1Q 2019 Interim Operating Report
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01.31.2019 – 03.31.2019 INTERIM OPERATING REPORT PREPARED AS PER CAPITAL MARKET BOARD’S COMMUNIQUE SERIAL II, NUMBER 14.2 MAY 7, 2019 TABLE OF CONTENTS CEO Letter...............................................................................................................3 Corporate ProFile....................................................................................................4 Operating Areas……………………………………….............................................................5 Shareholder Structure and Operations…….............................................................5 Mission, Vision, Strategic Priorities........................................................................6 Operational Areas...................................................................................................7 Evaluation oF Operational and Financial Results Polisan Holding....................................................................................8 Poliport..............................................................................................10 Polisan Kansai Boya...........................................................................11 Chemical Activities.............................................................................13 Polisan Kimya.....................................................................................14 Polisan Hellas.....................................................................................15 Polisan Yapı........................................................................................16 Polisan Tarım......................................................................................17 2019 Company Targets.........................................................................................18 Board oF Directors and Committees.....................................................................19 Senior Management and its Rights……………………………….....................................21 InFormation in regards to R&D, Incentive, Personnel, and Aids...........................22 Contact OFFices.....................................................................................................23 Consolidated Statement oF Financial Position......................................................24 Consolidated Statement oF P/L and Other Comprehensive Income....................26 Financial Ratios.....................................................................................................28 Material Disclosure on Subsequent Events……………………………………….................29 2 POLİSAN HOLDİNG: CEO LETTER According to the growth Figures announced in March, in the last quarter oF 2018, Turkey's economy contracted by 3%, and the construction sector, which we mainly supply with input From our product portFolio, by 8.7%. In 2018, Turkey's economy recorded a growth rate oF 2.6%, while the construction sector shrank by 1.9%. In the first quarter of the year, the sharp decline in domestic demand was replaced by recession. While the latest economic data released points out that the monetary and fiscal policies implemented were not as effective as desired in eliminating the deterioration in the budget balance, the continuing uncertainty regarding the election also exhibits a challenging outlook For the rest oF 2019. In the First quarter oF the year when the operations in many sectors almost came to a halt, Polisan Holding’s revenues increased by 2.3% to reach TRY234.1 million despite the sharp contraction in the domestic demand. The biggest Factor For us to maintain our revenues at similar was the Foreign exchange based revenues oF our chemical operations in Turkey generated through exports, as well as dollar-based port operations oF Poliport and Euro-based revenues oF Polisan Hellas operating in Greece. Our EBITDA margin declined by 4.1 p.p. to 9.0% with decreasing revenues in Turkey and increasing costs in Greece, in our chemical operations. In this quarter, we recorded a net loss oF TRY19.1 million mainly due to decreasing operational proFitability in chemical operations and the effect oF interest, Foreign exchange rate diFFerence, and amortization expenses oF the €51 million investment oF Polisan Kansai Boya, which we account For by the equity pick-up method. As per combined financial results, in which, Polisan Kansai Boya, our 50% partnership with Kansai Paint, is included; our combined revenues decreased by 19.4% to TRY391.8 million due to the base eFFect stemming From the Fact that our paint subsidiary recorded the highest revenue oF all time in the First quarter oF 2018. Our EBITDA margin also regressed by 5.7 p.p. to 11.0% with Falling sales volumes in our paint and chemical operations. We recorded a net loss oF TRY25.9 million due to diminishing operational proFitability in our chemical operations, and Polisan Kansai Boya’s expenses related to the new Facility investment. In our paint operations, we started to bid For the tenders, previously not a possibility, thanks to the capacity Flexibility gained through our new Facility. In this context, in March, we won the Solvent and Water Based Cold Road Marking Paint tender, consisting oF two parts, which total 15,525 tons for TRY102,035,000 excluding VAT. The sales related to this tender will be reflected on our revenues in 2019. In this challenging time, as there is a shiFt in demand in the market From premium towards more economical paints, our operations continue with the Focus oF introducing new products in this segment; expanding production on-site through mix machines; and managing working capital requirement in the most eFFicient way possible, by holding minimum inventory and reducing the number of days receivables. In this period, our revenues declined by 41.7% to TRY138.9 million due to the contraction in domestic demand and the base eFFect stemming From the Fact that we recorded the highest revenue oF all time in the First quarter oF 2018, while our EBITDA margin decreased by 6.2 p.p. to 13.6%. Based on the data released by the Directorate General oF Maritime Commerce as oF March 2019, cargo handed at Turkish Ports deteriorated by 1.4% compared to the same period oF previous year due to the stagnant economic activities. In the same period, total cargo handled at Kocaeli Ports shrank by 6% despite oF the 0.7% limited increase in container cargo. At Poliport, cargo handled in the First quarter shrank by 5.8% compared to the last year. Recording US dollar revenues, Poliport saw a revenue increase oF 19.8% compared to 1Q 2018 due to the depreciation oF TRY against the US dollar. EBITDA margin remained Flat at 43.5%. At Poliport, we continue our investments For capacity increase with a selective manner. In our chemical operations in Turkey, we are keeping working capital requirement under control by shortening the collection period and serving to a corporate clientele Polisan Holding with a selective manner. On the other hand, we are trying to mitigate the eFFects oF the contraction in the domestic market by diversifying the products in our portFolio, focusing on the sales of products with high profitability, and weighing more on exports particularly of formaldehyde resins. Our new underground chemicals developed in previous months For use in subways and tunnels, are currently being used in the ongoing construction oF the Ankara Metro. As a result oF our such efForts, we limited the CEO decrease in Polisan Kimya’s revenues at 10.2% while kept EBITDA margin at 7.2% with a Fall at 3.0 p.p. Polisan Maroc, the construction chemicals production Facility we established in Morocco, increases its market awareness and revenues by participating in the tenders in the domestic market. The revenue increase oF Polisan Hellas, Erol Mizrahi generating Euro-based revenues in Greece, was realized at 10.0% compared to 1Q 2018 due to the volume and price pressure created by the Chinese originated products in the market. This, together with the halt oF production during the maintenance undertaken in the Facility resulted in a 5.1 p.p. Fall in EBITDA margin to 1.2%. We have revised our strategy to protect our revenues in this competitive environment, where low-priced products are being Favored. As For Polisan Tarım, as oF April 16, we decided to halt our operations that we have been carrying out For walnut plantation in Balıkesir on our 4.4 million square-meter land, and For olive production on our 2.5 million square-meter land in Karacasu. We will liquidate our land and concentrate on our operations mainly Focusing on chemicals. While we selectively continue our investments with the Focus oF eFFiciency, we distributed a gross cash dividend oF TRY25 million to our shareholders on April 30. We hereby thank our shareholders, our employees, our business partners and our customers for their support. 3 POLİSAN HOLDİNG: CORPORATE PROFILE Company Name : Polisan Holding A.Ş. Address (Headquarters) : Dilovası Organize Sanayi Bölgesi 1. Kısım Liman Caddesi No : 7 Dilovası – KOCAELİ Address (Branch) : İçerenköy Mahallesi, Ali Nihat Tarlan Cad. No : 86 Ataşehir – İSTANBUL Trade Registry Office and Number : Gebze Ticaret Odası – 5769 / İstanbul Ticaret Odası – 615757 Subjected Legal Regulations : Laws of Republic of Turkey Telephone and Fax Number : Tel. 00 90 216 578 56 00 ; Fax. 00 90 216 573 77 92 Internet Address : www.polisanholding.com.tr Capital : TRY758,500,000 Registered Capital Ceiling : TRY1,000,000,000 The Bourse/Market where shares are traded : Bourse İstanbul (BIST) / Star Market Date of Quotation on the Bourse : May 24, 2012 Ticker Symbol : POLHO