ARÇELİK A.Ş. — Interim / Quarterly Report 2015

Jul 27, 2015

==> picture [76 x 61] intentionally omitted <==

Arçelik

1H15 Financial Results

==> picture [168 x 41] intentionally omitted <==

2Q developments

==> picture [76 x 61] intentionally omitted <==

Key developments

• Domestic appliances market: Volume growth accelerated in 2Q15 exceeding our expectations (1Q15: +7% YoY, 2Q15: +13% YoY)

• Divergent trends in international markets

• Arcelik continued to strengthen its international presence

• Positive trend in gross margin. Despite the strong base in 2Q14, GPM flat YoY in 2Q15 (vs. 1.4pp YoY decline in 1Q15)

• Mitigating negative impact of EUR depreciation via price adjustments and cost savings

• Working capital/sales ratio almost unchanged YoY despite the increasing share of domestic sales and inventory

build-up pre vacation period at manufacturing facilities. Domestic receivable days improved YoY

==> picture [168 x 41] intentionally omitted <==

2

2Q developments

==> picture [76 x 61] intentionally omitted <==

International markets

• Divergent trends in international markets

• European appliance markets overall robust. Especially Spain, Germany, UK and Romania.

• Continuing weakness in Russia /Ukraine (c.40% decline in the market in 5M15)

• Weakness in South African appliances demand (macro, store closures, credit constraints)

• Middle East market continues to be negatively impacted from the instability in the region

• Sharp decline in LCD market in Germany

• Arcelik continued to strengthen its international presence*

• Beko moved to 2nd rank in East Europe from 5th rank last year. Top winner in Poland/Eastern Europe

• Beko top winner in Germany, Spain and Italy. 2nd top winner in Western Europe

• Our price index continued to improve in Europe

*Source: GFK, in terms of unit market share, 5M15/ 5M14 data (Eastern Europe: 5M15/5M14).

==> picture [168 x 41] intentionally omitted <==

3

2Q15 developments

==> picture [76 x 61] intentionally omitted <==

Key factors impacting revenues

Domestic white goods, TV and SDA sales

Domestic A/C sales

FX rate

International volumes

Strong growth in domestic appliances and TV sales Strong growth in SDA category (partly due to pre-buying)

Soft volume trend due to adverse weather conditions in June and partly due to transition to higher priced inverter A/Cs. Revenue trend better due to improved product mix.

c.3% positive impact on consolidated revenues in 2Q15 (0% in 1H15)

Consumer Electronics: Decline in volumes due to high base impact in 1H14 pre FIFA World Cup, and impact of recent price increases. German LCD TV market declined by 27% in 2Q15 (15% decline in 1H15). *

A/Cs: Lower volumes due to instability in core A/C export markets

Appliances: Negative trend in volumes in France (channel restructuring) South Africa (market), Russia /Ukraine (market)

*Source: GFK

==> picture [168 x 41] intentionally omitted <==

4

2Q15 developments

==> picture [76 x 61] intentionally omitted <==

Key factors impacting margins

Commodity prices supported white goods margins in 2Q15

Commodity prices FX rate

Flat on GPM YoY

OPEX Deferred tax income

EUR/USD down from 1.37 in 2Q14 to 1.10 in 2Q15=> Negative impact on margins.

Despite EUR weakness, white goods GPM improved by 1.0pp YoY supported by commodity cost declines and price actions. Electronics margin declined by 5.1pp YoY to 19.9% due to USD appreciation. Actions (price increases/ cost savings) undertaken to address ‘consumer electronics’ margin weakness in the following quarters

OPEX/sales ratio (including net other operating income) increased by 0.8pp YoY

Change in calculation of tax benefit related to investment incentives, following the favorable court ruling (Turkey). Net tax income of TL146 mn in 2Q15 (TL166 mn in 1H15). Positive cash impact in the future

==> picture [168 x 41] intentionally omitted <==

5

2Q15 developments

==> picture [76 x 61] intentionally omitted <==

Other developments

• Continued to invest in technology and innovation

• opened R&D center in Cambridge (UK)

• acquired Computer Vision Interaction (Portugal)

• S&P affirmed Arçelik A.Ş.'s corporate credit rating as BB+ and outlook as stable

• In order to simplify our subsidiary structure, the remaining 50% stake in Beko plc (UK subsidiary) was acquired for GBP67.5 mn in June 2015.

• Hike in custom duties for small domestic appliances (SDA). We raised prices in July and are evaluating product supply alternatives for SDA category

==> picture [168 x 41] intentionally omitted <==

6

2Q15 developments

Domestic market monthly progression

==> picture [350 x 179] intentionally omitted <==

----- Start of picture text -----

mn units
0.8 30%
28%
0.7
25%
0.6
20%
0.5
16%
0.4 15%
0.3
10%
0.2
7% 6%
5%
0.1
3%
1%
0.0 0%
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
13 14 15 YoY (RHS)
----- End of picture text -----

==> picture [76 x 61] intentionally omitted <==

Domestic market in 1H15

in 000's Refrigerator	1H15 885	1H14 822	YoY 8%
Freezer	244	238	2%
Washing mach.	977	855	14%
Dryer	32	21	52%
Dishwashers Ovens Total	695 455 3,288	657 388 2,981	6% 17% 10%

in 000's	2Q15	2Q14	YoY
Refrigerator	518	459	13%
Freezer	162	175	-8%
Washing mach.	524	439	19%
Dryer	12	7	61%
Dishwashers	404	379	6%
Ovens	277	226	23%
Total	1,896	1,686	13%

Source: TURKBESD

==> picture [168 x 41] intentionally omitted <==

7

2Q15 developments

==> picture [76 x 61] intentionally omitted <==

==> picture [661 x 456] intentionally omitted <==

----- Start of picture text -----

EUR/USD development Raw material market price index
105
1.5
100
1.4
95
1.3
90
1.2 85
1.1 80
75
1.0
70
0.9
65
0.8
60
Annual Avg. EUR/USD Annual average RM price index (market)
Raw material price index for appliances category
8
13 Q1 13 Q2 13 Q3 13 Q4 14 Q1 14 Q2 14 Q3 14 Q4 15 Q1 15 Q2
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
----- End of picture text -----

==> picture [76 x 61] intentionally omitted <==

Sales performance

==> picture [168 x 41] intentionally omitted <==

9

Sales b re ion y g

==> picture [76 x 61] intentionally omitted <==

				Δ%	Δ%			Δ%			Δ%
TL mn	2015 Q2	2014 Q2	2015 Q1	YoY	QoQ	2015 H1	2014 H1	YoY	2014	2013	YoY
Total Revenue	3,355	3,076	2,867	9	17	6,222	5,878	6	12,514	11,098	13
Turkey	1,472	1,149	1,178	28	25	2,650	2,178	22	4,852	4,617	5
International	1,883	1,927	1,689	-2	12	3,572	3,701	-3	7,662	6,481	18

==> picture [328 x 171] intentionally omitted <==

----- Start of picture text -----

50%
37.4% 43.9%
45%
40%
32.5%
35%
29.5%
30%
25%
20%
13.8% 11.9%
15%
9.3% 8.5%
10%
4.2% 2.9% 2.9% 3.4%
5%
0%
Turkey Western CIS&Eastern Africa Middle East Other
Europe Europe
2014 Q2 2015 Q2
----- End of picture text -----

==> picture [319 x 173] intentionally omitted <==

----- Start of picture text -----

50%
37.0% 42.6%
45%
40%
33.8%
35% 31.1%
30%
25%
20%
13.5%
15% 11.6%
8.6% 8.0%
10%
4.2%3.2% 2.9% 3.6%
5%
0%
Turkey Western CIS&Eastern Africa Middle East Other
Europe Europe
2014 H1 2015 H2
----- End of picture text -----

==> picture [168 x 41] intentionally omitted <==

10

Sales bridge

==> picture [76 x 61] intentionally omitted <==

==> picture [489 x 350] intentionally omitted <==

----- Start of picture text -----

7,000
TL mn 472
6,000
0
-128
5,000
3,572
4,000 3,701
Impact on Rev
3,000 International
2,000 Turkey
2,650
1,000 2,178
-
2014 H1 Organic Int. Organic TR FX impact 2015 H1
2015 H1 Organic Currency effect Total
% International Growth -3% 0% -3%
% Consolidated Growth 6% 0% 6%
----- End of picture text -----

==> picture [168 x 41] intentionally omitted <==

11

==> picture [76 x 61] intentionally omitted <==

Financial performance

==> picture [168 x 41] intentionally omitted <==

12

Income statement

==> picture [76 x 61] intentionally omitted <==

				Δ%	Δ%			Δ%			Δ%
TL mn	2015 Q2	2014 Q2	2015 Q1	YoY	QoQ	2015 H1	2014 H1	YoY	2014	2013	YoY
Revenue	3,355	3,076	2,867	9	17	6,222	5,878	6	12,514	11,098	13
Gross Profit	1,082	990	872	9	24	1,953	1,882	4	3,979	3,388	17
margin	32.2	32.2	30.4			31.4	32.0		31.8	30.5
EBIT *	277	278	181	0	53	457	487	-6	1,024	853	20
margin	8.2	9.0	6.3			7.3	8.3		8.2	7.7
Profit Before Tax	180	190	122	-5	48	302	351	-14	732	745	-2
margin	5.4	6.2	4.2			4.8	6.0		5.8	6.7
Net Income**	326	167	141	95	131	468	302	55	638	623	2
margin	9.7	5.4	4.9			7.5	5.1		5.1	5.6
EBITDA*	370	363	270	2	37	639	656	-3	1,370	1,155	19
margin	11.0	11.8	9.4			10.3	11.2		11.0	10.4

• EBIT includes net other income/expense from operating activities (part of operating income as per CMB reporting) and income and expenses from sale of PP&E, but excludes foreign exchange gains/losses arising from trade receivables and payables, credit finance income/charges and cash discount expense.

** Net income before minority

==> picture [168 x 41] intentionally omitted <==

13

Revenue and gross profit by segment

==> picture [76 x 61] intentionally omitted <==

				Δ%	Δ%			Δ%			Δ%
TL mn	**2015 Q2 **	**2014 Q2 **	2015 Q1	YoY	QoQ	2015 H1	2014 H1	YoY	2014	2013	YoY
Consolidated
Revenue	3,355	3,076	2,867	9	17	6,222	5,878	6	12,514	11,098	13
Gross Profit	1,082	990	872	9	24	1,953	1,882	4	3,979	3,388	17
Gross Profit %	32.2	32.2	30.4			31.4	32.0		31.8	30.5
White Goods
Revenue	2,406	2,243	2,031	7	18	4,437	4,191	6	9,069	7,818	16
Gross Profit	846	766	671	10	26	1,517	1,425	6	3,080	2,564	20
Gross Profit %	35.1	34.1	33.1			34.2	34.0		34.0	32.8
Consumer Electronics
Revenue	422	409	430	3	-2	852	861	-1	1,829	1,607	14
Gross Profit	84	103	92	-18	-8	176	213	-18	442	346	28
Gross Profit %	19.9	25.1	21.3			20.6	24.8		24.2	21.6
Other
Revenue	527	424	406	24	30	933	826	13	1,616	1,673	-3
Gross Profit	152	122	109	24	40	261	244	7	457	478	-4
Gross Profit %	28.9	28.8	26.8			28.0	29.5		28.3	28.6

==> picture [168 x 41] intentionally omitted <==

14

Balance sheet

==> picture [76 x 61] intentionally omitted <==

TL mn	30.06.2015	31.12.2014		30.06.2015	31.12.2014
Current Assets	8,533	8,472	Current Liabilities	5,065	4,431
Cash and Cash Equivalents	1,053	1,621	ST Bank Borrowings	2,274	1,803
Trade Receivables	4,815	4,434	Trade Payables	1,881	1,781
Inventories	2,390	2,125	Provisions	307	264
Other	274	292	Other	602	583
Non-current Assets	4,180	3,923	Non-current Liabilities	3,310	3,566
Property, Plant and Equipment	1,888	1,813	LT Bank Borrowings	2,785	2,965
Financial Investments	837	894	Other	525	601
Other	1,455	1,217	Equity	4,338	4,399
Total Assets	12,713	12,395	Total Liabilities	12,713	12,395

	30.06.2015	31.03.2015	31.12.2014	31.12.2013	31.12.2012
Net Financial Debt/Equity	0.92	0.76	0.72	0.72	0.58
Total Liabilities/Total Assets	0.66	0.66	0.65	0.64	0.62

==> picture [168 x 41] intentionally omitted <==

15

Workin ca ital g p

==> picture [76 x 61] intentionally omitted <==

TL mn	FX Basis	TL Basis	30.06.2015		FX Basis	TL Basis	Total
ST Trade Rec.	2,055	2,760	4,815	ST Trade Payables	874	1,007	1,881
Other Receivables	42	44	86	Other Payables	204	155	359
Inventory	1,220	1,170	2,390	Working Capital	2,239	2,812	5,051

TL mn	FX Basis	TL Basis	31.12.2014		FX Basis	TL Basis	Total
ST Trade Rec.	1,994	2,440	4,434	ST Trade Payables	884	897	1,781
Other Receivables	27	32	59	Other Payables	246	58	304
Inventory	1,219	906	2,125	Working Capital	2,110	2,423	4,533

Working capital /sales

==> picture [554 x 173] intentionally omitted <==

----- Start of picture text -----

40% 33.3% 38.9% 39.2% 39.1% 38.7% 36.2% 37.2% 39.3%
30%
20%
10%
0%
Dec-12 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15
----- End of picture text -----

==> picture [168 x 41] intentionally omitted <==

16

Debt rofile p

==> picture [323 x 395] intentionally omitted <==

----- Start of picture text -----

3,000 TL mn
2,000
1,000 416
905 1,317 1,174 1,741 1,267 1,621 1,645 1,053
0
-839
-1,000 -1,915 -1,924 -1,629 -2,144 -1,673 -1,803 -1,982 -2,274
-1,218
-2,000
-1,528
-3,000 -1,577 -188 -1,859 -2,581
-2,965 -2,943
-2,785
-4,000
-5,000
-6,000
2008 2009 2010 2011 2012 2013 2014 2015 Q1 2015 Q2
Cash and cash equivalent Short term debt Long term debt
4,500 6
4,007
3,076
4,000
3,281 5
3,500 3,146
2,988
3,000 4
2,263
2,500
1,983 3
2,000
3.0
1,5001,000 5.1 1,207 740 2.3 2.2 2.6 2.3 2.4 2
1
500 1.3
0.9
0 0
2008 2009 2010 2011 2012 2013 2014 2015 2015
Q1 Q2
Net Debt (TL mn) Net Debt/EBITDA
----- End of picture text -----

==> picture [76 x 61] intentionally omitted <==

Debt profile (as of 30 June 2015)

	Effective Interest Rate p.a. (%)	mn Original Currency	TL mn Equivalent
TRY	10.5%	1,744	1,744
EUR	1.6%	217	646
ZAR RUB CNY Other Total	8.6% 8.7% 5.4% 1.7% Bank Borrowings	750 904 110	164 44 47 1 2,646
USD	5.1%	502	1,349
EUR Total	4.0% Eurobond	357	1,065 2,414
Total			5,060

Debt maturity profile

==> picture [274 x 219] intentionally omitted <==

----- Start of picture text -----

2015
2023 22%
27%
2016
2021 23%
21%
2017
5%
2018-19
2%
----- End of picture text -----

17

Cash flow*

==> picture [76 x 61] intentionally omitted <==

TL mn	2015 H1	2014 H1
Beginning Balance	1,621	1,266
Net Operational Cash Flow	266	270
CapEx	-222	-188
Acquisition of minority interest	-282	0
Fixed Asset Sales	10	1
Dividend Paid	-350	-300
Dividends Received	24	27
Changes in Bank Borrowings	34	218
Bonds Issued	0	1
Other Financial & Investing Activites	-144	-171
Differences due to FX Conversion	96	-25
Changes in Cash	-568	-167
Ending Balance	1,052	1,098

2014 figure reclassified

==> picture [168 x 41] intentionally omitted <==

18

==> picture [76 x 61] intentionally omitted <==

2015 expectations

==> picture [168 x 41] intentionally omitted <==

19

2015 ex ectations p

==> picture [76 x 61] intentionally omitted <==

==> picture [340 x 240] intentionally omitted <==

----- Start of picture text -----

Stable or higher market share
Market share
in key regions
Turkey : 3 to 5 %, Turkey :> 5%
White goods volume growth
International : > 6c.2 %
Revenue growth c.10% in TL
EBITDA margin (2015) c.10.5% c.11%
Long-Term EBITDA margin c. 3511 %
----- End of picture text -----*

• 5 main products, in compliance with WGMA data.

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

==> picture [168 x 41] intentionally omitted <==

20

==> picture [76 x 61] intentionally omitted <==

www.arcelikas.com

Contacts for Investor Relations

Polat Şen Doğan Korkmaz Gözde Çullas CFO Finance Director Investor Relations Tel: (+90 212) 314 34 34 Tel: (+90 212) 314 31 85 Tel: (+90 212) 314 3390

investorrelations@arcelik.com

==> picture [168 x 41] intentionally omitted <==

21

Disclaimer

==> picture [76 x 61] intentionally omitted <==

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 .

==> picture [168 x 41] intentionally omitted <==

22