CEO’s Letter

We redefined our business conduct in every segment with the “Sabancı of New Generation” concept. We plan to leverage the Sabancı Holding corporate venture capital fund to invest in the startup ecosystem and to reinforce our collaboration opportunities.

Assessing the economic and industry-specific key indicators from our Group companies, we took forward-looking strategic steps
in 2019.

Esteemed investors, dear business partners and employees,

We have left behind a challenging year in 2019 due mostly to the global developments. During a period of rising political and geopolitical risks leading to slowdown in economic growth around the world, we felt the impacts of trade wars and the vulnerability of the global economy. As a result of geopolitical risk factors and its geographic location, Turkey was not immune to the global fluctuations during this period, either.

The major contraction in the Turkish economy, particularly in the first half of 2019, brought about a challenging growth environment in all sectors. However, signs of a partial recovery emerged in Q4, supported by an improved outlook for 2020.

Sabancı Holding’s Performance in 2019 and Our Outlook Sabancı Group recorded major accomplishments across all business areas in 2019.

We bolstered the competitive position, productivity and growth of our existing business units and distinguished the Group from its competitors in 2019 thanks to our advanced data analytics applications, lean processes, and more comprehensive deployment of digitalization and technology in business applications.

During the year we further increased our efforts on sustainability, an increasingly more relevant topic on a global scale. We continued to conduct our business operations successfully owing to our flexible and agile management approach, robust equity capital, strong cash generation capability, and competent human capital. Our focus on operational excellence and supply chain management provided us with a significant competitive edge.

In 2019, we assessed the major trends and disruptive forces that have an impact on our main business lines and markets in general; we evaluated the impact of technology on our business segments and the opportunities it presents for the Group; and we reviewed our portfolio strategy for the next five years. We defined our roadmap based on growth, value creation and sustainability considerations.

We redefined our business conduct in every segment with the “Sabancı of New Generation” concept. As we continue to operate in our existing business lines at an expanded scale, we also develop new processes to unearth new opportunities in similar business areas and we plan to leverage the Sabancı Holding corporate venture capital fund to invest in the startup ecosystem and to reinforce our collaboration opportunities.

Sabancı Holding has identified three distinct areas of focus in an attempt to create value for the Group companies:
(1) Reinforcement of the performance culture,
(2) Dynamic strategic portfolio management, and
(3) Value creation from the ecosystem.

We are giving priority to taking better advantage of the strength of our ecosystem. We aim to create an innovation-oriented culture that reinforces cooperation.

Assessing the economic and industry-specific main indicators from our Group companies, we took forward-looking strategic steps in 2019.

First, in our energy business line, the proceeds from the successful public offering of Enerjisa Enerji in early 2018 was deployed as capital injection to Enerjisa Üretim, which in turn bolstered the health of the company’s balance sheet.

In the energy industry, Enerjisa Üretim was awarded two out of four regions – Aydın and Çanakkale – in the Wind Renewable Energy Resource Areas (YEKA RES-2) tender. Accordingly, we added half of the 1,000 MW capacity allocated in the tender to the portfolio of Enerjisa Üretim. Our goal is to further expand our capacity by investing in domestic and renewable resources, and we believe that the positive results of this strategy will be apparent in the period ahead. In 2019, we also continued infrastructure investments in our distribution business line through Enerjisa Enerji, deploying a total of TL 1.4 billion.

Demand in the Turkish cement industry contracted materially this year. In our cement business line, we managed to balance the maximum production capacity we achieved in the Turkish market with record-high exports to overseas markets thanks to our 50-year experience in this industry. Çimsa inked a deal to acquire Buñol, a white cement factory in Spain, for USD 180 million. We will be expanding our leadership in the white cement segment to overseas markets upon receiving the requisite approvals related to this investment.

While growing our overseas operations in 2019, we also made progress in our efforts to alleviate Turkey’s current account deficit. We expanded our presence to the global arena with the CTCE (Composite Technologies Center of Excellence), which was launched as a partnership between Kordsa and Sabancı University. We completed our fourth acquisition in the United States via Kordsa in the composites segment – one of the business lines of the future. As a result, Kordsa has become a strategic supplier to the most important players in the space and civil aviation industry, including Boeing. Also continuing our investments in Turkey, we placed in commercial operation this year a supplemental polyester yarn facility at Kordsa’s Izmit factory that will facilitate new generation manufacturing.

In 2019, we positioned Brisa, another Group company operating in the industrials business segment and the undisputed leader of the Turkish tire market, as a mobility solutions provider, rather than merely a tire seller. We also made great strides with our innovative product solutions during the year.

We integrated virtual reality into the manufacturing process at the Aksaray and Izmit factories, fully equipped with smart manufacturing systems which started operations in 2018.

While maintaining Akbank’s robust balance sheet composition in 2019, we made major investments in infrastructure in line with global technological trends. Demand for loans resumed its growth trend in the second half of the year as a result of falling interest rates, which in turn was fueled by declining inflation rate. While lending growth continued in 2019, we boosted our support to the economy to a total of TL 269 billion. Emerging stronger in the Turkish banking industry throughout 2019 thanks to its robust capital position, strong balance sheet, ample liquidity and state-of-the-art infrastructure, Akbank will continue to focus on financing the real economy and the export sector in the coming year.

In our retail business line, we focused on the multi-channel experience, customer relations management and data analytics at Teknosa. We accelerated the digitalization and transformation processes at Teknosa, and these investments will continue in 2020.

In 2019, we continued the transformation process at Carrefoursa, which was launched with our “New Generation Super Market” vision, by investing TL 153 million, opening new stores, overhauling the online shopping platform carrefoursa.com, focusing on customer experience, and implementing lean processes.

We continue to implement the technology and digitalization roadmap that is the focal point of our Sabancı of New Generation vision for the Sabancı Group, carry out culture management through talent transformation, and center our operations on sustainability.

To this end, we also launched this year “Digital Campus,” the new headquarters of SabancıDx, our new generation digital and analytics company. We place great importance on the positioning of SabancıDx within our goal of creating an innovation-oriented ecosystem that feeds on various business lines while reinforcing the culture of cooperation between the industry, universities and startup ecosystem. By establishing Sabancı University’s presence in this campus, we strive to foster an environment where academia, corporate world and other stakeholders engage in joint work and production and create value for Turkey and for the Sabancı Group.

Data is the lifeblood of all Group companies, and SabancıDx is positioned at a spot that brings the Group together. Serving as the digital multiplier of our companies, SabancıDx will focus on developing data-oriented products and services. The company will lead Turkey’s digital transformation by prioritizing new generation technologies such as big data, advanced data analytics, cyber security, industrial Internet of things, robotic workforce, and blockchain.

Finally, our 2019 financial statements reveal that Sabancı Group’s combined net sales in 2019 reached TL 97.6 billion, up 11% over 2018, while combined operating profit increased 11% to  TL 17.5 billion and consolidated net profit reached TL 3.8 billion.

In accordance with our Sabancı of New Generation vision, we will continue to work diligently and productively within our dynamic strategic portfolio management and technology focus to create value for our stakeholders while remaining steadfast to our strategic goals in the period ahead. While doing so, we will always prioritize our responsibility to the environment, the society, and the future.

I would like to extend my gratitude to our employees and all other stakeholders for their confidence in us and their support that made 2019 a successful year for the Group.

Cenk Alper
Member of the Board of Directors and CEO