan-13 Mar-13 May-13 Jul-13 Sep-13 Nov-13 Jan-14 Mar-14 May-14 Jul-14 Sep-14 Nov-14 Jan-15 Mar-15 May-15 Jul-15 Sep-15 Nov-15 Jan-16 Mar-16 May-16 Jul-16 Sep-16 Nov-16
2013 Q1 2013 Q2 2013 Q3 2013 Q4 2014 Q1 2014 Q2 2014 Q3 2014 Q4 2015 Q1 2015 Q2 2015 Q3 2015 Q4 2016 Q1 2016 Q2 2016 Q3 2016 Q4
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2016 Q4 Other Developments:

• All closing conditions has been satisfied regarding the acquisition of production and sales companies operating in Pakistan under Dawlance brand and the share transfer has been completed on November 2, 2016.

• Following regulatory approvals and upon final General Assembly approval, a new company named "Arçelik Pazarlama A.Ş” has been established to manage domestic operations with lean and focused management strategies in line with Group’s international operations.

• JV Agreement with LG was renewed to be effective until end-2023. In addition to existing product portfolio, Arcelik-LG will produce commercial air conditioning products.

• At Turkish Innovation Week which was held by the Turkish Exporters Assembly in December 2016 , Arçelik A.Ş. was granted "R&D Leadership" award.

• Arçelik has been awarded the title of most popular brand in Turkey in the white goods category based on the results of the research "Turkey's Lovemarks".

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Sales Performance

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Sales by Region

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				Δ%	Δ%			Δ%
TL mn	2016 Q4	2015 Q4	2016 Q3	YoY	QoQ	2016	2015	YoY
Total Revenue	4.526	4.067	4.083	11	11	16.096	14.166	14
Turkey	1.600	1.533	1.669	4	-4	6.449	5.724	13
International	2.926	2.534	2.414	15	21	9.647	8.442	14

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40,4% 40,1%
32,8%
31,6%
12,5% 13,0%
7,4%
6,9%
3,3% 5,1%
3,3% 3,5%
Turkey Western Europe CIS&Eastern Africa Middle East Other
Europe
2015 12M 2016 12M
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37,7%
35,4% 35,0%
32,8%
13,9%
13,2%
7,3% 8,2% 6,6%
3,0% 3,3% 3,8%
Turkey Western Europe CIS&Eastern Africa Middle East Other
Europe
2015 Q4 2016 Q4
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Sales Bridge

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- 2.000 4.000 6.000 8.000 10.000 12.000 14.000 16.000 18.000	5.724 16.007 6.449 8.442 - 9.647 725 551 566 89 2015 12M TR - Organic INT - Organic INT - FX Impact Acquisition 2016 12M Impact on Rev International Turkey TL mn

2016 12M	Organic	Currency Effect	Acquisition	TOTAL
Domestic Growth	12,7%	-	-	12,7%
International Growth	6,5%	6,7%	1,1%	14,3%
Total Growth	9,0%	4,0%	0,6%	13,6%

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Financial Performance

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Income Statement

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				Δ%	Δ%			Δ%
TL mn	2016 Q4	2015 Q4	2016 Q3	YoY	QoQ	2016	2015	YoY
Revenue	4.526	4.067	4.083	11	11	16.096	14.166	14
Gross Profit	1.432	1.322	1.361	8	5	5.340	4.536	18
margin	31,6	32,5	33,3			33,2	32,0
EBIT *	301	371	375	-19	-20	1.331	1.157	15
margin	6,7	9,1	9,2			8,3	8,2
Profit Before Tax	108	243	283	-55	-62	1.202	785	53
margin	2,4	6,0	6,9			7,5	5,5
Net Income**	230	212	264	9	-13	1.304	893	46
margin	5,1	5,2	6,5			8,1	6,3
EBITDA*	423	465	484	-9	-13	1.769	1.527	16
margin	9,3	11,4	11,9			11,0	10,8

• EBIT was calculated by deducting the impact of foreign exchange gains and losses arising from trade receivables and payables, credit finance income and charges and cash discount expense and adding income and expenses from sale of property plant and equipment.

** Net income before minority

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Revenue and Gross Profit by Segment

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				Δ%	Δ%			Δ%
TL mn	2016 Q4	2015 Q4	2016 Q3	YoY	QoQ	2016	2015	YoY
Consolidated
Revenue	4.526	4.067	4.083	11	11	16.096	14.166	14
Gross Profit	1.432	1.322	1.361	8	5	5.340	4.536	18
Gross Profit %	31,6	32,5	33,3			33,2	32,0
White Goods
Revenue	3.368	2.915	3.130	16	8	11.707	10.299	14
Gross Profit	1.099	1.024	1.079	7	2	4.138	3.578	16
Gross Profit %	32,6	35,1	34,5			35,3	34,7
Consumer Electronics
Revenue	634	649	528	-2	20	2.266	1.966	15
Gross Profit	191	157	151	22	26	633	433	46
Gross Profit %	30,2	24,2	28,7			27,9	22,0
Other
Revenue	525	503	426	4	23	2.123	1.901	12
Gross Profit	141	142	130	0	8	568	524	8
Gross Profit %	27,0	28,2	30,6			26,8	27,6

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Balance Sheet

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TL mn	31.12.2016	31.12.2015		31.12.2016	31.12.2015
Current Assets	10.986	9.406	Current Liabilities	6.606	5.236
Cash and Cash Equivalents	2.442	2.168	ST Bank Borrowings	2.251	2.185
Trade Receivables	5.295	4.791	Trade Payables	3.086	2.090
Inventories	2.762	2.140	Provisions	412	335
Other	487	308	Other	857	627
Non-current Assets	5.924	4.332	Non-current Liabilities	4.299	3.826
Property, Plant and Equipment	2.750	2.056	LT Bank Borrowings	3.407	3.269
Intangible Assets	2.304	1.171	Other	892	557
Financial Investments	239	749
Other	630	357	Equity	6.005	4.676
Total Assets	16.909	13.739	Total Liabilities	16.909	13.739

	31.12.2016	31.12.2015	31.12.2014	31.12.2013
Net Financial Debt/Equity	0,54	0,70	0,72	0,72
Total Liabilities/Total Assets	0,64	0,66	0,65	0,64

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Working Capital

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TL mn	FX Basis	TL Basis	31.12.2016		FX Basis	TL Basis	Total
ST Trade Rec.	2.381	2.914	5.295	ST Trade Payables	1.402	1.684	3.086
Other Receivables	48	58	106	Other Payables	313	44	358
Inventory	1.649	1.113	2.762	Working Capital	2.363	2.357	4.719

TL mn	FX Basis	TL Basis	31.12.2015		FX Basis	TL Basis	Total
ST Trade Rec.	2.038	2.753	4.791	ST Trade Payables	798	1.292	2.090
Other Receivables	29	33	62	Other Payables	248	44	292
Inventory	1.035	1.105	2.140	Working Capital	2.057	2.554	4.611

Working Capital / Sales

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41,8%
33,3% 38,9% 39,2% 39,1% 38,7% 36,2% 37,2% 39,3%
32,5%
30,9%
30,3% 30,8% 29,3%
Dec-12 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16
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Debt Profile

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Debt profile (as of Dec 31 2016)

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4.000 TL mn
3.000
2.000
1.000
1.317 1.174 1.741 1.267 1.621 2.168 2.491 2.467 2.722 2.442
905
0 416
-839
-1.000 -1.915 -1.924 -1.218 -1.629 -2.144 -1.673 -1.803 -2.185 -2.508 -2.078 -2.370 -2.251
-2.000 -188
-1.528
-3.000 -1.577 -1.859 -2.581 -2.965
-4.000 -3.269 -3.084 -3.078 -2.843 -3.407
-5.000
-6.000
-7.000
2008 2009 2010 2011 2012 2013 2014 2015 16 Q1 16 Q2 16 Q3 16 Q4
Cash and cash equivalent Short term debt Long term debt
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3.500 3.076 2.988 [3.146] [3.286] 3.100 3.216 6
3.000 2.689 5
2.491
2.500 2.263
1.983 4
2.000
3
1.500 1.207
1.000 5,1 740 2,3 2,2 2,6 2,3 2,2 2
1,8 1,8
500 1,3 1,5 1,4 1
0,9
0 0
2008 2009 2010 2011 2012 2013 2014 2015 16Q1 16Q2 16Q3 16Q4
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Net Debt (TL mn) Net Debt/EBITDA

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	Effective	mn Original	TL mn
	Interest Rate p.a. (%)	**Currency **	Equivalent
TRY	10,7%	1.540	1.540
EUR ZAR	1,7% 9,9%	151 750	559 193
RUB CNY GBP USD	8,9% 4,4% 1,0% 1,4%	475 110 5 0	27 55 23 2
PKR	6,3%	5.432	182
Total Bank Borrowings			2.581
USD EUR	5,1% 4,0%	504 352	1.773 1.304
Total Eurobond			3.077
Total			5.658
Debt maturity profile	2017 40% 2018 5% 2019-20 1% 2021 23% 2023 31%

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Cash Flow

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TL mn	2016 12M	2015 12M
Beginning Balance	2.166	1.621
Net Operational Cash Flow	2.067	1.723
CapEx	-831	-640
Acquisition of subsidiary	-746	-1
Acquisition of minority interest	0	-282
Fixed Asset Sales	7	19
Financial Asset Sales	559	0
Dividend Paid	-262	-350
Dividends Received	13	24
Changes in Bank Borrowings	-440	230
Other Financial & Investing Activites	-409	-330
Differences due to FX Conversion	317	153
Changes in Cash	275	546
Ending Balance	2.442	2.166

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2017 Expectations

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2017 Expectations

White goods market volume growth

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Market Share
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Turkey* : c.3% International : c.2%

Stable or higher market share in key regions

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Revenue Growth >20% in TRY

EBITDA Margin (2017) c.11% Long Term EBITDA margin**** c.11%

• 6 main products, in compliance with WGMA data.

**EBITDA margin calculations are inline with the methodology used in calculation of historical values

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www.arcelikas.com

Contacts for Investor Relations

Polat Şen Hande Sarıdal CFO Finance Director Tel: (+90 212) 314 34 34 Tel: (+90 212) 314 31 85

Orkun İnanbil Investor Relations Manager Tel: (+90 212) 314 31 14

investorrelations@arcelik.com

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Disclaimer

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This presentation contains information and analysis on financial statements as well as forward-looking statements that reflect the Company management’s current views with respect to certain future events. Although it is believed that the information and analysis are correct and expectations reflected in these statements are reasonable, they may be affected by a variety of variables and changes in underlying assumptions that could cause actual results to differ materially.

Neither Arçelik nor any of its managers or employees nor any other person shall have any liability whatsoever for any loss arising from the use of this presentation .

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