Message from the General Manager
Esteemed Shareholders, Business Partners and Employees,
I would like to start by sharing my deepest condolences for the sudden loss of Mustafa V. Koç, former Chairman of Koç Holding, who will be fondly remembered. Mustafa V. Koç, a distinguished and visionary business leader, invested unprecedented effort to develop business, society, arts and sports in our country and enabled our group to transform into a powerful industrial conglomerate with a global vision. In addition to his service to the country, he was a role model for many for all kinds of reasons including his modesty, geniality, dynamism and determination. I would like to extend my sincere sympathy to the Koç family, Koç Group and Arçelik. We will cherish his memory and remain committed to reaching his highest targets.
Leveraging this meaningful legacy, I want to introduce you an overview of the global and Turkish economy, along with an outlook of our industry and our activities in 2015. A year of many achievements for Arçelik. Despite the economic instabilities in the world and in Turkey, we secured a steady growth.
The global economy and financial markets have gone through turbulent times; the US Federal Reserve (Fed) increased the interest rate in December for the first time in nine years, mostly due to positive developments in the US economy, opening the door to a long-awaited new era. The European Central Bank (ECB), struggling with low inflation and weak growth, decided to continue with monetary expansion and kept the interest rates on deposits on the negative side. The lowest growth of the Chinese economy in the last 25 years and the slowing down of its wheels added to the generally worrying outlook. Japan on the other hand entered into another economic recession due to poor internal demand and the Bank of Japan's (BOJ) continual easing of monetary policies. Commodity markets fell mostly owing to Fed's monetary policies, and also to the slump in Chinese economy unaided by the strengthening US Dollar currency. Not to mention that the oil prices also plummeted. The USD appreciated against many currencies of the world.
The global economic growth in 2015 is estimated to be at around three percent. The International Monetary Fund's (IMF) most current estimate for 2016 growth is 3.4 percent. Expectations are for a moderate recovery in developed economies and a loss of acceleration in developing economies. The trend-setters of the year will be Fed's monetary policy, developments in the Chinese economy, commodity markets and Turkey's relations with Russia and Iran, as well as the Central Bank of Turkey’s (TCMB) monetary policy and structural reforms of the government on a national level. Regarding the Turkish economy, we estimate that the current deficit will continue to shrink provided that the strong internal demand continues and commodity prices are contained at low levels.
Limited growth in the global white goods industry
By the end of 2015, the global white goods industry is estimated to grow by one percent in terms of quantity but shrink seven percent in value (USD). The global TV market is even worse with two percent decline in quantity and 13 percent contraction in value (USD).
In Europe, our primary market, the white goods market, contracted by one percent year on year. If we take a closer look, the Western European market grew by five percent with the positive effect of all countries in the region, especially Spain, UK and Germany. The Eastern European market decreased by 19 percent, adversely affected by the weakening Russian and Ukrainian markets. The Pollish and Romanian markets recorded growth.
Political turmoil in the Middle East and North Africa continued to put great pressure on the economy. The white goods market in South Africa contracted. Turkey protected its position as the largest manufacturing center of Europe in white goods. Exports as of the end of 2015 were seven percent higher than the previous year with 18.08 million units cleared in six major appliances. Our home market also grew by 5.7 percent up to 7.09 million units.
The estimated growth rates in 2016 will be three to five percent for the white goods market in Turkey and two percent for the international markets. Our consolidated turnover is forecasted to improve approximately by 10 percent, which will correspond to an 11 percent improvement of the EBITDA (Earnings Before Interest Taxes Depreciation and Amortization).
Strengthening leading position in our home market, and securing a consistent global growth path.
Arçelik is the leader in home technologies in Turkey and the third largest in Europe. Arctic and Defy maintain their market leaderships by far in Romania and South Africa, respectively. Beko has been an undefeated champion of market share growth in European white goods market for seven years in a row, and has carved the top position in the free-standing segment. Beko’s market share continued to increase in other major markets including Germany, Italy, Spain, Russia and Poland.
We are launching operations in new regions in line with our strategic objectives. In addition to the Beko Balkans office in Belgrade, new offices in Malaysia and Vietnam now bring the number of worldwide sales & marketing offices up to 27. In line with our ambitious objectives in South East Asia, the Thailand Refrigerator Plant, constructed since early 2015, rolled over its first test production by the end of the year.
Grundig, the only European brand to offer products in all categories of home electronics, sustained its expansion in the white goods markets of Germany, Scandinavia and the UK. We offered Grundig white goods range to consumers in Spain, Italy, Belgium, Croatia, France, Austria, Malta, South Korea and South Africa.
In addition to our global performance, we also strengthened our leading position in Turkey. We opened new concept stores all around Turkey to fortify the largest retail store network in the country.
Robust and steady growth reflected in financial results.
Despite the downturn in critical markets and the economic turmoil we achieved a robust and steady growth in 2015, both in terms of income as well as operational profitability.
In 2015, our consolidated turnover totalled at TRY 14.17 billion, an improvement of 13.2 percent YoY, with 59.6 percent of our sales revenues generated in international markets. Our net profit reached TRY 893 million. Market capitalization of the company was USD 3.2 billion as of the end of the year.
We are acting bold to empower our global R&D organization; opened an R&D center at Cambridge University Science Park in the UK, in addition to our current hub in Taiwan. Over 1000 professionals are now employed in our ten R&D centers, eight of them being in Turkey. We look forward to opening two new R&D centers one in Germany and the other in USA.
In our home country, we hold an undisputed leadership in terms of new patent certifications for many years. We are the R&D leader in our industry in Turkey with total patent applications exceeding 2000. One third of Turkey’s international patent applications to the World Intellectual Property Organization (WIPO) belong to Arçelik and for the last 10 years, we have been the only company from Turkey to be listed in the top 200 chart of the WIPO in terms of patent applications. Based on the last four years' annual reports published by the European Patent Office (EPO), half of the registered applications from Turkey are also from us.
Our R&D experience and innovative competences enable us to evolve our product line to meet all market and requirements as we develop business models that will perfectly prepare us for the Internet of Things and tomorrow's digital world. We strive to deliver high energy-saving products, water-efficient designs and smart user interfaces; we care for wellness and life style of consumers, which also entails top performance and premium sound quality.
2015 was no exception to our innovative offerings: take the smart home concept HomeWhiz for example. It is one practical idea to remotely control your white goods via mobile devices or TVs. Or our groundbreaking Capsule Turkish Coffee Machine to exponentially introduce Turkish coffee culture to the world. VUX (Virtual User eXperience), takes touch screen control technology one step further and allows controling products via projection technology. Europe's first dishwasher with an automatic dosing system; a refrigerator with a super fast Ice Maker to reduce ice-making time by half (as low as 40 minutes). You may also want to explore our futuristic ovens with a glass front cover also designed as a touch screen and our magical StainExpert washing machine which offers stain-specific washing programs.
In a nutshell, we are leading innovation and our commitment has been recognized with multiple awards.
Innovation is not only limited to products and services but also integrated with our business processes. Our entire value chain is re-crafted with a smart and innovative perspective. Our R&D consultancy team consists of world-famous academicians and entrepreneurs who have proven their skills and abilities in major global enterprises. In addition to our in-house R&D resources, we are collaborating with some of the very best universities and research institutions worldwide including MIT and Cambridge. We are redefining our capabilities in digital user interfaces thanks to our partnership with COVII, a computer vision & graphics specialist.
In addition to the ‘R&D Leadership’ and ‘Leadership in Technology Development’ awards, which we received at the Turkey Innovation Week organized by the Turkish Exporters' Assembly, we were further encouraged by being the only Turkish finalist in the category of large corporations in the International IMP³rove Innovation Awards. We will continue to lead innovation, create an innovation ecosystem and support all smart ideas and initiatives.
Sustainability-centric initiative on a global scale.
We integrate sustainability into our core business processes to boost our competitive edge. We expand our investments to develop innovative and energy-efficient products and improve product life-cycles. We also continue supporting global initiatives against climate change. We attended the ‘Climate Action and Green Competitiveness’ Event, organized by the World Bank in Washington, in an effort to highlight the importance of global collaboration, continuous investments and innovation in the struggle against climate change. We also attended the COP21 Climate Change Convention in Paris, as a representative of Turkey's white goods industry.
We participated in UNEP’s ‘Energy-Efficient Appliances and Equipment Global Partnership Program in Thailand and South Africa. For the first time in Turkish white good industry, we recycled more than 100,000 old, energy-inefficient products at the Eskişehir and Bolu recycling plants. Total savings of this process amounted as equal to the energy generated by six 2.5 megawatt wind turbines in one year.
Our focus on sustainability brought us multiple awards and we are excited to confirm that we are moving in the right direction. For the second consecutive year, we were granted with the Carbon Transparency Leadership Award from the CDP-Carbon Transparency Project. We also received 'AAA’ rating, the highest in the MSCI Global Sustainability Index Series. We are among the 30 companies listed in the BIST sustainability index.
Streamlining brand perception with sponsorhips.
We continue strengthening our global identity by supporting sports events & clubs. Thanks to our cooperation with FC Barcelona, Beko brand is represented at the highest level of football and recognized by millions of fans around the globe. In basketball, we have been sponsoring major tournaments since 2009. Most recently in 2015, Beko was the presenting partner of the FIBA EuroBasket. Beko continued to sponsor Beşiktaş in Turkey, the Beko Basketball Bundesliga in Germany and LegaBasket in Italy. Beko and Grundig sponsored major national and international golf tournaments in Turkey. And last but not the least, Grundig brand remained a sponsor for the Fenerbahçe Women's Volleyball Team and the Norwegian Handball League.
Creating value in our operating regions.
In addition to our commercial achievements, many of our employees volunteered to join a number of local and international social responsibility projects. Koç Group is forging ahead with a solution oriented approach in Turkey for the “I Support Gender Equality for My Country” Project.
In this regard, Arçelik represented Koç Holding at the G(irls)20 Summit, which places an emphasis on the impact of economically empowering girls and women around the world. In addition, our employees and dealers demonstrated solid commitment to the HeForShe campaign organized by UN Women and sponsored by Koç Holding as a local partner in Turkey.
Proud with our global companies for their presence and history.
2015 was a year to celebrate important anniversaries for many of our subsidiary offices worldwide. We marked the 60th anniversary of Arçelik A.Ş., 70th anniversary of Grundig, 25th anniversary of Beko plc in the UK, 45th anniversary of Arctic in Romania, and 110th anniversary of Defy in South Africa.
Firm steps towards the future.
We are getting stronger in our current operating markets and will continue investing for a stable growth in new geographies. We will utilize new lines of business, partnerships and brand acquisition opportunities and create new success stories. We will improve the skills of our global human resources and maximize the effectiveness of our global organization.
The four pillars of Arçelik’s track-record and its future are our employees, dealers & service points, suppliers and business partners. In conclusion, I would like to extend my thanks to our customers for their trust in our products, as well as to our stakeholders and shareholders for their unfailing support.
* The message of CEO in Arcelik Annual Report 2015.