Sabancı Holding Industrials SBU
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Sabancı Holding Industrials SBU
2
Develop leadership positions through leveraging Sabanci’s
Industrials SBU
longstanding industrial heritage
Sabanci has a longstanding industrial heritage
• The early foundations of Sabancı were based in the industrials sector - it’s in our DNA
• Sabancı has driven growth in a number of long-term key industrial investments over time
• The industrials segment is core to the overall holding company and provides a number of attractive qualities
− A gate to Globalisation (currently running operations in 4 continents)
− Technology know-how and leadership in mobility and material technologies (strong R&D Centers and innovation capabilities linked with
Sabanci University)
− Strong Operational Excellence Culture (Safety, Quality, Cost Excellence)
− Strong Engineering Capabilities (Ability to execute investment projects worldwide, design and develop own machinery and products)
− Strong FX denominated cash generation
• A talent pool for Sabanci’s top leadership through global experience
3
Industrials SBU Current Group Companies
• Turkeys Leading Tire Company • Turkeys Leading Tire Company
• Leader in commercial vehicle
• Strong tyre manufacturing brands -
• Global Leader in Reinforcement Bridgestone, Lassa, Dayton
manufacturing and distribution
Materials − Bus, minibus and coach (own
− Tire Cord Reinforcement • Largest Dealer Network brand)
(Ny6.6, PET, Hybrids) − Light and heavy trucks (Fuso,
• Investing in services business (fast
− Composites (CF, GF, Aramid) fit service and fleet operations) to Volvo)
− Construction Reinforcement broaden revenue sources and − Construction equipment
(NY6.6, PP) increase capital light business (Komatsu)
• Worldwide Operations in 4 • Completed 2nd plant investment − Pick ups and Passenger Cars
continents (Mitsubishi)
• Best cost position in Europe
• Reinforcements Innovation Leader • Investing in electrical and
(600 + patents) autonomous vehicles and looking
to leverage the fleet via
• Stable cash and dividend digitalisation
generation
• Automotive R&D and Innovation
• Significant growth opportunities Champion
• Strong Position in EU and North
America
4
Industrials SBU Technology leader across the Group Companies
Proprietary technology Creation of innovative products… 1st R&D certified company in Turkey
Inventions All-Season tire project 94 Approved patents
Patent Applications
(MULTIWAYS) Turkey’s first 100% Electrical Bus and Battery
Patents Granted
Management System
185 employees
OE Tires with special 9500m2 workshop area
2003 2006 2009 2012 2015 2018 compound technology
INVENTIONS TOTAL APPLIED GRANTED Worldwide customised products
170 692 201 Avenue MD9
TBR
Potential to Create Value by Licencing Technology Electron ElectriCITY TS35 E
Local Production
(exponential increase)
Cutting edge new products …and services
Rolling resistance improvements through • Commercial solutions
higher modulus for high performance tires
− 100+ Profleet consultants
Protection layer for truck & bus tires;
reduces tire weight − 1000+ vehicles per year 20 new products in the last 3 years
− 2 TLm saving/fleet annually
RF Free Coating Technologies Recognised leader
Aerospace and automotive composites • Retail services
NY and PP Concrete reinforcement fibers − Franchise model
− 200 targeted sales points Innovalig Champion R&D Summit Automotive
Driven by Kordsa & Sabanci University collaboration
and establishment of test centres worldwide − 98% customer satisfaction level 2016, 2017 Category Champion, 2017
5
Industrials SBU Operational Excellence is in our DNA
Global Operations Benchmark in Bridgestone Cost Leader
Continuous cost and quality Strong Operational Excellence Culture Strong manufacturing cost position
improvements developed through 30 years JV in Adana
experience of Sabancı and Bridgestone
Lean Management Structure Strong absorption ratio in
Suru Raku Standardization approach distribution businesses covering
Globally Deployed TPM tools and fixed costs
methods Benchmark in Bridgestone System
Utilizing advantages of multi-brand
Focus on cash generation, strong Focus on Cash Generation and strategy in back offices
fixed cost and working capital Excellent Working Capital Control
control Leveraging advantages of strong
automotive supply chain in Turkey
Turkey’s Quality Circle Leader in the
last 6 years
6
Industrials Segment Continuous growth and consistent dividend generator
Combined Revenues Combined EBITDA*
TLbn TLbn
6,6
5,1 5,2 20%
4,9 19%
4,6 18%
16% 17%
1,1
1,0 1,0
0,9
0,7
2013 2014 2015 2016 2017 2013 2014 2015 2016 2017
Combined Net Income* Dividends paid
TLm TLm
639 627 634 631 346
320
288 298
445 243
2013 2014 2015 2016 2017 2013 2014 2015 2016 2017
*Financials excluding one-offs and including Philsa
7
Industrials SBU Strong growth trends for mobility and material technologies
Reinforcement market expected to enjoy continued growth Strong demand for advanced composites
kton Global reinforcement market Million $
5577
1177
1142 5164
1107 4763
1073
1040 4417
1009 4087
978 3787
949
3507
3256
2016 2017 2018E 2019E 2020E 2021E 2022E 2023E 2016 2017 2018E 2019E 2020E 2021E 2022E 2023E
Source : Company Estimates Source: Lucintel - Growth Opportunities in the Global Advanced Composites Market
Global Tire Market growth continue consistently Global Bus Market growth will speed-up
Million units Kunits
2010
1962
1909 687
1851
1791
1741
1690 568
1637 541
515
491
2016 2017 2018E 2019E 2020E 2021E 2022E 2023E
Source: LMC Tire Forecast
2013 2017 2018E 2019E 2023E
8
Industrials SBU Key Global Trends Affecting the SBU
Strategic Financial
TREND
Implication Implication
Rise of Autonomous Vehicles
Smart Cities
IoT and Smart Devices
Big Data and Data Mining
Electrification
Energy Storage
Demand for Alternative Energy
Robotics and Automation
Light weighting (New Materials)
3D Printing
Demand for Infrastructure
Drones and air transportation
9
Industrials SBU Developing next generation Industrials – “Industry 4.0”
Industry 4.0 Project Portfolio New Tyre Plant in Aksaray / Turkey Smart Mobility - Robotics
Future TCF Digital Plant Turkey’s 1st Smart Tyre Plant Fleetics (Smart Mobility System)
ASRS (Automated Storage and Retrival
System) − Combines data and cloud technologies
Digital Quality to remotely monitor vehicle data in
− Real time tracking and tracing
(Digital Yarn, Cord,Fabric Twins) material handling order to improve vehicle design
Robotics − Auto Dopping, storage and transfer
Material Handling Robots,
Warehouse Control System
Process Robots
− Implement FIFO
Worldwide Shop Floor (IoT) System
Data Analitics
− Automatic decision making with real-
Online Energy Monitoring time mc data
Autonomous Bus Driving
Visibility in Energy Consumption
Sustainable Infrastructure E-Cube
− Natural Lighting, solar panels, high Introduction of robots in the
heat insulation coating in roof &
walls, rain water collection & recycling manufacturing process
system
− Focused on increasing operating
efficiencies
10
Leveraging our platform to take advantage of trends
Industrials SBU
both at home and abroad
Current Future
• Building upon the industrial knowhow generated • “Continued focus on mobility and energy storage,
through partnerships with world’s known industrial renewable energy equipment and material
players. technologies opportunities globally
• Industrial SBU runs and develops businesses at global
scale in mobility and materials fields • Maximising capacity utilisation, and selected capacity
increases, to drive revenue and profits
• New industry trends (CASE) in mobility and
sustainability driven developments in material sciences
bring new opportunities to Industrial SBU through its • Increase in exports to increase share in developed
existing core competencies market demand
• In addition, existing core competencies of Industrials
group brings in new opportunities in group’s other • Leverage macro trends and global partnerships for
sectors like energy, cement continued growth
• Continued focus on operational and commercial
excellence, innovation management”11
Industrials SBU New Generations Sabancı
Capital Allocation
Kordsa: Transformation to a Reinforcement Company
• Tire Reinforcement to Composites and Construction
• Balanced Footprint: Tire-West to East, Composites-North America and Europe
• Innovation and Technology
Temsa: Bus Manufacturer to a Mobility Player
• Electrification: I Bus, Electron, E Cube
• Fleetics
• Local to Real Exporter
SBU: Looking for new opportunities at the intersections
• Energy – Industry (Energy storage, Renewable Energy Technologies)
• Material Sciences
Technology and Data
Industry 4.0 in manufacturing processes
Advanced Analytics Initiatives in Customer Processes
RPA (Robotics Process Automation) in offices
Talent Management
Developing Industry Leaders through Sabancı University Industry Leaders Program
Best Practice Exchange through Quarterly Sabancı Excellence Visits
Global Expatriation and Short Term Project AssignmentsKordsa Investor Presentation
July, 2018Disclaimer The information and opinions contained in this document The Company does not undertake any obligation, and have been compiled by KORDSA Teknik Tekstil Anonim disclaims any duty to update or revise any forward Şirketi (the “Company”) from sources believed to be reliable looking statements, whether as a result of new and in good faith, but no representation or warranty, information or future events. Neither this document nor expressed or implied, is made as to their accuracy, the information contained within can construe any completeness or correctness. No undue reliance may be investment advice, invitation or an offer to buy or sell the placed for any purposes whatsoever on the information Company and/or Its group companies’ shares. The contained in this presentation or on its completeness, Company cannot guarantee that the securities described accuracy or fairness. This document may contain forward- in this document constitute a suitable investment for all looking statements by using such words as "may", "will", investors and nothing shall be taken as an inducement to "expect", "believe", "plan" and other similar terminology any person to invest in or otherwise deal with any shares that reflect the Company management’s current views, of the Company and its group companies. The expectations, assumptions and forecasts with respect to information contained in this document is published for certain future events. As the actual performance of the the assistance of recipients, but is not to be relied upon companies may be affected by risks and uncertainties, all as authoritative or taken in substitution for the exercise opinions, information and estimates contained in this of judgment by any recipient. You must not distribute the document constitute the Company’s current judgment and information in this document to, or cause it to be used are subject to change, update, amend, supplement or by, any person or entity in a place where its distribution otherwise alter without notice. Although it is believed that or use would be unlawful. Neither the Company, its board the information and analysis are correct and expectations of directors, directors, managers, nor any of Its reflected in this document are reasonable, they may be employees shall have any liability whatsoever for any affected by a variety of variables and changes in underlying direct or consequential loss arising from any use of this assumptions that could cause actual results to differ document or its contents. materially. External 2
Global Footprint
715 patent applications*
4 continents ~4,000 2 R&D 218 patents
8 facilities employees Centers 172 inventions
WE REINFORCE LIFE
*as of 2018YTD
External 3Kordsa in Brief
T L F i n anc ials ( M T L )
2017 1Q 2018 1Q D
Sales 631 713 + 12.9%
EBITDA* 110 120 + 9.0%
EBITDA* margin (%) 17.4% 16.8% - 0.8 bp
U S D F i n anc ials ( M $ )
2017 1Q 2018 1Q D
Sales 171 187 + 9.4%
EBITDA* 30 31 + 5.6%
EBITDA* margin (%) 17.4% 16.8% - 0.8 bp
2 0 1 8 Gu i d an c e
Sales Growth + 15-25%
EBITDA* Growth + 15-25%
(a) As per March 31, 2018 CMB Report, Mar using avg TL/USD fx rate of 3.81
EBITDA* = Gross Profit – OPEX + Depreciation/Amortization
External 4Kordsa in Brief
Tire cord fabrics (“TCF”) Next generation fabrics Composite Construction
• Nylon and polyester based • Textile reinforcement • Carbon fiber, aramid, • Macro and micro fibers for
tire reinforcement fibers materials for green tires hybrid fabrics, and pre- concrete and soil
and fabrics for radial and • High performance pregs reinforcement
Description bias tires Monofilaments • Production technologies
• Global #1 by revenue/ #2 • Green Products with for composite materials
by capacity @ NY66 TCF Resorcinol Formaldehyde • High value added
• Global #2 by revenue / #3 Free Dipping thermoplastic and
by capacity @PET TCF • Highly engineered hybrid thermoset resins
cords with superior
properties
End markets
Selected
end-market
participants
External 5Milestones
Second R&D
Center
Brezilya @Composite
Global Start up of GPTW Technology AS9100
Merging The Best
Technology Indonesia Export 2 years Center of RevD
Acqusitions Reinforcer expansion R&D
Centre in Izmit Champion in a row Excellence Certified
Center
1973 - 2005 2006 2008 2010 2014 2015 2016 2017 2018
Kordsa Growth in Member of the Commercialisation Innovation Sustainability Composite Fortune 100 Fastest-
Asia; Indonesia, TURQUALITY of Kratos Strategy Report Technology Global 100 Growing
Thailand, China Global Brand Champion received 2 Center of Companies
Programme Gold Awards Excellence in Indonesia
from LACP in 2016-2017
External 6Overview of The Tire Cord Fabric Value Chain
Raw materials Manufacturing Process Products
Kordsa Products
NY66 and
Polymerisation PET HMLS
Spinning
Yarns
Oil Derivative
Twisting
Ingredients
For NY66 yarns:
• Hexamethylenediamine
(HMD)
• Adipic Acid
• NY66 Salt
• NY66 Flake • A tire is a highly complex composite with approx. 40
Dipped Greige
Dipping Weaving components working under dynamic conditions
For Polyester HMLS Fabric Fabric
• NY66 typically used in cap plies
yarns: • PET typically used in radial plies
• PET Chip • Approx 7-10% cost of a tire is Tire Cord Fabric
Twisting
Ko rd s a f ab ric s are d e v e l o p e d f o r s p e c i f ic re q u i re m e nts an d are c u s t om m ad e
External 7Overview of The Composites Value Chain
Raw materials Intermediates Composite Parts
Precursors & Fibers: Weaving
• PAN Precursor
• Carbon Fiber
• Aramide
• Glass Fiber
• ...
Resins:
• Phenolic Prepregging
• Epoxy
• Cyanate ester
• Composites use in aerospace & automotive is incresing,
due to improved material properties and weight savings
over conventional materials
• «Lightweighting» is a major theme, driven by emission
regulations as well as fuel-efficiency needs
Twisting
Ko rd s a f ab ric s an d p re p re g s o f f e r c u t t in g e d g e s o l u tion s f o r ae ro s p ac e & au t o moti ve m ark e t s
Confidential 8Overview of The Construction Reinforcement Value
Chain
Raw materials Manufacturing Process Reinforced Concrete Structures
NY66 and
Polymerisation PP
Spinning
Fibers
Oil Derivative
Ingredients
Twisting
For NY66 Fibers:
• Hexamethylenediamine
(HMD)
• Adipic Acid
• NY66 Salt
• NY66 Flake
Major • Screed concrete
Cutting Pucking Dipping applications:
For PP Fibers: • Concrete roads
• Polypropylene Chips • Tunneling
• Shotcrete
• Slab on ground
concretes
Ko rd s a ’ s Krat o s F ib e r R e i n f o rce me n t are ap p l i e d i n S u p e rs t ruc ture & I n f ras tru cture S o l u tio ns
Confidential 9Strategy House
Pillar Initiatives
•Reinforcements for
•Competitive Cost •Profitable Growth for Tire
Composites Industry
Industry
•Product and Service Quality
Leadership •Reinforcements for
•New Products for High Construction Industry
•Lean and Agile Processes Performing Tires
and Teams •Fibers for Alternative/ Adjacent
Industries
Foundations
Our Values
Customer Open Minded Result Driven Global Continuous
SHE Ethics
Focused Collaboration Improvement
External 10Must Win Battles
a. Continue TPM implementation at every site for zero
1. incident, zero defect, zero downtime
Operational b. High capacity utilization and/or optimisation at all
Excellence entities
c. Local Talent Development for cost and productivity
2. d. Focus on high value add segments
e. Investing for smart plant, deployment of Industry 4
Profitable
Growth in developments to support growth - future plant concept
Tire Industry f. Continuous Renewal of Product Portfolio – new product
revenue and increase approval base
3. g. Ramp up Composite Reinforcement Business and
Profitable complete inorganic growth
Growth in h. Ramp up Construction Reinforcement Business - PP line
Adjacent start up and global collaboration/ partnership
Industries i. Find out Alternative end uses for NY6.6
Focus on tire industry for profitable growth, selectively grow adjacencies
External 11Market Dynamics
Glo b al A u t o mo tiv e M ark e t
Global LV Assembly – M Units / Year 2018-2023E CAGR: +2,5%
• AP Exc. China: +2.4% ASEAN region expected to grow
102 105 107 109 • China: +3.4% Demand expected to grow parallel with
97 100
GDP increase, effects of tariff wars
• EMEA: +2.2% Middle East is expected to continue to
grow
• NA: +1.0% negative effects of tariff wars, Crossover
segment demand is strong
2018E 2019E 2020E 2021E 2022E 2023E • SA: +2.5% Market is recovering
Ap. Exc. China China EMEA NA SA
Source: PWC Autofacts
Glo b al T i re M ark e t
Global LV Tire Production– M Units / Year 2018-2023E CAGR: +2,9%
1.909 1.962 2.010 Tire Market mainly correlated to
1.851
1.741 1.791 Automotive Market Growth.
• AP Exc. China: +2.5%
• China: +4.9%
• EMEA: +1.7%
• NA: +1.3%
• SA: +3.0%
2018E 2019E 2020E 2021E 2022E 2023E
Ap. Exc. China China EMEA NA SA
Source: LMC Tyre Forecast
External 12Market Dynamics
T ire R e in f o rc e me nt M ark e t ( N Y 6 . 6)
2018-2023 CAGR: +2.5%
600 100%
95%
Nylon 6.6
500 91%
90%
85%
400
80%
300 76% 75%
• Limited number of suppliers & increasing demand for
70% another market, Engineering Plastics category, drive
200
65% NY66 raw prices higher. Engineering Plastics market
100
60% pays higher premium.
55%
• Switching to Ny6
0 50%
2018E 2019E 2020E 2021E 2022E 2023E • Newcomers in NY66 from China (Kangwei, Dikai)
Demand Supply Market Utilization Kordsa Utilization • PET usage in cap-ply
Source: Company Estimates
T ire R e in f o rc e me nt M ark e t ( P ET )
2018-2023 CAGR: +3.5% PET HMLS
1000 100% 100%
900 95%
800 90%
700 85% • Further growth of existing emerging PET HMLS producers
600 81% 80%
500 75%
(Hailide ,Hengli,Far Eastern)
400 70% • Consolidation by Indorama (acquiring PF Kaiping,
300 65% Glanzstoff, Durafiber)
200 60%
• Increasing PET usage in Tire
100 55%
0 50%
(*Capacity increase news aren’t common for further years.
2018E 2019E 2020E 2021E 2022E 2023E Therefore supply’s increase is shown smaller after 2019)
Demand Supply Market Utilization Kordsa Utilization
Source: Company Estimates
External 13Kordsa Highlights
Market leadership based on longstanding strategic partner status with all
1 global tire players
2 Global footprint with large presence at growth regions
Volume growth supported by favourable OE and replacement tire
3 demand
4 Technology leadership at the cutting edge of reinforcement
Growth opportunities from new tire reinforcement products and
5 adjacent construction and composites reinforcement sectors
6 Strong cash generation and dividend payout
7 Experienced management team with proven track record
External 14Market Leadership Based on Longstanding Strategic
Partner Status with All Global Tire Players
Nature of customer relationship as key barrier to entry Leading market shares
Length of Typical length of Co-development
relationship approval period(a) projects
Other
%17
Global Tire
Player 1
Since 1986 ~ 5 years D
%4
A
NY66 HDI %32
C Market
Global Tire %11
Player 2
Since 1995 ~ 5 years Share 2018
B
%8 Kordsa
Global Tire %28
Player 3
Since 1973 ~ 3 years
Global Tire Other
Player 4
Since 1985 ~ 2 years %22
A
PET HMLS %31
Global Tire
Player 5
Since 1973 ~ 3 years D Market
%8 Share 2018
Kordsa
C %11
Global Tire
Player 6
Since 1987 ~ 2 years %10 B
%17
(a) For a new supplier Source: Company Estimate
St ro n g b arriers t o en t ry f o r n ew c o m ers
External 15Capitalize on Global Footprint and Entrenched
Supplier Status with All Key Tire Manufacturers -
Segmental Progress
Global Players Regional Players Emerging Players Others
17% 17% 16%
22% 22%
26%
6% 6% 5%
6% 4%
5% 11% 12%
11% 7%
12%
12%
66% 66% 67% 66%
57% 60%
2014 2015 2016 2017 2017Q1 2018Q1
External 16Global Footprint (Revenue)
2013 2014 2015 2016 2017 2017 Q1 2018 Q1
41% 39%
36% 39% 36% 37% 36%
31% 32% 31% 29%
28% 30%
22% 22% 25%
17% 18% 17% 17% 19% 15% 13%
13% 14% 15% 15% 14%
EMEA NA SA APAC
Kordsa • #1 NY TCF producer • The only PET yarn, TCF
• #1 NY TCF • #2 NY TCF producer
and SEC producer in
market • #1 PET TCF producer producer in the US
• #2 PET TCF producer
LATAM
position
TURKEY
Headquarters Istanbul, Factory Izmit, Technology Center Izmit,
Composite Technologies Center of Excellence
Tire (NY6.6, PET, SEC, TCF), Composite, Construction
Regional
footprint
versus key
competitors
USA
Kordsa Inc. Laurel Hill N.C. Chattanooga, TN. USA
Tire (NY6.6, TCF)
THAILAND
Thai Indo Kordsa Co. Ltd. Ayutthaya, Thailan
Tire (TCF)
BRAZIL INDONESIA
Kordsa Brazil Salvador De Bahia, Brazil Pt Indo Kordsa Tbk. Jakarta, Indonesia
Tire (PET, SEC, TCF) Tire (NY6.6, PET TCF)
External 17Well – Positioned to Enable Volume Growth
Co m m e n ts Light Vehicle Tire manufacturing market evolution
SA SA
%6 %4
• Fabric form contributes the highest value add NA
• Disciplined approach to optimizing footprint NA
APAC
%13
%21
• 2015 investment in Indonesia has increased polyester tire %41
APAC
2005 2017
cord fabric capacity by 18 ktons EMEA
%59
EMEA
• * enables regional growth in technology-advantaged PET %32 %25
segment with global and emerging customers
• Further investment in PET HMLS for new generation yarns
• In TR for 6-6.5 ktons – due for completion in Q4 2018. Kordsa regional capacity development
• In Indo for 6,5 ktons – completed in Jan-2018.
SA
%9
APAC
SA
%19 NA
%20
Ko rd s a T CF v o lu m e d e v e l o p me n t (a) %21
APAC
2005 EMEA 2017 %32
NA
%33
%28 EMEA
250 100% %38
74% 73%
(2006 indexed to 100)
200 73% 80%
57%
Volume sold
150 60% Revenue Split
142 150
139
100 40%
100 2016 2017 2017Q1 2018Q1
50 20%
0 0%
2006 2015 2016 2017
36% 37% 36% 39% 31% 32% 31% 29%
Volume Sales % of TCF 18% 17% 17% 19% 15% 14% 15% 13%
(a) Volume development adjusted for divested volumes EMEA APAC NA SA
(b) Capacity expansion has finalized as of January 2015
External 18Technology Leadership at The Cutting Edge
of Reinforcement
S t ro n g f o c u s o n R & D Cu t t ing ed ge n ew p ro d u c ts
52
61* *2018
expected Rolling resistance improvements through
41 42 45 higher modulus for high performance tires
Sales from new products
Protection layer for truck &
bus tires; reduces tire weight
(US$m)
**18Q1
15** actualized
T802 7% higher tenacity and better fatigue
2014 2015 2016 2017 2018E performance for aircraft tires (bias)
* Once “new product life cycle” is completed in 7 years, it is transferred to “regular sales” portfolio 4G PET 10% higher dimensional stability for better
* Incl. Replacement products and incremental new products tire performance (improved labeling)
S e le c t e d c o l l ab oration s( a) L e ad e rs h i p i n I n n o v ation an d T e c h n o log y ”
• Best performed R&D center award of the year
2014 in all industries.
1 • R&D Center ranked best in textile category for the
last 6 years by the Turkish Ministry of Science,
Industry and Technology
• Innovation Strategy Champion
1
Turkish Exporters Assembly/InovaLeague
Top • Among the national top 6 institutions of
(a) includes both, universities as well as individual academics from the names institutions 6 R&D patent registration in Turkey.
Annual R&D expenses correspond ~1% of the consolidated revenue
External 19Further Growth Opportunities: Composite
M i d - t e rm o p p o rtun ity : c o m p o site s re i n f o rc e me nt
Cu rre n t s t at us Buy & Build
• Composite Technologies Center of Excellence opened in 2016 (~30 • Initial step of acquiring FDI & TPI in the US
MM$ investment) • Regulatory approvals are obtained from authorities, closing
• Ongoing development programs & joint projects with aerospace & expected in Q3 2018
automotive customers and major universities in both Turkey and
Europe. • Potential M&A targets are always under consideration
• Our target markets are Aviation, Automotive, Maritime and also (Competency fit and development opportunities, market
Rail Systems penetration and growth)
Confidential 20Growth Opportunities: Construction
Co n s t ruc tion R e i n f o rce me n t
Samsun 2nd and 3rd 3rd Bosphorus Bridge
Stage Light Railway Toll Booths and
Track Slab Electronic Pass Areas Asyaport
(Non- Conductivity (Non-Conductivity Tekirdağ Port
Concrete Concrete KraTos Macro
Reinforcement) Reinforcement) Reinforcement
KraTos Macro KraTos Macro
Reinforcement Reinforcement
• KraTos Macro & Micro Synthetic Fibers are approved and applied in over 50
significant superstructure, industrial and infrastructure reference projects.
• Non-conductivity concrete reinforcement applications with KraTos Synthetic Fiber
Current Reinforcements are approved in significant government-funded infrastructure
projects.
Status • "KraTos CEM: Bagged Cement With Pre-Dosed KraTos Micro Fiber Reinforcement"
projects development studies continue.
• Kordsa İzmit Plant, R&D Concrete Lab technical and test equipment capabilities
have increased. Technical Project Report service will be available for infrastructure
projects.
Confidential 21Well-Positioned for Strong Cash Generation and Dividends
Co s t d e v e l o p me nt ( U S $ ) • Demonstrates value-based pricing model
• Ability to pass through raw material price
TCF NY Yarn PET Yarn volatility:
100
98
(Revenue – raw material costs) tracked as a KPI by
96 91
sales team
Cost per ton
(indexed)
86 88
92 87 85 • Conversion costs as a key metric for management
87
84
KPIs (main components are personnel expenses
83 and energy costs)
81
75
2013 2014 2015 2016 2017
100
97 Other
Total fixed cost
-3.1% %21
(indexed)
87
-9.8% 86
87 Distribution
-1.3% 0.2%
& Packing 2018 Q1
80 %3 expenses by
2013 2014 2015 2016 2017
Energy Expenses
nature
F X e x p o s u re %10
Personnel Expenses Raw
Bant %13 Materials
BRL
EUR %3 %53
%5
%24 IDR
%5
• Hard currency revenues
TL • FX exposure on costs => EM footprint on local
Revenue %13 Costs costs + hard currency priced raw materials
(2018 Q1) (2018 Q1) • Benefit from US$ appreciation vs. TL, IDR and BRL
US$ US$
%76 %74
External 22Well-Positioned for Strong Cash Generation and Dividends
Gro s s p ro f i t Co m m e n ts
% margin
200 Price is a function of
21.1%
• Value Proposal of Product including services
21.6%
offered
(TLm)
• Product type (nylon vs polyester or fabric vs yarn)
150 • Raw Material Price Movement (formula based
136
100
pricing with adjustment on raw material indexes)
2017Q1 2018Q1
EB I T D A *
10 yrs avg EBITDA 12,0%
Target is progressive improvement in EBITDA
% of sales 16,8%
17.4%
margins over the medium term
150
• Focus on value
100 • Improved Total and per kg Fixed Cost
(TLm)
50 110 120 • Successful selling, general and administrative
(“SG&A”) cost reduction initiatives across all
0 business units
2017Q1 2018Q1
• Positive contribution of new products and
adjacent businesses
Di v i d en d d is t rib ution
Dividends:
80
60 • Lower of the Kordsa Turkey solo tax books
(TLm)
40 68
61 67 (VUK) or Kordsa Consolidated TFRS (IFRS) net
20
58
35 income - subject to general assembly
0 0
2012 2013 2014 2015 2016 2017 approval
(paid in 2013) (paid in 2014) (paid in 2015) (paid in 2016) (paid in 2017) (paid in 2018)
EBITDA* = Gross Profit – OPEX + Depreciation/Amortization
External 23Kordsa's Guidance & Financial Policy
Our company guidance for financial year 2018 is
as follows:
EBITDA Kordsa is targeting progressive improvement in
EBITDA margins over the medium term
Revenue : 15-25% margins
EBITDA: 15-25%
(These growth rates do not include the effects of acquisition of Distribution of all the distributable profits
Fabric Development Inc. and Textile Products Inc.
As of 02.07.2018: • which is lower of the Kordsa Turkey solo tax books (VUK) or
The approval process of the Committee on Foreign Investment in Kordsa Consolidated TFRS (IFRS) net income
the US (CFIUS) has been completed to acquire "Fabric • in the form of cash and/or bonus shares
Development" and "Textile Products Inc." which provide advanced • subject to general assembly approval
composite materials to the commercial aviation industry. The Dividend
closing process for the acquisition of FDI & TPI, which is estimated The distribution decision is agreed taking into consideration
to be completed within one month, has been started.) policy the sizable fixed asset purchases, acquisitions, covenants of
current liabilities and the Company’s mid and long term
strategies, national and global economic conditions
Kordsa does not apply payment of advanced dividends.
Reoccurring
Creep Capex USD 23 million
External 24Update on The 2018 Q1 Results
Ke y F i n an ci als
(in TL million, unless otherwise stated) 2017 Q1 2018 Q1
Sales 631 713
Gross profit 136 150
Gross profit margin 21,6% 21,1%
EBITDA* (b) 110 120
EBITDA* margin (b) 17,4% 16,8%
SARM margin 8,2% 8,4%
Net income (a) 61 61
Effective Tax Rate 15,5% 16,7%
WC Turnover 3,42 3,03
CAPEX (MMTL) 41 46
Net Debt/EBITDA 1,9 2,0
Dep./Amort. (MMTL) 25 29
(a) IFRS, excluding non-controlling interests portion
(b) EBITDA* = Gross Profit – OPEX + Depreciation/Amortization
Kordsa continues to perform well based on its value strategy
External 25We Reinforce Life
Reinforcing 2 out of every 3 aircraft tires and
26
1 out of every 3 automobile tires produced in
the worldAppendix
27Kordsa in Brief
2018 Q1 Revenue Split
Asia EMEA Tire Cord Fabric
%29 %39 %73
SA By Region By Product
%13
NA Adjacents Nylon Yarn
%19 %6 %21
2017 Revenue Split
Asia EMEA Tire Cord Fabric
%32 %37 %76
By Region By Product
SA NA Adjacents Nylon Yarn
%14 %17 %4 %20
External 28FX Rates
F X R at e s as o f M ar, 1 8
Monthly Avr Mar YTD 2017YE
$/TRY 3,88 3,81 3,65
EUR/$ 1,23 1,23 1,13
$/BRL 3,28 3,24 3,19
$/IDR 13.757 13.576 13.557
$/THB 31,28 31,54 33,94
Month End Mar YTD 2017YE
$/TRY 3,95 3,95 3,77
EUR/$ 1,23 1,23 1,20
$/BRL 3,32 3,32 3,31
$/IDR 13.756 13.756 13.548
$/THB 31,23 31,23 32,68
External 29SABANCI INDUSTRIAL DAY
4 JULY 2018
Confidentiality LevelBRISA AT A GLANCE
Strong Partnership of 30
Years
Best Governance with SA/BS
-------------------------------------------------------------------------------------------------------------------------------
Covered area Production Capacity
Tyre Manufacturing and Sales İzmit 361.000 m2 11 mn units
with 2 Plants &
2.700+ Employees Aksaray 146.000 m2 4.5 mn units capacity planned in 2021
-------------------------------------------------------------------------------------------------------------------------------
Passenger
Product Groups Motorcycle Agriculture
Truck&Bus Off-The-Road
-------------------------------------------------------------------------------------------------------------------------------
Replacement
Channels Served Export
Original Equipment
-------------------------------------------------------------------------------------------------------------------------------
Brands
2BRISA STRATEGY...
Export
2.+
Working
Capital
Management
Sales and
Innovation
Leadership
3WHY INVEST IN BRISA...
6% CAGR in last 5 years Growing automotive Leader in Turkish Record high
industry and vehicle pool Replacement Market operational cash flow
2018 Export Targets Potential in car ownership Highest Brand Value in No FX and interest risk on
15% Growth Turkish Tyre Market bank debt
210 million USD
5,4 million units Strong Brands Opportunity in stock price
Strong Dealer Network
Innovation Leader
Technology Leader
4BRISA STRATEGY...
Export
2.+
5EXPORT DRIVEN GROWTH (32% of revenue)
6% average volume growth in last 5 years
2018 Target: Growth by 15%, $210mn, 5,4 million units
70 Countries,
600 branded shops
6000 sales points
Growth with Focused EU Countries: Bridgestone
-------------------------------
-------------------------------
-------------------------------
- high potential Spain, UK, Germany, collaboration;
countries Italy, Balkans Bridgestone
- new countries export growth Outperforming market growth
- new customers Focused Non-EU rates both in EU and in others
- new channels Countries:
CIS, North Africa, and
Asia Pacific
6BRISA STRATEGY...
Sales and
Innovation
Leadership
7PROMISING & GROWING INDUSTRY, DOMESTIC CHANNEL
TURKEY VEHICLE PRODUCTION & SALES
Source: Turksat
HCV: Heavy Commercial Vehicle (Bus, truck & work machinery)
LCV: Light Commercial Vehicle (Minibus, small truck
9% CAGR in last 8 years 7% CAGR in last 8 years 15 years continuous growth in vehicle pool
Vehicle production increase trend Vehicle density is the major indicator for growth
Vehicle sales stable for the last 3 years.
continued in 2017.
Source: LMC Q4 2017
In The last 5 years:
6% average Total Growth 15% Penetration in car ownership
(world avg: 3,3%)
Both OE (9%) and Replacement (5%) are well above
Growth Potential in Car ownership
world average in Turkey
8SALES AND INNOVATION LEADERSHIP
Replacement By Far The Market Leader
Market Share Source: Europool
Consumer Products: PSR Car, LCV, HCV Product Groups
45% market share in Entered to fighting
Strength in Brand Portfolio Best/Better segment segment with Dayton
with BS and LS
Q1
RL MARKETS * 2018 2017 % ~1.400 Points of Sales Increasing
Strongest Dealer
TOTAL Network 4.197 3.703 113% geographical
Consumer 3.629 3.194 114% coverage priority
Commercial 569 509 112%
Q1
BRISA 2018 2017 %
TOTAL 1.343 895 150%
Consumer 1.161 740 157%
Commercial 176 153 115% Solid Increase in Sales and in Market Share
BRISA M/S%
TOTAL 32% 24% 8%
Consumer 32% 23% 9%
Commercial 31% 30% 1%
* Replacement Market, Sell-in Data, Europool Market Share
9SALES AND INNOVATION LEADERSHIP
1 Commercial Solutions
100+ Profleet 2M TL saving 1000+
Consultants fleet/year vehicle/year
Innovation Leader
------------------------------------------------------------------------------------------
2 Fast Fit Service Business(Otopratik)
200 Targeted Preference : 1 out Franchise Battery
Points of Sales of 3 customers Model business
-------------------------------------------------------------------------------------------------------------------------------
1 Dealer-Distributor E-commerce and new
-------------------------------
2
Management channels
Demand Inventory Campaign Spare parts E-commerce for Lastik.com.
forecasting management management platform export tr
Digital Transformation
In Replacement Business ------------------------------------------------------------------------------------------
(Data Analytics) 3 Customer Experience 4 Awards
Sell out focus Innovation for customer Digitalization Pioneers of
leader of sector digitalization
Source: Accenture digitalization index
10TOTAL 426 424 100% 162.208 160.361 101%
PSR 285 300 95% 122.310 114.923 106%
SALES AND INNOVATION LEADERSHIP
LCV 130 116 112% 36.120 40.521 89%
HCV 11 8 134% 3.778 4.917 77%
1 Original Equipment
OE MARKETS
14% of the channel portfolio
Q1
Export oriented growing Commercial tyres golden key
OE MARKETS
sector 2018 2017on repl. market
and impact %
TOTAL 1.971 1.934 102%
Consumer 1.882 1.870 101%
Strategic channel for Tandem mixer
Commercial
future 88 64 139%
BRISA SALES Q1
(TONNAGE) 2018 2017 %
Technology TOTAL 7.179 5.282 136%
2 R&D
Local design, 30 R&D capability & Product
Technology new products 17M $ localization
raw material / year İnvestment in ‘17
3 Smart Internal Processes ( Supply chain, smart factory)
Production Robotic Warehouse&logistics Employee
efficiency systems solutions efficiency
11SALES AND INNOVATION LEADERSHIP : AKSARAY PLANT
-------------------------------------------------------------------------------------------------------------------------------
1st SMART PLANT in TURKEY TYRE SECTOR
300M $ Investment
146k m2 building area
Investment 4.5M Units capacity in 2021
Strong tax incentive. 4-5% effective tax rate since
start of the investment. Possibility to extend to
2021 end
-------------------------------------------------------------------------------------------------------------------------------
Invest one fifth more on 278 MUSD, Decrease Aksaray Story from 2018 onwards
Cost by Two Thirds. Create Sales - Exports, Invest on Tire
Add 55 MUSD in 2018 onwards Machines«
Increase production from 1M units in 2018 to 4,5M
units in 2021
12WHY INVEST IN BRISA...
Record high operational cash
flow for the last 10 years
No FX and interest risk on bank
debt
Opportunity in stock price
13BENCHMARK OF CASH FLOW
BRISA took high place among its peers in cash conversion from OP & Assets in 2017
Focus on cash management
resulted more cash starting from
2017 and onwards
Fantastic Increase in Working
Capital Efficiency
14DEBT STRUCTURE
(1) Debt structure changed to long term in
2016&2017
(2) Debt increase stopped
Risks under Control Main principal debt
100% of debt is hedged to TL. repayment after 2 years
Average cost of debt is 12,65%.
Low interest rates has positive
impact on WACC
15INCOME STATEMENT Q1
Exceptional growth in revenue and EBITDA. We expect 30-40% growth in EBITDA in 2018
Q1
(M TL) 2018 2017 %
Net Sales 694 473 147%
Gross Profit 161 128 126%
% 23% 27%
Total Expenses (94) (81) 116%
EBITDA 106 70 152%
% 15% 15%
EBIT 78 58 134%
% 11% 12%
Net Profit 11 25 46%
% 2% 5%
Significant growth in revenues and nominal gross profit, thanks to higher volume.
Remarkable increase in EBITDA by 52% increase and operating profit by 34%.
Due to operational start of Aksaray plant, financing expenses related with Aksaray investment has started to be
shown in profit/loss statement. Besides, depreciation of Aksaray plant has started since the beginning of 2018.
Hence, net profit decreased.
16BALANCE SHEET Q1
(M TL) 31.03.2018
Financial ratios and working31.12.2017
capital continues to improve
TWC 726 638
Short Term Financial Debt 406 229
(M TL) 31.03.2018 31.12.2017
Long Term Financial Debt 1.448 1.651 Improvement in debt leverage of Brisa
TWC 726 638
Net Financial Debt 1.692 1.686
Short Term Financial Debt 406 229 is continuing. 0.5 improvement in
Long Term Financial Debt 1.448 1.651 Net Debt/Ebitda in the 1st quarter of
2018
Net Financial Debt 1.692 1.686
Ratios 31.03.2018 31.12.2017
Net Debt / Ebitda 4,7 5,2
TWC days 124 137
Ratios 31.03.2018 31.12.2017
Net Financial Debt / Equity 2,5 2,5 Improvement in working capital days of
Net Debt / Ebitda 4,7 5,2
Total Debt / Equity 2,7 2,8 Brisa is continuing. 13 Days
TWC days 124 137
improvement in working capital only in
Net Financial Debt / Equity 2,5 2,5 one quarter
Total Debt / Equity 2,7 2,8
Cash Flow (M TL) Q1 2018 Q1 2017
Operational Cash Flow 97 90
Investment (-) (44) (128) Better operating cash flow and lower
Cash Flow (M TL) Q1 2018 Q1 2017 capex resulted a decrease in total debt
Dividend (-) - - of Brisa.
Operational Cash Flow 97 90
Change in Financial Debt (26) 62
Investment (-) (44) (128)
Dividend (-) - -
Change in Financial Debt (26) 62
17RIGHT TIME TO INVEST...
Peak Price : 11.4 TL Average YoY Price : 7.08 TL
Improving Net Debt Strong EBITDA Growth Expectation
* Based on guidance disclosed to the public
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