Transcription for Tat Gıda. February 17 th 2014

Transcription

1 Transcription for Tat Gıda February 17 th 2014

2 Corporate Participants Tat Gıda Chief Financial Officer Neslihan Kazancı Tat Gıda Finance and Budget Group Manager Dear all, welcome to the conference call of Tat Gıda. The speakers are Mr, the Chief Financial Officer, and Mrs Neslihan Kazancı, the Finance and Budget Group Manager. The agenda is 2013 financial review and Q&A. Now the conference is beginning with Mr. Dear ladies and gentlemen, I would like to thank you for joining us and sharing your time. First of all, I would like to inform you about the adjustment made in financial statements for As you know, Tat has a majority ownership in Harranova, which is consolidated under Tat financials in tomato paste and canned food product segments. According to the Board resolution of Harranova taken on October 14 th 2013, it was decided that tomato and tomato paste operations are ceased and the studies for the evaluation of strategic opportunities have begun due to the unsatisfactory profitability from the current operations. Harranova held extraordinary shareholder meeting on December 26 th 2013 for the submission of provided results to the consideration of shareholders within the frame of restructuring of the operations, and strategic options, including material asset sales. In this respect, the studies for the evaluation of strategic options, including Harranova share of fixed asset sales, were initiated by Tat. In line with [this position], the figures related to Harranova s tomato and tomato business, the income statement for year 2012 was adjusted by eliminating them from the statements and classifying into the discontinued operations under income statement. The set classification would enable to year-on-year comparison based on the same grounds. Now, I would like to give the speech to Mrs Neslihan Kazancı to go over the review of 2013.

3 Neslihan Kazancı Dear all, I would also like to thank you for joining our conference and sharing your valuable time with us. I would like to mention about 2013 financials. First of all, I want to begin with the income statements. Our net sales realised as TRY 793 million in this year up by 6% when compared to TRY 747 million in the previous year, and gross profits realised at TRY 166 million in 2013, with a slight 3% increase when compared to TRY 161 million in The operating profit recorded as TRY 40 million in this year and operating profit margins were realised at 5%. Income before tax realised at TRY 27 million, up by 34% as to the previous year and the margin recorded a slight improvement to 3.4% from 2.7%. Net income from continued operations recorded as TRY 22.4 million up by 42 when compared to After the effect of the discontinued operation, the net income is TRY 2.5 million, which is similar with the previous year. EBITDA realised at TRY 47 million with the margin of 5.9% in Now, I would like to mention briefly about business segments. In this year tomato paste and canned food segment, sales and gross profit have increased, up by 9% and 5% Y-o-Y respectively, and the gross profit margin was recorded as 30.3%. Dairy segment sales again increased by 14% and gross profit increased by 17% Y-o-Y. The gross profit margin is also increased to 19.6% from 19.1% yearly. Meat segment sales recorded as TRY 97 million and the gross profit realised as TRY 7.9 million with the margin of 8.1%. Pasta segment sales realised at TRY 60 million and the gross profit was recorded as TRY 7.5 million with the margin of 12.6%. If we look at the Company balance sheet, total assets and liabilities realised as TRY 567 million and slightly down by 5% as to the previous year closing. On the other hand, while the working capital by the end of 2012 was TRY 324 million, it was recorded as TRY 288 million by the end of Accordingly, the net financial debt of the Company recorded as TRY 230 million by the end of this year when compared to the TRY 275 million as of the year-end When we look at the key ratios, improvements are seen Y-o-Y. The current ratio increased to 2 from 1.66, liquidity ratio increased to 1.15 from 0.9. Net debt to equity decreased to 1.04 from 1.19 and total liabilities to equity ratio

4 is similar with the previous year, with the rate of Finally, short-term net debt decreased to 50% from 70%. Now, again, will continue to inform you about some key issues currently in our 2014 agenda. I would like to mention firstly regarding with the share or asset sale of Harranova. As you know, it was resolved by the Board of Directors of Harranova that tomato and tomato paste operations are ceased, and the studies for the evaluation of strategic opportunities are begun due to the unsatisfactory profitability from the operations. Harranova held an extraordinary shareholders meeting on December 26 th 2013 for the submission of the provided results to the consideration of the shareholders within the framework of the restructuring of the operations and the strategic options including material asset sales. In this respect, the studies for the evaluation of strategic options including Harranova share and fixed assets sale have begun by Tat. Secondly, in 2014, the targeted revenue growth is over 15% and the volume growth is over 10% in total. Segment wise, targeted revenue growth will be expected to be 26% from the tomato and the canned products, 14 % from each dairy and meat products growth, and lastly 10% from pasta products. Capacity increase, modernisation, and the construction investment in Tat, Sek, Maret, and Pastavilla facilities will continue in year Total capital expenditures will be around $26 million. When we look at the breakdown of this investment programme, mostly the expenditures will be related with Maret operation, as we discussed before, and After moving the existing Maret facility from Istanbul to Bursa, to the same campus together with Tat tomato operations and Sek operations, total construction and the machinery equipment expenditure will be around $12 million. Also some brand new machinery equipment purchasing will be made during the year 2014, with the modernisation of the existing machinery equipment in the current facility, will be transferred to the new factory. The second largest investment item that we are planning is for the Tat operation. Actually, the majority will be very much related with the purchasing of some second-hand assembly lines and also some machinery from Harranova to Bursa city, which will be around $2.5 million. The rest, $1.5 million, also will be utilised for the modernisation programme of the existing Tat branded facilities.

5 For Sek operations, we are planning to make around a $5 million investment programme. The majority will be related with the new products. The rest will be utilised again for the modernisation and maintenance. Lastly, around a $1 million investment programme is planned for the pasta operation. Marketing investments will continue with the new products, new faces, and new campaigns in all product categories and the Company will continue to concentrate on more value-added products like we did before. I would like to end up review and now we can go through the Q&A session. Question and Answer Session Ladies and gentlemen, if you wish to ask a question, please press zero one on the telephone keypad. Please lift your handset before you ask your question. Thank you for holding until we have the first question. We have a question from Miss Melda Ağırdaş from Finans Invest. Madame, please go ahead. Melda Ağırdaş Hello, good afternoon, thanks for the call. I have a question regarding Tedi actually, your new investment regarding the fruit juice, what kind of strategy should we expect from this business and what kind of revenues are you targeting for 2014 or, let s say, in the mid-term? Also, can you also repeat the sales projection for the dairy segment. Melda Hn, thank you very much for the questions. First of all, let s begin with the Tedi. Let me remind you first that Tedi is a 50/50 joint venture company together with the Polish very big juice company, Maspex. Actually, just to remind you that the Company results will not be consolidated together with Tat s at the end of We will make just a consolidation on the equity side, so this is just reminding, but on that then let s turn back to the strategy of Tedi. As you know, there are lots of very well known juice companies, but there is not any segmentation for the time being at least in Turkey for the child segment. Our idea is that it was a missing point for Turkey. Especially in

6 Europe, including Poland, there are such segmentations and we will try to do the same thing in Turkey, and we wanted to prepare specific products for the child segment. That s why, the aim is to prepare a product with the fruits, on the base of carrot, adding some other fruits like orange, apple, pineapple, and apricot. The idea is, first of all, to visit mothers and the teachers, mention about how beneficial product we are serving. This year, the idea mostly penetration of the products in the market, but in five years time, we are targeting to reach and pass through TRY 150 million for the products, and targeted profit margin will be very much closely to Tat s margin level. Melda Ağırdaş Tamer Bey, I just missed the part that you were guiding for the year revenue growth for dairy segment, I heard growth figures for the other segments, but I missed that part. The revenue growth for the dairy segment is about 14%; mostly it will come from the more value added products. As you know, especially daily milk is growing very fast. Melda Ağırdaş Thanks so much, Tamer Bey, and also a little follow-up question regarding Tedi, will you be utilising the existing plant or should we expect additional CapEx or new CapEx for the production part of the new business. For the time being, according to the project, we will continue with the importation of the product from Poland, and get responses to the new product from the market during the year We are not planning to make any capital expenditure for the project in For the end of next coming year we will be beginning capital expenditure programme. Targeted location for the factory campus is Mustafakemalpaşa, in Bursa. As announced that we already have made TRY 27 mio capital increase to the Company and both parties already paid TRY 13.5 million and all the marketing investment will be made through that money from the Company.

7 Melda Ağırdaş Thank you so much, Tamer Bey. You're welcome. Ladies and gentlemen, I would like to remind you that if you wish to ask a question, please press 01 on your telephone keypad. We have a question from Mr Erdem Hafızoğlu from BGC Partners. Sir, please go ahead. Erdem Hafızoğlu Hello, thanks for the call. Regarding the guidance for 2014, did you mention about 26% of growth for the tomato operations? The second question is, maybe I have missed that, but what is your guidance about EBITDA margin? As you may remember, because of the discontinuation of the Harranova operation, Tat will purchase some of the machinery and equipment, and will extend its existing capacities in the west side of Turkey. Accordingly, the amount of the tomato purchasing and the contract basis will grow during the year The idea is at least to keep, as it is all the existing export clients portfolio belongs to HO. So accordingly, totally, the growth of the tomato products growth will be around 26% if you compared with the previous year. Targeted EBITDA margin for the whole Company will be around 6.5% for the year Erdem Hafızoğlu Thank you. You are welcome.

8 We have a question from Mr Ilyas Urganci. Sir, please go ahead. Ilyas Urganci Tamer Bey, thank you so much for the presentation. Can you actually give an idea about the raw material trends in 2014? As far as we know, from the press, we have seen some increase on raw meat prices, for example, how do you expect this to reflect on your margins on the dairy side, as with other segments as well. Secondly, I want to ask you, how do you see the impact of the new regulation on the processed meats side. As far as we can see, there is not an improvement on your gross margin in Should we expect some improvement next year with the impact of this new regulation? Thank you so much. Thank you very much for the question İlyas Bey. According to Tat s 2014 business plan assumptions, raw material prices will be in the increasing trends. Vegetables especially tomato prices may have around %5 upward trend. Raw milk and raw meat prices may also have around % 10 and %8 upward trends accordingly. For the 2014 targeted gross margin level of the processed meat products are higher than the previous year level. Ilyas Urganci Also, should we expect this year the sale of the idle land in Tuzla to be completed? I hope we will be sharing the information that we come to conclusion on the sale of the land during the year. Ilyas Urganci Thank you so much. You are welcome.

9 Ladies and gentlemen, I would like to remind you that if you wish to ask a question, please press 01 on your telephone keypad. We have no other questions. Mr, back to you for the conclusion. Thank you very much for joining the conference call, and if you have any further questions after the meeting, please feel free to connect us and call us and write us. We will try to give all the answers as soon as possible. Thank you again. Neslihan Kazancı Thank you, have a nice day. Ladies and gentlemen, this concludes our conference call. You may now disconnect.