Q2 2026 AG Anadolu Grubu Holding AS Earnings Call
Speaker #1: Good morning and good afternoon, everyone. Welcome to the Anadolu Grubu Holding First Self 2026 earnings conference call. I'm Mehmet Çolakol, Investor Relations Director at Anadolu Grubu Holding.
Speaker #1: We have Mr. Burak Başer, our CEO, and Mr. Onur Çevikel, our CFO, on the call with us as well. As usual, we will first listen to Mr. Başer for the key highlights of 2026, with the first-half results and his general overview.
Speaker #1: And later on, Mr. Çevikel will provide a brief analysis on segmental performance. I'd like to remind you that this is a live event, meaning that you will be listened to only for the entire session.
Speaker #1: You can write your questions at any time during the call. There will be a Q&A session at the end of our presentation, where we will go over your written questions.
Speaker #1: In addition, in accordance with the decree of the capital markets board, our financials are reported using TASS 29 Financial Reporting in hyperinflation economy standards.
Speaker #1: Accordingly, the financial figures in this presentation and all comparative amounts for previous periods have been adjusted according to the changes in the purchasing power of the Turkish lira.
Speaker #1: In accordance with TASS 29, and as finally expressed in terms of the purchasing power of the Turkish lira as of June 30, 2026, certain items from our financials are also presented without inflation adjustment for information purposes.
Speaker #1: These unaudited figures are clearly identified as such. And with that, I will now turn the call over to Mr. Burak Başer.
Speaker #2: Thank you, Mehmet. Good morning and good afternoon, everyone. Welcome to our first-half webcast and conference call. I will start with a high-level snapshot of our performance across two slides.
Speaker #2: First, the key highlights of the first half of 2026. Then, a look at performance across our major sectors. I will then briefly cover our financial results before handing over to Onur for a detailed breakdown of our financials.
Speaker #2: Before we begin, I want to very briefly address the recent regional developments. We continue to see pressure on consumer demand and uncertain macroeconomic and geopolitical backdrops.
Speaker #2: And disruption in some of the countries where we operate due to ongoing war. The US-Iran conflict increased uncertainty, obviously, causing higher and more volatile oil prices and inflationary pressures across our markets.
Speaker #2: Consumers, particularly in Türkiye, are increasingly rationalizing their shopping habits, making more value-oriented purchasing decisions, and increasingly concentrating demand around promotions. We are going through some quite challenging times.
Speaker #2: Supported by our diversified geographic footprint and balanced product portfolio, we have continued to deliver resilient consolidated performance despite these headwinds, and succeeded in growing our top line by 4.1% and EBITDA by 10.7% in the first half of 2026.
Speaker #2: Let me now move on to a snapshot of our first-half results. As you know, we continue to record top-line and bottom-line, and also EBITDA, growth in the first half, despite macro challenges and geopolitical uncertainties.
Speaker #2: And weaker consumer demand, particularly in the second quarter of the year. Our flexible, resilient business model, geographic and sectoral diversification, played a key role in revenue and EBITDA growth, particularly driven by strong performance in the Central Asia region.
Speaker #2: Despite margin pressures in certain areas, we protected and improved our consolidated EBITDA margin in the first half, driven by cost discipline and quality growth. The second quarter of 2026 was more challenging, with consumers changing value and promotions in Türkiye, especially.
Speaker #2: On a consolidated level, our financials are progressing in line with our expectations. However, we have lowered our domestic beer and Anadolu Isuzu guidance due to first-half Türkiye results.
Speaker #2: And a challenging outlook. These two businesses make up less than 10% of our consolidated revenue. Focus on disciplined balance sheet management and strong free cash flow generation continues, as we have reduced our consolidated net EBITDA ratio from 1.5 times in the second quarter of 2025 to 1.1 times in the second quarter, while recording a significant improvement in free cash across all of our core business lines.
Speaker #2: As always, we are committed to advancing our strategic growth ambitions in the second half of the year to ensure meaningful progress toward our Vision 2035 goals.
Speaker #2: I wish the same focus, discipline, and agility. Let me move on to slide four and then talk about the CCI, our soft drinks business.
Speaker #2: Despite the continued macro and geopolitical volatility, we've recorded strong results thanks to the resilience of our business model and the strength of our diversified geographic footprint.
Speaker #2: We recorded 9.8% volume growth in the second quarter and 8.5% volume growth in the first half, on top of a solid 8% growth in 2025.
Speaker #2: International operations continue to be the key growth engine with particularly strong performance in Pakistan and Central Asia. We've recorded 18.2% volume growth in Central Asia in the first half.
Speaker #2: And Pakistan volumes grew by 8.8% in the same period. Pakistan was a key growth driver during the first half, supported by more competitive market positioning.
Speaker #2: Successful new product launches and continued strong commercial execution. On a consolidated basis, we've also recorded robust margin expansion thanks to disciplined revenue growth management, continued portfolio mix improvement, and effective cost management.
Speaker #2: The improvements in channel, package, and product mix all strengthened our portfolio mix and supported margin expansion. As always, we focus on our QGA quality growth algorithm, turning robust volume growth into value creation across the P&L and converting that value into strong cash generation.
Speaker #2: A more favorable funding mix, supported by a higher share of borrowings in lower interest rate markets and with lower total interest expenses, also supported our bottom line.
Speaker #2: On the beer side, with Anadolu Efes, the transformation of the Efes family, which we started in April of this year with new packaging, taste, and quality, continues with the new portfolio rolled out across Türkiye business.
Speaker #2: We believe there is considerable room to expand consumer penetration and attract new consumers to our portfolio. Having said that, the challenging consumer environment in Türkiye is influencing the beer market and, obviously, impacting the pace of our rollout and adoption.
Speaker #2: We face a particularly high comparison base following the strong domestic beer market performance recorded last year. Also, prolonged erosion in consumers' purchasing power continues to weigh on demand.
Speaker #2: That said, we've started to see encouraging signs in the month of June. On the international businesses, our progress is in line with our expectations, and we're seeing positive volume growth and margin outlook in the CIS region.
Speaker #2: Also, our focus on expanding into new geographies broadened our portfolio countries, with agreements in Uzbekistan and also in China. We have also recently concluded the acquisition process of Mercan Rakı under our beer business.
Speaker #2: On the retail side with Migros, we've continued to grow our retail business, while consumers are increasingly making more value-oriented decisions around promotions. The positive contribution from our in-store efficiency investments continues in the first half.
Speaker #2: We have seen some of these gains offset by intensified promotions, higher employment costs, and lower contribution from seasonal stores. So in a way, our efficiency investments are defending us against a very challenging macro backdrop and weak consumer spending environment.
Speaker #2: As such, adjusted EBITDA margin remained broadly stable in the first half, while free cash improved on a year-on-year basis. The encouraging momentum we have seen in July has reinforced our confidence in achieving our full-year guidance for our retail segment.
Speaker #2: Online operations continue to expand as well. The contribution of online channels to total sales reached 23.1% in the second quarter of the year, up from 20.7% last year, excluding tobacco and alcoholic beverages.
Speaker #2: On the auto segment, as you know, the Turkish auto market has been going through a difficult year with high interest rates, a high base from last year, rising oil prices, geopolitical uncertainties, and lower gold prices that are possibly having a negative wealth effect on consumers.
Speaker #2: With regard to our business lines, in the auto segment, Çelik Motor, our key distribution business, and also Garenta car rental business, have been outperforming the market, growing volumes, and recording positive results in the first half of the year.
Speaker #2: Anadolu Efes's domestic business, on the other hand, has been negatively impacted by overall weakness in the domestic market, turning us more cautious for the rest of the year and revisiting our guidance for the full year.
Speaker #2: Integration of Sam Auto, which is the acquisition in Uzbekistan, also continues in line with our plans and is already making a positive EBITDA contribution to our full-year results, as well as the first half.
Speaker #2: And we're super optimistic about our Uzbekistan acquisition of Isuzu. Let me move on to slide five, where I would like to present first half results, both with and without TAS 29 inflation accounting.
Speaker #2: Looking at the first half with TAS29, revenues increased by 4.1%, while EBITDA increased by 10.7%. Excluding the impact of TAS29, the year-on-year increase in first half revenues was 37.4%, and EBITDA rose by 43.4%.
Speaker #2: For the bottom line, on top of solid EBITDA growth, lower financial expenses, higher monetary gains, and reduced losses from our joint ventures accounted for under the equity pickup method resulted in more than doubling our bottom line in the first half of the year.
Speaker #2: Let me move on to slide six. Our segmental breakdown reflects the breadth of our portfolio. As you can see, retail is the largest contributor at 57% of our total revenues, followed by soft drinks at 29%, auto at 8%, and the beer business at 7%.
Speaker #2: In terms of EBITDA, on the other hand, soft drinks led with 64%, followed by retail at 29%, and beer at 6%. Collectively, these three core businesses account for approximately 98% of our total EBITDA for the first half of '26.
Speaker #2: The charts illustrate our geographic diversification as well. In the first half of '26, international revenues benefited from stronger volume growth in both the beer business and soft drinks business, with international volumes outpacing domestic volumes, primarily driven by strong Central Asia performance.
Speaker #2: On the other hand, the share of international EBITDA was only slightly higher due to the resilient performance of the Turkish lira and the rebound in domestic soft drinks margins.
Speaker #2: As such, the share of international revenues was 21.1% of total sales and 56.4% of EBITDA in the first half of the year. With that, let me hand over to Onur for the detailed financials.
Speaker #2: Thank you.
Speaker #1: Thank you. Thank you very much for this. Good morning. And good afternoon, ladies and gentlemen. Welcome to our first half 2026 financial results call.
Speaker #1: It is always a great pleasure to host you. As usual, I will briefly go through the segments, the financial review one segments, then talk about balance sheet matrix.
Speaker #1: Starting with the soft drink segment, our total sales volume reached 933 million unit sales, with strong growth of 8.5% in the first half of 2026.
Speaker #1: Pakistan, Uzbekistan, and Kazakhstan were the main contributors to growth, as well as the 'still' category. Net sales for the first half of 2026 were at 123.26 million PR, with strong growth of 7.9% under TAS 29 inflationary accounting standards.
Speaker #1: Excluding TAS 29 standards, the growth reached up to 42.4%. EBITDA for the segment was recorded at 24,983 million PR, with a strong 24.2% growth for the period.
Speaker #1: The improvement in profitability was mostly attributable to profitable revenue growth management, portfolio mix improvement, strong operational execution, and disciplined cost management. Net income was recorded at 13,895 million PR for the period.
Speaker #1: On top of strong operational performance, better working capital management and lower financial expenses helped us improve our net profitability. Without TAS 29 adjustments, the increase in net profitability was 168.1%.
Speaker #1: The free cash flow generation for the period was at ₺2.3 billion, compared to negative ₺7.4 billion in the prior year, which made us particularly happy.
Speaker #1: Continuing with the beer segment, our sales volume for the first half of 2026 was at 5.9 million hectoliters, with a decline of 8.6%. The high base of the prior year, pressure on consumer purchasing power, softened tourism, and the FS family transformation impacted the volumes in Turkey, which was the main reason for the decline.
Speaker #1: Net sales revenue for the first half of 2026 was 29,460 million PLN, representing a decline of 6.9%, in line with the volume decline. EBITDA, on the other hand, was recorded at 2,277 million PLN, reflecting a decline of 36.6%.
Speaker #1: While international beer operations profitability was resilient, Turkey operations' profitability was under pressure due to both volume decline and FS freelance expenses. Net income for the beer group was recorded as 3,452 million TL for the first half of 2026 with TAS 29 adjustments, showing a decline of 35.9% in line with the decline in EBITDA.
Speaker #1: Continuing with Migros, the total number of stores for Migros has reached 3,830, with an increase of 147 stores. Online store services also reached 2,577 stores, with an increase of over 1,000 stores.
Speaker #1: In the first half of 2026, net sales for the first half of 2026 have reached 241,298 million PL, with a growth of 4.5%. Excluding the effects of TAS 29 inflationary accounting, the growth has reached 37.7% compared to the same period last year.
Speaker #1: This growth in a subdued demand environment was reached through strong execution, prioritizing consumer value, and increased contribution from online sales. EBITDA, on the other hand, was recorded as 10,967 million PLN, with a decline of 6.8% in the first half of 2026.
Speaker #1: Higher promotional activities, increased personnel costs, and lower seasonal store contributions were the main pressures on profitability. We were able to offset these pressures with optimized energy costs, self-checkout, and electronic shelf investments that lowered our operating expenses.
Speaker #1: Without the inflationary accounting adjustments, our EBITDA has reached 16,899 million PL, with a growth of 27%. Net income for Migros in the first half of 2026 was recorded at 1,011 million PL.
Speaker #1: Having free cash flow as a major priority item across the Group, we are again particularly happy to generate strong free cash flow of PLN 5.8 billion in the first half of 2026.
Speaker #1: Talking about the automotive segment, as mentioned by Brontë, our net sales for the automotive segment reached 33,004 million PLN in the first half of 2026, with a decline of 5.6%.
Speaker #1: Excluding the TAS 29 inflationary impacts, our sales volume was at 31,660 million PL, with a growth of 25.1%. Strong lira, increasing competition, high interest rates, vehicle consumer power, mix optimization, and limited price adjustments have kept the financials of the segment under pressure.
Speaker #1: EBITDA for the first half of 2026 was negative 12 million PLN, excluding the TAS 29 impacts. Our EBITDA was at 2,509 million PLN, with a growth of 10.4%.
Speaker #1: Net income for the segment was at a loss of PLN 1,131 million in the first half of 2026. It's worth mentioning that our first international operation for the segment, SumOto in Uzbekistan, has already started to make a positive contribution to our results, and its integration continues in line with our plans.
Speaker #1: Talking about agri-energy and industry segments, our net sales for the segment were recorded at 3,877 million PLN, with an increase of 9.7% in the first half of 2026.
Speaker #1: Excluding the TAS 29 impacts, this growth was a strong 53.5%. The strong performance of Adel was one of the main contributors. Strong growth in order intake and improvement in shipment realizations were the main reasons for the performance.
Speaker #1: EBITDA for the segment was recorded at 347 million PL, with a decline of 12.5% excluding the inflationary accounting effects. EBITDA was at 635 million PL, with a strong growth of 61%.
Speaker #1: Net loss for the period was at 1,045 million PLN, mostly due to deferred tax impact in adopted tariffs. And continuing with the balance sheet management, our net debt to EBITDA ratio was at 1.1 times, showing a solid improvement over the first half of 2025.
Speaker #1: Back then, this ratio was at 1.5 times. Despite the headwinds, throughout the years between 2019 and 2026, our net debt to EBITDA ratio kept on improving.
Speaker #1: Back in 2019, net debt to EBITDA ratio was at 2.1 times, whereas we are now at 1.1 times, despite the deconsolidation of Russian operations.
Speaker #1: This improvement in indebtedness was mostly achieved through positive free cash flow generation, tight balance sheet management, proactive risk management, and asset optimization. Our total consolidated net debt was at 97.5 billion PLN in the first half of 2026, which corresponds to €1,836 million in high currency.
Speaker #1: Excluding IFRS 16 effects, our net debt is at 54.9 billion PL, which corresponds to €1,035 million. Being one of our major priorities, our free cash flow generation in the first half of 2026 was negative 5,896 million PL, which shows a significant improvement compared to the prior year's 2025 first half, which was negative 19,867 million PL.
Speaker #1: And finally, talking about our financial priorities—our financial priorities, as we had shared with you at the beginning of the year, remain broadly unchanged.
Speaker #1: This includes tight balance sheet management, a commitment to positive free cash flow generation, profitability and efficiency improvements, working capital management, proactive risk management, and, obviously, making sure that we have the right leveraging both in terms of maturities as well as cost.
Speaker #1: While this concludes my part of the presentation, I would like to hand over to Brontë for his closing remarks.
Speaker #2: Well, thank you, Onur. As we approach the final slide, let me highlight a few priorities for the remainder of 2026 and beyond. We will continue to manage our business proactively through inflationary pressures and broader economic challenges, maintaining a close watch on our consumers across all of our geographies.
Speaker #2: In the first half, we continued to grow our business despite a number of major challenges, as you know. Our operational and financial priorities are clearly defined and consistently communicated at both the holding and subsidiary levels.
Speaker #2: Financial discipline is embedded in every stage of our decision-making. We made moderate changes to our guidance, mostly due to a softer domestic environment, but overall our outlook for 2026 remains broadly in line with our initial plans at the beginning of the year.
Speaker #2: Free cash flow generation, effective asset utilization, and rigorous balance sheet management will remain our core KPIs. Moving on to slide 16. And finally, our key priorities: we will continue to strengthen our core business, while selectively pursuing expansion into new sectors and geographies in line with our Vision 2035.
Speaker #2: Quality growth at scale remains a central priority. For all of our decisions, sustainability will continue to guide how we build a better future for our people, communities, and the planet.
Speaker #2: We will also advance the digitalization of our operations across all of our group companies. Financial discipline remains a core pillar, and we will continue investing in our people, empowering diverse, future-ready talent to support our long-term ambitions.
Speaker #2: I would like to once again thank all of you, and we appreciate your continued interest in Anadolu Group and our companies. Now, I think we're ready to take your questions.
Speaker #2: Thank you so much.
Speaker #3: As a reminder, you can write your questions in the question box of the webcast.
Speaker #4: Hello, I guess there are no questions at this time. So, thanks a lot for joining our webcast, and hopefully we'll see you at one next time, next year.
Speaker #4: Thanks a lot.
