2014 ANNUAL REPORT PETKİM 2014 ANNUAL REPORT ANNUAL PETKİM 2014 For 50 years we have been producing for the future HAVING THE ONLY INTEGRATED PETROCHEMICAL COMPLEX IN TURKEY, PETKİM PROVIDES RAW AND INTERMEDIATE MATERIALS TO VARIOUS INDUSTRIES- INCLUDING CONSTRUCTION, AGRICULTURE, AUTOMOTIVE, ELECTRICITY, ELECTRONICS, PACKAGING, TEXTILES PHARMACEUTICAL, PAINT, DETERGENT AND COSMETICS- THROUGH THE HIGH VALUE- ADDED PRODUCTS SUCH AS THERMOPLASTICS, FIBERS AND RAW MATERIALS FOR PAINTS. Petkim Petrokimya Holding A.Ş. P.O. Box: 12 Aliağa 35800 Izmir Phone: +90 232 616 1240 / 616 3240 (Pbx) Fax: +90 232 616 1248 Web: www.petkim.com.tr Registered Email Address: [email protected] *Petkim products were used for the front cover and in the design of the Annual Report. TABLE OF CONTENTS INTRODUCTION INVESTOR RELATIONS 04 Petkim at a Glance 64 Investor Relations 18 Principal Financial Indicators 66 Agenda 20 A Story of Growth 67 Declaration of Independence 26 Message from the Chairman 72 Corporate Governance of the Board of Directors Principles Compliance Report 28 Board of Directors 89 Profit Distribution Policy 32 Message from the General Manager 92 Statement of Responsibility 38 Executive Management 42 SOCAR Turkey ACTIVITIES IN 2014 FINANCIAL INFORMATION 45 Production 97 Auditor’s Report on the Annual Report 46 Sales and Marketing of the Period 48 Human Resources 98 Independent Auditors’ Report 52 The Environment 53 Procurement 54 Technology Management 56 Projects and Investments 57 System and Process Development 58 R&D and Quality Assurance 61 Corporate Social Responsibility PRODUCTION CAPACITY INCREASED 13% Petkim recently finalized two of its strategic investments, which increased its production capacity by 13%. In this way, the Company reinforced its leading role in the procurement of raw material for the market. Prearranged maintenance over hauls are carried out for all of the plants every four or five years, and these have also been successful. This year, the Company is aiming for full-capacity production. 4-5 INTRODUCTION PETKİM AT A GLANCE With over 60 products in production, Petkim is the most important raw material supplier in Turkey. The Company also figures among the pioneers in terms of financial performance. The product portfolio of Petkim comprises high On May 30, 2008, in a privatization tender with value-added goods such as thermoplastics, the block sale method, 51% of Petkim’s public fibers, and raw material for paints, products shares were sold to SOCAR&Turcas Petrochemical which constitute primary inputs for a number of for US$ 2,040,000,000. In 2011, Turcas Petrol A.Ş. industries. These products are also essential for sold all of its shares to the State Oil Company of the plastic, chemical, packaging, piping, paint, Azerbaijan Republic (SOCAR); following this sale, construction, agriculture, automotive, electricity, title of SOCAR&Turcas Petrochemical Enerji A.Ş. electronics, and textiles industries, as well as was registered as SOCAR Turkey Petrochemical the pharmaceutical, detergent, and cosmetics A.Ş. In 2012, 10.32% of the public shares of the sectors. Prime Ministry Privatization Administration in the capital of Petkim Petrochemical Holding Located in the Aliağa Peninsula, the Company’s A.Ş. were sold to SOCAR İzmir Petrochemical 60 production facilities consist of 14 production A.Ş. and the shares were transferred. 43.68% of plants, seven auxiliary processing units, 21 other Petkim’s shares are still traded on the BIST (Borsa NUMBER OF plants, and administrative and social facility Istanbul). PRODUCTS buildings. PROVIDED TO With over 60 petrochemical products in its The idea of establishing a petrochemical industry product range, Petkim is the most important THE MARKET in Turkey was put on the agenda during the First raw material supplier in the Turkish industry. The Five-year Development Plan period. Following Company has a privileged position in the private research and evaluation made under the sector in terms of profitability and production leadership of TPAO, Petkim Petrokimya Holding performance. A.Ş. was established on April 3, 1965. Petkim made its initial infrastructure investment with five plants constructed at the Yarımca Complex in 1970. Following investments at Yarımca, within the framework of the Third Five-year Plan, work began to establish Petkim’s second complex in the Aliağa region. The Aliağa Complex, operating at optimum capacity with the latest technology of that period, began in 1985. Since its founding, Petkim has invested 3.6 in the Aliağa Complex to realize capacity increases, debottlenecking, refurbishment and ANNUAL modernization. Thus, the Company sustains PRODUCTION its competitive advantage internationally CAPACITY by effectively meeting its clients’ needs and (MILLION TONS) expectations. PETKİM 2014 ANNUAL REPORT Having the only integrated petrochemical Petkim has an adequate production infrastructure With the only premises in Turkey, Petkim rapidly moves ahead for the growth plans set in accordance with its to achieve its target of increasing capacity by long term strategic targets. Taking advantage integrated means of value added products. With the Petkim of this strength, the Company has been in a petrochemical Peninsula identified as the Company’s ‘Value-Site dramatic transformation process, including raw 2023,’ investments aimed at the integration of material integration, on the way of becoming the facilities in refineries, petrochemical and energy facilities, and largest petrochemical complex in Europe. Petkim, Turkey, Petkim is logistics are still ongoing. In this context, planned which has an annual average gross production rapidly advancing investments for the peninsula in preparation for of 3 million tons, is committed to adding value this goal will amount to US$ 10 billion. The first to Turkey’s national economy and being a toward its target and most important part of the integration chain, source of pride by respecting people and using of increasing STAR Refinery, with an investment value of US$ environment-friendly production technology 5.6 billion, which is expected to start production contributing to Turkey’s cultural, social and capacity through in early 2018. It will be the country’s first private economic life. value-added refinery, and the largest investment in a single location in the history of the Republic. products. The first phase of the Petkim Container Port will come online in 2015, and will meet the logistical requirements of the supply chain. The port investment will be made by Petlim Limancılık ve Ticaret A.Ş., 70% of which is owned by Petkim and 30% by Goldman Sachs. The total cost of the development and its financing will come to US$ 400 million. The operation and management of the port will be carried out by the Dutch firm APM Terminals, one of the world’s biggest port operators in its field, for a 28-year period with a 4-year option. 6-7 PETKİM AT A GLANCE INTRODUCTION FIVE-YEAR KEY INDICATORS (TL thousand) 2010 2011 2012 2013 2014 Total Assets 2,375,893 2,671,127 2,799,356 3,245,630 3,788,257 Net Sales 2,909,392 3,891,322 4,348,910 4,158,730 4,132,846 Net Profit (Loss) 130,085 102,341 24,605 48,897 8,679 Exports (US$ million) 531 834 1,041 816 564 Issued Capital 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 Investments 84,872 151,897 85,236 215,182 222,423 Number of Employees 2,457 2,585 2,401 2,457 2,425 51.00% SOCAR Turkey 5.32% 43.68% Petrokimya A.Ş. SOCAR Turkey Other publicly Enerji A.Ş. traded on BIST 51,000,000,000 5,321,568,109 43,678,431,890 Number of Shares Number of Shares Number of Shares 510,000,000 53,215,681 436,784,318 Value (TL) Value (TL) Value (TL) 0.00% Privatization Administration (Group C–Privileged Shares) 1 Number of Shares 0.01 Value (TL) TOTAL ASSETS INVESTMENTS (TL MILLION) (TL MILLION) 2014 3,788 2014 222 2013 3,245 2013 215 2012 2,799 2012 85 2011 2,671 2011 152 2010 2,376 2010 85 PETKİM 2014 ANNUAL REPORT OUR VISION √ To sustain our leadership in the Turkish market through continuous growth. √ To be a major regional player in petrochemical industry. OUR MISSION √ Petkim produces high quality petrochemical products in its integrated, high technology premises and imports high quality petrochemical products, compatible with international standards. √ Petkim sells its products in the domestic market and in international opportunity markets utilizing a strong customer focus. √ Petkim cares about innovation; it takes quality as its philosophy of life. √ Petkim grows with its partners by increasing Petkim’s market value and profitability. √ Petkim keeps the competence, satisfaction and loyalty of its employees at a maximum level with innovative human resource applications. √ Petkim follows universal ethical values that protect the environment, ensures occupational health and safety, as it supports and adds value to society with a sustainability perspective. OUR VALUES √ Adding value to our customers √ Employee focused approach √ Creativity and innovation √ Product quality and continuity √ Adding value through partnerships √ Occupational health and safety √ Taking responsibility for a sustainable future A SAFE HARBOR IN A ROUGH MARKET As a result of significant changes in oil prices and fluctuating foreign exchange rates affecting the economy, Petkim utilized its dynamic structure to make critical decisions and position itself in line with the market. Over the course of this period, the Company’s real strategic value for Turkish industry became evident yet again. 10-11 PETKİM AT A GLANCE INTRODUCTION Thanks to