ARÇELİK A.Ş. — Interim / Quarterly Report 2016

Oct 21, 2016

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Arçelik

2016 9-Month Financial Results

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2016 Q3 Key Developments

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• Domestic MDA market was stagnant in terms of industry sell-in sales

• Retail sales, on the other hand, were positive in the Turkish market

• Arçelik A.Ş., outperforming market-average growth in MDA, TV and A/C in domestic markets

• Ongoing organic growth in international markets, increasing market share in built-in segment

• Decreasing gross margin (QoQ) due to increasing steel costs and depreciating GBP

• Working Capital/Sales ratio stabilizing around 30% thanks to sustained structural measures

• Historically low leverage ratio

• Strong cash position composed of hard currency

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2016 Q3 Sales Performance

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Key factors impacting revenues

Domestic Market

Though industry sell-in sales (sales to dealers) were stagnant in MDA and down in A/C markets, retail sales, on the contrary, were strong in Q3.

Extension of Deadline in POS Cash Reg.

Deadline for the transition to new generation POS cash registers was extended until the end of 2017 for merchants with turnover up to 150 K TL, and estimated to account for around 50% of the replacement market.

International Growth

Continuing market share gains, especially in built-in segment.

Brexit

Depreciating GBP negatively affected sales in TRY terms (around 1% down YoY in 2016 Q3).

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2016 Q3 Margins

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Key factors impacting margins

Raw Material Prices

Product Mix

Depreciating GBP

Sales & Marketing Expenses

Increasing steel costs have negatively affected gross margin in white goods.

Larger size TV sales and slightly better (QoQ) unit sales in POS cash registers helped gross margins in consumer electronics.

Though it was partly mitigated with increasing sales volume in the UK, depreciation of GBP had a negative effect on margins in Q3.

Investments to support our long-term branded sales in international markets have partly diluted the margins.

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2016 9-Month Market Performance - Turkey

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Market
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• Growth in MDA and air conditioner markets

  • Due to flat sell-in MDA sales in Q3, cumulative unit growth down to 4% in 9-months

  • With shrinking sales (-12%) in Q3, the A/C sell-in market was up 9% in Jan-Sep ‘16

• Shrinking TV market (around 10%) due to issues with import brands and non-traditional

  • retail channel

• 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.

• Around 10% unit growth in shrinking TV market

• Around 20% increase in unit sales for A/C, especially due to the performance in June

• Despite the slowdown in Q2-Q3, high increase (YoY) in POS cash register sales

• Based on company sell-in unit sales.

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2016 9-Month Market Performance - International

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• Overall positive performance in European MDA markets

• Despite the slowdown in Q3, cumulative growth in all major markets in Europe

Market

• Increasing growth in the UK after the Brexit decision

• Ongoing strong demand in Romania

• Ukraine turning into positive by August

• Continuing weakness in S. Africa in line with macroeconomic environment (2016 8M: -%8)

• Arçelik Group continuing to strenghten its position in international markets

• More stable performance in free-standing segment as Beko is already N1 in Europe

Arçelik A.Ş.

• Beko also capturing the leading position in total MDA market in East Europe

• Continuing strong performance in built-in segment

• Beko has become N1 also in built-in segment in the UK in Jan-Sep‘16

• Expansion of Grundig MDA goes on with sales growth of 63% in the first 3 quarters

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2016 9-Month Market Figures

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

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%
10
Total Free-standing Built-in
9
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
J-A
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Turkish MDA6 Total Market – Monthly Sell-in Figures (MDA 6)

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

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January-August 2016
West Europe
France
Germany
Italy
Spain
UK
East Europe
Poland
Romania
Russia
Ukraine
S. Africa
-10% -5% 0% 5% 10% 15% 20% 25% 30%
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Turkish Market by Product Group (MDA6)

in 000	9M 2016	9M 2015	YoY
Refrigerator	1.561	1.503	4%
Freezer	590	526	12%
Washing mach.	1.579	1.517	4%
Dryer	55	46	18%
Dishwashers	1.154	1.111	4%
Ovens	717	734	-2%
Total	5.655	5.436	4%

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Trends in Parity and Raw Material Index

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EUR/USD Development
1,6
1,4
1,2
1,0
0,8
0,6
0,4
0,2
0,0
Annual Average EUR/USD
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
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Raw material Market Price Index
105
100
95
90
85
80
75
70
65
60
Annual average RM price index (market)
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
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• Raw material price index for appliances category

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2016 Q3 Other Developments: Pro osed Reor anization in Turke p g y

• Arçelik A.Ş. intends to separate its Turkish marketing and aftersales functions from its other operations (such as its production and R&D operations) and transfer these functions to a new wholly-owned subsidiary, Arçelik Pazarlama A.Ş. , in order to bring Turkish operations in line with global organization.

• The Proposed Reorganisation will be effected by dividing the balance sheet of Arçelik A.Ş. through a partial spin-off (using a procedure for restructurings provided for under Turkish law), with the relevant assets and liabilities being transferred to the new subsidiary.

• As Arçelik Pazarlama A.Ş. will be a wholly-owned subsidiary of Arçelik A.Ş., the Proposed Reorganisation is not expected to have any impact on the presentation of the Group’s consolidated financial reports.

• Following the approval process from local authorities and shareholders, the Proposed

Reorganisation is expected to become effective from 1 January 2017.

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2016 Q3 Other Developments:

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• Arçelik A.Ş. participated the IFA 2016 Fair in Berlin with Beko and Grundig stands.

• Arçelik A.Ş., with its 5 products, was granted awards at the Red Dot Awards , which is one of the most important competitions of the design world besides being a quality approval recognised by

authorities.

• A survey of senior executives conducted by monthly economy magazine Capital

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Sales Performance

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Sales by Region

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				Δ%	Δ%			Δ%			Δ%
TL mn	2016 Q3	2015 Q3	2016 Q2	YoY	QoQ	2016 9M	2015 9M	YoY	2015	2014	YoY
Total Revenue	4.083	3.877	3.960	5	3	11.570	10.099	15	14.166	12.514	13
Turkey	1.669	1.542	1.724	8	-3	4.849	4.191	16	5.724	4.850	18
International	2.414	2.335	2.236	3	8	6.721	5.908	14	8.442	7.664	10

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41,9%
41,5%
32,0%
31,2%
12,2% 12,7%
8,0%
6,6%
2,8% 4,5%
3,0% 3,4%
Turkey Western Europe CIS&Eastern Africa Middle East Other
Europe
2015 9M 2016 9M
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39,8% 40,9%
33,1%
30,9%
14,3%
13,5%
8,0% 6,9%
4,5%
2,3% 2,5% 3,3%
Turkey Western Europe CIS&Eastern Africa Middle East Other
Europe
2015 Q3 2016 Q3
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Sales Bridge

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- 2.000 4.000 6.000 8.000 10.000 12.000 14.000	4.191 4.849 5.908 6.721 451 658 362 2015 9M Organic Int. Organic TR FX impact 2016 9M Impact on Rev International Turkey TL mn

2016 9M	Organic	Currency Effect	Total
% International Growth	7,6%	6,1%	13,8%
% Total Growth	11,0%	3,6%	14,6%

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Financial Performance

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14

Income Statement

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				Δ%	Δ%			Δ%			Δ%
TL mn	2016 Q3	2015 Q3	2016 Q2	YoY	QoQ	2016 9M	2015 9M	YoY	2015	2014	YoY
Revenue	4.083	3.877	3.960	5	3	11.570	10.099	15	14.166	12.514	13
Gross Profit	1.361	1.260	1.353	8	1	3.908	3.214	22	4.536	3.979	14
margin	33,3	32,5	34,2			33,8	31,8		32,0	31,8
EBIT *	375	330	331	14	13	1.029	787	31	1.157	1.024	13
margin	9,2	8,5	8,4			8,9	7,8		8,2	8,2
Profit Before Tax	283	241	656	18	-57	1.093	543	102	785	732	7
margin	6,9	6,2	16,6			9,4	5,4		5,5	5,8
Net Income**	264	214	653	24	-60	1.074	681	58	893	638	40
margin	6,5	5,5	16,5			9,3	6,7		6,3	5,1
EBITDA*	484	423	441	14	10	1.346	1.063	27	1.527	1.370	11
margin	11,9	10,9	11,1			11,6	10,5		10,8	11,0

• 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%			Δ%
TL mn	2016 Q3	2015 Q3	2016 Q2	YoY	QoQ	2016 9M	2015 9M	YoY	2015	2014	YoY
Consolidated
Revenue	4.083	3.877	3.960	5	3	11.570	10.099	15	14.166	12.514	13
Gross Profit	1.361	1.260	1.353	8	1	3.908	3.214	22	4.536	3.979	14
Gross Profit %	33,3	32,5	34,2			33,8	31,8		32,0	31,8
White Goods
Revenue	3.130	2.947	2.747	6	14	8.339	7.384	13	10.299	9.069	14
Gross Profit	1.079	1.038	1.070	4	1	3.039	2.555	19	3.578	3.080	16
Gross Profit %	34,5	35,2	38,9			36,4	34,6		34,7	34,0
Consumer Electronics
Revenue	528	465	529	14	0	1.633	1.317	24	1.966	1.829	7
Gross Profit	151	101	119	50	27	442	276	60	433	442	-2
Gross Profit %	28,7	21,6	22,6			27,1	21,0		22,0	24,2
Other
Revenue	426	466	684	-9	-38	1.598	1.399	14	1.901	1.616	18
Gross Profit	130	122	163	7	-20	427	383	12	524	457	15
Gross Profit %	30,6	26,2	23,9			26,7	27,4		27,6	28,3

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Balance Sheet

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TL mn	30.09.2016	31.12.2015		30.09.2016	31.12.2015
Current Assets	10.760	9.406	Current Liabilities	6.151	5.236
Cash and Cash Equivalents	2.722	2.168	ST Bank Borrowings	2.370	2.185
Trade Receivables	5.275	4.791	Trade Payables	2.495	2.090
Inventories	2.402	2.140	Provisions	401	335
Other	362	308	Other	886	627
Non-current Assets	4.118	4.332	Non-current Liabilities	3.440	3.826
Property, Plant and Equipment	2.211	2.056	LT Bank Borrowings	2.843	3.269
Financial Investments	221	749	Other	597	557
Other	1.686	1.528	Equity	5.287	4.676
Total Assets	14.879	13.739	Total Liabilities	14.879	13.739

	30.09.2016	31.12.2015	31.12.2014	31.12.2013
Net Financial Debt/Equity	0,47	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	30.09.2016		FX Basis	TL Basis	Total
ST Trade Rec.	2.021	3.254	5.275	ST Trade Payables	1.074	1.421	2.495
Other Receivables	44	76	120	Other Payables	217	263	480
Inventory	1.225	1.177	2.402	Working Capital	1.999	2.823	4.822

TL mn	FX Basis	TL Basis	30.06.2016		FX Basis	TL Basis	Total
ST Trade Rec.	1.744	3.283	5.027	ST Trade Payables	954	1.452	2.406
Other Receivables	40	58	98	Other Payables	163	195	358
Inventory	1.055	1.256	2.311	Working Capital	1.722	2.950	4.672

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%
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
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Debt Profile

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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
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
-2.000 -188
-1.528
-3.000 -1.577 -1.859 -2.581 -2.965
-4.000 -3.269 -3.084 -3.078 -2.843
-5.000
-6.000
-7.000
2008 2009 2010 2011 2012 2013 2014 2015 16 Q1 16 Q2 16 Q3
Cash and cash equivalent Short term debt Long term debt
3.500 3.286 6
3.076 2.988 3.146 3.100
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
500 1,3 1,5 1,4 1
0,9
0 0
2008 2009 2010 2011 2012 2013 2014 2015 16Q1 16Q2 16Q3
Net Debt (TL mn) Net Debt/EBITDA
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Debt profile (as of 30 Sep	2016)
	Effective	mn Original	TL mn
	Interest Rate p.a. (%)	**Currency **	Equivalent
TRY EUR ZAR RUB	11,8% 1,7% 9,9% 8,9%	1.715 162 750 475	1.715 543 163 22
CNY GBP	4,4% 1,1%	110 5	49 19
USD	1,3%	2	6
Other			0
Total Bank Borrowings			2.518
USD	5,1%	509	1.526
EUR Total Eurobond	4,0%	348	1.169 2.695
Total			5.213
Debt maturity profile	2016 28% 2017 18% 2018-19 3% 2021 22% 2023 29%

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Cash Flow

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TL mn	2016 9M	2015 9M
Beginning Balance	2.166	1.621
Net Operational Cash Flow	1.211	454
CapEx	-439	-414
Acquisition of minority interest	0	-282
Fixed Asset Sales	9	11
Financial Asset Sales	559	0
Dividend Paid	-262	-350
Dividends Received	13	24
Changes in Bank Borrowings	-361	474
Other Financial & Investing Activites	-288	-197
Differences due to FX Conversion	113	222
Changes in Cash	555	-57
Ending Balance	2.721	1.563

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2016 Expectations

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2016 Expectations

White goods market volume growth

Turkey* : 3% - 5% International : c.2%

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Stable or higher market share Market Share in key regions Revenue Growth c. 12% in TL

EBITDA Margin (2016) 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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23

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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