Koç Holding (KCHOL) H1 2024 earnings summary

Executive summary

• Growth outlook is uncertain amid global geopolitical conflicts and tight financial conditions, with Turkey's economy slowing after a strong Q1 and monetary tightening impacting domestic demand; consolidated net income for 1H24 dropped 95% year-over-year to TL 1,632 million due to sectoral headwinds and inflation accounting.

• The group operates in energy, automotive, consumer durables, finance, and other sectors, with a broad international presence and 30% of revenues generated internationally; 90% of NAV is from listed assets.

• Portfolio diversification and robust dividend income, supported by companies with FX or FX-linked revenues, help maintain resilience.

• Actions to reduce expenses and working capital needs, along with prudent risk management, support a strong liquidity position.

• Interim consolidated financials for the six months ended 30 June 2024 were reviewed with no material misstatements identified by the independent auditor.

Financial highlights

• Consolidated revenue for 1H 2024 was TL 1,009,725 million, up from TL 886,314 million in 1H 2023, but gross profit fell 29% and operating profit declined 57%.

• Net profit attributable to equity holders was TL 1,632 million for 1H 2024, down from TL 36,165 million in 1H 2023, with net cash position at end-June 2024 at $712 million and gross cash at $1.5 billion.

• Dividend income in H1 reached TRY 23.7 billion ($737 million), with further dividends expected in H2; TL 23,608 million was distributed in April 2024.

• Net financial debt/EBITDA on a combined basis stood at 0.7x.

• Earnings per share for 1H 2024 was 0.644 Kr, compared to 14.266 Kr in 1H 2023.

Outlook and guidance

• Domestic and export market slowdowns are expected to persist through the next two quarters, with 2025 outlook dependent on government policies and market recovery; 2024 expectations for key subsidiaries include flattish domestic revenue for Arçelik, lower refining margins for Tüpraş, and double-digit real loan growth for Yapı Kredi.

• No planned changes to payout ratios; inflation accounting effects are mostly non-cash, and dividend income flexibility is maintained.

• Capital allocation will focus on growth areas with acceptable risk-adjusted returns, especially healthcare and manufacturing.