Şişecam 2024/q2
Türkiye Şişe ve Cam Fabrikaları A.Ş. was founded in 1935 by İş Bank and currently consists of a holding company with 56 subsidiaries, 1 joint venture, 4 associates, and 2 joint activities.
Şişecam is among the world’s most prestigious manufacturers and with its 89 years of corporate history, it has a considerable experience and high degree of specialisation. As a global company Şişecam has production activities spanning 14 countries on 4 continents, and sales in more than 150 countries.
Following the merger, which was completed as of 01 October 2020, Şişecam is on track to become one of the top three global producers in all its core business lines. Although the value creation objective seems to be wounded, the company is decisively moving forward despite global economic uncertainties and geopolitic risks.
After this brief introduction, now let me cover the financials of the company for 2024/q2. But a quick reminder: Due to application of inflation accounting in accordance with TFRS, TAS 29 and the announcements made by the Public Oversight Accounting and Auditing Standards Authority, financial statements are adjusted since 2023/q4. Unfortunately, continuously changing figures and missing quarterly data for other periods make the LTM and DCF analysis vulnerable to forecast failures. With those reasons, I didn’t publish my 2024/q1 report and until the data settle, I will share only quarterly or year-end figures and comparisons, and my calculations based on given data.
EXECUTIVE SUMMARY
Global pandemic, supply chain bottlenecks, transformation from VUCA World to BANI World and even the war did not hit the financials of the company as the unfolding events and their lagging effects in the last twelve months.
Previously Şişecam managed to exceed all expectations and produced solid results even amongs the dismay, but this quarter revelad that the company is not immune to inflation accounting and recessions. Half-year results showed a deep detorriation in financial tables and a negative figures for EBIT. Geopolitic unrests, slowing demand and constraints on the pricing power due to increased competition are also among the other culprits.
Consolidated net sales fell to 85.8 billion TRY (USD 2.5 billion) in 2024/H1 from 103.6 billion TRY (USD 3.1 billion) in 2023/H1. International sales accounted for 61% of total sales, and investments amounted to 11 billion TRY. Şişecam has produced 2.7 million tons of glass, 2.3 million tons of soda ash, and 1.8 million tons of industrial raw materials at the end of first half year of 2024.
As Mr. M. Görkem Elverici, CEO of Şişecam, commented: “Trust is the fundamental value we need during challenging times. Şişecam reaffirmed global confidence in the company with its record-demand bond issuance in April. Our Eurobond issuance, totalling $1.5 billion attracted nearly $5 billion in international institutional demand, setting a record.” Heartfelt congratulations to the management and hope to see the same confidence from the international actors in the stock market, too.
Şişecam’s Chairman and Executive Member of the Board of Directors Prof. Dr. Ahmet Kırman’s resignation from his duties as of 01.07.2024 was unexpected. Under his leadership the company’s turnover increased approximately 3.5 times in euro terms. The share of international sales reached to 60 percent, and the number of employees grew from 15,000 to 24,000. In this regard, I’d like express my thanks to Mr. Kırman for all his contributions and I wish him all the best.
Last but not least, Şişecam has also received a credit rating upgrade (from B2 to B1) along with Türkiye (from B3 to B1) by Moody’s on 26.07.2024. The company continues to its investments and share buyback program. As of today (08.09.2024) buybacks reached to 68.8 million nominal value shares, corresponding to 2.25% of the capital. As conclusion; revenue and profit stumbled and margins faced headwind. International sales are relatively still strong and investments continue. Financial risk ratios are not volatile and in the safe zone, but effect of increased debt reflected in the financial leverage and debt ratios. Considering the ongoing risks, it is difficult to claim that stock price hit the bottom, but is also true that relative to index and intrinsic value it lags behind.
Now let’s delve in to details.
Key Financials
In the first half of 2024, consolidated revenue fell from 103,568 million TRY to 85,792 million TRY, down by 17.2% (YoY cumulative). The same retreat is visible at both quarters for all variables below. In 2024/q2 revenue shrank to 41,797 million TRY with a 17.9% decrease from 50,931 million TRY in 2023/q2. Compared to previous quarter of this year, decrease is 5.0%.
Gross Profit is down by 32.2%, from 29,344 million TRY to 19,887 million TRY. YoY change is -27.8% and compared to previous quarter of this year, decrease is 2.3%.
I follow the financials of the company since 2011/q1 and this is the first time that I have recorded a negative EBIT for Şişecam. EBIT has declined from 9,057 million TRY to minus 1,492 million TRY from 2023/q2 to 2024/q2.
Finally, Parent Only Net Income is also down by 53.8%, from 10,660 million TRY to 4,928 million TRY. YoY change is -51.4% and compared to previous quarter of this year, decrease is 7.0%.
Share of international revenues is at 61% in the 2024/H1, while the sales in Türkiye is at 39% and exports from Türkiye is at 20%. These figures are in line with previous trend and logistics seems good balances between different demand conditions. Although I have mentioned production and investment figures on the Executive Summary section, you can find the comprehensive data at the table below.
Segments and Regions
Following the same perspective for Key Financials, you can see the Segmental Breakdown of Revenues from 2023 to 2024 for both quarters and cumulative values. Except Industrial Glass (YoY: 3%) and Glass Packaging (QoQ: 5%) all segments decreased in 2024 in a range from -1% to -43%. It was a very tough six months and as noted above consolidated decline in revenue is 17.2%.
Architectural Glass was 21% up by volume, but pricing was -31%. A similar trend was also visible in Glass Packaging with a 5% volume increase, compared to -21% pricing, production mix and currency effects. The only segment that was able to sustain pricing power was Industrial Glass. A word also on Energy segment, 52% volume increase is impressive, but due to general market conditions pricing power was pressured by -63%.
Breakdown of Income Statement
At this point, it is apt to see where this 85,792 million TRY Revenue comes from, and how it evolves to Net Income. In the following Sankey Diagram, I have showed the revenue by segments on the left hand side. Then I have deducted 65,906 million TRY Cost of Sales and obtained 19,887 million TRY Gross Profit.
Operating Expenses stood at 21,379 million TRY. Operating Income at the year end was minus 1,492 million TRY and after adjusting for other items, Şişecam ended the first half of the year 2024 with 4,378 million TRY Income Before Tax figure. As the 652 million TRY Tax Income added to that sum, Net Income for the period is 5,030 million TRY, which is roughly 170 million USD. Profit attributable to equity holders of the parent is 4,928 million TRY.
Financial Risk Ratios
Financial risk ratios for Şişecam still look healty with a light negative change in financial leverage and debt ratios, due to a record setting Eurobond issuance, which totals $1.5 billion and will be executed in two tranches, 55% with an 8-year maturity and an average yield of 8.455%, and 45% with a 5-year maturity and a yield of 8.056.
Financial leverage that the company uses is at 48% and the Debt-to-Equity ratio is jumped from 0.74 to 0.91. When it comes to liquidity ratios Current Ratio is up from 1.69 in 2023/12 to to 2.38 at the end of 2024/H1. Quick Ratio is at 1.76.
Share Buyback and Dividends
Şişecam has previously announced a buyback program on 26.02.2021 and made its first purchase on 15.03.2021. After reaching the first criteria Şişecam announced a second, supportive program and it is still ongoing. For further details you can read my article on Şişecam Stock Buyback.
In the chart below you see share prices (daily closing) in white color, and buybacks in yellow (in Turkish lira). The most recent share buyback was on 07.08.2024 with a 2.000.000 shares and the net total from the beginning of the program reached to 68,778,416 with a share of 2.25 percent to the capital.
As we all know share buybacks are important for share holder value, but it is not the only instrument to that end. In addition to search for the best returns to the invested capital, Şişecam also pays dividends regularly with an increasing ratio each and every year. In 2024, with a precautious cash management, the company distributed 2,200 million TRY as dividends, which is 0.7182 TRY gross and 0.6464 TRY net per share.
Şişecam is one of the companies that I follow closely and have in my global portfolio for years. I hope this figures, analysis and calculations are also useful for you, too. For further documents and news please check Şişecam Investor Relations use their official figures to avoid unintended errors or miscalculations.
With this opportunity, I’d like to thank to Şişecam management and all employees for their efforts and performances, who work for the best of the company and to create sustainable value.
Ergun UNUTMAZ, 08.09.2024
You can download and print the pdf version of this report, read a short summary in Turkish at X or check my previous works by clicking the links.
ŞİŞECAM 2023/q1
ŞİŞECAM 2023/q2
ŞİŞECAM 2023/q3
ŞİŞECAM 2023/q4
I wish you all the best.
Disclaimer
General information and statistics that are provided herein this article acquired from official sites and public resources. Thoughts and comments belong to the author and do not represent any other third parties’, public/private institutions’ or organisations’ point of view.
The information contained on this article is not an offer to buy or sell securities, foreign exchanges, indices or any other financial instruments. Works on this blog also comprise educational materials, translations, summaries and experience sharing essays. I do not provide any kind of financial services. For the investment advices and recommendations, please refer to registered institutions and authorised bodies. Parties, who gets information from this website, accept to bear the possible benefits and risks at their own responsibility, and act through their own initiative.