Chief Financial Officer, GXO LOGISTIC INC
Sabancı Holding CFO Barış Oran / Bloomberg UK - Bloomberg Surveillance
About Baris Oran
In a September 2021 interview with Bloomberg UK, Barış Oran, then Chief Financial Officer of Sabancı Holding, discussed the company's performance and outlook. Oran stated that the company had a "solid year in 2020," increasing EBITDA by 23% and net profit by 34%, and that it had committed to retaining all employees. He described the company's debt-to-EBITDA ratio as "down to one and a half times" and said operating cash flow had doubled over the prior two years, adding that the company did not have a "cash shortage." Oran outlined investment priorities including renewables, electric vehicle charging stations, flexible electronics, and the fuel cell industry, as well as broader digitization and IT services such as cybersecurity. He said the company had set a target to "double the new economy's share within the group." Regarding the Turkish economy, Oran noted that "orthodox policies" implemented by the new economic administration had improved business and consumer confidence, and he predicted GDP growth for 2021 would exceed the average estimate of 4%. He also indicated that Sabancı Holding would consider divestitures and further listings of its enterprises "to crystallize value for all of our shareholders."
Transcript (11 segments)
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Francis Lacroix0:06
Economics, finance, politics. This is Bloomberg Surveillance: The Early Edition, and I'm Francis Lacroix here in London. Now to Turkey, where growth is outpacing all the nation's peers except China. It's being driven by lower interest rates and a credit binge that's boosting domestic consumption. Now the growth push saw a slump in the lira, keep inflation in double digits for the entire year. Sabanci Holdings is one of Turkey's largest industrial and financial conglomerates. Its main areas include financial services, energy, cement, retail, and industry. The company's business partners include prominent global companies such as Aviva, Carrefour, and E.ON. And Baris Oran, Sabanci Holdings' Chief Financial Officer, joins us. Mr. Oran, thank you so much for coming on Bloomberg Surveillance. When you look at exactly what's happening in Turkey and some of your investments, how optimistic are you about the next eight to nine months? What key units in Sabanci will actually drive growth?
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Baris Oran0:59
We had a really solid year in 2020, where we were able to improve our top line, increase our EBITDA by 23%, and increase our bottom line by 34%. Earlier on, we made a commitment to our employees that everybody is going to keep their jobs, so that we were able to focus on business continuity and keep the economy running. Looking forward into 2021, I still see robust consumer demand, although it's normalizing. Just like you have mentioned, it has been a very solid consumer sentiment-driven economy growth in 2020. It's normalizing in 2021, but I also see that the demand for our products and services in the European Union, the U.S., and especially Asia is increasing rapidly. I think it's going to be a great year as the global economy reboots itself.
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Francis Lacroix1:52
So are there any industries or companies that Sabanci actually doesn't deem in its core business that you could actually be selling off?
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Baris Oran2:00
We have a structural capital allocation policy where we rigorously deploy year after year. Currently, our debt levels are quite low. Our debt-to-EBITDA level is down to one and a half times. In fact, in the last two years, we were able to increase our operating cash flow; we have doubled our operating cash flow during the last two years. Therefore, we don't have a cash shortage, quite frankly. Having said that, we would like to invest in a number of growth industries, such as renewables, such as electric vehicle charging stations, such as digitizing our retail operations even more so we can serve our customers on the omnichannel side. We will also look at our set of businesses for opportunities to divest when the time comes with good valuation.
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Francis Lacroix2:52
Are there new industries that you would like to enter? Is there something on your radar now that you think would be attractive within the Sabanci house?
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Baris Oran2:58
Sure. What we are looking into is adjacent businesses. We are investing in charging stations, for example. We are investing more and more into renewables; that's an area that has been our focus for some time. We are looking into flexible electronics. We are a supplier to the fuel cell industry globally; it's another industry that we are looking into. And overall digitization of the entire group, as well as IT services including cybersecurity. Those are the areas. They are not new areas per se, but they are adjacent areas that would accelerate the growth of the enterprise. In fact, we have recently shared our guidance with our investor community, and we have provided a target to double the new economy's share within the group, and we would like to execute on that.
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Francis Lacroix3:51
Is there anything that you would list that's not listed right now, where you see value and listing separately in an IPO?
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Baris Oran3:59
Well, listing within the Sabanci Group, we have done quite well in the last 20 years. In fact, we have over 10 listed enterprises, and we have created a very solid dialogue with our investor base based on delivering our promises year after year. In fact, in the last 10 years, we have listed IPOs or SPOs of five enterprises, and we would like to continue doing that to crystallize the value for all of our shareholders. In fact, a couple of businesses that we have, they are getting ready to be invested, and we are looking into operational opportunities around those. But let me give you a couple of examples. For example, our energy business, which has done quite well, which has a growth pipeline, will be able to pay dividends in a couple of weeks and also reduce its debt profile quite clearly. When the time comes, we'll take a look at those and we would like to crystallize value for our entire shareholders. But the current market conditions may not be ideal for listings.
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Francis Lacroix5:07
Mr. Oran, talk to me a little bit about how much you think Turkish exports are actually giving a lift to overall GDP in Turkey. What kind of GDP estimates do you have for the country, and is there a danger that the lira will have higher inflation, therefore the lira will be less stable, and what does that mean for Sabanci?
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Baris Oran5:26
Well, after fighting with COVID in the earlier part of 2020, there has been a focus on orthodox policies implemented by the new economy administration, and it provides better visibility. It not only improved business confidence but also improved consumer confidence. Therefore, I think it will be a better investment climate moving forward. The average estimate for GDP growth for 2021 is 4%. We personally think it's going to be higher than that. There's going to be a balancing of local consumer versus exports. I think the export side will be much more solid, and local consumption will stabilize.
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Francis Lacroix6:10
Thank you so much for joining us today, Baris Oran, Sabanci Holdings Chief Financial Officer.