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TURKEY

Publication Date: March 27, 2015

Global Knowledge supported by Local Experience”

Copyright © 2007 by JCR Eurasia Rating. 19 Mayıs Mah., 19 Mayıs Cad., Nova Baran Plaza No:4 Kat: 12 Şişli-İSTANBUL Telephone: +90.212.352.56.73 Fax: +90 (212) 352.56.75 Reproduction is prohibited except by permission. All rights reserved. All information has been obtained from sources JCR Eurasia Rating believes to be reliable. However, JCR Eurasia

Rating does not guarantee the truth, accuracy and adequacy of this information. JCR Eurasia Rating ratings are objective and independent opinions as to the creditworthiness of a security and issuer and not to be considered a recommendation to buy, hold or sell any security or to issue a loan. This rating report has been composed within the methodologies registered with and certified by the SPK (CMB-Capital Markets Board of Turkey), BDDK (BRSA-Banking Regulation and Supervision Agency) and internationally accepted rating

Corporate Credit Rating

Manufacturing & Trade

(Plastic Construction Materials)

*Assigned by Japan Credit Rating Agency, JCR on July 11, 2014

Senior Analyst: Gökhan IYIGUN/+90 212 352 56 74 gokhan.iyigun@jcrer.com.tr

Long

Term Short Term

In te rn a tio na l Foreign Currency BB+ B Local Currency BB+ B

Outlook FC Stable Stable

LC Stable Stable N a tio na l

Local Rating BBB- (Trk) A–3 (Trk)

Outlook Stable Stable

Sponsor Support 2 - Stand Alone B - So ve re ig n* Foreign Currency BBB- - Local Currency BBB- - Outlook FC Stable - LC Stable -

PAKPEN PLASTİK BORU ve YAPI ELEM. SAN. ve TİC. A.Ş. and ITS SUBSIDIARY

F i n a n c i a l D a t a 2014* 2013* 2012* 2011* 2010*

Total Assets (000 USD) 342,413 351,460 304,438 267,838 282,648

Total Assets (000 TRY) 794,022 748,751 541,170 505,919 434,599

Equity (000 TRY) 236,446 218,271 157,575 76,334 112,804

Net Profit (000 TRY) 1,455 -13,983 34,777 -36,470 -3,973

Sales (000 TRY) 475,308 422,391 412,466 342,445 250,618

Net Profit Margin (%) 0.31 -3.31 8.43 -10.65 -1.59

ROAA (%) -0.25 -2.83 8.36 -9.47 -1.12

ROAE (%) -0.84 -9.72 37.44 -47.09 -3.57

Equity / Total Assets (%) 29.78 29.15 29.12 15.09 25.96

Net Working Capital / T. Assets (%) 9.92 20.72 17.46 8.88 16.29

Debt Ratio (%) 70.22 70.85 70.88 84.91 74.04

Asset Growth Rate (%) 6.05 38.36 6.97 16.41 4.45

*End of year Overview

Pakpen Plastik Boru ve Yapı Elemenları San. ve Tic. A.Ş. (hereafter, Pakpen, the Company or the Group), was founded in 1989 in Konya. Main activity fields of the Company include the production of polyvinyl chloride (PVC) materials, marketing and sale of PVC doors, windows and shutters in domestic and overseas markets and the production of infrastructure, internal plumbing, sewage, clean water and gas pipes.

The Company carries out its production activities through 7 integrated factories in Konya, comprising approximately 250k m2 of facilities, about 120k m2 of which is indoor area. Marketing and sale activities are performed through 5 regional directorates in Istanbul, Ankara, Konya, Izmir and Antalya. The Company has a dealer network of 650 throughout the country. The Company‟s profile, pipe and insulation products under the brand names of PAKplast, PAKPEN, PAKDoor, PAKForm,

PAKsiding, PAKcountry, PakBoard and Pakpanel are offered for sale in almost 1,500 sales points including the sub-dealers. The Company‟s overseas sales started in 1998, spread to 42 countries and composed 17.7% of its gross sales as of FYE2014. Moreover, the Company ranked among the Top 500 Largest Industrıal Organization – 2013 of Istanbul Chamber of Industry, Fortune 500 – 2013 and Super Brands – 2014.

As of FYE2014, the Company‟s controlling shareholder with a 88.50% stake was Tuza Holding A.Ş.,

wholly owned by TUZA Family Members. Cofounder Mr. Mehmet TUZA haled a 9.24% stake. Additionally, the Company had a wholly-owned subsidiary (Pakpen Dış Ticaret A.Ş) and an average labor force of 768 FY2014 (FY2013: 773).

Strengths

 Competitive edge in raw material procurement, manufacturing and sales processes achieved through synergy and economies of scale stemmed from the production of three interrelated main product groups

 High brand recognition and effective market efficiency contributing to the ability to reflect the cost changes in prices

 Wide-ranging distribution network leading to a comparatively broad customer base

 Management strategy emphasising R&D along with innovative and pioneering products, contributing to market efficiency, brand recognition and productivity

 Continuously increasing sales revenue over the years, contributing to market efficiency and almost steady gross profit margin facilitating future forecasts and planning

 Balance sheet and receivables/payables term structure generating positive working capital with upward trend, relieving liquidity management  Upward growth trend along with supportive legislations and practices

providing positive outlook to business sectors

Constraints

High import dependency inherit in the sector for the supply of raw materials and consequently high effect of oil prices and exchange rates on costs giving rise to difficulty in planning and volatility in profitability Foreign currency position along with decreasing trend, generating

volatility potential in profitability and restraining internal equity generation capacity in upward foreign exchange market

Relatively high off-balance sheet commitments and contingencies augmenting the risk level and restraining asset quality

Comparatively high sales deductions level inherit in the sector, restraining profit generation capacity

Increasing trend in NPL ratio along with decreasing provisioning level suppressing asset quality

Upward trend in financial liabilities and its short-term weighted structure along with short-term bond issuance projection

Relatively high competition in the domestic and overseas plastic construction products sector

0.31 -3.31 8.43 -10.65 -1.59 -50.00 0.00 50.00

Net Profit Margin (%)

30 29 29 15 26 0 200

Equity / Total Assets (%) -0.25 -2.83 8.36 -9.47 -1.12 -20.00 0.00 20.00 ROAA (%) -1 -10 37 -47 -4 -100 0 100 ROAE (%) 10 21 17 9 16 0 50 2014 2013 2012 2011 2010

Net Working Cap. / T. Assets (%) 70.2 70.8 70.9 84.9 74.0 0.00 100.00 2014 2013 2012 2011 2010 Debt Ratio (%)

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1. Rating Rationale

Pakpen Plastik Boru ve Yapı Elemenları San. ve Tic. A.Ş.‟s rating grades are the conclusion of a rating process that has taken into account all aspects of the Company‟s consolidated independent audit reports which involve the consolidated financial statements of the Company‟s one subsidiary as of FYE2014. JCR Eurasia Rating‟s own studies and records, information and clarification provided by the Company itself and non-financial figures have also been drawn upon. In addition to the Company‟s financial indicators regarding equity structure, liquidity position, asset quality, indebtedness, efficiency, growth rates and expected support, the main shareholders‟ financial and non-financial positions, risk exposures, activity markets, problems and expectations in the field of activity were also taken into consideration while determining the risk assessment of the long-term international local currency and foreign currency grades as well as national grades.

Prominent Rating Considerations are;

Competitive Edge Achieved through Synergy and Economies of Scale Stemmed from the Production of Three Main Product Groups Closely Interrelated

The Company‟s initial field of activity of PVC profile manufacturing expanded to insulation and plastic pipes sectors following 2001. The Company became one of the largest plastic-based construction materials and plastic pipe manufacturers in Turkey through its 7 integrated factories and rapidly expanding product range. Pipe, insulation and profile

group productsare tightly interrelated and generate synergy

and economies of scale leading to a competitive edge in raw material procurement, manufacturing and sales processes. High Brand Recognition and Effective Market Efficiency The Company enjoys significant brand recognition and effective market efficiency achieved through its high production capacity, broad product range and wide-ranging distribution network. Accordingly, the Company listed on the 2013 Istanbul Chamber of Industry‟s Top 500 Largest Industrıal Organization List, the 2013 Fortune 500 and 2014 Super Brands lists. Such achievements contribute to the Company‟s ability to reflect in its prices the coast changes due to the dependency on the importation of raw materials and resultant effect of oil prices and exchange rates on raw material prices.

Wide-ranging Distribution Network Leading to

Comparatively Broad Customer Base

Marketing and sale activities are performed through 5 regional directorates in Istanbul, Ankara, Konya, Izmir and Antalya. The Company has a dealer network of 650 spread across the country. The Company‟s pipe, profile and insulation

products under the brand names of PAKplast, PAKPEN,

PAKDoor, PAKForm, PAKsiding, PAKcountry, PakBoard and Pakpanel are offered for sale in almost 1,500 sales points including sub-dealers. The Company‟s customer portfolio is mainly composed of commercial, manufacturer and practitioner dealers. Accordingly, the Company enjoys a comparatively broad customer base, contributing to trade volume and brand recognition.

The Management Strategy Emphasising R&D along with Innovative and Pioneering Products

The Company has adopted a management strategy emphasizing R&D. Accordingly, the Company had a central quality laboratory furnished with the accreditation certificate (TS EN ISO/IEC 17025) about the existence of international standards. Moreover, every independent manufacturing facility has separate smaller production labs. Systematic studies are performed within the coordination of the R&D directorate regarding innovation, improving product quality or standards, increasing productivity and reduction of production costs in products and production process. Consequently, the Company‟s innovative and pioneering products contribute to its market efficiency, brand recognition and productivity.

Continuously Increasing Sales Revenue and Almost Steady Gross Profit Margin

Both the gross and net sales revenue of the Company exhibited an ongoing increasing trend over the assessment period of the last six years. While the gross sales revenue of the Company exercised a five-year cumulative growth of 146.34%, that of net sales revenue was 164.17% due to decreasing share of sales deductions, contributing to market efficiency. Moreover, the Company‟s gross profit margin displayed an almost steady pattern of 17.5% over the last four years, facilitating future forecasting and planning. Positive Working Capital with Upward Trend

The Company‟s total assets displayed a short-term weighted dispersion over the years with a 2014 year-end share of 62.94%. Although the total liabilities had a short-term weighted structure, the short-term assets continuously exceeded short-term liabilities and generated positive net working capital over the years and relieved the liquidity management. Additionally, the net working capital exhibited an upward trend over the assessment period despite the last year deterioration, complicating the liquidity management within the considerations of inventories with the highest share (53.81%) in current assets, days‟ inventories utilization of 232 which is above the average maturity of trade payables of 179 days and term structure of sales. On the other hand, the average maturity of trade receivables of 103 days contributes well to the liquidity management.

Growth Trend and Positive Outlook of Business Sectors The Company activities are associated mainly with developments in the Turkish construction and plastic sectors. The construction sector displayed an ongoing, yet decelerating, above GDP growth over the last five years, with the exception of 2012. Provided that there is no further deterioration in the political stability and related macro-economic outlook, the market conditions in the Turkish Construction industry are not expected to weaken much within the considerations of increasing share of real estate in total foreign direct investments and February 2015 Consumer Tendency Survey results covering correction movement in consumer confidence index with downtrend and improving indicators regarding saving and buying or constructing housing possibilities. Moreover, the plastic construction materials sector, the second largest sub-sector of Turkish plastic sector, showed a continuously increasing trend over the last four years with a last year growth of 15.35% in tons due to the increasing domestic consumption and exports.

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Pakpen Plastik Boru ve Yapı Elemanları San. ve Tic. A.Ş. 3 Additionally, the three acts regarding the construction and

real estate sectors effectuated in 2012 (Urban

Transformation, Reciprocity and 2B) maintains their contribution to sectors‟ outlooks as well as the legislations and regulations regarding the insulation sector such as the building heat insulation, building energy performance regulation and Kyoto Protocol regarding the reduction of greenhouse gas (GHG) emissions.

High Dependency on Raw Material Imports

The plastic materials manufacturing sub-sectors are highly dependent on the import of raw materials due to insufficient domestic raw material production. Accordingly, in addition to oil prices, the raw material of plastic, exchange rates was included in the factors having a high effecting level on costs, giving rise to difficulty in planning and volatility in profitability, which is an important consideration in a volatile market as it stands.

FX Position Generating Volatility Potential in Profitability in Upward Foreign Exchange Market

The balance sheet structure of the Company engendered a short foreign exchange position over the years due to higher raw material import volume than exports sales volume as in the overall sector. The Company ratios of FX position to total assets and equity were -10.75% and -36.10%, respectively, as of FYE2014 and decreased from 2012 year-end figures of -37.10% and -127.40%, respectively. The relatively high short position restrains the Company‟s profitability figures in periods of increasing exchange rates as in 2013 and 2011. Relatively High Off-balance Sheet Commitments and Contingencies

The Company‟s tangible assets had a cost value of TRY 476.36mn and net book value of TRY 274.73mn, constituting almost 35% of total assets. Off-balance sheet commitments and contingencies of the Company had a 2014 year-end value of TRY 363.25mn, of which TRY 314.27mn was comprised of mortgage, corresponding to 65.97% of tangible assets‟ costs. The relatively high off-balance sheet commitments and contingencies level augmented the risk level and restrained the asset quality.

High Sales Deductions Level Inherit in the Sector

The sales deductions of the Company, mainly composed of sales discounts, had a share in gross sales of approximately 28% over the last three years and had a 2014 year-end value of 27.72%. Comparatively high levels of sales deductions inherent in the sector due to high competitiveness restrain the Company‟s profit generation capacity. Increasing Trend in NPL Ratio and Decreasing Provisioning Level

The doubtful trade receivables of the Company increased by 23% in 2014 and amounted to TRY 38.67mn as of FYE2014. Accordingly, the NPL ratio increased to 16.80% from 13.15%, restraining the asset quality. While the doubtful receivables increased by 23%, the related provisions increased by 3.69% and resulted in a decrease in provisioning level from 78.43% to 66.12%, coming in view as another factor restraining the asset quality.

Upward Trend in Financial Liabilities and Its Short-term Weighted Structure

The Company ratio of „financial liabilities to total assets‟ increased to 51.06% in 2014 from 40.02% in 2012, increasing the risk level and restraining profitability through increasing interest expenses. Additionally, the financial liabilities structure of the Company turned to a short-term weighted dispersion of 74.91% due to the two-year bond issuance in 2013 transferring from long to short term. The comparatively low level of long term liabilities formed the basis for further growth opportunities via long term funding in accordance with the Company‟s short-term bond issuance projection.

Relatively High Competition in the Domestic and Overseas Plastic Construction Products Sector

According to records of Turkish Plastics Industrialists‟ Association (PAGDER), approximately 6,500 manufacturers composed of mostly small and medium sized firms operate in the Turkish Plastic Sector, in which the plastic construction materials sub-sector leads with 23.1% regarding number of firms. This leads to high and unfair competition through „price before quality‟ type consumer behavior and unregistered manufacturers, mostly in the pipe sub-sector.

With respect to the above mentioned factors, JCR Eurasia Rating has assigned Long Term International Foreign Currency

and Local Currency Ratings of ‘BB+’ and Long Term National

Local Ratings of ‘BBB- (Trk)’ in JCR Eurasia Rating‟s notation system.

2. Outlook

JCR Eurasia Rating has assigned a ‘Stable’ outlook on the

National Long and Short Term Rating perspectives of Pakpen

Plastik Boru ve Yapı Elemenları San. ve Tic. A.Ş. due to high effect of foreign exchange rates on raw material costs, restrained and volatile profitability figures, supressed asset quality through rising NPL ratio, decreasing provisioning level and comparatively high level of off-balance sheet commitments and contingencies, increased financial liabilities with short-term weighted structure and intense competition in the business sectors as well as long market experience, wide-ranging distribution network, high brand awareness and market efficiency, continuously increasing sales revenue, competitive edge achieved through production and product diversity and bond issuance projection with its probable positive effects on liabilities and balance sheet structure. Additionally, JCR Eurasia Rating has assigned a ‘Stable’ outlook on the International Long and Short Term Local

Currency Rating perspectives of Pakpen Plastik Boru ve Yapı

Elemenları San. ve Tic. A.Ş., to be followed closely within the considerations of an upward trend in export sales and effect of foreign exchange rates on raw material costs along with the existing market conditions of high volatility in foreign exchanges.

The main driving forces that can call forth a revision in the current outlook status include Company related issues affecting its financial figures along with Turkey‟s sovereign rating which is highly responsive to domestic and foreign

political and economic uncertainties, tensions and

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3. Sponsor Support & Stand Alone Assessment

Sponsor Support notes and risk assessments mainly reflect the financial and non-financial positions and assistance capability of the major shareholders of Pakpen Plastik Boru ve Yapı Elemenları San. ve Tic. A.Ş., Tuza Holding A.Ş., TUZA Family members and Mr. Mehmet TUZA with the highest direct and indirect shares. It is considered that the Company‟s legal entity shareholder and the TUZA Family members have the willingness to supply long term liquidity or equity within their financial capability when required, and that they have adequate experience to provide efficient operational support to the Company.

The Stand Alone grade has been constituted particularly with respect to Pakpen‟s long operating track record, versatile market experience achieved through diversified production and product range, high brand recognition, extensive manufacturing facilities, wide-ranging distribution network, influential and reputable customer portfolio, diversified funding sources and qualified human resources.

Under these assessments, JCR Eurasia Rating has assigned the Sponsor Support grade as ‘2’ reflecting financial and non-financial states and expected support by the shareholders, and a Stand Alone grade of ‘B’ with the opinion that Pakpen has reached the level of high experience and facilities to manage the incurred risks on its balance sheet without any assistance from its shareholders, on condition that it maintains its efficiency in the market.

4. Company Profile

a) History & Activities

The roots of the Company date back to 1970, the year that

Mr. Mehmet TUZA established “PAKSU İnşaat Tesisat

Malzemeleri San. ve Tic. A.Ş.” and began trading of construction products in Konya. Following the experience gained in the sector, Mr. Mehmet TUZA founded “Pakpen Plastik Boru ve Yapı Elemanları San. ve Tic. A.Ş.” in 1989 under the name “IBG Pakplastik Plastik Yapı Elemanları Sanayi ve Ticaret A.Ş.” and began production of PVC window profiles. The export of Company products began in 1998. The Company rapidly expanded its product range of plastic building materials, particularly following the favorable investment environment in 2001. The production of PVC building siding was initiated in 2001 through the establishment of a siding plant and of PVC panels and PVC sandwich panels in 2003 and 2004, respectively. The heat insulation material plant was engaged in 2005 to produce white (EPS) and colored (XPS) insulating boards. Plants for the manufacturing of indoor plumping pipes and infrastructure pipes plant were engaged in 2006 and 2007, respectively. In addition, door production began in 2007 through additional investment in the siding plant. The years between 2007 and 2012 saw extensive expansion and investment in automation. Accordingly, the Company become one of the largest plastic-based building materials and plastic pipes manufacturers in Turkey through its operations in three business lines (PVC window and door profiles, plastic pipes and insulation). The Company was ranked on the 2013 Top 500 Largest Industrıal Organization as compiled by the Istanbul Chamber of Industry and on the 2013 Fortune 500 and 2014 Super Brands lists. The Company products under the brand names of

PAKplast, PAKPEN, PAKDoor, PAKForm, PAKsiding,

PAKcountry, PakBoard and Pakpanel are offered for sale in almost 1,500 sales points, including sub-dealers. The Company‟s overseas sales started in 1998, spread to 42 countries and composed 17.7% of its gross sales as of FYE2014.

b) Organization & Employees

The board of the Holding Company consisted of 3 non-independent members, Mr. Mehmet TUZA and his two sons, as of FYE2014.

The organizational chart of the Company is composed of 14 main units (Raw Material Purchasing, Investment & Purchasing, Maintenance, R&D, Operations, Quality, Financial Affairs, Human Resources, IT System, Advertising & PR, Wholesale and Special Projects, Insulation Group Sales, Pipe Group Sales and Profile Group Sales) configured under the General Manager and Executive Board. Moreover, the Company‟s organizational chart covers 15 sub-units (5 regional offices, in-building pipe sales, infrastructure pipe sales, accounting, finance, investor relations, infrastructure pipe production, in-building pipe production, infrastructure pipe technology, profile group production and XPS-EPS) structured under four main units.

The Company carries out its production activities through its production facilities located in the Konya Organized Industrial Zone. Facilities are comprised of 7 integrated plants spread over a land area of 234.366 m2, 119.682 m2 of which is indoor area. Marketing and sales activities are performed through 5 regional directorates in Istanbul, Ankara, Konya, Izmir and Antalya. The Company has a dealer network of 650 spread across the country. Overseas sales are performed through the wholly-owned subsidiary Pakpen Dış Ticaret A.Ş. The Company had a labor force of 793, of which 609 were union members, as of FYE2014 (FYE2013: 827 and 601, respectively). The Company signed a three-year collective bargaining agreement with the Petroleum Chemical Rubber Workers Union of Turkey.

c) Shareholders, Subsidiaries & Affiliates

The following table provides the Company‟s year-end shareholding structures, paid-capital amounts and realized changes since 2010. The Company‟s paid capital increased from TRY 90mn to TRY 113mn in 2012 and has since remained unchanged. The Company became a subsidiary of Tuza Holding A.Ş. through the transfer of 88.50% of shares in 2014.

Mehmet TUZA Chairman

İbrahim TUZA Vice Chairman

Fuat TUZA Member

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Pakpen Plastik Boru ve Yapı Elemanları San. ve Tic. A.Ş. 5 As of FYE2014, the shareholder structure of Tuza Holding

A.Ş., founded in 2014, is as follows.

The Company had a wholly-owned subsidiary, Pakpen Dış

Ticaret A.Ş., conducting overseas marketing and sales activities of the Group through a work force of 12 as of FYE2014.

Additionally, the Company had a related party company, Paksu İnşaat ve Sıhhi Tesisat San. ve Tic. A.Ş., mentioned in its 2014 year-end audit report. TUZA Family members are sole owners of the company, with Mr. Mehmet TUZA holding a 50% share. The sale of construction and plumping materials constitutes its main activity field. The company has established the sales points and sub-dealer network regarding the sale of natural gas following the attaining of natural gas in Konya. The company had TRY 48.44mn total assets, TRY 7.42mn equity and TRY 40.34mn net sales revenue as of FYE2014.

d) Corporate Governance

As Pakpen is not a publicly listed company, it is not subject to Corporate Governance regulations set by the Capital Markets Board (CMB). On the other hand, highly competitive markets in its activity fields, the structure of activities involving production and export sales and bond issuance in 2013 create the necessity of implementing corporate governance related practices. The Company maintains its books of account and prepares its statutory financial statements in accordance with accounting principles in the Turkish Commercial Code and tax legislation. The annual financial results of the Company are subject to independent audit reports prepared in accordance with international financial reporting standards over the years.

The Board of Directors consists of 3 members, all of which are TUZA Family members and accordingly none are independent. The chairman of the Board is an utmost qualified shareholder in the Company through the stakes in the

Company‟s legal entity shareholder, Tuza Holding A.Ş.. It is concluded that the Board Members have the adequate qualifications and broad market experience to administer their duties and that the Board successfully performs its duties of leading, supervising and inspecting. Although the Committees (corporate governance, audit and early detection of risk) outlined in the „Corporate Governance Principals‟ (CGP) have not yet been established, the Company established an Executive Board comprised of board members and the general manager. Moreover, the Company has not established a separate internal control unit. On the other hand, a management strategy emphasising corporate governance principles has been adopted in recent years. Additionally, the audit firm of the Company has prepared an audit report regarding the establishment of an early detection system and committee and submitted it to Company Board in accordance with the related provision of the Turkish Commercial Code.

The Company‟s website has a comparatively high compliance level with corporate governance principles, includes a separate investor relations heading and provides information and disclosed documentation such as the Company‟s history, vision and mission statements, quality policy and certificates,

environmental policy, affiliates, organization chart,

shareholder structure, board structure and board member‟s CVs, audit and annual reports, articles of association, trade registry information and operating certificate, general meeting minutes, code of ethics, disclosure and notices sent to Public Disclosure Platform, prospectus and circular regarding bond issuance and social responsibility practices. Moreover, the personal backgrounds and CVs of the managerial staff and the disclosure policies and remuneration policy regarding board members and executive managers should be disclosed to the public via the website to realize the principles of corporate governance. Within the scope of social responsibility, the Company actualized an exemplary project of foundation of a technical and industrial vocational high school in 2012.

5. Sector Analysis and Operating Environment

The activities and investments of Pakpen are principally concentrated on the production plastic based construction materials. As such, the sector report will be primarily concerned with the global and domestic developments in the wider construction, plastics and plastic construction materials industries.

Construction Sector

One of the main growth engines of the Turkish economy, the construction sector contributes to economic output not only through principal sector revenues but also more than 150 subsectors including cement, ceramics, wood and glass. The Sector engendered solid sales and construction figures in recent years and completed 2014 with success and yet another record in housing units sold, exceeding 1.17mn.

The Sector is estimated to provide employment to 1.8mn people, marking its importance to the economy. Furthermore, the sector has a significant presence in neighbouring countries and the wider international market with regard to construction materials exports and overseas contracting projects. In 2013,

2014 2013 2012 2011

Tuza Holding A.Ş. 88.50 - -

-Mehmet TUZA 9.24 79.19 79.18 79.18 Güzide TUZA 0.45 3.90 3.90 3.90 İbrahim TUZA 0.83 8.35 8.35 8.35 Fuat TUZA 0.98 8.56 8.57 8.57 Paksu A.Ş. 0.01 0.01 TOTAL 100.00 100.00 100.00 100.00

Paid Capital (TRY/000) 113,000 113,000 113,000 90,000

PAKPEN PLASTİK BORU ve YAPI ELEM. SAN. ve TİC. A.Ş. Shareholders Structure Share % Share % 2014 Mehmet TUZA 81.16 İbrahim TUZA 7.19 Fuat TUZA 8.57 Güzide TUZA 3.08 TOTAL 100.00

Paid Capital (TRY) 50,000

TUZA HOLDİNG A.Ş. Shareholders Structure Total Assets 17,314 Equity 1,070 Paid Capital 2,000 Net Sales 66,137 Pre-tax Profit/Loss 256 Net Profit/Loss 205

Pakpen Dış Ticaret A.Ş.

Main Financial Figures as of FYE2014 TRY (000)

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the total value of the 393 new projects undertaken by Turkish construction firms in 47 different countries realized a value of USD 31.7bn, indicating a slight yet continuous growth. Turkmenistan, the Russian Federation, Azerbaijan, Iraq and Kazakhstan accounted for 74.3% of the total project value. On the other hand, Turkish contracting companies operating in foreign countries were faced with a very challenging year due to significant economic and political disturbances in key markets such as Libya, Syria, Iraq and Russia which account for the vast majority of contracts. Nevertheless, these companies acquired 255 new contracts amounting to USD 22.5bn in first 9 months of 2014.

Between 2001 and 2013, there was a sharp rise in the value of new projects undertaken abroad, from USD 2.39bn in 2001 to USD 31.3bn in 2013. Total overseas business volume in the same period reached USD 274bn across 7,371 projects. In the first half of 2014, USD 9.98bn worth of new projects across 116 countries, a significantly lower value as the instabilities and security concerns major Iraqi and Libyan markets had a detrimental impact on the growth of construction contracts. With 42 Turkish companies listed on the Top 250 International Contractors List 2014, compiled annually by the Engineering News Record Magazine, Turkey ranked 2nd after China (62 companies).

As of 3Q2014, the share of the sector within GDP realized a value of 5.85%, maintaining its share (3Q2013: 5.88%). The Sector‟s growth mimics that of the GDP, with more accentuated hikes and declines. Therefore, the outlook of the sector will be heavily dependent on the economic prospects of Turkey.

The growth in housing loans, one of the key indicators concerning demand and activity in the sector, maintained its upward trend and increased to TRY 125.75bn as of FYE2014. As such, growth in housing loans recorded a value of 14.02% during FY2014, lower than the growth of 29.31% recorded during FY2013, indicating a slower yet strong growth. The share of housing loans among total loans given by the Turkish banking system recorded a slight drop of around 0.04% and realized a value of 10.06% as of FY2014.

Statistics obtained from the Turkish Institute for Statistics (TUIK) reveal that construction permits increased by 18.11%, 24.52%, 42.93% and 21.43% in number of buildings, floor area, value and number of flats, respectively. Occupancy permits on the other hand recorded increases of 4.92%, 9.44%, 25.14% and 6.29%, respectively, in the same fields.

TURKISH CONSTRUCTION SECTOR's BUILDING PERMITS

(New building and additions)

Year Number of Buildings Floor Area (m2) Value - (000 TRY) Number of Flats

2010 139,422 176,429,366 101,794,139 907,451

2011 101,900 123,621,864 81,177,868 650,127

2012 104,151 152,952,913 104,257,399 750,922

2013 116,525 174,796,911 121,339,465 835,609

2014 137,632 217,664,482 173,429,279 1,014,678

TURKISH CONSTRUCTION SECTOR's OCCUPANCY PERMITS

(Completed or partially completed new buildings and additions)

Year Number of Buildings Floor Area (m2) Value - (000 TRY) Number of Flats

2010 82,407 85,281,468 101,794,139 429,755

2011 101,900 123,621,864 81,177,862 650,127

2012 94,750 103,877,581 69,053,134 546,672

2013 117,619 137,810,938 94,316,004 721,152

2014 123,409 150,823,673 118,031,455 766,527

Following a robust growth in 2013, the construction sector managed to display a satisfactory performance in 2014 as well. When the monthly data is examined, a hike in the housing sales as of August is observed, indicating realization of postponed housing investments due to the Presidential elections that took place at the same month. Upon the resolution to a certain extent of the uncertainty and political tensions, housing sales accelerated in the last quarter of 2014. The total sales figure reached 1,165,381 as of FYE2014, slightly beating the previous year (1,157,190). Therefore, it appeared that the volatility in interest rates and in the local currency markets following the corruption investigations that began on 17 Dec, 2013 have been negated to a certain extent. On the other hand, the fluctuations in the currency rates, unfavorable economic outlook in the neighboring regions including the EU, Russia and Middle East might curtail the prospects of the Sector in 2015.

Housing Sales Figures

Year Total Houses Sold

2010 607,098

2011 708,275

2012 701,621

2013 1,157,190

2014 1,165,381

In 2014, upper-end housing market sales displayed a notable slow-down in terms of units sold with the total number of house sales falling to 10,032 from 15,095. On the other hand, net sales revenue declined only slightly to TRY 5,212mn from 5.766mn, indicating much higher prices per unit were achieved, on average, in 2014 compared to the previous year, compensating the decline in the number of houses sold.

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Pakpen Plastik Boru ve Yapı Elemanları San. ve Tic. A.Ş. 7 A series of legislations passed by the Turkish Parliament are

expected to have a positive impact on the sector‟s outlook in the medium and long-term. These include the permitting of the development on land areas of almost 4.1mn acres, the increase in the number of countries whose nationals are allowed to buy Turkish property from 56 to 180 and large-scale urban transformation projects expected to last 20 years and create a market worth USD 400bn. Furthermore, the ongoing growth trend in the Turkish economy and the increasing share of the mortgage market in the country‟s GDP are other important factors that will support the sector‟s growth in the long-run. On the other hand, the ongoing unrest in Turkey‟s nearby geography is a factor effecting downward pressure on the sector domestically as well as on Turkish Construction Companies with overseas operations.

In addition to the factors listed above, continuous investment in public infrastructure in line with the plans of the General Directorate of Highways, the General Directorate of State Hydraulic Works and the Housing Development Administration of Turkey are important contributions to the sector‟s growth and development in the long-term.

The Ministry of Transport, Maritime Affairs and Communications targets the construction of 5,562km of new highway using the build operate transfer model by 2023. According to the ministry web site, Turkey had 2,244km highway as of 31 October 2013. By 2023 Turkey projects a total highway length of 7,827km, dual-carriage length of 29,000 km, for a total highway length of 36,839km. the total road network covered with hot bituminous mixture (HBM) will reach 70,000km.

Furthermore, the Turkish Banking Sector maintains its support for Turkish contractors operating abroad. The increase in the overall population by an average of 1.2% a year combined with increases in per capita income and new household formation as a result of new marriages and immigration into large urban centers are the other factors that drive the sector‟s growth performance.

In 2015, the Turkish parliament approved the international job safety and health legislation promoted by the International Labor Organization (ILO). According to the law, numerous structures, facilities, tools and equipment used in construction works must comply with ILO standards. The law also gives several rights to the construction workers to prevent occupational hazard. While the law is expected to increase the costs for the construction companies, better safety standards and monitoring is expected to contribute to the Sector as a whole.

The Turkish government proposed a series of structural reform and incentive policies, including a subsidy package for prospective house owners in 2015. Mortgage loans are allowed to cover at most 75% of the total value of the house by law, meaning that the remaining 25% must be provided by the buyer upfront. According to the new plan, individuals who open a specific savings account with the intention of accumulating funds for the initial payment of the house (25% of the house‟s value), will receive a 15% governmental support to be added to their savings account balance. This incentive is expected to provide support particularly to the

low & middle income individuals and increase their housing demand.

Despite the modest outlook noted for the sector in the medium and long-term, it suffers from a number of shortcomings in a number of areas. These include the large share of informality within the sector, the relatively short maturity of housing loans limiting access, increasingly short contract terms and difficulties inherent in the financing of new housing projects resulting from high leverage. On the other hand, the technical know-how, high-quality human resources and its international reach are among its major strengths.

Sources: Turkish Contractors Association, the Association of Real Estate Investment Companies and TÜİK, BRSA

Plastics Industry

According to statistics compiled by Plastics Europe, global production of plastics reached 299mn tons as of FYE2013, representing a 3.82% increase from the FYE2012 figure of 288mn tons. In line with the expansion of the world economy, growth in the plastics industry averaged 8.70% in the 1950-2012 period as metal, glass and paper have been increasingly replaced by plastic packaging particularly for foods. China remains the leader in the production of plastic materials with a share of 24.80%, followed by Europe and NAFTA with shares of 20% and 19.40% respectively based on FYE2013 figures. The five largest producers of plastic materials include China, United States, Germany, Saudi Arabia and India with an aggregate share exceeding 53.00%.

It is anticipated that the global market for plastics will maintain an upward momentum in the forthcoming period and reach USD 654.38bn by 2020. Growth that will be observed in industries such as packaging, construction and automotive in large emerging markets particularly China, India and Brazil will be the major contributors to demand for plastic products. On the other hand, North America and Europe represent relatively mature markets with new demand stemming largely from bio-based and sustainable alternatives. Some of the largest companies operating in the sector on a global scale include BASF (Germany), E.I. du Pont (USA), Dow Chemical Company (USA), SABIC (Saudi Arabia) and LyondellBasell Industries (Netherlands).

According to data from AMI Consulting, global polymer demand is expected to grow by about 5%, reaching more than 300mn tons by 2018 as consumption in the developing

24.80 20.00 19.40 16.40 7.30 4.80 4.40 2.90

Global Plastics Production by Geography (%)

China Europe NAFTA Rest of Asia Mid East & Africa Latin America Japan CIS

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world outweighs the slowdown in growth across the developed world. As the greatest polymer consuming region, China now accounts for 30.00% of volumes in FY2013 compared with 6.00% 30 years ago. On the other hand, the aggregate share of the developed economies of North America, Western Europe and Japan reduced to 32% from approximately 74% in 1983. Polyethylene (PE) emerged as the leading product segment for plastics and accounted for 34.90% of total market volume in FY2013. It is utilized in high volumes across various industries including film and sheet, injection molding, blow molding and pipe manufacturing. The Turkish plastics sector maintained an upward trend over the last 10 years, and continued to grow above the GDP growth rate. The average annual growth rate of the industry for the 2000-2012 period attained a value of 10.80%. Furthermore, with a processing capacity of 8.1mn tons, the Turkish Plastics Industry is ranked as the 7th largest on a global scale and 2nd largest in Europe after Germany. The Turkish Plastics Industry has a 1% share in global plastic product exports whilst having a 1.3% share in plastic product imports. Packaging, construction and automotive represent the three leading sectors that drive demand for plastics.

The exports of Turkish plastic material products exhibited a CAGR of 9.80% in quantitative terms and 8.30% in monetary terms for the 2008-2012 period. The monetary value of direct exports (USD 3.3bn in FY2012) remains well below those of other countries such as Italy and Belgium with exports of USD 10bn and USD 5bn respectively. As such, the value of exports per kg of plastic materials produced for Germany and Italy are USD 1.80 and USD 1.20 respectively in comparison to Turkey‟s 46 cents. Therefore, the Turkish plastics industry largely concentrates on products that have relatively lower added value in comparison to other developed economies in Europe.

According to data obtained from the Union of Chambers and Commodity Exchanges of Turkey (TOBB), there are approximately 14,000 companies operating in the plastics sector, 98.00 % of which is comprised of SMEs. Statistics from PAGDER (Plastic Industrialists‟ Association) show that 6,499 companies are involved in manufacturing. The total employment opportunities generated by the sector reached 250,000. When the numbers of companies are categorized on a sector basis, construction material producers lead the way with a 23.10% share followed by packaging materials producers and producers of household goods with shares of 22% and 9.40% respectively.

The construction and buildings sector enjoy a 20-25% share among all fields of application across the plastics industry. The utilization of plastic products in the construction sector has undergone a rapid increase in comparison to alternative products. Plastic products possess certain competitive advantages compared to other materials including insulation,

endurance, cost-effectiveness, low operational and

maintenance expenses, ease of hygiene and innovation. According to data published by PLASFED, the plastic construction materials producers met 93% of domestic demand in Turkey, having maintained their growth trend throughout FY2013. As of FYE2013, the aggregate value of production attained by the sector reached USD 7.2bn, with exports of USD 1.8bn and a foreign trade surplus of USD 1.3bn which recorded an increase of 7% throughout FY2013. The production of plastic construction materials increased to 1.7mn tons as of FYE2013, up from 1.1mn tons figure recorded at FYE2008 whilst the monetary value of the sector‟s output attained a value of USD 7.2bn. On monetary terms, production increased by 12% compared to the previous year whilst its share among the wider plastics industry remained flat at 22%. On the other hand, exports of the sector maintained an upward momentum in the 2008-2013 period and reached 713,000 tons with an aggregate value of USD 1.8bn from 466,000 tons with a value of 1.3bn. Turkey is currently ranked as the 5th largest exporter of plastic construction materials on a global scale with a market share of 4%. Across the EU, it is the third largest exporter behind Germany and Italy. Turkey exports plastic construction materials to more than 150 countries with the 5 leading markets including Iraq, Russia, Libya, Azerbaijan and Georgia. Exports to ten leading markets comprised 71% of total exports in quantitative terms and 67% in monetary terms.

The unit value of plastic construction material exports corresponds to approximately half of the unit value of imported products. On quantitative terms, the sector exports 42% of its aggregate production, however based on value, the corresponding amount falls to 25%, emphasizing the need for greater value-added manufacturing. The unit price per ton of imports underwent an increase of 5% in FY2013 and realized a value of USD 5,889 while the unit export price per ton of exports grew by 2% and attained a value of USD 2,494. As such, there is an increasing gap in favor of imports when the unit prices of imports and exports are compared. It is anticipated that Turkey‟s strategic location at the heart of a rapidly developing region along with a young demographic and increasing levels of household income which contributes to the demand for qualified residential property are the major factors that will contribute to the growth of the plastic construction materials sector in the medium and long-term. In order to improve the competitiveness of the sector in the

long-0 2 4 6 8 10 2008 2009 2010 2011 2012 2013 5.2 5.7 6.2 6.7 7.2 8.1

Turkish Plastics Material Production (Mn Tons)

Packaging Construction Durable Goods Agriculture Textile Automotive Others TOTAL 324 1134

Plastics Production by Industry (000 Tons)

8100 3240 1782 810 486 324

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Pakpen Plastik Boru ve Yapı Elemanları San. ve Tic. A.Ş. 9 run, greater levels of state support should be provided to

increase investment and R&D activity in order to ensure greater contribution to Turkey‟s balance of payments. As of FYE2013, 252 firms in the plastics sector enjoyed foreign ownership with the five leading investors including Germany, Italy, France, Netherlands and Iran. According to PLASFED, 31 companies featured among the 500 Largest Industrial Enterprises List compiled by the Istanbul Chamber of Industry (ISO) based on sales revenues. The five largest companies namely included PETKIM, Brisa Bridgestone, Sasa Polyester Sanayi, Turk Pirelli and TUSAŞ. On the other hand, the five largest centers with the highest level of plastics production include Istanbul, Bursa, Izmir, Ankara and Kayseri that have an aggregate output of 6.3mn tons corresponding to 78% of the countrywide total. Similarly, the distribution of plastics companies across the country resemble a similar pattern to that of industry with 91.30% of firms located in 12 cities.

Total exports by the plastics sector stood at USD 5.6bn as of FYE2013. 34 firms were ranked among the Leading 1000 Exporter Companies‟ List compiled on an annual basis by the Turkish Exporters‟ Assembly. (TIM) The exports of 34 companies equated to 51.00% (USD 2.90bn) of total plastic and raw material exports and 2% of Turkey‟s total exports. The share of the largest players in industry‟s output and exports is declining in contrast to SMEs in recent years. Based on the monetary value of exports, the largest companies namely include Petkim, Türk Pirelli Lastikleri A.Ş., Sasa Polyester, Korozo Ambalaj and Köksan Ambalaj. The largest export destinations include Germany, Russia, Italy, Egypt and Iran.

The capacity utilization rates of companies operating in the sector dipped in FY2009 with the onset of the global economic recession and attained a value of 64.30%. However, with the rise in demand, utilization rates underwent a recovery in the following period and peaked in FY2011 with a rate of 76.20%. In general, the capacity utilization rates resembled that of the wider trend in the manufacturing sector and reached 72.60% in FY2013 which was slightly below that of the wider manufacturing industry (74.60%).

In line with the growth in processing capacity, the sector invested approximately USD 6.40bn in machinery and equipment in the 2003-2013 period, 80% of which has been imported. The investment in machinery and equipment followed a similar pattern to the trend in economic growth

having peaked in FY2011 with USD 885mn and dropped to USD 732mn in FY2013.

Dependence on imports for raw material requirements is one of the most pressing issues facing the plastics industry in Turkey. The dependency rate on imports is currently estimated as approximately 86.00% (FYE2012: 88.00%) with Turkey being one of the leading net importers of polymers such as polyethylene (PE), polypropylene (PP) and polyvinylchloride (PVC). The average export unit price for plastic raw materials was USD 1,689 per ton in FY2013, indicating a rise of 2% from the FY2012 figure.

PETKIM is by far the largest investor in Turkey in the field of petrochemicals and is unable to meet current market demand whilst it remains difficult to attract foreign investors into the sector. The dependence on raw materials coupled with high import taxes becomes more significant in times of economic instability which increases vulnerability to fluctuations in exchange rates, contributing to the cost-base of manufacturers. Large falls in crude oil and naphta prices from the beginning of FY2015 onwards led to a substantial drop in petrochemical feedstock costs across Europe which can have a positive effect on company margins.

Despite some of the issues mentioned above, the Turkish plastics industry continues to be highly attractive in the medium and long-term due to rising per capita income, urbanization, young demographics and the anticipated growth in the packaging and construction sectors. Furthermore, in line with the government‟s 2023 agenda which projects exports of USD 50bn for the chemicals industry, the export of plastic and rubber products is estimated to reach USD 23.3bn.

Sources: Plastics Europe, TUIK, Turkish Plastic Industrialists’ Federation (PLASFED), Turkish Plastics Industry Foundation (PAGEV), Turkish Plastic Industrialists’ Federation (PLASFED)

6. Financial Foundation

a) Financial Indicators & Performance Indices Relating to Size

The Company‟s total asset size increased by 6.05% and amounted to TRY 794.02mn as of FYE2014. The Company exhibited a continuously positive and fluctuating asset growth pattern over the last five years and realised a five-year cumulative growth of 90.82% as of FYE2014. The main

76.7 65.2 72.6 75.4 74.2 74.6 74.5 65.3 73.1 76.2 72.1 72.6 58 60 62 64 66 68 70 72 74 76 78 2008 2009 2010 2011 2012 2013 General Manufacturing Plastics and Rubber

Capacity Utilisation Rates (%)

0 2 4 6 8 10 12 2009 2010 2011 2012 2013 5.3 7.6 9.9 9.9 11.0

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factors of the last year asset growth were the increases of 11.08% in inventories, 7.93% in tangible assets of which half of it derived from revaluation, 8.83% in trade receivables and 185.30% in trade receivables due from related parties. The Company showed a steep growth in 2013 mainly due to a 48.67% increase in tangible assets through TRY 19.17mn investment and TRY 89.91mn revaluation and 20.41% and 6.36% increases in inventory and trade receivables, respectively.

The Company carries out its manufacturing activities through 7 factories. Moreover, the Company holds a certain stock level due to its field of activity and in accordance with the management strategy adopted. Accordingly, the asset distribution of the Company exhibited an almost similar pattern over the years with the highest share in tangible assets and after inventories and receivables, respectively.

Activities in the three business lines of PVC window and door profiles, plastic pipes and insulation produced a continuously increasing gross profit over the last five-year assessment period. The Company realised five-year cumulative growths of 164.17%, 146.34% and 131.86% in net sales, gross sales and gross export sales, respectively. The gross export sales, with the main export markets of France and Azerbaijan, held a 17.67% share in gross sales and actualised a net sales generation capacity of 72.28% as of FYE2014.

Indices Relating to Profitability

The Company ratio of „cost of sale to total sale‟ showed an almost steady pattern and stood immediately below the maximum international reference value over the last four years depending on market conditions and raw material price movements. Direct raw materials and supplies coast constitutes 84.95% of total coast of finished goods.

The gross profit margin of the Company displayed an almost stable pattern over the last four years, ranging between 16.87% and 18.51% over the last two years and fluctuating slightly due to differential sales deductions, mainly composed of sale discounts, and cost of sales. An almost steady gross profit margin level enables more accurate future forecasts and facilitates planning. The gross profit from principal activities increased by 16.21% and amounted to TRY 82.82mn as of FYE2014. A 1.15% increase in sales deductions against 36.64% increase in net sales led to the steep increase in 2011 gross profit growth.

The Company‟s profitability ratios of ROAA and ROAE exhibited mostly negative and fluctuating pattern over the assessment period between 2010 and 2014 considering the

6.05 38.36 6.97 16.41 4.45 90.82 79.94 30.06 21.58 4.45 0 10 20 30 40 50 60 70 80 90 100 2014 2013 2012 2011 2010

Asset Growth Rates (%)

ANNUAL CUMULATIVE 1.31 1.45 0.70 4.22 2.01 25.01 26.36 33.11 27.55 24.77 33.86 32.33 29.56 29.14 28.64 34.89 34.28 31.90 29.30 36.31 4.93 5.59 4.73 9.79 8.27 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 2014 2013 2012 2011 2010 Asset Distribution (%)

Intangible Assets + Others Tangible Assets

Inventories (Net) Trade & Other Receivables & Leasing Liquid Assets+Marketable Securities

475.31 422.39 412.47 342.45 250.62 179.92 657.60 586.86 569.99 495.54 401.96 266.95 116.20 127.11 65.09 71.22 47.48 50.12 0 100 200 300 400 500 600 700 2014 2013 2012 2011 2010 2009 TRY (000,000)

Net Sales Gross Sales Gross Export Sales

84.47 85.19 82.15 84.07 87.11 79 80 81 82 83 84 85 86 87 88 2014 2013 2012 2011 2010

Cost of Sales / Total Net Sales (%)

16.21 -6.67 31.10 65.43 -25.63 17.42 16.87 18.51 17.01 14.05 -4000% -2000% 0% 2000% 4000% 6000% 8000% 2014 2013 2012 2011 2010

Gross Profit from Principal Activities Growth (%) Gross Profit Margin (%)

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Pakpen Plastik Boru ve Yapı Elemanları San. ve Tic. A.Ş. 11 pre-tax profit and average total assets and equity. The main

factors suppressing the profitability ratios are activities and financing expenses. Foreign exchange gains/losses are the main factor of the fluctuating pattern.

On the other hand, the annual average equity and total assets of the Company exhibited comparatively high income generation capacities over the years despite a slight decelerating trend and stood at 294.02% and 86.66%, respectively, as of FYE2014.

b) Asset Quality

The Company‟s total asset exhibited a continuously current assets weighted dispersion along with an almost steady level ranging between 60% and 65% over the years due to comparatively high trade receivables and inventories amounts. Inventories were the largest item among current assets, followed by trade receivables and cash to a smaller extent. Current assets weighted asset dispersion together with the average maturity of trade receivables of 103 days and which was below the average maturity of trade payables of 179 days relieved the liquidity management and lowered the risk level.

The NPL ratio of the Company exhibited an upward trend over the last five years and increased to 16.80% in 2014 from 9.90% in 2010. A higher increase in doubtful receivables than that of trade receivables together with decreasing provisioning level pressured down the asset quality. Accordingly, a 23% increase in doubtful receivables against an 8.83% increase in trade receivables resulted in an increase in the NPL ratio from 13.15% to 16.80% in 2014. Additionally, the provisioning level decreased to 66.12% from 78.43% in the last year.

c) Funding & Adequacy of Capital

The Company‟s equity level exhibited a stable pattern at 30% over the last three years and stayed slightly below the international reference values and average of publicly traded companies in the plastic materials sector during the assessment period. Year end 2014 figures were 29.78% and TRY 236.45mn, respectively. While Company equity increased by 46.72% over the last two years, the cash generation capacity of the equity remained limited due to its structure comprised of approximately fifty-fifty paid-capital and revaluation funds. The funding needs derived from asset growths were satisfied mostly through external funding sources of borrowings and TRY 100mn bond issuance with a two-year maturity in 2013. Accordingly, the share of financial liabilities exhibited an upward trend since 2010 and stood at the highest share of 51.06% as of FYE2014.

The Company‟s debt ratio and equity level among its liabilities remained almost at the same level since the share capital increase from TRY 90mn to TRY 113mn in 2012 following fluctuations due to increasing trade volume and inventories. Both ratios remained around the national

-0.25 -2.83 8.36 -9.47 -1.12 -0.84 -9.72 37.44 -47.09 -3.57 -60.00 -50.00 -40.00 -30.00 -20.00 -10.00 0.00 10.00 20.00 30.00 40.00 50.00 2014 2013 2012 2011 2010 ROAA (%) ROAE (%) 294.02 318.11 504.03 530.46 304.98 86.66 92.69 112.59 106.67 95.90 0% 10000% 20000% 30000% 40000% 50000% 60000% 2014 2013 2012 2011 2010

T. Income / Equity (%) T. Income / T. Assets (%)

62.94% 61.93% 65.11% 65.84% 60.72% 37.06% 38.07% 34.89% 34.16% 39.28% 0% 10% 20% 30% 40% 50% 60% 70% 2014 2013 2012 2011 2010

Current Assets / T. Assets (%) Noncurrent Assets / T. Assets (%)

16.80 13.15 12.68 13.50 9.90 0 2 4 6 8 10 12 14 16 18 2014 2013 2012 2011 2010 NPL % Trend Line 51.06 46.23 40.02 45.13 34.29 47.88 10.26 12.90 20.39 30.56 29.62 3.88 5.02 5.07 3.38 4.42 6.48 7.62 3.88 6.64 7.10 4.81 3.66 3.44 29.78 29.15 29.12 15.09 25.96 37.18 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 2014 2013 2012 2011 2010 2009 Resource Distribution %

Equity+Minority Interest (%) Advances Received (%) Other Liabilities (%) Trade Payables (%) Financial Liabilities (%)

References

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