Şişecam 24/q4
Türkiye Şişe ve Cam Fabrikaları A.Ş. was founded in 1935 by İş Bank, and I hope 90 years of experience leads to a better, brighter future. The Group consists of a holding company, 56 subsidiaries, 1 joint venture, 4 associates and a 1 joint activity.
Şişecam is among the world’s most prestigious manufacturers and with its 90 years of corporate history, it has a considerable experience and high degree of specialisation. As a global company it 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 was on track to become one of the top three global producers in all its core business lines. Increase on sales were accompanied with profitability and solid margins. However, last year at these times, I have pointed the adverse effects of inflation accounting and stopped DCF valuations. One of the reasons for that was changing figures at every quarter and another reason was difficulty forecast EBIT margin. Global imbalances, low growth in China and recessions in Europe posed challenges for the company. As a result of global factors and internal setbacks the value creation objective wounded. I have plotted the operating profitability of the company with operating income (black) and operating profit margin (blue). There is a continuous and strong declining trend since 2022/q4. Although there was slight recovery in income, margins kept shrinking.
This is one of the metrics that I attach high importance. Because what happens here, goes directly to the share price. I have prepared another chart to show this relation. Below you see daily closings for the share price (black) on the right axis and earnings per share figures for every quarter on the left axis. After reaching its intraday peak at 55.64 TRY on 21/05/2024 share price took a nose dive. Cyclical and geopolitic factors definitely have their fair share on this fall, but declining EPS is what markets follow.
Having said that, the company is committed to its long-term objectives. We have witnessed high inflation period, tight monetary policies, high interest rates and rising energy costs. Downturn in demand, dim macroeconomic outlook and low growth had also distorted the company’s financials, but it seems like the worst is left behind. This does not mean a strong recovery and immediate rise in share price but cost control, efficiency and return to profitability should be under way.
On March 1, I have published the Stock Analysis for Şişecam and showed the stock performance both for price movements and returns. There is also a comparison of the share performance with the BIST100 Index. Year to date decline in share price is 22.1% and return of the Index at the same period is 26.7%. Historical maximum drawdown for the last 2 years is at 35.5% level and we are currently at this minimum point. If the economic outlook improves and company management achieves the high profit margins again, then we can expect an increase in the share price. Based on the recent correlation analysis the same expectation is also valid for a recovery in the BIST 100 Index.
Now let’s delve into year-end quarter financials of the company. 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.
Executive Summary and Key Financials
On the earnings release, Mr. M. Görkem Elverici, CEO of Şişecam, explained the factors and challenges that were causing the meltdown in the share price. He provided details on developments, various setbacks and steps taken to improve the situation. As I depicted above, cost control, efficiency, increase in the sales and free cash flow are essentials for return to profitability and this comment from his notes gives confidence: “Our priority for the first half of 2025 is to optimize our cost and expense structure, carefully manage our investment expenditures, and establish a solid foundation for our cash flow. …
We continue to invest in digitalization and innovative product development which are our strategic priorities to achieve Şişecam’s growth targets.”
If we check the year-end result; consolidated net sales fell to 185.6 billion TRY (USD 5.3 billion) in 2024 from 219.4 billion TRY (USD 6.2 billion) in YoY terms. This is an equivalent of 15.4% decrease. Quarterly change is minus 11% from 45,555 million TRY in 2024/q3 to 40,730 million TRY in 2024/q4. At the end of 2024, capital expenditures amounted to 30.1 billion TRY. Şişecam has produced 5.6 million tons of glass, 4.6 million tons of soda ash, and 3.8 million tons of industrial raw materials.
International sales accounted for 59% of total sales, and the share of domestic sales is at 41%. Exports from Türkiye is at 19% for the full year. These figures are more or less the same as 2023. For the last quarter’s consolidated figures, the share of international revenue is 200 basis points lower at 57%.
At the end of last quarter and with cumulative figures, compared the same period of previous year: Consolidated revenue is down by 15.4% and this retreat is visible at all items with varying degrees. Gross Profit is down by 30.4%, from 60,371 million TRY to 42,025 million TRY. I follow the financials of the company since 2011/q1 and this is the third time that I record a negative EBIT for Şişecam. EBIT has declined from 14,853 million TRY to minus 4,269 million TRY. From 2023 to 2024 decrease is 128.7% . Finally, Parent only Net Income is also down by 79.7%, from 24,789 million TRY to 5,022 million TRY.
When it comes to margins, there is a drastic collapse. Below are the changes for three key financials. Gross profit margin declined from 27.51% to 22.64%. The change is minus 587 basis points (bp). EBIT margin declined from 6.77% to minus 2.30% with a 907 bp fall. As a last item, net income margin is also in recess. In year on year terms, decline is 859 bp from 11.30% to 2.71%.
Şişecam | Segments and Regions
Following the same methodology for Key Financials, you can see the Segmental Breakdown of Revenues from 2023/12 to 2024/12 in cumulative values. All seven segments record declines in 2024/12 in a range from -2.8% to -38.4%. All in all, it was a very tough year. The columns represent values in million TRY and marks point out the YoY changes in percentage.
Architectural Glass was 8.9% down from 45.088 million TRY to 41,060 million TRY. Volume is 13% up, but pricing is -21%. A similar trend is also visible in Industrial glass and Glassware with respectively 10.5% and 8.2% declines. Glass packaging decreased 4.1%. Volume increased for this segment by 10%, and pricing effect was minus 7%. Chemicals is a major segment and decrease here is considerably high. It is 24.1% from 56,931 million TRY to 43,209 million TRY. A word also on Energy segment, 64% volume decrease and 5% pricing power loss were due to market conditions, product mix and currency.
The chart above shows the net sales by segments at the end of 2024 in cumulative values. Chemicals is leading with 43,209 million TRY and this is 23% of sales total of 185,589 million TRY. Architectural glass is at the second place as usual and figures are 41,060 million TRY and 22%. You can check the composition for other items from the pie chart on the left.
If we look at the regional breakdown of the net sales for 2024 in cumulative values, we see that Türkiye is leading with 45% of all total. The corresponding value is 84,140 million TRY. Europe is following it with 43,298 million TRY and the share is 23%.
Breakdown of Income Statement
At this point, it is apt to see where this 185,589 million TRY Revenue comes from, and how it evolves to Net Income (parent only). In the following Sankey Diagram, I have plotted the revenues by segments on the left hand side. Then, I have deducted 143,564 million TRY Cost of Sales and obtained 42,024 million TRY Gross Profit.
Operating Expenses stood at 46,294 million TRY and sales, marketing expenses are dragging the profits with 29,929 million TRY. Transportation expenses (16,4 billion TRY) and Indirect salaries and wages expenses (13,5 billion TRY) are two major burdens. Operating income does not exist for the third time. Operating Loss in 2024 is 4,269 million TRY and after adjusting for other operating, investing and financial items, Şişecam ended the year 2024 with 3,227 million TRY Income Before Tax figure. As the 2,016 million TRY Tax Income added to that sum, Net Income for the period became 5,243 million TRY. Profit attributable to equity holders of the parent is 5,022 million TRY, which is roughly 142 million USD.
Şişecam | Financial Risk Ratios
Financial risk ratios for Şişecam look healthy. Both the Financial Leverage that the company uses and the Debt-to-Equity ratios are higher due to eurobond issues and ratios are 0.48 and 0.92 respectively. When it comes to liquidity ratios Current Ratio is stable at 1.69 in 2024. Quick Ratio is slightly lover from 1.20 to 1.15 compared to 2023.
Şişecam | 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 can see share prices (daily closing) in white color, and buybacks in yellow (in Turkish lira). The most recent share buyback was on October 15, 2024 with a 1.000.000 share. And the net total from the beginning of the program reached to 70,778,416 with a share of 2.31 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 regular dividends 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. At the time that I prepare this report, Şişecam announced 0.6529 TRY gross and 0.5550 TRY net per share dividends for the year 2025.
Şişecam is one of the companies that I follow closely and have in my global portfolio for years. Considering all the developments that I tried to summarise above, share price has decreased from all time high levels drastically. Based on this losses and divergence in return performance compared to BIST100 Index, investors are definitely not happy. Considering the time value of money there are also other burdens for investors, too. Erosions in operating profitability melting value. As Görkem Bey emphasised, there is a strong need for cost management and optimisation in every process. With the recovery in EBIT and profitability, share price will reflect positive improvements. Although I do not expect a fast and strong growth in markets, I believe that Şişecam will do all it can to reach its long-term goals.
As a final note on share buybacks, there was an important change of acts at the end of 2024. Türkiye İş Bankası A.Ş. increased its share from 0.5122 to 0.5212 in two weeks. They have bought 32,500,000 shares in 8 transactions and this is almost the half of what Şişecam did in 3 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 incase of 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, 03.03.2025
You can check my previous works by clicking the links.
ŞİŞECAM 2024/q3
ŞİŞECAM 2024/q2
Stock Analysis SISE
DCF Valuation Porsche AG
I wish you all the best.
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