CONTENTS 30 TIRE REINFORCEMENT TECHNOLOGIES 61 About Kordsa AGENDA OF 2018 GENERAL MEETING OF 36 COMPOSITE REINFORCEMENT SHAREHOLDERS 2 KORDSA AT A GLANCE TECHNOLOGIES 62 CORPORATE GOVERNANCE COMPLIANCE REPORT 4 KORDSA IN BRIEF 40 CONSTRUCTION REINFORCEMENT TECHNOLOGIES 88 INDEPENDENCE DECLARATIONS OF 6 STRATEGY HOUSE 42 RESEARCH AND DEVELOPMENT INDEPENDENT MEMBERS OF THE BOARD 7 MISSION-VISION-VALUES OF DIRECTORS 44 OCCUPATIONAL HEALTH & SAFETY AND ENVIRONMENT 90 2018 PROFIT DISTRIBUTION PROPOSAL AND DIVIDEND TABLE In 2018 46 HUMAN RESOURCES 8 GLOBAL FOOTPRINT Financial Information 10 KORDSA in 2018 Corporate Governance 16 KEY FINANCIAL HIGHLIGHTS 91 CONSOLIDATED FINANCIAL STATEMENTS 48 INDEPENDENT AUDITOR’S REPORT ON AND INDEPENDENT AUDITOR’S REPORT 17 SHAREHOLDER STRUCTURE THE BOARD OF DIRECTORS’ ANNUAL 19 SABANCI GROUP IN BRIEF REPORT 20 CHAIRMAN’S MESSAGE 51 ANNUAL REPORT OF THE BOARD OF DIRECTORS FOR THE ACCOUNTING YEAR 22 BOARD OF DIRECTORS OF 1 JANUARY 2018 - 31 DECEMBER 2018 24 CEO’S MESSAGE 60 CONCLUSION SECTION OF THE 26 EXECUTIVE MANAGEMENT AFFILIATION REPORT UNDER ARTICLE 199 OF THE TURKISH COMMERCIAL CODE Our website has been renewed. Kordsa corporate Kordsa blog: website: www.reinforcer.com www.kordsa.com KORDSA Annual Report 2018 1 INSPIRED FROM LIFE WE REINFORCE LIFE People are as rich as our happy moments and as strong as they can hold those moments together. Knowing the value of those moments, we are trying to make them permanent. In doing so, we are inspired by those unique moments in life. With reinforcement technologies that we developed, we aim to create a better future for all our loved ones. With innovative tire, construction and composite technologies, we imagine a sustainable future by reinforcing the vehicles and structures that carry to those unique moments. We believe that we add value to life as we increase and share our competency. That is why we are reinforcing life all over the world. 2 KORDSA Annual Report 2018 About Kordsa KORDSA AT A GLANCE DIGITAL TRANSFORMATION IN THE CONTEXT OF TÜSİAD’S DIGITAL FINANSAL TRANSFORMATION ACCELERATOR PERFORMANCE PROGRAM IN THE INDUSTRY, WE ARE WORKING WITH A START-UP COMPANY ON A PROJECT THAT AIMS TO PREVENT QUALITY ERRORS IN PRODUCTION BY EMPLOYING IMAGE PROCESSING TL 3.95 BILLION TECHNOLOGIES. TURNOVER WE AIM TO ACCELERATE PRODUCTION AND INNOVATION PROCESSES THROUGH IMPROVED PRODUCTION QUALITY, PRODUCTION WITH LESS ERROR AND SMART PRODUCTION SYSTEMS. 58.8% INCREASE IN TURNOVER TL 621 MILLION OCCUPATIONAL EBITDA HEALTH & SAFETY AND ENVIRONMENT PLANTS IN 4 CONTINENTS - ISO 14001: 2015 CERTIFIED 83.1% SAFETY EXPERIENCE CENTERS AIM INCREASE IN EBITDA “ZERO WORK-RELATED ACCIDENTS”, “ZERO QUALITY DEFECTS”, “ZERO BREAKDOWNS” AND “HAPPY EMPLOYEES” TL 339 MILLION NET PROFIT KORDSA Annual Report 2018 3 R&D TALENT MANAGEMENT 2 R&D CENTERS PATENT APPLICATIONS 4,500 729 REINFORCERS 179 REGISTERED PATENTS 35.6 MAN/HOUR TRAINING 181 INVENTIONS 3 YEARS IN A ROW USD 64 MILLION GREAT PLACE TO WORK AWARD IN REVENUES GENERATED BY NEW BRAZIL PRODUCTS 2 YEARS IN A ROW 2% R&D EXPENDITURE BEST EMPLOYEE AWARD IN INDONESIA OF NEARLY 2% OF THE TURNOVER • ECO-FRIENDLY DIPPING SOLUTION: KORDSA- OPEN CONTINENTAL COLLABORATION • POLYNSPIRE PROJECT – 22 PARTNERS FROM INNOVATION 11 COUNTRIES - TO DEMONSTRATE A SET OF INNOVATIVE, COST-EFFECTIVE AND SUSTAINABLE SOLUTIONS FOR EFFICIENT PLASTIC RECYCLING • DICOMI PROJECT – 11 PARTNERS FROM 8 COUNTRIES - 3D PRINTING OF COMPOSITE MATERIALS • PRODUCTION OF COMPOSITES REPAIRING MATERIALS WITH THE ADDITION OF NANO-MATERIALS FOR THE AEROSPACE INDUSTRY. SUPPORTED BY GERMANY’S FEDERAL MINISTRY OF EDUCATION AND RESEARCH AND THE SCIENTIFIC AND TECHNOLOGICAL RESEARCH COUNCIL OF TURKEY (TUBITAK). 4 KORDSA Annual Report 2018 About Kordsa KORDSA IN BRIEF TIRE-REINFORCEMENT TECHNOLOGIES YARNS NEXT-GENERATION SINGLE-END CORD CORD FABRIC FABRICS RUBBER PRODUCTS PASSENGER VEHICLES CONSTRUCTION EQUIPMENT HOSES AVIATION HEAVY-DUTY VEHICLES BELTS AUTOMOTIVES LIGHT COMMERCIAL AGRICULTURAL INDUSTRY VEHICLES EQUIPMENT KORDSA Annual Report 2018 5 COMPOSITE CONSTRUCTION REINFORCEMENT REINFORCEMENT TECHNOLOGIES INDUSTRIAL FABRICS AND MACRO & MICRO- FABRICS PREPREGS FIBERS RUBBER PRODUCTS AEROSPACE INFRASTRUCTURE AUTOMOTIVE HOSES SUPERSTRUCTURES RAIL SYSTEMS BELTS MARITIME TUNNELS 6 KORDSA Annual Report 2018 About Kordsa STRATEGY HOUSE Pillar Initiatives KORDSA Annual Report 2018 7 MISSION-VISION-VALUES VISION MISSION AGILE KORDSA IN HIGH VALUE TO DELIVER HIGH VALUE-ADDED BUSINESSES FOR SUSTAINABLE GROWTH REINFORCEMENT SOLUTIONS, GLOBALLY. VALUES • SAFETY, HEALTH AND ENVIRONMENT: WE • RESULTS DRIVEN: AS THE LEADER OF GLOBAL BELIEVE THAT ALL OCCUPATIONAL AND NYLON 6.6 MARKET AND A COMPANY ENVIRONMENTAL ACCIDENTS MAY BE CONTINUOUSLY CREATING VALUE FOR PREVENTED. OUR TARGET IS TO CREATE ITS SHAREHOLDERS, WE PROVIDE OUR A 100% ACCIDENT-FREE AND SAFE WORK CUSTOMERS WITH THE HIGHEST QUALITY ENVIRONMENT AND TO PRODUCE 0% WASTE. SERVICES. OUR TECHNOLOGIES REINFORCE ONE CAR TIRE OUT OF EVERY THREE, ONE • COMMITMENT TO ETHICAL VALUES: WE PLANE TIRE OUT OF EVERY TWO. ARE 100% COMMITTED TO OUR ETHICAL VALUES CONDUCTING OUR RELATIONSHIPS • GLOBAL COLLABORATION: WE RETRIEVE WITH OUR EMPLOYEES, SHAREHOLDERS, OUR POWER FROM GLOBAL COOPERATION CLIENTS, SUPPLIERS, BUSINESS PARTNERS, BENEFITING FROM BENCHMARKS OF OUR COMPETITORS, ENVIRONMENT AND SOCIETY. FACTORIES SPANNING GLOBALLY. • CUSTOMER FOCUSED: WE GROW TOGETHER • CONTINUOUS IMPROVEMENT: WE WITH OUR CUSTOMERS WHO PREFER US AS CONTINUOUSLY ENHANCE ALL OUR THEIR STRATEGIC TECHNOLOGY PARTNER PROCESSES WITHIN OUR ORGANIZATION AND WE OFFER THEM INNOVATIVE, THROUGH OUR CUSTOMER FOCUSED ACCURATE AND CUSTOM MADE SOLUTIONS. APPROACH AND TOTAL QUALITY MANAGEMENT. • OPEN MINDED: INNOVATION IS IN OUR GENES. WE CONTINUOUSLY DEVELOP NEW PRODUCTS, TECHNOLOGIES AND PROCESSES THROUGH OUR MORE THAN 40 YEARS OF EXPERIENCE. 8 KORDSA Annual Report 2018 NORTH AMERICA SOUTH AMERICA ANNUAL TURNOVER ANNUAL TURNOVER TL 958 TL 491 MILLION MILLION QUAKERTOWN, PA ANAHEIM, CA LAUREL HILL, NC SAN MARCOS, CA CHATTANOOGA, TN About Kordsa BRAZIL GLOBAL FOOTPRINT KORDSA SERVES ITS CUSTOMERS ON FOUR CONTINENTS WITH ABOUT 4,500 EMPLOYEES WORKING IN 11 FACTORIES AND 2 R&D CENTERS. KORDSA Annual Report 2018 9 EUROPE, MIDDLE ASIA-PACIFIC EAST, AFRICA ANNUAL TURNOVER ANNUAL TURNOVER TL 1.133 TL 1.366 MILLION MILLION ISTANBUL IZMIT THAILAND INDONESIA Tire Reinforcement Business Unit Composites Reinforcement Business Unit Construction Reinforcement Business Unit R&D Center 10 KORDSA Annual Report 2018 In 2018 KORDSA in 2018 Kordsa shows off fast-curing resin technology that offers superior visual quality. Kordsa, leading the industry with its innovative technologies, has developed a next-generation resin technology that reduces curing time. Known as “CM14”, this new resin technology achieves superior visual quality by eliminating water spot and white-spot problems. Kordsa included in the “Technical Industry R&D Personnel Training Program” In keeping with its vision of fostering an interest in technology, innovation, R&D, and engineering among young people, Kordsa gave a training to students under the Uludağ University Career Center’s “Technical Industry R&D Personnel Training Program”. Kordsa takes part in yet another EU-funded Horizon 2020 project Kordsa has been included in a new project under the European Union’s “Horizon 2020” R&D and innovation program. The company is one of twenty-two project partners taking part in the PolynSPIRE project under the EU Horizon 2020 program, which was initiated in order to strengthen research and technology-development capabilities, encourage university-industry collaboration, and develop cooperation in a variety of areas. The goal of this project is to demonstrate “innovative technologies towards a more efficient and sustainable plastic recycling”. Kordsa embarks upon its third year in the BIST Sustainability Index with improved environmental rating Having improved its environmental performance rating in the BIST Sustainability Index, Kordsa is once again among the top 50 companies with the best corporate sustainability performance. Publishing its fourth sustainability report of its environmental, social, and economic impact this year, Kordsa has thus also embarked upon its third year in the BIST Sustainability Index. KORDSA Annual Report 2018 11 Kordsa once again is one of Indonesia’s Top 100 FastestGrowing Companies Kordsa has been listed again among the top 100 fastest- growing companies among 355 publicly-listed companies by Infobank, one of Indonesia’s prominent economics magazines. Indo Kordsa’s Human Resources and Information Technologies Group Manager accepted the magazine’s award at a ceremony that took place at the Jakarta stock exchange. Kordsa listed as one of Brazil’s “150 Best Employers” Kordsa has added yet another prestigious award to its international awards. Kordsa Brazil was once again named among the “150 Best Employers” list published by Você S.A., one of Brazil’s most prestigious publications. In the magazine’s ranking based on responses to a survey of employees in the 18-26 age Kordsa honored with “Industry 4.0” award in Platin group, Kordsa Brazil was listed among the country’s “Global 100” series leading employers. Based on the results of a survey conducted jointly by Platin, a magazine, and IPSOS, an independent research firm, Kordsa became the recipient of an “Industry 4.0” award in the Textiles category in recognition of its standing as one of Turkey’s top 100 global companies. Kordsa’s sustainability