Operator: Ladies and gentlemen, thank you for standing by. I am Konstantinos, your Chorus Call operator. Welcome and thank you for joining the Koç Holding conference call and live webcast to present and discuss the Q3 and nine months 2026 financial results. All participants will be in listen-only mode, and the conference is being recorded. The presentation will be followed by a question-and-answer session. Should anyone need assistance during the conference call, you may signal an operator by pressing star and zero on your telephone. At this time, I would like to turn the conference over to Ms. Helin Çelikbilek, IR coordinator at Koç Holding. Ms. Çelikbilek, you may now proceed.
Helin Çelikbilek: Welcome, and thank you for joining us today for Koç Holding's Q3 and first nine months 2026 earnings call. This is Helin, IR coordinator of Koç Holding, and today I am joined by our CFO, Doğan Korkmaz, our finance coordinator, Özge Eşim, and our IR manager, İsmail Özer, to take you through our presentation and answer questions during the Q&A session. Our presentation covers the company's unaudited financial results for the first nine months of 2026, prepared in accordance with Turkish Accounting and Financial Reporting Standards, including the application of IAS 29 inflation accounting. Please note that our presentation and Q&A session may include forward-looking statements and assumptions based on the current business environment, which are subject to change. As a reminder, a replay of this webcast will be available on our website following the call. There will be a Q&A session at the end of the call.
Helin Çelikbilek: With that, I would like to hand the call to Doğan Bey to begin the presentation.
Doğan Korkmaz: Welcome, everyone. I would like to begin with a brief overview of the macroeconomic backdrop that defined our group's operating environment in the first nine months. Geopolitical uncertainty remained elevated throughout the period, with escalating conflicts putting renewed pressure on energy prices and global inflation. In Türkiye, inflation continued to run high while economic activity weakened in the Q3 amidst tight financial conditions. Interest rates remained high despite some easing, sustaining high financing costs, while currency dynamics weighed on the operating environment. Portfolio diversification, financial strength, and disciplined execution supported our performance through a challenging environment. Against this backdrop, we delivered a strong set of results with a significant step-up in profitability compared to last year. On slide 5, we highlight some of the key metrics for the first nine months. Our combined revenue exceeded TRY 4.5 trillion, which is approximately $92.6 billion, on an 8% growth year-on-year.
Doğan Korkmaz: Our consolidated net income increased threefold and reached TRY 56.4 billion. We maintained our growth investments, with CapEx reaching roughly $2.7 billion in the first nine months. Strong liquidity, a healthy current ratio, and a conservative leverage level remain key pillars of our financial resilience. As at the end of September, we had approximately $1.6 billion as gross cash at the holding level, current ratio of 1.24 times on a combined basis, and a net financial debt over EBITDA, excluding the finance segment, ratio of 0.9 times. On slide six, we take a closer look at our financial performance. Focusing on consolidated results, we generated TRY 185.8 billion in profit before taxes, registering around 180% increase compared to the same period of last year.
Doğan Korkmaz: Energy was the largest contributor in the first nine months at TRY 52.3 billion at the net income level, followed by automotive at TRY 10.2 billion, and finance at TRY 1 billion. Consumer durables and businesses under other segments were dilutive, with TRY 3.3 billion and TRY 4 billion of losses, respectively. The other segment losses mainly reflected monetary losses related to holding net cash position under inflationary accounting, as well as operating losses across several companies in the retail, services, and healthcare sectors, offset by revenues from marina and tourism operations. Slide seven, I would like to take a moment here to highlight the strength of our diversified portfolio.
Doğan Korkmaz: As market conditions change, different businesses can come to the fore. For instance, when consumer demand was high for manufactured products in 2020, manufacturing operations accounted for the largest share of our operating profit, while two years later, finance became more prominent. Today, energy has a greater weight in the mix, reflecting the current market environment. This shifting contribution across our businesses supports the resilience of our portfolio over time. Its breadth and balance give us confidence in its ability to navigate different market conditions. Now to slide eight. Beyond our financial performance, the period was also marked by a number of important strategic and operational developments across the group. Portfolio management is an integral part of our role as a holding company, and we remained active on this front. Our group companies also took a number of strategic steps to further advance their businesses.
Doğan Korkmaz: At the same time, several commercial and operational milestones further strengthened the positioning of our businesses for the future. This year is also particularly meaningful as we celebrate Koç Group's centennial and a century of contribution and impact. We continue to build on this legacy through our commitments in areas ranging from climate leadership to the next generation. Overall, these developments reflect our continued focus on creating sustainable long-term value. On slide 10, the chart on the left presents the sectoral composition of our diversified portfolio's net asset value as at the end of September. The refining, oil, and gas distribution in total accounts for 35%, followed by automotive segment in total at 27%, finance at 18%, and consumer durables at 3%. Approximately 90% of our NAV is derived from our listed assets. It is also important to keep in mind the value of our unlisted assets.
Doğan Korkmaz: Their book values may not fully reflect their underlying value, particularly in an inflationary environment. Even on a book basis, our effective share amounts to around $2.5 billion, in addition to around $1 billion of net cash. Our portfolio diversification extends beyond sectors to include international exposure. Around 30% of our combined revenues was from international sales in the first nine months. Including hard currency indexed commodity businesses, half of our revenues can be considered hard currency-based. Moving on to slide 11. At the Holding level, we ended the Q3 with a net cash position of $963 million, which is approximately TRY 47 billion, where our gross cash level remained at $1.6 billion. Around 81% of our gross cash was in hard currency. In terms of FX position, we remain well within our risk management rules.
Doğan Korkmaz: With that, I will hand over to Helin to walk you through the key sectoral developments in the first nine months.
Helin Çelikbilek: Thank you. Let's begin with the Energy sector on slide 13. The Energy segment's contribution to our consolidated net income in the Q3 was strong, bringing the first nine months total to TRY 52 billion, compared to TRY 13 billion in the same period of last year. Energy markets remained highly volatile in the first nine months, with geopolitical tensions and supply disruptions driving sharp swings in crude oil prices. At the same time, tight product markets supported strong refining margins, particularly for middle distillates. in Türkiye, fuel demand trends were mixed in the first eight months, with gasoline remaining strong at 10% growth year-on-year and diesel growing modestly by 1%, while jet fuel declined by around 5%. Within this landscape, Tüpraş delivered exceptional operational performance with its highest quarterly capacity utilization in five years, higher production, and a strong white product yield.
Helin Çelikbilek: Combined with effective crude slate optimization, this enabled Tüpraş to capitalize on the strong margin environment and deliver outstanding financial performance and cash generation. Reflecting the stronger-than-anticipated Q3 performance, the nine-month net refining margin reached $23 per barrel. Accordingly, Tüpraş revised its full-year net refining margin guidance to $20 to $22 per barrel, from $13 to $15 per barrel previously. Despite a 2.8% year-on-year contraction in the Turkish LPG market in the first eight months, Aygaz delivered a 3% volume growth, strengthening its market leadership with a 42.4% share. With an increasing contribution from Bangladesh operations, total sales volume growth of Aygaz was up by 11% in the first nine months. Let's move to slide 14 and discuss the developments in the Auto segment.
Helin Çelikbilek: The first nine months were marked by subdued demand in a challenging environment shaped by tight financial conditions, evolving competitive dynamics, and macroeconomic uncertainties. The Turkish automotive market contracted by 13%. In this environment, our operations maintained strong position, both domestically and in export markets, supported by operational capabilities and resilient scale. Ford Otosan accounted for 35% of Türkiye's total vehicle production and 76% of commercial vehicle outputs, while Tofaş contributed around 10%. Our combined share in the domestic market reached 31%, up by 4 percentage points since year-end. On the export side, the European passenger car market grew by 6% year-on-year, and the commercial vehicle market expanded by 2%. Our group's export market share increased by around 10 percentage points to 52%. Ford Otosan's export sales volume accounted for 43% of Türkiye's total vehicle exports.
Helin Çelikbilek: Meanwhile, Ford Otosan faced top-line and profitability pressures in the first nine months, mainly reflecting lower domestic sales volume and unfavorable inflation FX backdrop. Encouragingly, performance improved in the Q3, supported by stronger export volumes, disciplined commercial execution, and lower financial expenses, resulting in a sequential recovery in company's profitability. Meanwhile, Tofaş continued its domestic market leadership, which was supported by higher production volume and a better product mix. The K0 ramp-up supported production and solid export growth. The K0 NAFTA project is also progressing as planned, with first deliveries expected towards year-end. As a milestone, K9 production started, with distribution commencing in October. K9 is a key pillar of Tofaş's next phase of growth, expanding its multi-brand manufacturing capabilities and reinforcing its strategic position within Stellantis' regional distribution of production network.
Helin Çelikbilek: TürkTraktör revenues declined 28% year-on-year in the first nine months, reflecting the ongoing cyclical downturn in the domestic tractor market, with locally produced tractor sales down 51%. This was partly offset by a 13% increase in exports. The domestic tractor market contracted by 44% as tight financing conditions continued to weigh on demand, despite improving agricultural fundamentals. TürkTraktör continued to outperform the market, increasing its market share to 42.7% as of September. Furthermore, TürkTraktör is strengthening its advanced technology offering, aiming to become a broader solutions provider for farmers. Otokar started the year with softer revenues, mainly due to the contract penalty as well as soft demand in the domestic commercial bus market. Performance improved in the Q3 as higher military vehicle deliveries drove 11% revenue growth and helped EBITDA turn positive on a quarterly basis.
Helin Çelikbilek: Otokar's order visibility strengthened significantly following a nearly $1.5 billion export contract for armed vehicles, with deliveries expected for the next three years. Meanwhile, production in Romania is underway to fulfill the related contractual commitments. Another milestone was the start of serial production of Mercedes-Benz Conecto bus at Otokar's Sakarya plant under the manufacturing agreement signed in 2025. On slide 15, let's look at the consumer durables segment. Arçelik continued to operate against a challenging demand and pricing backdrop in the first nine months, with persistent headwinds across several of its key markets. In Turkey, demand remained soft, but Arçelik continued to outperform the market, gaining share as volumes grew 7% against a 4% market contraction. Europe showed early signs of stabilization, while competitive and pricing pressures persisted. Arçelik maintained its market-leading positions while prioritizing profitability over volume, with mixed trends across other international markets.
Helin Çelikbilek: Overall, despite a 12% top-line contraction, gross margin improved by 67 basis points to 29.4% in the first nine months. This was supported by procurement savings, productivity improvement initiatives, and disciplined cost management. At the same time, lower volumes, wage inflation, and higher conflict-related price and input costs continued to weigh on Arçelik's profitability. Deleveraging remains a key priority for the company, and they are focusing on working capital and inventory discipline, tighter CapEx, alongside non-core asset monetization. Last but not least, a few words on the finance segment, with a particular focus on Yapı Kredi on slide 16. As in previous quarters, Yapı Kredi's KPIs are based on consolidated BRSA financials, which are not subject to inflation accounting. The finance segment maintained a resilient performance, supported by improving margins, proactive balance sheet positioning, and disciplined risk management.
Helin Çelikbilek: In the first nine months, Yapı Kredi's net profit increased by 10% year-on-year to TRY 41.7 billion, with return on tangible equity at 20.6%. Importantly, margin momentum improved in Q3, with net interest margin expanding by 23 basis points quarter-on-quarter and 58 basis points year-to-date to 2.82%. This was supported by disciplined loan pricing, effective asset liability management, and an improving funding mix. Fee generation remained resilient, with net fee and commission income growing 19%, including the one-off payment network transition costs. At the same time, operating expense growth was contained at 34%, below the bank's full-year guidance, despite continued inflationary pressures. Asset quality showed some signs of softening under a slower economic growth and high real rates environment, particularly in unsecured consumer and SME lending.
Helin Çelikbilek: The NPL ratio increased to 4.6%, while Yapı Kredi maintained its prudent provisioning approach, with a total coverage of 4.1%, or 4.7% adjusted for NPL sales and write-offs. Cost of risk stood at 214 basis points for the first nine months. Capitalization remained sound, with a consolidated capital adequacy ratio of 14.1% and CET1 of 9%. Looking ahead, the bank expects internal capital generation to resume in Q4, with additional potential support from the Yapı Kredi Portfolio Transaction upon closing. On slide 17, you see a snapshot of our first nine months group's financial performance on a segment basis. We have already covered the key figures throughout the presentation. Overall, our nine-month performance demonstrates the strength of the group's underlying businesses and our ability to navigate changing market conditions while maintaining the financial flexibility to invest for long-term value creation. Thank you for listening.
Helin Çelikbilek: We can now open the floor for questions.
Operator: Ladies and gentlemen, at this time, we will begin the question-and-answer session. Anyone who wishes to ask a question may press star followed by 1 on their telephone. If you wish to remove yourself from the question queue, then you may press star and 2. Webcast participants who wish to ask a question, please type your question in the Ask a Question box. Please use your handset when asking your question for better quality. Anyone who has a question may press star and 1 at this time. One moment for the first question, please. The first question comes from the line of Hanzade Kılıçkıran with J.P. Morgan. Please go ahead.
Hanzade Kılıçkıran: Doğan Bey, Helin, thank you very much for the presentation. I mean, I have a usual question on your subsidies, and I wonder about your view on Arçelik leverage. I mean, are you alerted on this significantly elevated leverage levels in Arçelik, and how can they handle this high leverage going into 2027? Because we do not see much tailwind in the consumer side, both in Europe and Turkey. So I wonder how you monitor the Arçelik at the moment. My second question is about the Made in EU discussions. As you are the largest auto exporter in Turkey, are you actively involved in these discussions with the government, and do you see any positive sign that Turkey can be included here? Thank you.
Doğan Korkmaz: Thank you, Hanzade. Let us start with your questions on Arçelik. Obviously, there has been a lot of headwinds on Arçelik businesses until today. But for 2027, we kind of see a potential for a gradually improving demand environment, although obviously conditions will likely remain challenging and still competitive. In Turkey, probably the key factors will continue to be the inflation interest rate, increasing their operational costs, and the availability of credit for the consumers. But as monetary conditions gradually will ease, we would expect improving affordability and financing conditions to provide some support for consumers, particularly probably as we move through the year. In Europe, though, demand conditions have remained relatively subdued, but the bigger challenge has been the pricing environment.
Doğan Korkmaz: There has been significant competitive pressure across the industry in the European market, so we would expect competition to remain intense in the case of Europe, although some stabilization in pricing could be possible, as cost pressures from our side will be subdued. Overall, while the environment remains challenging, we see some scope for improvement in 2027. For Arçelik, the focus will obviously remain on protecting margins, maintaining the pricing discipline, and improving operational efficiency and strengthening their cash generation. From our perspective as a shareholder, deleveraging remains an important priority for Arçelik. The company's focus on working capital discipline, lower investment intensity, and portfolio optimization should increasingly support their cash generation and balance sheet improvement. We expect leverage to come down progressively, although the pace will really depend on operating performance and market conditions. We would leave specific targets and timing to Arçelik management, obviously.
Doğan Korkmaz: They have been discussing these issues in their own call. But directionally, we are supportive of the actions being taken to strengthen the balance sheet and improve cash generation.
Hanzade Kılıçkıran: Tuncay, here in Arçelik, can I ask one more question? Thank you very much for your explanation. I mean, as Arçelik finance the domestic market, I mean, the consumer, the dealers actually, they always need some financing. At this high, I mean, at this elevated leverage, do they have good access to Turkish banks to continue to get the Turkish lira at reasonably okayish interest rates?
Doğan Korkmaz: Yes, I can confirm that their cost of funding in Turkish market and mostly in Turkish liras are pretty in line with the market dynamics. They are pretty much aligned with the rest of the Koç Group when it comes to their pricing. The issue is not really the high leverage having an effect on their cost of financing on percentage basis. The real reason for the increase in their overall the interest rate expenses is really the volume that they are trying to support. In the absence of adequate financing for the consumers, the level of financing provided by Arçelik is a bit on the high side in comparison to historical levels. Obviously, that is needed for increasing capacity utilization in their factories.
Doğan Korkmaz: All in all, Turkish demand is in place, but with the help of the producers themselves rather than consumer financing being available by the banks and other financial institutions. But
Hanzade Kılıçkıran: Thank you.
Doğan Korkmaz: I mean, to summarize, as a direct answer to your question, no, nothing inflated in terms of cost of financing in the case of Arçelik, in terms of the rates that they are paying. The second question was Made in EU initiative. We are obviously closely following the discussions around the proposed Made in EU requirements. Obviously, the final framework and the implementation details are still evolving. Our priority really remains to emphasize Turkey's longstanding and integral role in the European automotive value chain, not only in automotive car manufacturing, but also across the value chain for European producers as well. We believe that preserving these established industrial partnerships is important for Europe's competitiveness, own competitiveness as well. At the same time, obviously, Ford Otosan has a degree of operational flexibility through its manufacturing footprint in both Turkey and in Romania.
Doğan Korkmaz: Together with Ford Motor Company, they are evaluating potential scenarios to mitigate an adverse implications should regulatory framework evolve in a less favorable direction. They are looking into different scenarios to spread the manufacturing accordingly. However, at this point in time, there are no specific actions taken because it is still a moving issue. Given the remaining uncertainties around the final scope and implementation of the framework, we believe it will be premature at this point in time to draw any conclusions on the potential implications for our own businesses. You will be in probably a better position to assess the impact and any necessary actions once the legislation is really finalized.
Hanzade Kılıçkıran: Thank you very much, Doğan Bey. Is it fair to say that Tofaş is a bit insulated, I mean, more protected against the Made in EU current discussion framework compared to Ford? Ford also has some tools to mitigate the risk, right? Given that they have the plant in Romania. In case of a worst-case scenario, you are still kind of protected, I guess.
Doğan Korkmaz: Yeah, I understand, but again, I would need to reiterate. I mean, thinking about the worst-case scenario is not easy because there are many different moving parts, and whenever they change direction before they come to a conclusion in the legislation, one might be to your advantage, but then the other might be to your disadvantage. At this point in time, with our own understanding, yes, Tofaş is in a better place because of obviously the weight of Tofaş within Stellantis production in Europe. There is this 85% to 15% breakdown. So, if Tofaş doesn't make more than 15% of overall group production in the case of Stellantis, with the current state of the discussions in the regulation, it seems like they are, I mean, more protected. But these things change in a matter of days.
Doğan Korkmaz: Whereas in the case of Ford, that rule wouldn't necessarily help, so they are looking into other mitigations. But having a factory in Romania obviously helps a lot. Therefore, it's very difficult to make a conclusive contribution to answer your question. I'm in that position at the moment. There are moving parts, and before we see the end of this, it's very difficult to comment on the balance of the advantages and disadvantages for each and every company. But we're following very, very closely. We're talking to many different parties. We're using all the connections of our companies, but also of Koç Holding as well. Turkish government is very much supportive in this initiative, so we're all together in this and trying to get the best out of it.
Hanzade Kılıçkıran: Thanks very much, Doğan Bey.
Operator: As a reminder, if you would like to ask a question, please press star and 1 on your telephone. Ladies and gentlemen, there are no further audio questions at this time. We will now move on to written questions from the webcast participants. Our first question comes from Orkun Gödek with Deniz Yatırım, and I quote, "Thank you for the presentation. Following the recent news flow, could you elaborate on the holding's long-term strategy and expectations regarding nuclear reactors and energy transition through Tüpraş? Should we consider this a new strategic focus area for the group? We would appreciate your thoughts on this. Thank you.
Doğan Korkmaz: Thank you for this question. Let me answer that. I mean, in the case of Tüpraş, the idea around nuclear reactors, SMRs really to be precise, are more operational than strategic. What Tüpraş alluded to in their announcement recently was really them preparing themselves to be able to use nuclear reactors in a refining setting. They are working on different arrangements where they would be able to install an SMR when obviously there is the availability of SMRs in the market and probably needed legislation being available at that point in time. Having obviously the electricity and the steam together really helps in a refining environment. Nuclear reactors are more feasible if you are able to get use of that steam out of the electricity production as well. Having said that, obviously, group-wide, we are following the developments on the SMR space.
Doğan Korkmaz: We are also aware of the Turkish initiative in developing the domestic national reactor. I mean, if anything, if we decide on any inclusion of one of our companies, then we might consider that being a strategic initiative going forward. But at this point in time, we are in a following mode, save for Tüpraş's initiative to prepare itself to be able to use nuclear reactors in a refining setting.
Operator: Ladies and gentlemen, there are no further questions at this time. I will now turn the conference over to Mr. Korkmaz for any closing comments. Thank you.
Doğan Korkmaz: Before we conclude, I would like to briefly touch on a few key messages. Despite the challenging environment, we delivered strong profitability and maintained a solid balance sheet while continuing to invest for growth. It has also been a particularly active period for the group, with a number of important strategic and commercial developments and corporate initiatives. As we celebrate our centennial, our focus really remains firmly on the long term and on creating sustainable value through disciplined execution and investment. I would also like to invite those of you attending COP31 in Antalya to join us at our event. As the global business partner of COP31, Koç Holding, together with our group companies, will host more than 40 events, bringing together international stakeholders around key dimensions of climate action. We would be delighted to see you there.
Doğan Korkmaz: Thank you again for joining us today and for your continued interest in Koç Holding. Have a lovely day.
Operator: Ladies and gentlemen, the conference is now concluded, and you may disconnect your telephone. Thank you for calling, and have a pleasant evening.
