Earnings call transcript: UCaaS Q2 2025 sees strong revenue growth amid challenges

Ulker Biskuvi reported Q2 2025 revenue growth of 11.5% year-over-year to 23 billion Turkish lira, though gross profit margin slightly decreased to 27.2% amid a challenging macroeconomic environment marked by 35% inflation and volatile commodity prices. Despite these headwinds, the company maintained market leadership in Turkey and expanded internationally, attributing growth to new product launches and strategic cost management. Ulker projects 3% net sales growth and a 17.5% EBITDA margin for 2025, supported by strong financial health, a healthy balance sheet, and the initiation of a syndication loan refinancing, reflecting investor confidence in its resilient performance and strategic direction.

Analysis

Ulker Biskuvi demonstrated operational resilience in Q2 2025, delivering an 11.5% year-over-year revenue increase to 23 billion Turkish lira despite severe macroeconomic headwinds, including a 35% inflation rate and a 2% decline in Turkish GDP. This top-line growth was primarily driven by successful new product launches, which contributed 4% to Q2 snacking revenue, and the company's ability to maintain its dominant market share in Turkey, including a 33% share in biscuits. However, profitability is under significant pressure, as evidenced by a slight contraction in the gross profit margin to 27.2% and a decrease in the EBITDA margin to 14.6%. Management attributes this margin erosion to volatile commodity prices, particularly for cocoa, and the necessity of higher promotional activity in a contracting market. The company's forward guidance is conservative, projecting 3% net sales growth for the full year with a 17.5% EBITDA margin, reflecting ongoing uncertainty. Its strong financial health, indicated by an InvestingPro score of 3.19 and the proactive launch of a syndication loan refinancing, suggests a solid balance sheet and prudent financial management capable of navigating the challenging environment.

Key Decisions for Investors

• Investors should weigh the company's proven resilience and market leadership against the significant margin pressures from commodity inflation and a challenging Turkish economy.
• Monitor key input costs, particularly for cocoa and packaging, and the company's progress toward its 17.5% EBITDA margin guidance for FY2025, as this will be critical for validating the investment thesis.
• The announced refinancing of its syndicated loan is a positive credit event, but investors should assess its final terms for any impact on future financing costs and balance sheet flexibility.