Esteemed Business Partners, Colleagues and Shareholders,

First of all, I would like to briefly review the state of the world economy in 2019.

The main factor that affected the global economy during the year was the ongoing trade wars. Disagreements between China and the US, coupled with political and economic uncertainties on both sides, adversely impacted the global economy.

According to the IMF’s latest estimates, world economic growth slowed to 2.9% in 2019, down from 3.6% a year earlier. As the pace of economic expansion in advanced countries fell from 2.3% in 2018 to 1.7% in 2019, emerging market growth declined from 4.5% to 3.7% in the same period. China’s economy registered growth of 6.1% for the year, down from 6.6% in 2018. Meanwhile, the Eurozone economy expanded 1.2% in 2019, versus 1.9% a year earlier.

While the US has recorded relatively strong economic growth of 2.3% in 2019, the world’s biggest economy could not escape the impact of global recession concerns. The high level of economic uncertainty throughout the year caused central banks in developed countries, especially the Fed in the US, to change the direction of their monetary policies, from contractionary to expansionary in 2019.

Steps to rebalance Turkey’s economy started to yield results…

The Turkish economy entered 2019 with rising foreign exchange rates and growing inflation, which impacted every aspect of the economy in the prior year. After GDP contracted by 2.1% and 1.0% in the first two quarters of the year, Turkey’s economy emerged from recession in the third quarter. Thanks to a more robust external environment and the positive impact of the government’s rebalancing efforts in terms of both monetary and fiscal policies, the Turkish economy expanded by 1.0% and 5.9% in the last two quarters of the year, respectively. Turkey recorded GDP growth of 0.9% for the year. The economy’s upward momentum as the year came to close shows that the rebalancing steps implemented by the government restored Turkey’s macro-economic stability.

Covid-19 pandemic brings about uncertainty

The Covid-19 outbreak in December in Wuhan, China quickly became a global pandemic, significantly impacting the entire world. Under globalization, societies across the globe have become interdependent in every aspect thanks to increasing communication and transportation links while the rate of urbanization has climbed to 75%. These factors resulted in the Covid-19 pandemic rapidly morphing into a full-blown global crisis, whose destructive impact is felt across the world economy and society.

The Covid-19 pandemic hit just when Turkey’s economic rebalancing measures, initiated in 2018, had started to produce results. By leveraging its extensive health care infrastructure as well as the country’s competitive advantages and advanced production capabilities in strategic sectors such as textiles and food, Turkey quickly established itself in the new environment.

In the coming days and months, we will more clearly see the economic impact of the Covid-19 pandemic on our country. However, government policies to support the private sector in addition to SMEs and tradesmen will need to be implemented as well as other interventions to stabilize and stimulate Turkey’s economy.

Borusan will further contribute to Turkey’s sustainable growth

Borusan Holding enters this new environment emerging with the Covid-19 pandemic by focusing on protecting its employees, stakeholders and business. We are taking all necessary measures to safeguard the health of our employees and stakeholders. We maintain business continuity without compromising the safety of our people. At Borusan Group, we believe this is the most appropriate approach for our national economy as well as for our shareholders, employees and all our stakeholders. We aim to successfully overcome this difficulty with social unity – much like the unity and togetherness shown by Borusan employees.

At Borusan Holding, we see that the Covid-19 crisis has highlighted the power of economies that engage in value-added production. We remain committed to significantly contributing to the sustainable growth of our country with the rich heritage of our well-established corporate culture and our strategic product portfolio in domestic and international markets.

Nothing will darken our achievements

In 2019, I can proudly say that we prudently managed our risks in spite of the difficult conditions. During the year, we focused on efficiency and never compromised our financial discipline at Borusan Group. Thanks to our drive and determination, we recorded another successful year. In 2019, our Group reported total turnover of more than USD 4 billion and EBITDA of USD 331 million. Showing improvement in our general administrative expenses compared to the previous year, we significantly reduced our net indebtedness by 25%.

Our affiliate Borçelik, operating in the flat steel industry, once again accounted for the lion’s share of our total Group turnover. In 2019, Borçelik posted turnover of USD 1.1 billion. Our steel business, including Borusan Mannesmann, recorded turnover of over USD 1.9 billion. Meanwhile, Borusan’s automotive and heavy machinery business lines also made a significant contribution to the Group’s total turnover accounting for about USD 800 million each. Aiming to be a strong player in every country where it operates, Borusan Group recorded total international sales of USD 1.4 billion through its various companies, making up 35% of our consolidated turnover.

We differentiate from the competition with our value-added products

Borusan Group left behind a successful year where it ventured into new markets due to declining global trade volume, rising protectionist policies in the steel business while focusing on value-added products. With total production capacity of 1.5 million tons with the Borçelik brand and 500 thousand tons of metal processing capacity with the Kerim Çelik brand, Borçelik is Turkey’s largest high-quality steel producer. In 2019, Borçelik further boosted its profitability and expanded its market share. As a leader in the Turkish steel pipe industry, Borusan Mannesmann also recorded a strong year with its innovative product portfolio and prudent management approach both in Turkey and the US. Boosting its productivity drastically with Industry 4.0 investments made throughout the year, our Borusan Mannesman company continued to move forward on its digital transformation journey with great success.

In 2019, Borusan Automotive Group increased its market share despite the major contraction in the market and achieved real growth in profitability. Boosting its EBITDA by 75% compared to the previous year, our Automotive Group recorded a strong year all around. Celebrating the 25th anniversary of its business partnership with Caterpillar in Turkey and the 20th anniversary of its operations in Kazakhstan in 2019, Borusan CAT was our company that was most affected by the contraction in the domestic market. Nevertheless, thanks to the exceptional performance of our overseas dealers, our Caterpillar company increased its EBITDA by 9% year-on-year.

Supsan, the valve supplier of the world’s leading car brands and Turkey’s largest manufacturer of valves, produced a total of 5.5 million units in 2019. The company exported 3.6 million pieces during the year. Widely recognized for its R&D efforts, our Group company Supsan included push rod, cam shaft and turbo products to its portfolio in addition to its valve offerings, significantly boosting its market penetration. As Turkey’s first and only manufacturer of push rod products, Supsan maintained its leadership position in the industry during the year.

Borusan Lojistik consolidated its sector leadership by developing a new business model, eTA Platform, for road transport. The company continued to be the most trustworthy companion of its customers with its digital truckers, thanks to the eTA Trucker Mobile App, which has become the third largest digital logistics platform in Europe. More than 150 thousand trucks were registered on the eTA Platform as of year-end 2019. In addition, the average number shipments per month reached 30 thousand.

Borusan EnBW Enerji generates power for Turkey and contributes to sustainability with 11 power plants, each based on renewable energy sources. In 2019, Borusan EnBW Enerji expanded its installed capacity from 495 MW to 505 MW. Reaching a total portfolio size of 1,200 MW as of year-end 2019, Borusan EnBW Enerji aims to increase its total installed capacity to 715 MW by year-end 2020.

Borusan aims to operate 200 years from now…

Borusan Holding has the capability to grow further in all its business lines, including steel, energy, automobile and heavy machinery distribution as well as logistics.

What moves Borusan forward is its well-established corporate culture. This competitive advantage will enable us reach new heights in the future. As across the entire world, change and transformation continue at full speed in our lines of business and the markets where we operate. With the Covid-19 pandemic, we are facing risks as well as opportunities. We stand among the leaders of this change and those who shape the future by evaluating risks and opportunities effectively. With our innovative approach, the importance we place on R&D and our investments in future technologies, Borusan Group will add value to our country not only today but also in the future.

Borusan Group has significant experience and a comprehensive vision: We want Borusan to be successfully operating 200 years from now. We realize how difficult it is to achieve this ambitious vision. However, we will rely on our deep experience and expertise, which is part of our corporate DNA. I wholeheartedly believe that we will achieve this goal with the help of our shareholders, customers, business partners, and most importantly, our employees. We are one big team whose members are all interconnected – moving forward together into the future.

Thank you all for your support to us on this journey.

Kind regards,

Erkan Kafadar
Group CEO
Borusan Holding