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Arda, Please go ahead.
Thank you, Michael. Ladies and gentlemen, thank you for standing by, and we will welcome you to Dogus Otomotiv Full Year 2021 Conference Call on the 1st of March, 2022. [Operator Instructions] The format of today's recorded call will be a presentation by Dogus Otomotiv team, followed by a question-and-answer session. So without further ado, I would like to pass the line to Mr. Kerem Talih.
Thank you very much Arda with our greetings and more welcome to all the participants in the name of Dogus Otomotiv and myself for the moment. Apart from the silent listeners, I'm together with my colleagues Arda and [ Damla ]. So we are all welcoming you to the fourth quarter results of Dogus Otomotiv.
As we did in the last time, I just would like to start with the new launch plan for year 2022. Considering that, during this year, we will have almost more than 20 new models that's going to be launched in the market, some of them -- of which have already been launched recently. Our showrooms are quite busy because 2 days ago, we have recently launched the new SUV models of Volkswagen namely the new Taigo and T-Cross has been showed up in the showrooms. And also in a couple of weeks' time, the makeup version of the T-Cross, which is also a very valuable model, will be on stage. But of course, it's not only Volkswagen as you can see in the presentation, we have various models of Porsche and Audi and also our Scania brand, which is to be revealed in the market. So in that respect, I can say that this year is going to be quite heavy in terms of marketing activities and new launch plans. When we consider the whole market, I must initially say that despite all the adverse effects of the pandemic influences, together with the supply obstacles relating to the chip crisis, as Dogus Otomotiv Group on the consolidated level, we have achieved all the targets that we have put at the end of year 2020 despite all the adverse factors. As you can see, the market -- the performance of the market -- just a second please, I cannot see some figures on the -- okay, now it's fine. The performance of the market is almost at the same level as year 2022 at a level of 760,000 units, which is 3% below the previous year. But the performance of Dogus Otomotiv is 2% better than the performance of the market. By the way, Arda, I cannot see the nominal values at the -- below chart, so I'm able to express them through my presentation. But market size at the middle of the presentation, I cannot see them right now. But it's not a problem for me, but maybe you can put a recent version of the presentation. When you consider the performance on a segment basis, the passenger vehicle market has been realized at a level of 506,000 levels, which is 8% below the market, but we have almost kept at the same level. And when we consider the performance of the heavy commercial vehicle and also the light commercial vehicle segment, the performance of Dogus Otomotiv is still better than the performance of the market only in premium segment because of the supply of vehicles in our Audi branch, we are a bit lower than the performance of the market itself. When you consider the market share in the -- as you can see in the passenger car segment, we are at #2 with a market share of 18.9%. And in the light commercial vehicle, we are just following Ford, Tofas and PSA Group with a market share of 8.4%. So when we consider -- when we consolidate them all, our level is 16.54%. That we are ranked at third position in the consolidated market share standards. When we consider each segment a little bit in detail, despite the fact that the market, the passenger car market has decreased 8% by itself, Dogus Otomotiv's market share has been realized at a level of 18.9%. And as you can see in the chart, we are just we are just following Renault and we are just placed at the second point. And we should also consider the fact that both Renault, Tofas and PSA Group has lost some of its market share despite the fact that we have almost increased our market share at the level of 1.3%. As you all would remember, our leading models in their respective segments, the Golf and the Passat are the leading models. And in our self-brands, the SEAT Leon is the leading model. In Skoda, the Superb, the Kodiaq, and the Arona is the leading models. And A3, both sedan and hatchback models are the leading models in their respective segments, I must say. Considering the light commercial vehicle itself, you know our stars are the Transporter and the Caddy in this segment within which the market has increased by 8%. With respect to Dogus Otomotiv's share has increased at a level of 8.4%, and we have been placed at the fourth level just after Ford, Tofas and PSA, respectively. Coming to the performance of January, which is always the little tiny and the low performance month of the year -- I'm sorry, this is the total December information. I'm sorry for the mistake. The performance of the total sales, together with our subsidiary Skoda brands. Our total sales volume in 12 months has reached to a level of 118,000 units within which the Volkswagen passenger cars, and Skoda and light commercial vehicles and SEAT brands are the leading ones. The performance of this year is 6% below the previous year, which has been shaped or structured by supply obstacles that are stemming from chip crisis I must say. Then coming to the performance of January, this is quite the low performance month of the year that -- not only Dogus Otomotiv, but all the sector is just keeping their sales at almost a minimum level just because the new brands of year 2022 is to be replaced in the market effective from mid of February and even March. In that respect, our sales performance at the end of January is quite lower than the previous month. But I do not have much to add, because it has already been planned, and we are quite beyond the performance of the market. But January, as I have said, is just the very little performance month of the year. In that respect in February, I must say the cumulative performance, I have already been compensated. Coming to the financial performance indicators. As you can see, the total consolidated turnover of Dogus Otomotiv Group has increased to a level higher than TRY 24 billion at the consolidated level, which is almost 30% higher than the performance of the previous year. And we have successfully maintained and increased our EBITDA and net profit margin, respectively at a level of more than 100%, and averaging a net profitability 124%. So I will try to touch some detailed points in the detailed P&L portion. Our CapEx expenditures have almost more than doubled itself just because the previous year was a period that most of the capital expenditures have been suspended because of COVID precautions. But I must -- I would like to underline the fact that, as you can see, the size of the assets have increased only 37% despite the fact that our net sales has just increased almost 30%. So we are just heating up the balance sheet, I must say. And our total asset size synergies has almost touched to a level of TRY 10 billion, and respectively our working capital together with the increase in the volume with the effect of the receivables and inventories, has just increased to a level of TRY 6.3 billion. Looking at the margins, I just remember whether we were able to sustain the profit margin of year 2022 at the end of this year, and as we have been doing at the end of third quarter, so I believe most of you would be able to recall our recent thoughts on that. Has not only maintained but also increased our gross profit margin. Of course, this is a combination or a mixture of supply and demand, of course, within which our gross profit margin has just increased to 14.5%. Respectively, our operational -- considering that our consolidated turnover has just reached to a level of TRY 24 billion, our OpEx over sales is also at a very low, historical low level which is 1.8% under which we are just maintaining and keeping our disciplined cost management strategy with no doubt. And EBITDA margin is also respectively that we see almost 5% better than the performance of the last year. And of course, as a combination of increase in gross profitability, controlled operational costs relatively and slightly higher financial costs, and together with the positive effect of the currency gain, our net profit margin has almost reached to a level of 10% in an area that -- in line with our vehicle availability limit. We have just kept our wholesale market sales without Skoda almost at the level of 95,000 units, which is only 5,000 units less than the performance of the previous year. Coming to the income statement. In this slide, we can see the variance between the fourth quarter and the third quarter, and also as compared to the previous year. As you can see, in the third quarter and the fourth quarter, we have almost sell -- sold the same amount of units, which is only 7% higher than the previous one. The revenue is almost the same and the gross profit margin is 1.7% better than the previous quarter. The important point here is that the positive influence on the total operational expenditures. Under IFRS rules, we are also considering a foreign currency gain in this caption. In that point, I just would like to put at the bracket and I would like to inform you that we are just keeping our disciplined financing strategy, which is in favor of keeping no open position or creating no composition in terms of foreign currency. And we are just keeping all of our deposits in terms of Euro. In that respect, considering the fact that at the end of the year, we have a deposit of EUR 220 million, the devaluation of Turkish lira has just brought some foreign currency -- foreign currency gain on a yearly basis, which is TRY 800 million -- almost TRY 800 million and at the fourth quarter itself, which is around TRY 600 million. In that respect, the total operational advantages has turned out to be positive. But when we just eliminate the influence of the currency gain, which is -- then we can say that the total operational expenditures are maintained almost at the same level. As you can see, the income from associates are definitely much better than the third quarter, which is a matter of the volume of our subsidiaries. And after the taxation costs, which has increased because of the increased profitability of the fourth quarter. At the fourth quarter, we have just added up TRY 1 billion at the top of our performance at the end of the fourth quarter successfully. And when we just consider the yearly variance, our net profitability has just more than doubled itself and has just increased from TRY 1 billion level to TRY 2.3 billion. In that respect, we should also -- we should, of course, consider the influence of determining factors, which is the devaluation of Turkish lira in terms of Euro to Turkish lira at the rate of 65%, which has caused in the increase in the total revenue to a level of TRY 24 billion, which is almost 30% better off than the previous year, together with the influencing factors of model mix and also our flexibility in setting up the gross profit relatively at higher levels because of the disruption in the supply process. As you can see, the gross profit in terms of nominal values has reached a level of TRY 3.5 billion. And the total operational expenditures has been -- I mean, just because of the influence of the foreign currency gain at a level of TRY 800 million has just decreased to TRY 400 million. And also, one important factor is the financing expenditures. This is -- we have almost kept the same level of borrowings with a steady increase of TRY 500 million additional borrowings as compared to previous year, but the increase in the average -- sorry, increase in the average interest rate has also caused some financial expenditures to reach to a level of almost TRY 600 million. And at the end -- we have kept a profit at the end of the year at a level of TRY 2.3 billion. So coming to the performance of our associates. As we can see, both vdf Group, Dogus Sigorta, Yuce Auto, TUVTURK and Dogus Teknoloji has really -- has acquired a very financial -- successful financial performance at the end of the year. The sales performance of Yuce Auto -- they also has acquired some additional gross profitability and has just increased their share to a level of TRY 7 billion. TUVTURK has also, at the consolidated level, has just increased its share above TRY 200 million level. And also luckily Dogus Teknoloji has turned out to be positive at the end of last year. And vdf Group is also -- has almost tripled its consolidated performance and also [ market share ] has almost reached a level of TRY 150 million. Coming to the balance sheet. As you can see, the size of the balance sheet has just increased almost 40% to a level of TRY 9.7 billion. As I have already noted, in line with our cautious liquidity planning strategy, our cash and cash equivalents are at a level of TRY 3.4 billion. So when you just consider or compare with financial liabilities, our year-end liquidity is TRY 400 million, more than the financial liabilities. So I mean, technically speaking, at the end of the year, we had adequate cash that can pay off all the financial liabilities. So in the next chart, we will see that our net cash position has turned out to be positive, respectively. And the increase in trade receivables and inventories, I mean, the inventories are low -- lower as compared to previous year, while the trade receivables has been kept at the same level, which is in line with our turnover ratios that I will also talk in the next page. And increase in the tangible, intangible assets are in line with our continued investments in test cars and also in hardware and software. And our trade payables are relatively lower by the performance of the increased turnover ratios that we will see in the next page. And related to the detail of the financial costs, as you can see, the financial expenditures has increased almost 30%, which is stemming from additional TRY 500 million additional borrowing in line with our working capital requirements, plus together with the increase in the average interest rates. And the other influencing factor is the commission expenditures on letter of guarantees, which is the second highest figure in our financial costs, which is at a level of TRY 65 million. Just to refresh you, we are just carrying a letter of guarantee volume in the books of OEM at a level of EUR 250 million on a yearly basis. And at the end, considering that we are just keeping some deposits in Euro and also some portion is in Turkish lira, we have [ appetite ] from TRY 45 million stemming from interest income. As I have said, when you just consider the performance of the turnovers, as I have said, our net cash position in line with the liquidity strategy has just turned out to be positive to a level of TRY 485 million. This is a net cash position. And both turnover ratios of receivables and inventory and payable turnover has just decreased, which is in line with the level of demand just in time stock planning, and with the availability of the vehicles that -- at the maximum level that we were able to acquire from the original manufacturers. So all those turnovers has just showed up better improvement at the end of the year. And then we just consider the key material event disclosures of the year 2021. Our Corporate Governance Compliance Rating has also increased to a level of 9.7. In the previous year, it was 9.6. So we are just doing our very best to increase it. But considering that the maximum grade is 10, we are just going very slowly, as you would appreciate. And also, we also had a change in our Investor Relations Department after Muge has just shifted his career in a new path. Our [ friends ] Arda and Damla has been appointed in our Investor Relations Department. And also we have just made some changes in our Articles of Association in a way that we have just add some sentences, let me say, related with our new business area in sea, marines and maintenance and purchasing and marketing activities in our marine business. And also at the 3rd of February this year, the Competition Board investigation relating with the influence of OEMs activities influence which Turkish market have been finalized, and it has been decided that there is no impact on the Turkish automotive markets. So at this point, relating to our strategy on sustainability, I would like to pass the word to my colleague Arda, and he will just put some brief words on that. Arda, please?
Thank you, Mr. Talih. Our sustainability strategy is generated on the baseline of stakeholder engagement with maturity, accountability and completeness principles. Also, it's a part of our governance and risk management models from the beginning. Since 2017, we were one of the first, which included United Nations' Sustainable Development Goals into the sustainability disclosures mentioned with our issues related performances. There will be 2 important points to be underlined regarding sustainability processes in 2022. The first one is the solar power investment you see in the environmental part. The cost of this investment is $2.2 million, and this investment has the power to meet 115% of energy we spend. And the second plan is sustainability integration in purchase and processes that you see in the economic part. In this direction, the sustainability title has been added to the supply selection criteria and risk categorization of suppliers have been done. If we take a closer look to 2022 expectations, we estimate that the automotive market will be around 830,000 units. And we also estimate that our excluding Skoda sales volume will be around 97,000 units. Last of all, we plan to spend approximately TRY 400 million investment on investments. IT infrastructure and digital transformation expenditures will be predominant here. Thank you very much. We will now start the Q&A session.
Thank you, Arda. As we have always been doing, we just try to keep the presentation part considering that it has been revealed beforehand and prevail more time if you have any questions. Thank you very much very much for listening to us.
[Operator Instructions]. Thank you. Our first question comes from Mr. Vladimir Bespalov from VTB Capital.
I have a couple of questions. First, could you update on the situation with the microchip supplies with general supplies, maybe some other logistic disruptions. What is the situation now, how it compares maybe to January to December? And the second question is, given that you have turned cash positive, so what is your capital allocation strategy for the coming months? We know about the dividend proposal and we know about your CapEx, but are you going to deleverage further given that interest rates are quite high. So maybe you could provide some color on this as well.
Thank you very much, Vladimir for your valuable questions. Relating to the supply issue and the problems with chips, as it has already been pronounced by all the players in the automotive market, the issue will be still predominant in the agenda of year 2022. There is still a lack of supply. And through the whole year, the influence of the chip issue will be affecting and also some logistic problems, of course, together with it, will be influencing the automotive market. In that respect, if it would have been under normal circumstances and if there would have been no chip crisis, we would definitely be increasing the performance -- the sales performance, at least in terms of the result as compared to previous year. But as you have seen in the presentation, the size of the market is almost and almost the same as the previous year, and our sales performance will be around the performance of last year as well. In that respect, we hope and we believe that the adverse effects of the chip crisis will start to be cured or eliminated in the last quarter of this year. And hopefully, we would be -- I don't know, we will see, of course. It is early to comment on that. We may talk about higher volumes relating to our performance of the year to come. Relating to the liquidity management, as we have already been -- as we have already been published it, our dividend payments will be TRY 1.250 million and we are going to make the payment in the middle of April. So this is a new information for the whole audience. And this will somehow will decrease our liquidity. But for the moment, we have more than enough cash deposits in the hand to be able to pay this dividend. Through the year, we are not planning to increase the financial leverage. So total borrowings level would be around the same level as last year. And at the end of the year, in line with our budget, we are -- we will have some liquidity in hand, but we are not planning to deleverage. But considering that the current liquidity is in terms of Euro, if devaluation of Turkish lira is beyond the expected levels, which is, as you would appreciate, difficult to guess at this stage because in the last week, we also have experienced the adverse effect of the Russian and Ukraine's war and the U.S. dollar has just jumped again to a level of TRY 14.20 unfortunately. If this depreciation is beyond the expected levels, then we will definitely have additional foreign currency gains as we did last year, which may -- theoretically speaking, which may serve for some deleverage. But at this stage, I can say we are not planning to do so far.
[Operator Instructions]
The presentation was sufficient enough that there is no question at all.
Yes, indeed. Maybe we'll give another half a minute. Actually, we do have one question now from Lutfu Gazioglu from HSBC.
I have a question on equity pick up income. In the fourth quarter, we see a significant increase from net income from -- one sec -- Skoda, it is TRY 51 million. Contribution from Skoda, it was far, far better from the previous quarter. And the contribution from TUVTURK was TRY 84 million, it is far, far better as well. Quarterly contribution total, is TRY 1.84 million. How do we foresee the quarterly contribution from equity pick up, is it sustainable from these levels -- TRY 200 million quarterly or is it very, very optimistic? This is my first question.
Okay. Let me try to explain it briefly. Let me try to explain it or answer it. It is in line with the seasonality of the sector. It is not only, of course, for Dogus Otomotiv, but Skoda, it is applicable that the performance of the fourth quarter in terms of sales volume is the highest one. Somehow last year, the availability of vehicles has just changed. And at the end of the last quarter, Skoda was able to acquire more cars than as compared to the previous quarters, and they were able to respond to the current demand in hand. In that respect, their fourth quarter's performance is just better off than the previous years on a standalone basis. And also, we -- there is also some seasonality in TUVTURK business. So these are -- we believe, are sustainable performances.
My second question is about the fixed gain booked in other operating income. It is an unprecedented line in the operating -- net operating income. What is the reason behind it, because in the financial income/expense line, we see a regular income/expense line in the operating income, there's a huge boost coming from a fixed gain to bottom line.
Yes, because it is the IFRS rule that a fixed gain and loss is just -- positions in the total operational expenditures. And the reason it has occurred is the volume of more than EUR 200 million worth of deposits that we were having at the end of the year. And as you just consider the devaluation of Turkish lira mainly at the last 2 months of the year, almost TRY 600 million worth of a fixed cost they just stand in -- has just occurred in November and December. So this is the reason why we had that much of foreign currency gain because of the net plus a FX position.
It looks like indeed, we have no further questions. I will pass the line back to Mr. Kerem for the concluding remarks.
Okay. Thank you very much all the participants for your patience in listening us. We will be continuing to do our very best to sustain this both market, operational and financial performance. And hope to see you at the performance of the first quarter -- that almost we have completed almost half of the first quarter. So thank you for your time and patience, and we all wish you a nice day. Thank you very much.
This concludes our conference call. We'll now be closing all the lines. Thank you. Bye-bye.