Koç Holding. BEING ONE creating one common legacy for 85 years - PDF

Koç Holding BEING ONE creating one common legacy for 85 years Investor Presentation November 2012 Why Koç Holding? Slide # Best Proxy to the Turkish Market Continuous Leadership Strong Financial

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Koç Holding BEING ONE creating one common legacy for 85 years Investor Presentation November 2012 Why Koç Holding? Slide # Best Proxy to the Turkish Market Continuous Leadership Strong Financial Performance High Resilience Against Risks Leading Player in R&D and Innovation High Flexibility & Execution Power Focus on Shareholder Value Creation Winning Through Continuous Growth Setting the Benchmarks in Core Sectors Increasing Margins & Geograhic Diversification Well Diversified & Defensive Portfolio High Quality and Award Winning Products Adaptability to Changing Market Conditions Performance Culture 2 Best Proxy to the Turkish Market - Winning Through Continuous Growth We have the right size to benefit from economies of scale We are the best proxy to the growing Turkish market Total Sales / GDP Total Exports / Turkey s Exports Total Share in ISE Market Cap. As of year-end % 11% 15% GDP Growth % (CAGR) Koç Growth % (Consolidated Revenues Constant Prices - CAGR) with unrivaled competitive advantages to differentiate. Largest distribution and after-sales network Largest customer database (strong CRM capabilities for up/cross-selling) Leading brands and strong recognition Optimum portfolio diversification (Resilience against sector and geography-specific risks - Use of early warning indicators) with leading positions in low-penerated markets. Market leader or close second in every business we operate Long-standing international partnerships Strong growth potential in line with increasing penetration levels Focus on core sectors with large investments promising for maximum returns 3 Continuous Leadership - Setting the Benchmarks in Core Sectors Energy Automotive Automotive Consumer Durables Finance Main Companies Tüpraş* / Aygaz* / Opet / AES Entek International Alliances AES Corporation Domestic Market Position Market Share Sole petroleum refiner in Turkey #1 in LPG distribution 28% #2 in petroleum products distribution 19% Main companies Ford Otosan* / Tofaş* / Türk Traktör* / Otokar* / Otokoç International Alliances Ford Motor Co. / Fiat Auto S.P.A. Case New Holland Domestic Market Position Market Share #1 in total automotive 30% #1 in passenger cars 20% #1 in commercial vehicles 49% #1 in farm tractors 51% #1 in automotive retailing Main Companies Arçelik* International Alliances LG Electronics (Air conditioner manufacturing) Domestic Market Position Market Share #1 in refrigerators, washing machines, dishwashers and ovens 50% #1 in TVs and air conditioners Main Companies Yapı Kredi Bankası* International Alliances UniCredit Domestic Market Position Market Share #4 in total banking assets among private banks #1 in credit cards 18% (outstanding volume) #1 in leasing 20% #1 in factoring 18% #2 in asset management 17% Others Main Companies Tat Konserve* (Food) / Koçtaş (DIY Retailing) / Marmaris Altınyunus* (Tourism) / Koç Sistem (IT) * Listed companies 4 Koç Holding : Strongest Beneficiary of the High Growth Environment and Strong Profitability Despite Global Turmoil Revenues Consolidated-US$bn EBITDA Consolidated-US$bn Operating Profit Consolidated-US$bn Strong Global Reach Combined Exports US$mn Consolidated Exports US$mn 11,073 31% 14,511 7,641 30% 9,926 FY10 FY11 FY10 FY11 Combined International Sales US$mn Consolidated International Sales US$mn 34% 17,852 32% 11,994 13,315 9,068 FY10 FY11 FY10 FY11 6 High Resilience Against Risks Well Diversified Portfolio Our diversified portfolio enables us to balance out cyclicalities among different sectors EBITDA Breakdown 2011 Our increasing geographic diversification enables us to reduce country-specific risks International Sales 2011 Regional Breakdown Energy 44% Automotive 16% Other 2% Finance 25% Durables 14% US$1,163mn 7% US$9,879mn 55% US$1,759mn 10% US$4,993mn 28% US$57mn 0.3% 7 High Resilience Against Risks Strong B/S & Cash Position Our net cash position enables us to be proactive in new M&As Our consolidated debt remains at 1.1 times EBITDA Koç Holding Stand-Alone Net Cash Position Consolidated Net Debt / Cash Excl. Finance Total Debt: ~US$ 0.08 bn Net Cash: ~US$ 727 mn 2013 Redemption Schedule US$ 75 mn to be paid in January Total Cash: ~US$ 0.80 bn 1H12 ~US$ -2.9 bn 9M12 ~US$ -2.5 bn 8 Well-Managed FX Position Koç Holding Stand-Alone FX Position 1H12 US$ + 222mn 9M12 US$ +232mn Koç Holding Consolidated FX Position FX Position Weighted by Effective Ownership 1H12 9M12 1H12 9M12 US$ - 3.6bn US$ -3.0bn* US$ - 1.8bn US$ -1.3bn * The natural hedging mechanisms due to FX linked pricing of Tüpraş, Opet & Aygaz inventory and take-or-pay agreements of Tofaş account for ~US$ 2.3bn. 9 High Flexibility & Execution Power Adaptability to Changing Market Conditions Acquisitions: US$ 6.6 billion Opportunistic M&A strategy to strengthen our market leadership in core sectors (Merged with Migros and divested) Disposals: US$ 3.0 billion Proactive disposals ahead of the 2008 crisis when asset prices were at their peak 10 Sustainability of Strong Competitiveness via Leading Positions in R&D and Technology Investments Koç Group makes the highest R&D investments in Turkey compared to any other corporation with around TL490 million spent in 2011 With over 270 filings, Koç Group submitted 8% of the total number of patent applications received by the Turkish Patent Institute in 2011 Koç Group s share in private sector R&D investments in Turkey is 12-16% each year Ratio of annual R&D spending to net revenues Koç Group R&D companies is 1.5%, at par with global standards Koç Group Total R&D Investments TLmn Koç Group Companies Patent Portfolio - Cumulative 490 2, Focus on Large Investments with High Returns Ongoing investments to increase efficiency Opportunistic M&A activities in core business lines Combined Investments US$bn New manufacturing projects for export markets with our JV partners Automotive Opportunistic buyouts in international markets as a consolidator Energy Focus on higher ROI generating businesses Enhancing shareholder value Consumer Durables Residuum upgrade project - Tüpraş Opportunities in different fields including electricity generation and renewable energy Finance Organic and inorganic growth opportunities 12 Nov 2012 D-09 J-10 F-10 M-10 A-10 M-10 J-10 J-10 A-10 S-10 O-10 N-10 D-10 J-11 F-11 M-11 A-11 M-11 J-11 J-11 A-11 S-11 O-11 N-11 D-11 J-12 F-12 M-12 A-12 M-12 J-12 J-12 A-12 S-12 O-12 Focus on Shareholder Value Creation We endeavor to maximize the value we create for our shareholders Executive compensation based on economic profit and share performance Proactive investor relations management Cash dividend payout Strong share performance Strong relative stock performance Consistently low levels of NAV discount Increase in foreign ownership İMKB30 İMKBHold KCHOL Koç Holding Peer Group 9M12-6% -46% 1H12-6% -47% 2H11-6% -54% 1H11-8% -43% 2H10-9% -44% 76.0% 78.4% 72.8% 58.5% 55.4% 55.9% 49.9% 50.3% 50.2% 13 Main Goal: Maximizing Shareholder Value One of the few Turkish Companies which Links Executive Compensation to Share Performance Shareholder Value Economic Profit Market Cap L-T Strategic Targets to Maximize Future Shareholder Value Aggressive Growth Sustainable Profitability Executive Effectiveness Asset Efficiency Customer Satisfaction Employee Dev.&Satis. Technology Development Other Strategic T. Performance Culture (Remuneration strongly linked to performance) 14 Key Takeaways : Value Propositions Strong top-line growth Leading positions in enabling the benefits of Best proxy to core sectors and new economies of scale the Turkish investment and M&A Economy opportunities Strong commitment to Corporate Governance, Corporate Social Superior and sustainable Responsibility and improvement in operational Sustainability performance Focus on high High resilience against margin revenue volatility and risks streams and shareholder value 15 Operational Excellence and Leadership in Core Business Segments Slide # Energy Sector Automotive Sector Consumer Durables Sector Finance Sector Strongest Player in the Turkish Energy Sector Undisputable Leaders of Turkish Automotive Industry Strong Global Network Focus on Lucrative Business Lines 16 Why Energy Sector? High growth potential Strong demand dynamics Per Capita Energy Consumption Toe EU * Turkey ** Source : * Eurostat 2010, ** Eurostat 2009 Among the fastest growing energy markets in the world parallel to its economic growth Demand for electricity is estimated to grow at an annual rate of 6% between Total installed capacity is expected to reach 96,000 MW until 2023 to meet the demand Offers a wide range of opportunities in electricity generation based on all known energy sources Energy corridor in the region Liberalizing market Strategically located between Asia and Europe Hub for international oil and gas pipelines (Operational: BTC & Kirkuk-Ceyhan In progress: Turkey-Greece-Italy Planned: Samsun-Ceyhan & Nabucco) Well-organized and structured legal framework Energy Market Regulatory Authority operating as an independent market regulator Government incentives for renewable energy Plans to interconnect Turkey s energy system with Union for the Coordination of Transmission of Electricity grid to establish a common energy market with the EU 17 Tüpraş Turkey s Sole Refining Company 4 refineries with 28.1 MT total capacity One of the most complex refineries in the Mediterranean. Nelson Complexity: 7.25 Among the most profitable refineries in Europe and the U.S. : Operational flexibility Optimum production and sales policy Energy efficiency programs ~70% of Turkey s total storage capacity Provides 65% of domestic fuel demand 7 th largest refinery in Europe and 30 th largest in the world Integrated refining company with downstream operations Well-positioned refineries Diversified supply base Shift to higher margin products İzmir 11 MT NC: 7.66 İzmit 11 MT NC: 7.78 Kırıkkale 5 MT NC: 6.32 Batman 1.1. MT NC: 1.83 Iran Russia S. Arabia Turkey Iraq : 7.41 MT : 2.88 MT : 1.80 MT : 2.50 MT : 2.06 MT 34 Product Yields Kazakhstan : 2.21 MT White products Black products 18 Aygaz Turkey s Undisputable Market Leader in LPG for 50 years Fully integrated LPG services Highest efficiency per station in Turkey Best inventory turnover globally Serves 100,000 homes with cylinder LPG everyday More than 1 million vehicles use Aygaz autogas daily Synergies with Koç Group energy companies Unmatched brand recognition Europe s 5 th largest LPG distributor Turkey s largest LPG storage capacity Strong distribution network High logistics competency 2,410 cylinder LPG dealers 1,447 autogas stations Sole fleet operator Reduces costs Provides flexibility in sourcing and inventory management Over 1 MT filling capacity Direct import to 5 different locations 19 Opet Turkey s Fastest Growing Fuel Distribution Company Unrivaled leader in customer satisfaction in its sector for 7 consecutive years Retail and wholesale activities in fuel distribution Production and marketing of lubricants Aviation fuel distribution JV with Turkish Airlines International trade of petroleum products 2 nd in white products with 19% Turkey s highest storage capacity in the fuel distribution sector Strong distribution network & market share Station Numbers ,224 1,279 1, White Products Market Share M12 Opet Sunpet Petrol Ofisi OPET Shell 9M11 9M12 20 AES Entek Ambitious Investment Plans in Electricity Generation AES ENTEK Power generation company 302MW installed capacity 2 natural gas combined cycle plants Gas turbine based cogeneration facility AES Fortune 500 company 50-50% JV established with AES, targeting 3000MW total installed capacity within 5 years Investment plans : 625 MW capacity power plant to run on imported coal 205 MW natural gas plant 50 MW wind-energy 130 generation and 15 distribution operations 5 continents and 27 countries 21 Why Automotive Sector? Dynamic market with high growth potential Well-supplied manufacturing hub Car Ownership per EU * Turkey ** Source : *Eurostat 2009, ** Turkstat th largest labor force compared with the EU Over 24.7 million young and well-educated professionals High growth in labor productivity Strong local supply base Low-cost base An important energy terminal and corridor Attractive distribution hub for global brands Strong performer 6 th largest economy in Europe (16 th in the world*) Turkish Total Automotive Market 000 units 74.7 million people (42% under the age of 25) Efficient and cost-effective outlet to multiple markets with over 1.5 billion customers Rapid household formation and urbanization * 2011, according to the GDP adjusted by PPP Koç Group in the Automotive Sector Largest distribution network Highly skilled and experienced workforce Strong R&D focus Long-standing JV partnerships Benefits of large scale procurement contracts via JV partners Ongoing investments for further efficiency Economies of scale Highest quality and safety of production among the JV partners global manufacturing hubs High profitability vis-a-vis global peers Spread of best practices and synergies among Group companies Undisputable leader in Turkey Motor Vehicle Production Domestic Motor Vehicle Sales Motor Vehicle Exports 51% Others 73% Others 52% Others Koç 49% Koç 27% Koç 48% 23 Ford Otosan Leader in Total Automotive Sales for 10 Consecutive Years 50-50% JV with Ford Strong distribution network Best Ford assembly plant in Europe since 2002 Best Ford powertrain manufacturer worldwide since 2005 Largest automotive investment for a single project in Turkish automotive ($630mn for the new Transit) Among the highest dividend paying companies at the ISE Highest market share of Ford in Europe in total automotive and commercial vehicle market Largest R&D staff in the Turkish automotive sector Large scale export program Increasing capacity utilization Strong market share and profitability Revenues $3.7bn 57% 43% $5.1bn 56% 44% $6.3bn 56% 44% $3.9bn 61% 49% M12 Domestic Exports Capacity utilization rate Market Share Rank 74% 90% 80% Total Automotive 13.8% 1 54% PC 9.0% 3 LCV 25.4% 2 Heavy Truck 19.9% M12 Capacity : 320K EBITDA Margin : 8.1% RoAE : 31.8% 24 Tofaş Production for 5 Global Brands 50-50% JV with Fiat The only domestic manufacturer of both PCs and LCVs Extensive dealer and after-sales network The first Fiat company among 170 companies to reach silver status in WCM with the highest score Owns the full intellectual and industrial property rights for MiniCargo and New Doblo Consumer financing activities through its fully owned subsidiary, Koç Fiat Kredi Among Fiat s 3 main R&D centers globally 2 nd in total Take-or-pay Turkish contracts covering automotive 62.5% of production production capacity Turkey s 2 nd largest auto exporter Largest production capacity in Turkey Strong market share and profitability Revenues % 100% Market Share Rank 74% 78% 77% $4.3bn $4.4bn % 63% 80% Total Automotive 12.8% 2 $3.3bn % 59% $2.8bn 54% PC 8.4% 4 60% % 56% LCV 25.8% % 41% 46% % 44% 0 0% EBITDA Margin : 12.3% M M12 Domestic Exports RoAE : 24.1% Capacity CUR 25 Other Automotive Companies TÜRKTRAKTÖR Turkey s Largest Farm Tractor Manufacturer 50-50% JV with Case New Holland First in Turkey to use flexible manufacturing system in tractors, providing a high degree of flexibility Strong dealership network and reputable brand image Global engineering and production hub for NHTD & Case IHJX tractors Undisputable market leader with 51% share Profitability level among the highest in the industry in the world OTOKAR Largest Private Company in the Turkish Defense Industry Manufacturer of : Leader of the bus segment Minibuses and buses 4x4 tactical vehicles and light-armored vehicles for the defense industry Trailers and semi-trailers for the transportation and logistic sector Prime contractor for Turkey s first national tank project 26 Why Consumer Durables Sector? Underpenetrated segments and renewals drive growth Strong value proposition White Goods Penetration % EU Turkey Source : Euromonitor, Arçelik Strong R&D focus and innovative products Efficient and cost-effective outlet to multiple markets with over 1.5 billion customers Competitive labor cost Strong supply base Favorable demographic dynamics Construction growth is a strong driver Projected as the fastest growing economy in OECD between with 6.7% p.a. growth rate Rapid new household formation and urbanization Annual number of marriages : ~650,000 Occupancy permits Source : Turkish Statistical Institute 27 Arçelik Provides Products and Services to Over 100 Countries Worldwide Most extensive sales and after-sales network in Turkey 3 rd largest appliances company in Europe Unsurpassed brand recognition for 13 consecutive years among all sectors One of the highest market share increases in international markets due to new distribution channels Among the world s top 10 white goods brands Manufacturing in low cost centers : Turkey, Romania, Russia, China & South Africa Turkey s market leader in white goods (50%), TVs and air-conditioners U.K. s market leader in refrigerator, freezer & washing machine Market leader in Romania & South Africa Large player in Europe & strong EM exposure Regional Breakdown of Revenue % Turkey Western Europe CIS & Eastern Europe 9M Africa 9M12 Middle East Other Sustainable profitability vis-a-vis global peers Important restructuring Higher profitability in TV business Optimization of supply chain management Efficiency gains in production Increasing sales in emerging markets Focus on brand management R&D and Innovation for sustainability R&D expenses at ~2% of total sales 95 th in global patent application list 140 patents filed annually #1 in Turkey The world s most energy and water efficient products 28 Why Finance Sector? Low penetration levels providing an opportunity for rapid growth Loans + Deposits / GDP % Branches per million inhabitants Mortgage loans / GDP % Eurozone* Source : *ECB 2011, **BRSA 2011 Turkey** Eurozone * Turkey ** Eurozone* Poland** Turkey*** Source : *ECB 2010, **BRSA 2010 Source : *ECB 2011, **NBP 2011, ***BRSA 2011 Strong economic recovery and solid GDP growth Sustained profitability driven by robust volume growth and improvement in asset quality Strong and sustainable growth driven by domestic demand and steady productivity gains Sustained low inflation environment Consumer confidence progressively strengthening to pre-crisis levels Continuous improvement in unemployment Strong lending growth (30% in 2011) Comfortable funding position (Loans/Deposits at 94%) Positive asset quality trend (NPL ratio at 2.6%) Robust capitalization level (CAR at 15%) Sustained profitability (ROAE at 15.4%) 29 Yapı Kredi Bank Balanced Growth and Sustained Profitability Committed and strong shareholders: 50-50% JV with UniCredit Widespread network with 922 branches, 2,742 ATMs and award winning internet bank and call center Leading positions in key seyments including credit cards, asset management, leasing and factoring Strong capital and liquidity together with increasing emphasis on diversification of funding (~US$2.7 bn syndication, TL1.15 bn bond) Continuation of customer business focus 4 th among private sector banks in asset size Strong fee and commission income generation Effectively managing the new environment Upward loan repricing actions Emphasis on optimal asset allocation Focus on cost of funding optimisation, lengthening maturity and diversification Realignment of ALM strategies Sustained revenue base with quality mix +7% 3,218 3,244 14% 5% 26% 30% 56% 9M11 69% 9M12 Net Interest Income Net Fees & Comms. Other Share* 30% 6.3% Positive asset quality trend 68% 3.4% 3.2% 3.6% 2.9% 3.0% 3.0% 3.3% *excl. regulatory impacts NPL Ratio Q11 2Q11 3Q Q12 3Q12 30 Yapı Kredi Subsidiaries and Other Finance Companies YAPI KREDİ LEASING YAPI KREDİ FACTORING YAPI KREDİ ASSET MANAGEMENT YAPI KREDİ PENSION Leader with 17.2% share Leader with 14.3% share 2 nd in the market with 18% share 4 th in private pension funds w
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