ARÇELİK A.Ş. — Interim / Quarterly Report 2015

Apr 22, 2015

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Arçelik

1Q15 Financial Results

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1Q15 developments

Key developments

• Domestic appliances market: Slow start to the year, but volume growth accelerated in March (1Q15: 7% YoY growth, March-15: 16% YoY growth)

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

• …….but strength negated by

• weakness in Russia: decline in oil prices, price increases and prebuying in Dec

• Commodity prices continued downward trend in 1Q15

• EUR/USD rate declined from 1.37 in 1Q14 to 1.13 in 1Q15 impacting revenues and margins negatively

  • Initial signals of price increases in the European TV market

• Working capital/sales ratio at 37.2% in Mar-15 vs 39.2% in Mar-14

• Ground breaking ceremony for Thailand plant in January

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1Q15 developments

Key factors impacting margins

(1) Commodity prices

(2) FX rate

• (1)+ (2)=

• -ve impact on GPM

Deferred tax income

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Continued fall in commodity prices in 1Q15. The positive trend not fully reflected to Arcelik’s COGS in 1Q15 due to duration gap (contract periods and inventory).

EUR/USD down from 1.37 in 1Q14 to 1.13 in 1Q15=> Negative impact on TRY based revenues, and margins.

GPM down by 1.4pp YoY to 30.4%. White goods GPM was relatively resilient (lower USD exposure compared to electronics segment, and tailwinds from commodity prices).

Net tax income of TRY20mn in 1Q15=> Cash impact in the following periods

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1Q15 developments

Key factors impacting revenues

Domestic white goods & TV sales

Domestic A/C market

Strong growth in domestic appliances and TV sales

Lower volumes due to 1) transition to inverter A/Cs. 2) Stock reduction at dealers. Sell-out progression in 1Q15 significantly better than sell-in. Dealer inventories getting close to normalized levels.

4% negative impact on consolidated revenues

FX rate

High base impact in 1H14 pre FIFA World Cup

International TV sales

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1Q15 developments

Other developments

• 60th year of Arcelik’s establishment, Beko celebrates 25th year in UK

• Fitch Ratings has affirmed Arcelik 's long-term foreign and local currency Issuer Default

Ratings at 'BB+' and outlook as stable

• Exemption on Resource Utilization Support Fund (KKDF) on imports on credit for selected raw materials and components

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1Q15 developments

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Domestic market monthly progression
mn units
0,8 18%
0,7 16,3% 16%
14%
0,6
1,4% [2,7% ] 12%
0,5
10%
0,4
8%
0,3
6%
0,2
4%
0,1 2%
0,0 0%
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
13 14 15 YoY (RHS)
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Domestic market in 1Q15	Domestic market in 1Q15
in 000's	1Q14	1Q15	YoY
Refrigerator Freezer Washing mach.	363 63 416	367 82 453	1% 31% 9%
Dryer Dishwashers	14 277	20 291	48% 5%
Ovens Total	162 1,295	178 1,391	10% 7%

Source: TURKBESD

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1Q15 developments

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Raw material market price index EUR/USD development
120 1,4
112,9
104,1 1,4
110 103,5
1,3
100
87,1 1,3
90
1,2
80 1,2
70 1,1
1,1
60
1,0
Annual average RM price index (market) Annual Avg. EUR/USD
7
Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15
13 Q1 13 Q2 13 Q3 13 Q4 14 Q1 14 Q2 14 Q3 14 Q4 15 Q1
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International growth Thailand investment overview

Investment

• Investment of c.USD100mn (during initial 3 years), including working capital requirement

• 263k sqm plot at Hemaraj Rayong Industrial Land. Ground breaking ceremony on 6th January

• Expandable capacity

• Start-of production by YE15, exports by early 2016

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Strategy

• Leverage Beko brand and its European image across the region

• Sourcing to 10 countries incl. Philippines, Vietnam, Malaysia, Singapore, Indonesia, Australia and New Zealand

• Local production for refrigerator from Thailand. WM sourced from other Arçelik plants.

ASEAN Market

Expectations

• 620mn population

• c.90% of production will be exported

• Low penetration of white goods

• Expected GDP CAGR between 14 and 2017E: +5%

• Washing Machine market is estimated to be c.USD1.65bn and at c.6.8mn units

• Refrigerator market worth c.USD2.5bn at c.8.6mn units

• c.USD500mn revenues and +800k units production in 3 years following the completion of the investment (cumulative)

Incentives

• Corporate tax exemption for 8 years (capped at investment amount excluding land cost). Reduction on corporate tax during the following 5 years

• Exemption on import duties on machinery

• Partial exemption on duties on raw materials

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International growth ASEAN countries overview

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Vietnam Laos Asean total
$ 186 $ 12
91 7 GDP (USDbn) $ 2,459
Population (mn) 620
Vietnam
Myanmar $/ 2.1 $/ 1.7
Laos
$ 5.9% $ 7.6% GDP/capita(USD 000’s) $/ 4.0
GDP growth (14-17E) $ 5.1%
Thailand
Myanmar Cambodia Philippines
Cambodia
$ 63 $ 17 $ 285
51 15 99
Philippines
$/ 1.2 $/ 1.1 $/ 2.9
$ 8.4% $ 7.2% $ 6.3%
Malaysia
Thailand
$ 374
Singapore
69
$/ 5.4
$ 3.9%
Indonesia
Malaysia Singapore Indonesia
$ 308
$ 327 $ 889
5
30 251
$/ 10.8 $/ 56.3 $/ 3.5
$ 4.9% $ 3.1% $ 5.5%
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Source: WEO April 2015

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Sales performance

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Sales b re ion y g

				Δ%	Δ%			Δ%
TL mn	2015 Q1	2014 Q1	2014 Q4	YoY	QoQ	2014	2013	YoY
Total Revenue	2,867	2,802	3,402	2.3	-15.7	12,514	11,098	12.8
Turkey	1,178	1,029	1,337	14.5	-11.9	4,852	4,617	5.1
International	1,689	1,774	2,065	-4.8	-18.2	7,662	6,481	18.2

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45%
41.1%
40% 36.7%
35.3%
35% 32.9%
30%
25%
20%
13.1%
15%
11.2%
10% 7.8% 7.5%
5% 4.2% 3.6% 2.9% 3.8%
0%
Turkey Western Europe CIS&Eastern Africa Middle East Other
Europe
2014 Q1 2015 Q1
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Sales bridge

- 500 1,000 1,500 2,000 2,500 3,000 3,500
	1,029 1,774 TL mn		1,178 - 108 1,689 23 149

	Organic	Currency effect	Total
% International Growth	1%	-6%	-5%
% Total Growth	6%	-4%	2%

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Financial performance

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Income statement

					Δ%	Δ%			Δ%
TL mn		2015 Q1	2014 Q1	2014 Q4	YoY	QoQ	2014	2013	YoY
Revenue		2.867	2.802	3.402	2,3	-15,7	12.514	11.098	12,8
Gross Profit		872	892	1.050	-2,3	-17,0	3.979	3.388	17,4
	margin	30,4	31,8	30,9			31,8	30,5
EBITDA*		270	293	351	-8,1	-23,2	1.370	1.155	18,6
	margin	9,4	10,5	10,3			11,0	10,4
EBIT *		181	209	263	-13,6	-31,3	1.024	853	20,0
	margin	6,3	7,5	7,7			8,2	7,7
Net Income**		141	135	176	5,0	-19,6	638	623	2,5
	margin	4,9	4,8	5,2			5,1	5,6

*The effects of foreign exchange gains and losses arising from trade receivables and payables, credit finance income and charges and cash discount expense are deducted from operating profit and the effects of income and expenses from sale of property plant and equipment are added to operating profit in order to maintain consistency in the presentation with prior years EBITDA calculation.

** Net income before minority

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Revenue and gross profit by segment

				Δ%	Δ%			Δ%
TL mn	2015 Q1	2014 Q1	2014 Q4	YoY	QoQ	2014	2013	YoY
Revenue	2,867	2,802	3,402	2.3	-15.7	12,514	11,098	12.8
Gross Profit %	30.4	31.8	30.9			31.8	30.5
White Goods Revenue	2,031	1,948	2,434	4.3	-16.6	9,069	7,818	16.0
Gross Profit %	33.1	33.8	33.0			34.0	32.8
Electronics Revenue	430	452	552	-5.0	-22.2	1,829	1,607	13.8
Gross Profit %	21.3	24.5	23.1			24.2	21.6
Other	406	402	416	1.0	-2.3	1,616	1,673	-3.4
Gross Profit %	26.8	30.2	28.8			28.3	28.6

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Balance sheet

TL mn	31.03.2015	31.12.2014		31.03.2015	31.12.2014
Current Assets	8,371	8,472	Current Liabilities	4,669	4,431
Cash and Cash Equivalents	1,645	1,621	ST Bank Borrowings	1,982	1,803
Trade Receivables	4,306	4,434	Trade Payables	1,547	1,781
Inventories	2,123	2,125	Provisions	284	264
Other	297	292	Other	857	583
Non-current Assets	4,127	3,923	Non-current Liabilities	3,535	3,566
Property, Plant and Equipment	1,862	1,813	LT Bank Borrowings	2,943	2,965
Financial Investments	884	894	Other	591	601
Other	1,380	1,217	Equity	4,294	4,399
Total Assets	12,498	12,395	Total Liabilities	12,498	12,395

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Workin ca ital g p

TL mn	FX Basis	TL Basis	3/31/2015		FX Basis	TL Basis	Total
ST Trade Rec.	1,840	2,466	4,306	ST Trade Payables	767	780	1,547
Other Receivables	38	44	82	Other Payables	209	75	284
Inventory	1,047	1,076	2,123	Working Capital	1,949	2,731	4,680

TL mn	FX Basis	TL Basis	12/31/2014		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

31-Mar-15 37,2% 31-Dec-14 36,2% 30-Sep-14 38,7% 30-Jun-14 39,1% 31-Mar-14 39,2% 31-Dec-13 38,9% 31-Dec-12 33,3% 0% 10% 20% 30% 40%

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Debt rofile p

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3,000 TL mn
2,000
1,000 416
905 1,317 1,174 1,741 1,267 1,621 1,645
0
-839
-1,000 -1,915 -1,924 -1,629 -2,144 -1,673 -1,803 -1,982
-1,218
-2,000
-1,528
-3,000 -1,577 -188 -1,859 -2,581
-2,965 -2,943
-4,000
-5,000
-6,000
2008 2009 2010 2011 2012 2013 2014 2015 Q1
Cash and cash equivalent Short term debt Long term debt
3,500 3,281 6
3,076 3,146
2,988
3,000 5
2,500 5.1 2,263
1,983 4
2,000
3
1,500 1,207
2.6 2
1,000 740 2.3 2.2 2.3 2.4
1
500
1.3
0.9
0 0
2008 2009 2010 2011 2012 2013 2014 2015 Q1
Net Debt (TL mn) Net Debt/EBITDA
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	Effective	mn Original	mn Original	TL mn
	Interest Rate p.a. (%)		Currency	Equivalent
TRY EUR	10.3% 1.9%		1,474 308	1,474 873
ZAR RUB	8.6% 8.9%		750 928	162 41
CNY Other Total USD EUR	5.6% 1.9% Bank Borrowings 5.1% 4.0%		110 508 353	46 3 2,599 1,326 1,000
Total	Eurobond			2,327
Total				4,925

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Cash flow*

TL mn	31.03.2015	31.03.2014
Beginning Balance	1,621	1,266
Net Operational Cash Flow	149	124
Fixed Asset Sales	9	1
CapEx	-116	-80
Dividend Paid	0	0
Changes in Bank Borrowings	-21	278
Bonds Issued	0	0
Other Financial & Investing Activites	-36	-38
Differences due to FX Conversion	38	1
Changes in Cash	24	287
Ending Balance	1,644	1,552

2014 figure reclassified

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2015 expectations

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2015 ex ectations p

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Stable or higher market share
Market share
in key regions
Turkey : 3 to 5 %,
White goods volume growth
International : > 6%
Revenue growth c.10% in TL
EBITDA margin (2015) c.10.5% c.11%
Long-Term EBITDA margin c. 3511 %
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• 5 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 Doğan Korkmaz CFO Finance Director Tel: (+90 212) 314 34 34 Tel: (+90 212) 314 31 85

Gözde Çullas Investor Relations Tel: (+90 212) 314 3390

investorrelations@arcelik.com

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Disclaimer

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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