Q3 2019 Global Yatirim Holding AS Earnings Call
Istanbul May 8, 2020 (Thomson StreetEvents) — Edited Transcript of Global Yatirim Holding AS earnings conference call or presentation Tuesday, November 12, 2019 at 10:59:00am GMT
TEXT version of Transcript
* Mehmet Kerem Eser
Global Yatirim Holding Anonim Sirketi – CFO, Head of Financial Affairs & Finance Group and Finance Director
Ladies and gentlemen, welcome to Global Investment Holding 9 Months 2019 Results Conference Call. Today, the CFO, Mr. Mehmet Kerem Eser; and Head of IR, Madam Asli Su Ata are present to give you the highlights of the third quarter and to answer any question you may have.
I now hand over to Mehmet Kerem Eser, the CFO. Sir, please go ahead.
Mehmet Kerem Eser, Global Yatirim Holding Anonim Sirketi – CFO, Head of Financial Affairs & Finance Group and Finance Director 
Thank you. Thank you, operator. Good afternoon, good morning, everyone, and thank you for joining us for Global Investment Holdings Third Quarter 2019 Results Call. And as always, I’ll give you a short heads up on the GIH 9 months results, and then we’ll have a Q&A session afterwards.
We have announced consolidated net revenues of TRY 1.0837 billion and operating EBITDA of TRY 425.9 million and these numbers again indicates a pleasing growth in revenue and EBITDA by 32% and 22%, respectively.
Q3 performance overall has been similar to and on track with the first half performance. One marked improvement is the Q3 bottom line turning into positive, Q3-only profit is TRY 13.5 million compared to a net loss of TRY 35.2 million in Q3 2018. And the Q3 profit — and as a matter of fact, the 9 months profit has been achieved on the back of a strong Gas division performance. This business arm has been a solid performer over the last 9 months.
Starting with them, a total of 127.8 million cubic meter of CNG, compressed natural gas, was distributed in the first 9 months this year as opposed to 110.5 million cubic meters for the same period last year. On the back of City Gas sales, this volume increase was a result of the strategy to increase winter sales and all year around stable customer volume base to eliminate summer peaks. And this strategy gives the company much better flexibility in utilizing existing capacity that’s without the need for additional CapEx spend.
And volume increase together with better pricing made the revenues almost double compared to the same period last year reaching TRY 325.2 million. EBITDA growth was even more significant with 9-month EBITDA reaching TRY 82.3 million from TRY 30.5 million in the same period in 2018.
Just again a reminder, natural gas is a market leader with around 24% market share in Turkey’s non-piped natural gas transportation sector and a massive 74% share if you take the CNG market alone.
You’ll recall from this second quarter conference call that management expects the same trends to continue for the rest of the year with increased City Gas, auto sales and services provided to downstream gas producers in Trace Basin. A strong balance sheet is expected to be achieved as well for full year performance with gross debt-to-EBITDA multiple dropping below 1 and that’s the first time ever in the company’s history.
And accordingly, management remained confident for pursuing a potential IPO in the first half of 2020, then again, of course, markets permitting.
On the port division side, the port segment revenues were TRY 515.2 million and operating consolidated EBITDA, TRY 343.6 million. And these numbers indicate a growth by 19% and 14% year-on-year compared to the same period in 2018, and of course, on Turkish lira terms.
If you look at the numbers on hard currency terms performance in Q3, I can say followed a similar trend to the first half of the year. Group revenues were $91.5 million and adjusted operational EBITDA, $61 million. Pretty much, if not slightly weaker compared to the same period last year. At the end of Q3, and as we speak in Q4, 2 new ports, namely Nassau and Antigua Cruise Ports have been added to the portfolio, which is truly a major milestone in group’s history. That’s a strong expansion of our portfolio into the Caribbean, the largest cruise market in the world, a step change in group’s operations and I believe similar or even more important threshold than Barcelona acquisition at the time which has marked group’s dominance in the Mediterranean market.
GPH, our subsidiary has announced that it started operating Prince George Wharf Cruise Port, Nassau on October 9 and the port handled 3.7 million passengers in 2018 and it will become the largest cruise port. As a matter of fact, it has become the largest cruise port in the group’s portfolio and increased total passenger volumes by close to 50%.
The project company established, namely the Nassau Cruise Port Limited, is going to invest up to $250 million in expanding the capacity of the port. And the investment will include the building of a new terminal building, the creation of an event and entertainment area, investment into improving the current retail facilities, design and construction of new food and beverage facilities. Overall, it will integrate the port into Bay Street and Downtown, Nassau. And the construction phase is expected to start in Q4 this year and is anticipated to be completed within 24 months. And we expect total revenues in the range of $35 million to $40 million per year once the construction is completed.
The second one, St John’s Cruise Port in Antigua. That port handled approximately 800,000 passengers last year and it captures 6.3% of the total Caribbean market. A new pier is going to be completed and that pier is going to be capable of berthing the largest vessel in the industry, that’s 5,000 plus passenger vessels. And then, of course, this expansion is crucial for improving the volumes growing over 1 million in the medium term.
The expected total investment — initial investment for this port, it will be around $45 million to $50 million and annual revenues is expected to be around $8 million.
Next, with the Power division, the Power division revenues generated from biomass and co-gen combined reached TRY 97.8 million. That’s an increase by 65% from TRY 59.4 million compared to the 9 months in 2018. And apart from the increased production in existing circuit plants and co-gen capacity of 54 megawatts, the increase this year is mainly from the new Mardin plant, 12 megawatts again, which was commissioned at the end of 2018. And the plant is operate — the plant started operations as of January 1 this year, selling electricity at a feed-in tariff of $0.133 just like the existing 2 other biomass plants.
If you look at the EBITDA side, profitability on the other hand, has been hampered by several factors. And 2019 EBITDA was TRY 2.1 million compared to TRY 4.8 million in the same period last year. Basically 2 reasons, first of all, half year results, again, you’ll remember, were on negative territory. And the reason being the bad weather for most of the year. It was instrumental in increased consumption of fuel stock as well as availability as well as cost of the stock. There was various equipment breakdowns. Some customary, we can consider customary during the ramp-up period, was also a hindering factor for reaching optimal capacities. Construction for the closed storage area as a remedy for dry buffer stock is planned to be completed before the end of this year together with delivery of the new crushers.
Well, the other factor is value accounting — accounting valuation of the available fuel stock that’s mostly relevant for the new Mardin plant where the cost of stock is inflated during the initial set-up and ramp-up phases due to rare injuries and inefficiencies which is — this cost increase is not a recurring issue during continuous operation going forward and the impact of such excess nonrecurring valuation differences or cost increases in the fuel stock for 9 months consumption is estimated by the management around TRY 4 million, that’s reflected in the biomass EBITDA.
On the power generation side, one major development is the new 9-megawatt Mardin solar plant. It has been partially commissioned at the end of October last month. And total capacity from renewable sources in group’s portfolio has increased to 38.2 megawatts and group’s total generation capacity reached 92.3 megawatts while the co-gen capacity is also included. Solar plant will be subject to a feed-in tariff of $0.133 per kilowatt hour produced starting from January 2020. For 10 years, these are pretty much the same terms as the existing biomass plant.
Then next with the Mining division, another good performer in 2019. Well, we highly value the contribution from mining operations because it’s an export-oriented business. Sales volume in terms of tonnage and profit generation in terms of hard currencies remained low compared to previous year. But again, that gives the management as well as to us, the parents, the confidence for sustainable export performance. On TL terms, EBITDA in 9 months in 2019, increased to TRY 15.9 million from TRY 13.7 in the previous year and that’s a growth by 16%.
Jumping to the real estate arm, just a few words on that. EBITDA generated was a TRY 15.7 million positive compared to TRY 20.1 million. The change in EBITDA is just solely attributable to SkyCity offices in 2018. Other than that, the rental revenues from the commercial rentals remained same as the last year.
And last but not least, the finance arm, the asset management in particular, showed good progress in 2019. The pension fund which also takes place in the group’s, I mean, GIH Pension Contribution Scheme, has registered the highest return among the 408 pension funds in the market with 37% return year-to-date, compared to 17.6% return on its benchmark. And that, of course, the debt increase is also contributing to our employees taking part of the scheme.
And similarly, the mutual funds of the asset management, Actus, ranks #1 among all mutual funds in the market and the return is 62.9% compared to the BIST 100 benchmark of 13.3%(sic)[13.2%].
Looking at the bottom line P&L on a consolidated basis, the Group has reported a net loss of TRY 60 million — TRY 86.3 million, apology. And this figure is almost the same as the last year. Bottom line, it has been impacted by the net noncash depreciation and amortization charges of TRY 269.7 million. This is up from TRY 207.9 million in 2018.
Foreign exchange differences, net foreign exchange differences of TRY 44 million. This is down from TRY 106 million in 2018. And the net interest expenses of TRY 163.2 million and this is up from TRY 135 million. All of these 3 items are closely related with changes in foreign currency valuations. So it may be — just would be more meaningful if you look at the numbers in hard currency terms, depreciation, for example, for first 9 months was $47.9 million as compared to $45.5 million in 2018, and that increase is coming from the IFRS impact only.
There is no real increasing in the depreciation numbers on dollar terms. Likewise, if you look at the net interest expenses in dollar terms this year, in the 9 months, interest expenses were $34.7 million versus, I don’t have the figure here in front of me, let me check, versus $31.6 million and that there is a slight increase in dollar terms and that’s because of the increased interest rates, in particular in 2019 in second and third quarters during a period of the local economic fluctuations.
Continuing with the balance sheet, just a few more words on the balance sheet. As of the end of September Q3 this year, the Group had cash and cash equivalents on a consolidated basis amounting to $132 million and that has increased by approximately $22 million compared to Q2, end of June.
Consolidated gross debt has increased slightly by $6 million and the consolidated net debt position of the group is $442.2 million. Again, if you compare the number with the end of June numbers, that’s an improvement by $26 million. So this concludes my review on the 9 months of 2009 (sic) financial results. So we can move on with the questions. Operator?
(Operator Instructions) We don’t have any question for the moment.
Mehmet Kerem Eser, Global Yatirim Holding Anonim Sirketi – CFO, Head of Financial Affairs & Finance Group and Finance Director 
All right. Well, in that case — so thank you, everyone for taking your time this afternoon. The participants, our investors can reach us anytime after the call, myself or our Investor Relations department via e-mail and ask questions, should they have further questions. And thank you, everyone, for joining us for this call.
Thank you, ladies and gentlemen. This concludes today’s conference call. Thank you all for your participation. You may now disconnect your lines. Thank you.