Q3 results

Ülker grows in Turkey, but Iraq conflict eats into export sales

By Oliver Nieburg

- Last updated on GMT

Price hikes and downsizing helps Ülker in Q3, but exports under pressure
Price hikes and downsizing helps Ülker in Q3, but exports under pressure

Related tags Generally accepted accounting principles Revenue

Wholesale price hikes and product downsizing help Ülker grow net profit in Q3, but export volumes shrink due to instability in Iraq.

The Turkish confectioner, owned By Yildiz Holding, said on Friday that its sales revenues for the quarter were up 3.1% to TL 673m ($300m) compared to Q3 last year. Sales volumes fell 4% to 110,095 metric tons, but net profit was up 15.7% in Q3 to TL 35.6m ($15.8m).

Domestic market

“Higher revenue is mainly due to a price increase in the chocolate category, along with some price increases and downsizing in the biscuit category​,” said Ülker CFO Bora Yalinay during an earnings call.

Ülker raised prices across its product range in Q1 and made further price increases for chocolate products in September in response to rising commodity costs, particularly for cocoa.

“As expected there has been a demand response to these material price increases. We are monitoring this carefully and showing some patience, while expecting consumer and customer demand to recover,” ​said Yalinay.

Ülker grew sales in its largest division, chocolate, in Turkey by 4% in Q3. However, this was below the overall Turkish chocolate market, which rose 9.2% over the period.

Iraq conflict harms export sales

“Even though we observed a higher demand for the Ülker brand in the domestic market, lower volume in exports resulted in a volume decline,”​ said the CFO.

Exports – which accounted for 14% of sales revenues in Q3 – were down mainly due to lower volumes sold in conflict torn Iraq.

“Lack of opportunity in the conflicted areas in Iraq led to volume to contract by 17% in the Q3 and 11% in the first nine months over the comparable period,”​ said Yalinay.

Yildiz Holding last week added UK-based United Biscuits to its Ülker business. In January it secured DeMet’s Candy from Brynwood Partners for $221m.

Further price increases if required

Ülker’s gross profit margin declined to 18.7% in Q3 from 22.2% for the same period last year due to higher input costs.

“We were negatively affected by about a 10% increase in cocoa and wheat prices,”​ said Yalinay, adding that nut prices increased by over 20% during the period. “Accordingly, these input costs weighted on our margins.”

He said that Ülker would feel comfortable to raise prices further if needed.

The company forecasted full year revenues of TL 2.85bn ($1.27bn) and EBITA margin of 11-11.5%, representing single digit growth over 2013.


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