Earnings call transcript: UCaaS Q2 2025 sees strong revenue growth amid challenges

Ulker Biskuvi’s Q2 earnings call highlighted a robust revenue growth of 11.5% year-over-year, reaching 23 billion Turkish lira, despite a slight decrease in gross profit margin. The company, currently valued at $1.04 billion in market capitalization, maintained its market leadership in Turkey and expanded its international presence, while navigating economic challenges such as high inflation and volatile commodity prices. Ulker’s stock remained stable post-announcement, reflecting investor confidence in its strategic direction and future growth prospects. According to InvestingPro analysis, the company maintains a GREAT financial health score of 3.19, suggesting strong operational fundamentals.

Key Takeaways

• Q2 revenue rose by 11.5% YoY to 23 billion Turkish lira.
• Gross profit margin slightly decreased to 27.2%.
• New product launches contributed significantly to revenue growth.
• The company maintained a strong market position in Turkey with a 33% share in biscuits.
• Economic challenges include a 35% inflation rate and volatile commodity prices.

Company Performance

Ulker Biskuvi demonstrated solid performance in Q2 2025, with revenue growth driven by new product innovations and strategic market expansion. Despite a challenging economic environment marked by high inflation and a declining Turkish GDP, the company managed to sustain its market leadership in Turkey and expand its footprint in international markets.

Financial Highlights

• Revenue: 23 billion Turkish lira (+11.5% YoY)
• Gross profit margin: 27.2% (a 0.6% decrease)
• EBITDA margin: 14.6% (decreased from previous period)
• H1 total revenue: 50.6 billion Turkish lira (+4.6% YoY)

Outlook & Guidance

Ulker Biskuvi provided guidance for 2025, projecting net sales growth of 3% with an EBITDA margin of 17.5%. The company plans to focus on five growth models, emphasizing sustainable and profitable growth strategies. Future earnings per share are forecasted at 0.56 USD for FY2025 and 0.85 USD for FY2026.

Executive Commentary

CEO Jose Guray emphasized the company’s commitment to sustainable growth, stating, "Despite the challenging time, we try to remain committed to sustainable growth." CFO Fulya highlighted financial prudence, noting, "Our objective is to maintain healthy net debt at EBITDA levels."

Risks and Challenges

• High inflation rate at 35% could impact consumer spending power.
• Volatile commodity prices, particularly in cocoa and packaging, may pressure margins.
• Economic downturn in Turkey with a 2% GDP decline poses macroeconomic risks.
• Increased competition in international markets could affect market share.

Ulker Biskuvi’s strategic initiatives and market leadership position it well for future growth, despite the current economic headwinds. With a healthy current ratio of 2.27 and debt-to-equity ratio of 1.51, the company maintains strong financial flexibility. The company’s focus on innovation and international expansion are likely to be key drivers in its continued success. For comprehensive analysis including Fair Value estimates and detailed financial metrics, explore Ulker’s full InvestingPro Research Report, part of our coverage of 1,400+ stocks.

Full transcript - Ulker Biskuvi-EXCH (ULKER) Q2 2025:

Beste Pesha, Investor Relations Lead, UCI Discrete: Good afternoon, everyone, and welcome to the service fee second quarter twenty twenty five results first half. Thank you for joining us today. I’m Beste Pesha, leading the Investor Relations department. I will briefly walk you through the agenda before handing over to our speakers. Our CEO, Jose Guray, will start with an overview of the quarter’s performance and key strategic highlights.

Then our CFO, Kuliaman, will provide a detailed review of the financial results. After their presentation, we will open the line for questions. With that, let me now hand it over to our CEO of Kubey. Kubey?

Jose Guray, CEO, UCI Discrete: Thank you, Kubey. Good morning, good afternoon, and good evening to all who are joining from different place of the world. I’m pleased to welcome you to UCI Discrete second quarter two thousand twenty five earnings presentation. Today, we will walk you through our performance and strategic initiatives and outlook. So our agenda for today is structured around four key points.

First, we will highlight the strategic and operational achievements of the quarters. Then we will we will examine the mark macroeconomic context and its impact on our business. We will follow-up with a deep dive into our financial performance. And finally, we will share our outlook for the remainder of 02/2025. Each section reflects our commitment to transparency and long term value creation.

In quarter two, WeChat continues to build momentum across multiple fronts. We launched new products that contributed meaningfully to our revenue, executed high impact marketing campaigns, and advanced our sustainable agenda. Our portfolio saw strong volume growth, and we maintained our leadership position in our key markets. These achievements are a testament to our team’s ability and strategic focus. Looking at the macroeconomic context, the Turkish economy remains in flux.

In quarter two, GDP continues its declining trend and reached to 2%. Inflation continues to be a key challenge with 35% CPI and 24% CPI. The Central Bank interest rate is still stands at around 43% level. Despite these headwinds, The UK has adapted its operation through dynamic pricing, cost discipline, and strategic sourcing with agility. We remain vigilant and responsive to all the macroeconomic shifts that we are going through.

Looking at the key role in the prices, the role in the volatility continues to impact our cost base. One of the biggest contributor is cocoa prices. We have seen huge fluctuations in cocoa prices going to the levels of £9,500 levels per ton. Recently, it’s the surge is around 5,377 per metric ton. Sugar prices in a slight decline, sir, in GDP terms.

Looking at beef and milk, they have shown relative stability, while packaging costs, especially paper, has increased. Hazelnut is we are going through the hazelnut season, and it’s expected to increase also. Our procurement strategy and long term supply relationships has helped us mitigate these pressures and maintain supply chain resilience. So let me share with you the today’s key messages. First, we are staying agile despite a challenging macroeconomic context.

You can head coach you to deliver resilient growth driven by innovation, operational excellence, and a deep commitment to our consumers and communities. Secondly, we are ensuring affordability and accessibility across all segments. Thirdly, we have strong h two plans focusing on sustaining growth momentum. Fourthly, we are accelerating sustainable growth through through technology, AI powered procurement, and operational efficiency. And next, we are committed to driving targets through impactful innovation and communication.

Last but not the least, operation access and cost assistance remain our top priorities. We have recently introduced a continuous social share savings program, which helps us to minimize the impact of all the cost increases in our operations. Now let’s look into the new product launches that we have seen in the first half of the year. In the first half of the year, we launched several new products, some of which you see on the screen, both domestically and internationally. These launches contributed 4% to quarter two snacking revenue in the second quarter.

Our innovation pipeline is really robust, and we are seeing strong consumer engagement. These products are not only driving incremental revenue, but also reinforcing our brand relevance in a competitive market. New product development in three years period contributed 12% of our quarter two connecting revenue, 14% domestically, and seven percent internationally, summing up to 12% in total. This performance highlights our ability to innovate at scale and meet evolving consumer preferences. Our teams have gone have done an exceptional job in identifying trends, executing launches, and ensuring distribution efficiencies.

Our marketing campaigns have been both creative and effective. Some of I will give some of some examples from Kusserl Magma to original video taste and cheesy man Oseman celebrity campaign. You know Osman is a famous worldwide known player who is currently playing in the first league in the last five football team. We have leveraged TV, digital, outdoor, and social media to connect with consumers. These campaigns are not just about visibility, they are about building emotional resonance and driving brand loyalty and brand equity.

Our partnership with influencers have amplified our reach and relevance. Sustainability is at the core of our operations and whatever we do. We are qualified as an a rating in CDP supplier engagement assessment. We reached 100% reuse recyclable recycle of up upcycling and launched cyclicals, deal fortified biscuits in collaboration with Saban University, which is one of the best top universities of Turkey. This is the first time done in Turkey.

Biofortification means directly is sourcing from the soil itself the nutritional elements. And in this project, that could be little bit work, we have enriched our biscuits with selenium and zinc. These efforts reflect our commitment to responsible growth. We have continued to strengthen our corporate reputation through community engagement and brand storytelling through our marketing campaigns. They launched the first the my first match campaign with major football teams, of which we are sponsored for, provided for our consumers who never saw a football game of a major football team.

As an opportunity to to see their first ever football game in this stadium. This city made huge engagement in the in the country, creating huge buzz, which is a important example of our connection with our consumers. Another inch initiative and other initiatives from renovating something some examples like renovating a basketball court in Hussai, one of the key city earthquake zone back in 02/2023, the earthquake. And we we really support our communities and the kids to to provide them with the basketball court. Another example is the our support to our Olympic players, which also created a lot of engagement to our videos that we provided in the social media.

All these efforts, we’ve trust and deepen our sole society impact. These these initiatives were also awarded in in important platforms, like we have received the s and m SMP global flag. We have five years in a row, we have been awarded as the largest food company of Turkey by one of the big business magazines of Turkey called Capital. And recently, we have also been awarded as the happiest place to work in in Turkey. Our people are at the heart of our success, which we always highlight in different platforms.

It is TV awards for great employers. We received nine honors, including employer of the year. This is really what we are proud of. This recognition reflects our commitment to creating a supportive, inclusive, and high performing workplace. We continue to invest in talent development, new employee engagement, and workplace culture to ensure UK UK remains a top employer in the region.

So now let’s look in coverage operational performance. In the 2025, we managed to increase our 2K revenue by 8.8% and EBITDA by 3.6% compared to the same period of last year. In our export business, our revenue grew by 8.4% and EBITDA deteriorated by 20.8%, mainly driven by the weakening correlation between inflation and Turkish lira devaluation. As of June 2025, the yearly inflation rate is 35%. There is the Turkish lira to USC depreciation is around 24 21%.

This is lagging behind the inflation, which explains mainly the the weakening impact on this on this correlation. In our North Africa business, our revenue grew by 33.6%, driven by improved pricing, mix management, and currency effects, and EBITDA grew by 8.8%. In Middle East region, revenue grew by 1.5% and EBITDA declined by 22.1. Higher raw material cost and increase in energy cost put pressure on profit margins in both Middle East and North Africa regions. In Central Asia region, h one performance is in line with previous year in terms of revenue and EBITDA delivery.

Despite the ongoing slowdown in domestic market, we achieved to recover the sales and EBITDA gap occurred in Q1 during the second quarter. On time pricing actions and effective promotion activities has been higher sales and profitability, which results in a really good comeback in quarter two. All in all, in the first half of the year, we successfully achieved growth in sales in our all regions. Despite these headwinds, we remain committed to our strategic priorities and confident in the long term potential of our international operations. Now let’s take a closer look at our revenue breakdown for the 2025.

Our Turkey operations continue to be the backbone admiralship of our business, contributing solid 72% of our total revenue. The remaining 28% comes from our export and international operations, reflecting our growing footprint beyond domestic borders. When we break this down further by region, we see the following composition. As I said, the Turkey domestic operations account for 7272% of total revenue. Our export business contributes 12% driven by direct shipments from Turkey.

The Middle East region represents 10% showing a resilience despite despite marketing, sorry, market challenges. North Africa contributes 3% and Central Asia also accounts for 3% of our total revenue. This regional breakdown highlights the strategic importance of our diversified international presence while reaffirming the strength and consistency of our domestic operations. As we move forward, we remain focused on optimizing our performance across all regions and leveraging growth opportunities in both major and emerging markets. Looking at the market share, UCLEAR UCLEAR continues to strengthen its leadership position across key categories and geographies.

In our home market, in Turkey, we hold our leading 33% share in biscuits, 27% in chocolate, and 14% in cakes, underscoring our deep rooted brand equity and consumer trust. In The Middle East, we remain a strong presence with a 14% market share in this group, reflecting our ability to adapt to regional preferences and drive growth through innovation and distribution. Our footprint in North Africa and Central Asia also remains solid with 14% dispute market share in both regions. These figures sourced from Newsel’s year to date June 2025 data highlight our consistent performance and strategic focus on maintaining category leadership while expanding our global global reach. Now I leave it to the stage to Fulya, our CFO, for to be driving to our financial performance.

Beste Pesha, Investor Relations Lead, UCI Discrete: Thank you, Duvet. Good morning. Good afternoon, everyone. Thank you for joining our q two webcast meeting. Unless noted otherwise, again, I’d like to remind that all the numbers are shown are stated for inflation accounting, I s 29, adjust adjusted figures.

So let me start with q two results first. Q two only results first. Volume grew by 5.5% and revenue grew by 11.5%, reaching to 23,000,000 Turkish lira by the end of q two. Gross profit remains nearly flat, slightly down by 0.6%, reaching to 6,300,000,000.0 Turkish lira and delivering 27.2% growth profit margin. Slight decrease on the growth profit margin is mainly driven by high input cost and overall EBITDA margin also decreased by 14.9%, reaching to 3,400,000,000.0 Turkish lira.

We ended up at 14.6%, and net income ended up 7,220,000.00 Turkish lira. We delivered most before future results, mainly mostly in line with what with the market expectation. Input cost, more promotions, sales support activities within the shrinking market also are the main results for the EBITDA decrease. Overall, h one results, when we take a look at the on the h one results, we see a slight decrease on the volume by 2.6, reaching to 344,000 times in half one. This is reflects the temporary slowdown in certain international markets, partially offset offset by stronger domestic market results.

Total revenue reached to 50,600,000.0 billion Turkish lira, and we chose a 4.6 growth versus prior year. Gross profit 2.3%, reaching to approximately 31% gross profit margin. In terms of EBITDA, we reached 9,200,000,000.0 reaching to 17.8%, and net income land landed at 6.4% of the net revenue at 3,300,000,000.0 Turkish lira by the end of q two on a year to date basis. Net debt is 1.92, but again, I’d like to remind that this is a net debt is a calculation based on the phase of the balance sheet In terms of covenant perspective, which we will show on the coming pages, it’s around one point below 1.25. So despite the very challenging environment and large market strength significantly in all of our regions, We maintain top line growth and protected growth profitability.

We are definitely working actively on initiatives to strengthen the financial figures on the second half of the year. So when we take some of the domestic and international breakdown of our q two results, we see a very solid revenue growth in domestic market by 10.9% versus prior year, landing at 6,200,000,000.0 Turkish lira. And also, gross profit landing at 26% on a margin basis and which grew by 5.77%. EBITDA margin and GP margin EBITDA margin as you can see landed at 16.1%, and there is a 6.5% decrease versus prior year’s quarter. Both EBITDA margin and gross margins were affected by input, mainly cost and other cost increases that impacted our domestic market.

On international markets, again, we see a solid and strong revenue and top line growth. And all of our volumes also increased, especially in q two for domestic or international markets. However, with the shrinkage, especially in Middle East and North Africa market or especially of the Middle East market, increase input cost and energy cost in take down gross profit margins and EBITDA margins. On the next page, we see the category impact by discrete profit and take. Let’s start with the volume first.

So snacking sales volume was up by 6.5%. I mean, in terms of category contributions, cake shares remains the same as 10%, whereas chocolate decreased slightly and discrete increased slightly by 3% each respectively in terms of volume contribution. And in terms of revenue contribution, again, Cape has steady at 9%. And in terms of revenue contribution, Chocolates continues to be a stronger contributor in terms of revenue by contributing 53%, whereas this is 38%. Again, this performance our category performance, again, highlights the strength of our snacking portfolio and the effectiveness of our innovation and marketing strategies.

We will definitely continue to focus on driving growth in high margin categories and expanding our leadership in discrete and chocolate. We’d like to give you more color on in terms of our international operations and and businesses. In North Africa, yeah, there’s a slight decrease in terms of EBITDA margin versus prior year in terms of from 13.1 to 12.1%. When we take a look at North Africa numbers, we see a strong solid top line growth, especially in future and year to date basis, volume volume and and net sales. And gross profit margin also remains on a very high level basis as well, but it is slightly decreased versus prior year.

And the CP percentage decreased around 1% is also reflected to EBITDA margin percentages for North Africa region. For Middle East, sales volume and revenue also grew, not as strong as as North Africa because the market shrinkage is is quite high versus North Africa in The Middle East. But more of profitability due to contracted domestic markets, triggering higher promotional activities, higher brand equity investments, and using more brand equity activities, A higher raw material cost and increased energy cost put pressure on profit profit, which we landed at 16.8% as of first half of the of the year in Middle East region. In Santa Fe, there is also our CEO also they mentioned there is a comeback in q two, which kind of we were able to recover the losses from q one in q two. And we also had established the Uzbekistan this contact center, which is going to believe that there’s a great potential.

And even though it seems there’s a decrease versus prior years, However, when we compare the first half and fourth half for the tenth and later reason, we kind of see that EBITDA margin is stable versus prior year’s first half first half. In terms of balance sheet numbers, let me start with net debt EBITDA. Net debt EBITDA, and we’re coming in perspective is below 1.25. So in the first half of the year, we reached 1.24. Working capital base, average working capital base kind of slightly increased versus June 2024.

And the two drivers is mentally phasing and and receivables. Again, there’s also phasing effect that we expect to be normalized within the coming quarters. And in terms of strengthening our balance sheet activities, our journey continues. We said 66 net position is closed. As of June, $549,000,000 worth of open position is set.

And as you know, $77,000,000 dividend is distributed to our shareholders on June 19. Again, I am happy to share with you that today we officially launched our syndication loan. Original maturity is April 2026. Our syndication official launch is is final is kicked off today, and the leader bank is JPMorgan. Again, I’d like to highlight that great news with you as well.

In terms of output, I’ll hand hand over five to you.

Jose Guray, CEO, UCI Discrete: Okay. Thank you, Fulya. Despite the challenging time, we try to remain committed to sustainable growth, driven by our strong purpose of ensuring our products are accessible to every consumer. So with that highlight in mind, our 2025 guidance is 3% net sales growth and 17.5% EBITDA margin. So for the year on year net sales growth, 3% plus minus one is the our guidance.

And on EBITDA margin, 17.5% plus minus 0.5% is our guidance on the EBITDA perspective. And, of course, this is powered by our five h five FMS growth model, which I shared with you earlier. As we did in q two, we would like to continue our growth, which is a consistent happiness growth driven by volume, competitive happiness growth to maintain an increase of market share, increase our profit profitable happiness growth, sustainable happiness growth, and last but not the least, people centric happiness growth to bring bring into life our vision, bringing happiness with everybody internally with for our employees and externally for all all our consumers. So I think with that, this brings us to the end of the presentation. Thank you.

Moderator/Call Facilitator: Thank you very much. We will now be moving to the q and a part of the call. In the meantime, we’re opening a quick survey for our web participants. Your feedback is highly valued and greatly appreciated. The survey will remain open during the q and a.

If you’d like to ask questions and you’re joined from the phone, please press 2 from your phone. That is 2. And if you’re connected from the web, you can request to ask a voice or a text question. We’ll wait a few moments for the questions to come in. Okay.

So our first question is from from JPMorgan. Your line is now open. Please go ahead.

JPMorgan Analyst, JPMorgan: Thank you very much for the presentation of Gurbe Fujairam. I have three questions. The first one is on your it’s about your gross margin. I mean, there is a large variation in the margin in the in the past few quarters, which is reasonable because of the cost inflation, I presume. But I’m struggling to estimate the upcoming quarters.

So how should we think about the trend in the next quarter? Is this going to be similar to q two or there could be some sort of improvement starting from q three and almost? The second one is on your working capital, which is a concern on the free cash flow side. And you have highlighted that it will normalize in the coming quarters. What is driving this normalization?

I mean, is this inventory driven or you are cutting the inventory days? What is your working capital or sales target in 2025 based on your current cost contracts? And Nina, the third one is about Nina. It has been showing weakness more than other markets for a while. What are the main drivers behind this?

I presume that your cost base is similar to other markets. So is there a pricing pressure in this market or mix is shifting or there is much higher competition? Thank you.

Jose Guray, CEO, UCI Discrete: Thank you very much for your for your questions. Let me start with the first part of the question. You are asking for gross margin. Actually, what we do is, as I said with you earlier, in our 05/08 growth model, we first put the reach to our consumers. So being consistently driving our growth agenda is critical for us.

And as you have seen, the context is getting tougher and tougher in 02/2025. And looking at our also, the commodity prices are are also showing increases. So despite of all these headwinds, what we are do trying to do is to manage it really effectively from source to shop to minimize this impact to our consumers. So with that, agility and cost discipline, we are trying to and we are aiming to manage our profitability in line with our h one performance. This is the what we also expect in h two answering your question.

Mhmm. Moving to the second question about the cash. So I I I leave it to Poujat to to answer. Yes.

Beste Pesha, Investor Relations Lead, UCI Discrete: Thank you for the question, Hazard, I mean, in terms of working capital, I mentioned savings of in in terms of receivables and inventories. For inventories, what happened is most of the inventory of the Coco, the shipments came out in in q two. So which kind of increased our inventory. But because our consumption did not change in the full year of 2025, we expect it to be paid off based on our production plan and production plan in q three and q four. So that’s one.

And in terms of receivables, we kind of see the you know, if you might remember from last year, again, the cash flow receivables also kind of normalized in q three and in in q four. So we expect it to be the same again this year as well. It reflects seasonal patterns, sales growth, and switching and temporary transaction. Regarding your and we don’t definitely, we have some targets, but we do not explicitly share a working capital target or some targets that are not public. But we can definitely assume that our first I mean, that we have a priority of our optimizing our working capital.

It’s also shared in the prior process with you all. Regarding Q 3 Middle East, I hand over to our CEO.

Jose Guray, CEO, UCI Discrete: Thank you. Thanks, Fulia. So in in Middle East, lower profitability, what we have seen is mainly due to contracted domestic market demand, triggering higher promotional activities. The slowdown in market is structural and competition is expected to continue aggressive promotions. In addition to domestic contraction, margins have been declined in export markets as well, And higher raw material cost and increased energy cost also put pressure on profit margins.

In in the outlook in the year, we aim to drive our cost efficiency to a better performance in half two. So with with our discipline, cost discipline, powered by our brand campaigns and also successful innovations, which we have a strong pipeline for for H 2. We aim to drive better profitability in H 2 in MENA region. Our

Moderator/Call Facilitator: next question is from Alper Ozdemar from Guaranty BBVA Asset Management. Can you give us some color on the free cash flow for the 2025 and the 2025 estimates, estimated net debt to EBITDA levels? Can we expect some deleveraging in the second half? Thank you.

Beste Pesha, Investor Relations Lead, UCI Discrete: Net thank you for the question. So net debt is around 1.24, So which is below 1.25 in terms of covenant calculations agreed with our finance business partners. So I do not see any deleveraging in terms of, so we do we we do not you should not expect any significant risk decreases from it’s a it’s a already it’s a very low level as below stated as below one twenty five. So our objective is to maintain it and to maintain healthy net debt at the EBITDA levels helping maintain healthy and very strong net debt EBITDA levels in terms of having a strong balance sheet. In terms of free cash flow, I have also mentioned on the first question, the phasing on mainly two items receivable and inventory, which we expect to normalize and stabilize over the coming quarters.

And as I have shared, anything that’s not public, we do not disclose. So we definitely have some free cash flow target that we are not disclosing right now. And plus, you should notice, our objective is to optimize both working capital and free cash flow. Thank you.

Moderator/Call Facilitator: Thank you very much. Just a reminder, if you’d like to ask a question, it’s star two on your phone. Star two from the phone. And your phone if and if you’re connected from the web, you can send a voice or text question. Our next question is from from Barclays.

Your line is now open. Please go ahead.

Beste Pesha, Investor Relations Lead, UCI Discrete: Hello. Thank you thank you for the presentation. I have several questions. So you mentioned during the presentation something on the syndication loan. Is it correct to assume that you’ve refinanced the 2026 syndication loan with the new facility?

And if yes, what is the terms what are the terms of the new facility, like maturity, etcetera? And then on my second question for margins, I don’t really understand. So in the second half of the year, I mean, your Q2 margins were kind of like very down 14%. And previously, you were also talking about hedges and how that would prevent margin dilution going forward. So just to like, maybe if you could break down where exactly will we see margin count improvement from Q2 levels going into Q3, Q4, what would be the main driver for you to achieve your guidance?

Thank you. Thank you for the no. No. Sorry. I think it looks like there’s a call connection issue, now it’s it’s over.

Related to syndication loan, yes, The the objective is there is a syndication loan, which is maturing in April 2026. The objective is this is a syndication loan to refinance the syndication loan. Today, we have launched it. JP Morgan is leading is our leader bank, who is leading our syndication loan. The details are not public yet.

So but I definitely look forward to sharing with you the completion news over the coming quarters. So we are also very excited. I constantly believe that we will be finalizing and completing it very, very successfully, like we did our prior syndication and likely it completed our Eurobond in 2024. So that’s what I can share related to syndication. Regarding margins, I hand over to our CEO for today.

Jose Guray, CEO, UCI Discrete: Yes. Thanks, Eugenia, for the question. So regarding the margins, actually, there are a couple of factors. First of all, in the markets globally and also in our region, we see a kind of challenging times in the market context in across all most of the sectors and also in our food sector as well as the snacking sector as well. And you might have seen the news, the public out results of the big players.

This has shown significant decline, some of them on the volumes and also in the profitable case. So the the decline in the in the margin is due to a couple of things. First, the pressure on the market, which also resulted in higher promotional activity in the market. And in terms of protecting our competitiveness, we also balance our competition activities with our together with our margins in order to protect and increase our market share and which we did. Secondly, you have seen increasing Tako prices and we also have seen some phasing of the of the stock impact of the Tako especially which showed a kind of which made some impact on this on this outcome.

Thirdly, there is also seasonality impact of our mix. What we see in the second quarter of the of the year because of the heat, because of the temperature, the in our portfolio, the biscuit and the bakery products are preferred higher than the chocolate chip products. And as you know, the chocolate has a higher mix impact and which is also impacted by the ice cream market in the hot summers in The UK as well. But in the years ago, in the normal course of our seasonality, we we we are expecting to see a positive impact from our mix and we will see a positive impact from our pricing actions that we have taken as a kind of compound impact. And also, because of our procurement strategies and the operation efficiencies that we are creating in the second half of the year, half of the year, I think this this is what we will see as a kind of positive impact in in second half.

So and also, as we we have shown in the in the total outlook, we have already reflected in our numbers some dilution in the in the margin, which we have seen some of it in the quarter two.

Beste Pesha, Investor Relations Lead, UCI Discrete: Okay. Thank you. Just to follow-up on the on the syndication, will that include the IFC facility as well? Like, do you refinance the whole 2026 debt maturity? And on your covenant, could you please remind, you said it’s 01/25.

Right? Our covenant as of today yeah. Sure. Sure. Our covenant as of today is 1.24, below one twenty five.

So which is a very low and strong number. In terms of syndication, yes, DFI, both EBRD and IFC are part of our current syndication. Yes. We will also we also plan to refinance those amounts as well. And on sorry.

On the covenant, the limit for the covenant or the one that the level that is tested is one twenty five. Well, I mean, there there is no limit on it’s one twenty five. One twenty five is a very low number, but I’m sharing it in terms We do not disclose anything. But we what we are saying is we want to maintain a very strong and healthy leverage number.

But as you know that a healthy net debt, it is based around anything below three and three point five. Okay. Thank you. Thank you.

Analyst, Konark Capital Advisors: Thank

Moderator/Call Facilitator: you very much. Our next question is from Yejide Onabule from Barings. Your line is now open. Please go ahead.

Beste Pesha, Investor Relations Lead, UCI Discrete: Hi there. My question was on the covenant.

JPMorgan Analyst, JPMorgan: It’s it’s been answered. Thank you.

Moderator/Call Facilitator: Okay. Thank you.

Jose Guray, CEO, UCI Discrete: I covenant question is answered. Mhmm. The covenant question which is answered.

Beste Pesha, Investor Relations Lead, UCI Discrete: Oh, it’s just covenant. Okay. I already answered. Okay. Great.

Moderator/Call Facilitator: Thank you very much. We’ll just give it a few more moments for any new questions. It’s star two to connect it from the phone, and you can also send a text or voice question from the web. Wait a few more moments. Okay.

Our next question is from Gustavo Campos from Jefferies. Sorry if I missed this. What how how are you planning to repay the the the remainder of the $25.01? Apologies if you got was already discussed.

Beste Pesha, Investor Relations Lead, UCI Discrete: Thank you for the question. So we want to plan to repay the outstanding debt with the refinancing that we plan to finalize. Like we did in prior syndication and likely within the prior year of one. Hope that makes sense. And and this one so

Moderator/Call Facilitator: hard currency bank bank loan Correct. Potentially together with with other syndication.

Jose Guray, CEO, UCI Discrete: There is one that be

Beste Pesha, Investor Relations Lead, UCI Discrete: Yeah. There is loss syndication.

Moderator/Call Facilitator: Okay. So it will be separate processes, like the term loan that the syndicated loan that’s from 2026 will have a different refinancing than than the existing ’25.

Jose Guray, CEO, UCI Discrete: Is that correct?

Beste Pesha, Investor Relations Lead, UCI Discrete: No. That’s not correct. So we will we we currently have a month indication where some commercial banks are part of it and two DFIs are part of it. Even though we have separate agreement with two DFIs, but they are part of the total syndication loan. So what they do is the original maturity of this loan is, which we closed in April 2023, is April 2026.

What we have kicked off today is with the leadership of JPMorgan to refinance this loan. In fact, that’s it. To to to refinance this current syndication loan. Okay. Okay.

Understood.

Jose Guray, CEO, UCI Discrete: Thank you

Moderator/Call Facilitator: very much.

Beste Pesha, Investor Relations Lead, UCI Discrete: You. Our

Moderator/Call Facilitator: next question is from Muhalam Guzhavi from Konark Capital Advisors. Your line is now open. Please go ahead.

Analyst, Konark Capital Advisors: Thank you very much for the presentation and the portion to the question. I have two questions. First, in respect to the guidance, what is situation to the new project for the real growth of 3%? And the second one is, you’re in monthly turnover. If you look at the number on a quarterly basis, it’s all time.

So should we expect even if you should expect normalization, what is the normalized level for you given the current macro environment? Thank you.

Jose Guray, CEO, UCI Discrete: More on the thank you for the question. So in let me answer the first question and then give the second question to Fulya. The the inflation rate assumption we took is 30%. So I I hope this answers your question. As of now, it’s 35%, but our estimation for the second half is to go a little bit down to 30%.

Year end, 30% is the is our estimation.

Beste Pesha, Investor Relations Lead, UCI Discrete: Mhmm. Second question. Regarding the second question, inventory increases mainly phasing because most of our shipments came out in q two, which in fact, is our q two numbers. However, our total procurement numbers, our production plan has not changed. So which means that our inventory levels will be normalized over the coming quarters until year end.

So you should expect a normalization in terms of inventory levels in q three and q four. Since these numbers, these targets are not published, we do not disclose any target in terms of working capital or basing in inventory. So what you can estimate, we will definitely try to optimize it as much as we can to make it much more effective. Hope that helps.

Analyst, Konark Capital Advisors: Okay. Thanks.

Moderator/Call Facilitator: Thank thank you. We’ll give a few more moments for any further questions. Okay. It looks like we have no further questions. I will now hand it back to the OKR team for the concluding remarks.

Jose Guray, CEO, UCI Discrete: So thank you very much for your participation and for your questions. So as a closing remark, what I will say is what I said at the beginning. Actually, we are here as UCaaS is to really bring happiness with everybody to our consumers. This is what we have done in the first half of the year, and this is what we we we are really striving for to to doing the second half of the year and the upcoming upcoming periods driven by our five h growth model and strong strategy and operation excellence. Thanks very much for joining and hopefully see you next time in the next quarter.

Beste Pesha, Investor Relations Lead, UCI Discrete: Thank you all.

Moderator/Call Facilitator: That concludes the call for today. Thank you, and have a nice day.

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