Ladies and gentlemen, thank you for standing by. I am Gaili, your Chorus Call operator. Welcome and thank you for joining the Arschulek conference call and live webcast to present and discuss the Q2 2021 Financial Results. At this time, I would like to turn the conference over to Mr. Polat Shen, Chief Financial Officer Mr.
Oscar Simon, Finance and Enterprise Risk Director Mr. Alper Gur, Investor Relations and Capital Markets Compliance Manager. Mr. Shen, you may now proceed.
All right. Thank you very much. Ladies and gentlemen, good morning and for some of you, good afternoon. Welcome to our Q2 2021 results webcast. I'm here with Erskine Chimen, our Finance and Year End Director and Alpergura, our Investor Relations Manager.
Before going into details, I want to take this opportunity to thank all of our employees for their dedication and high motivation and relentless efforts this year. Let's move on to the Slide 2. I'll start with the highlights of the 2nd quarter. Our net sales has increased by 86% year on year and 12% quarter on quarter, thanks to the continued high demand in many markets and our pricing initiatives. The increase in raw material prices hit profitability and our margins have declined on both quarterly and yearly basis.
Our OpEx to sales ratio in this quarter was flat compared to the Q1 of this year. One of the most important indicators for us is working capital to sales ratio, which is 27.4%, which is flattish compared to the previous quarter. Please kindly be informed that this ratio does not include the acquisition of Whirlpool and Hitachi for apple to apple comparison purposes. If included, the ratio comes down to 26.8%. I said Wurpl and Itachi, but I'm just talking about Wurpl because Wurpl has been acquired on 30th of June, so we had to include it in our balance sheet.
I'm quite happy that we have completed our strategic acquisitions. Verpool, in the last day of this quarter and Hitachi on July 1. It gives me great pleasure to tell that our green bonds, the first of its kind in Turkey, was a success story, receiving more than 4x demand from 190 global investors, reflecting the trust that the markets put into our company. Our leverage was 1.54 times in the Q2, excluding the impact of our acquisitions and apple to apple comparison for apple to apple comparison purposes again. Can we move to the next slide, please?
Our net sales was EUR 14,500,000,000 dollars up by 86% year on year, thanks to substantial unit growth yet coming from a low base, of course. Proactive actions in pricing and strong euro USD against Turkish lira. The revenue growth was 12% on a quarterly basis, mainly attributable to the price increases and Turkish lira depreciation. In terms of margins, the Q2 of the year marked by the significant upsurge in the raw material prices, which was not unexpected. As you can see in the middle and the right hand side of the slide, our gross margin was 30.2 percent and EBITDA margin was 9.8% in the second quarter, reflecting around 430 basis points 4.73 basis points contraction, respectively, on a quarterly basis, mainly due to the severe increase in the raw material costs.
But this was not something unexpected, as I told and uncommunicated before. Our capacity utilization is a bit normalized in this quarter compared to the last two quarters, which was around 100%. EuroUSP parity had a neutral impact on our gross margin in this quarter, which the impact was positive a quarter before when euro was stronger. Beyond higher raw material costs, a slight increase in OpEx to sales ratio had a small negative impact on the in the EBITDA margin as well. Can we move to the next slide, please?
I'll continue with the domestic market. In quarter 2 of 2021, Turkish MDA6 market was up by 16% in unit terms. At Arcelik, we continue to outperform Turkish MVA6 market once again following the Q1 of this year, delivering 23% year on year growth within the same period and sustained our strong leadership. We have seen gradual decreasing decrease in the trend in the consumer demand growth from April to June, mainly due to 17 days lockdown in May and inflationary macroeconomic environment and relatively lower house sales. We see the contraction in June was the first signals of the expected normalization in the demand trend going forward due to the strong base of the last year's second half.
The growth of AC market decelerated following the Q1. Our AC sales have declined due to the high base of June 2020 last year and not executing the consumer campaign. TV market has declined further because of the supply issue in the panel market. Can we move to the next slide, please? I'll continue with the European markets.
In Western and Eastern Europe, the strong demand continued in the 2nd quarter, where we saw growth on both quarterly and yearly basis in majority of the countries. The 4 of the 5 big countries in Western Europe performed quite good on a quarterly basis, except for France. Demand remained high and sellouts were very strong, despite the logistic prices in the ports faced with Brexit, thanks to increasing vaccination coverage. And Germany recovered very well after a decline in Q1 despite the traditional channels opened later than the rest of the Europe. Eastern Europe was also resilient, and except for Poland, the units sold in each country grew on a quarterly basis.
Next slide. Our situation in the European markets, as demand remained high in European markets, Archilica benefited from that. The share of European market in total sales increased slightly compared to the Q1 and reached 45%. In Western Europe, we saw strong top line growth on a yearly basis in euro terms, thanks to the unit growth and our pricing initiatives. On a quarterly basis, sales were almost flat.
We have been able to decrease our market share increase our market share in the UK with a slight improvement of our price index there. Our performance in Eastern Europe was resilient, and we delivered around 40% year on year and 10% quarter on quarter growth in euro terms. We sustained our strong leadership in Romania and Poland. As a result of our price increases, we have been able to improve our price index in Russia, Ukraine and Romania. Next slide, please.
Cycling a very low base, South Africa sales posted more than doubled revenue year on year in euro terms. Due to the lockdown in the country, net sales decreased by 8 percent quarter on quarter. In the 1st 6 months of the year, we have gained significant market share and reinforced our strong leadership in South African market. Sales in APAC has increased its share in total sales compared to Q1 of 2021. Our sales was up by 83% year on year, thanks to mainly the strong growth contribution from Pakistan and Bangladesh.
In Pakistan, our sales have increased more than 20% in both euro and peak Pakistani rupee terms, reflecting the positive impact of both continued high demand and price increases. Despite lower units sold in Bangladesh, we have been able to increase our sales by 32% in local currency terms. Just after the quarter ended, there has been some looting issues in South Africa, as many of you know, which had impacted our sales in July. We are aiming to recover the loss of July within the quarter 3. We do not expect significant financial loss, thanks to our insurance coverage in this country.
Please move on to the next slide. As expected, the upward trend in the raw material prices, which started in the second half of the last year, continued this quarter as well. The supply shortages caused by high consumer demand to the finished product, which contains plastic and metal raw materials. China's conservative attitude for metal producers and logistics crisis that the world has been facing were the key reasons of the price increases so far. As Artilik, we have been closely following the market in order to manage our costs.
But as you can see, we have been affected from the price increases in the raw material market. As you may remember, the last quarter call, I told you that we had in especially in quarter 3, quarter 4 and quarter 1 of 2021, 3 quarters back to back. Our results were very strong, mainly due to our long term raw material price contracts, which has been starting to finish by now. So starting from quarter 2, we are feeling the effect of increases in the prices. So every company has a different cycle on this one.
So everybody is going to be feeling that sooner or later. So this is what I can say. I'll just hand over to Uskam to move on with the numbers a little bit more. Uskam?
Thank you so much. I will continue with the sales performance slides. In Q2 of this year, Turkey sales grew by 47%. On the other side, international sales grew more than actually doubled, where 60% was coming from organic growth and 52% is coming from the FX impact. On the right hand side, you can see our regional revenue breakdown.
The share of Turkey in total sales compared to the previous year has gone down to the normal levels of 33%, while our other developing markets and European markets gained some share. Last year in Q2, Turkey sales was an outlier in terms of revenue breakdown because Turkey shares has increased while the other markets were impacted with the COGS. Move on to the next slide, please. So here you see the detailed financials. I will not talk in detail of every item, but I will give some highlights.
Our EBITDA was €1,400,000,000 in Q2 and the margin was 9.8%, around 50 basis points lower than Q2 last year and around 4 70 basis points lower than last quarter, which was exceptionally high with 14.6%. If you look at the full year figures, EBITDA margin is 12.1%, which is 90 basis points better than last year. We delivered in Q2 EUR 541,000,000 net income with 3.7 percent margin, which is 32% higher than Q2 last year. If we move to the next slide, please. On the right hand side, you see our loan portfolio and the effective interest rates.
We have TRY 24,000,000,000 equivalent of loan, TRY 40,000,000,000 is bond portfolio and around TRY 10,000,000,000 is loan portfolio. We have euro, EUR 2 1 USD bond as the biggest shares in our total borrowings. We financed our Turkish business working capital only with Turkish lira loans. Turkish lira loan and bond is around TRY 6,000,000,000. Last year, we have benefited from the low rates while financing our working capital need.
In this quarter, as we renew our loans, we got higher market rates from the markets. Therefore, our effective tax interest rate for TL borrowing has increased to 16%. On the left hand side, you can see the leverage. Our leverage, including the impacts of acquisitions, was 2.2 in the second quarter. We have been able to manage to sustain the ratio at quite healthy levels despite our cash payments for the acquisitions and without any contribution EBITDA.
So if you look at the apples to apples comparison, the leverage is calculated at 1 point 5 1.54 actually. As recently, a card company starts to create EBITDA contribution for us, our leverage will get healthier since their CapEx requirement and net working capital need is quite lower despite the margins are over the our consolidated figure. So we expect a lower leverage than 2 when the companies fully operate. Move on to the next slide. As you know, Archielik places sustainability at the core of its business.
Our efforts regarding sustainability appreciated by various types of third parties so many times before. This time, the investors showed their trust in our sustainability credentials. We have successfully issued €350,000,000 green bond at the end of May, which is the first of its kind and attracted high demand from the investors. Total demand was €1,600,000,000 around 4.5 times of the issued amount. We started with 3.50 basis points initial price talks and completed the deal with 300 basis points.
We can move to the next slide. Our free cash flow remained at negative levels, but with an improvement compared to the Q1 figure. Despite having better CapEx to sales ratio and flat almost flat net working capital sales in this quarter, the significantly higher raw material costs hit our EBITDA margin, which resulted in negative free cash flow in this quarter. So that was the last slide. So now I will hand you over to Poulade for guidance.
Thank you, Esken. I just muted myself. Our guidance has changed for the year end, including the impacts of 2 acquisitions. So we had to do that because of the acquisition. So our expectation for Turkey's sales growth is around 30% in Turkish terms and international sales to grow by 35% in foreign exchange terms in hard currency, and that's mainly to the change in the international sales is mainly due to the acquisitions.
And our consolidated sales is going to be our guidance is to grow by around 50% in Turkish returns on a yearly basis. Considering relatively lower EBITDA margins of the recently acquired companies, we now expect our consolidated EBITDA margin to be around 11%. And our net working capital to sales ratio and our CapEx guidance has not changed, and it is 25% and EUR 220,000,000 respectively. So this is all from our side. We are ready for the questions and answers, Keshi.
The first question is from the line of Demistas Kemal with Ata Invest. Please go ahead.
Thank you for the presentation. My first question is about your guidance. You gave a guidance including the Whirlpool and Hitachi. What could be the guidance excluding these 2? And what was the effect on the balance sheet?
You gave some numbers, but could you further elaborate how this will change the net debt levels for the following year for the year end, sorry? That's my first question. And the second question is about the income statement. When I look into details, the FX items, FX losses and gains, normally, when the currency is going up, net net, when you include all the FX in others and financial expenses, you come up with positive numbers usually. In Q1, it was net TRY 99,000,000.
But in Q2, despite currency increases, we see FX losses. What might be the reason in the 2nd quarters for this? This is the second question. Thank you. Okay.
Kemalvi, thank you very much. I'll take the first question and Oskar is going to take the second one. To be honest with you, we have just acquired the companies. It's been 1 month that we are really working with the companies. And the acquisition, especially with Hitachi, is a very multi jurisdictional.
Jurisdictional. We are talking about 10 different subsidiaries in 10 different countries, and it is because of the COVID situation, it's really hard to get into the details quickly because of the circumstances that we have. So we are going to be in need of some more time in order to say give you a guidance of a full year because right now what we see is that's what I can share right now. We see a more upside potential, especially on the synergies than what we were expecting. It is a better picture for Archeric in terms of synergies, especially on the raw material costs.
So our expectation is and the last year of Hitachi, especially, has been a year that was more successful in terms of EBITDA than the year before. So we expect all of those going to be contributing on a full year basis, especially on 2022 because the effects will take time in order to change suppliers or in order to really materialize those synergies. But we are going to start seeing the FX in 2022. So it would be much more wiser for us to make an indication on this, especially at the end of the year this in 2021. So I have to say that the Whirlpool has been included as balance sheet because of the 30th June acquisition.
But Hitachi there, you can't see any numbers about Hitachi except the amount that we have paid has been transferred due to the time differences of Japan and Europe in 30th July. So we see the cash out on 30th July. So that is also one of the reasons of our a little bit complicated results in quarter 2. But to give you a better understanding about without any acquisitions, what will be the situation, We see I will not be able to give you a direct or concrete answer on this one, but I can tell you that we have guided you last time with 12% around 12 And according to us, around 12% was between 11.5% and 12.4%, according to our interpretation. And I think that we are going to be close to the lower side of this bracket, let me say, for Archilik without the acquisition.
So I hope that answers your question, and then I'll ask Uskhan to answer about the FX losses. For the Polatpe, for the top line growth, because of this inorganic thing, now we are just in between because we have some numbers in our valuation. But now we don't know whether excluding those changes, there is any upgrade in your numbers or not. That I think that's a little bit gives puts that blank because we know the for the transparency, any thing with the current numbers, you'll have the analysts to see whether a revision upward or downward. That's what I want to understand.
In the margins, I understand, it's very clear. But is it in hindsight? In revenue, there is no deterioration without the acquisition. Actually, what we have guided you before in Turkey, let me I have to check the numbers. Sorry about that.
Yes, maybe I'll answer that after Oskar answers this question, then I'll get back to that one. I'll check
this. Thank you. Thank you. So, Jean Robert, your question around FX, as you have pointed out that we are closely monitoring our open positions in the balance sheet. So we are trying to do this as quickly as possible looking at every day's breakdown.
So we are working with more than 30 different currencies. So we are trying to manage the impact of those currencies. And sometimes the daily estimations that we are making is derating from the actual position. So that's creating a small variance in our positions, which we need we can make another transaction to close the deficit in the coming transaction. Therefore, those variances, if there is a big impact daily impact in the FX, sometimes affect the total FX position.
But other than that, we have swap differences coming from the total positions, which is reflected to the FX line in the P and L. So when we compare the 2 character, yes, you said 1 is positive and 1 is negative, but this is coming just a temporary impact, which is actually balancing each other.
Thank you. And maybe one last question about the tax rates. It's lower than results. I think it's what could be assumed for the second half of the year and with all these transactions. Did the Wurtele transaction have any effect?
I don't think. But what was the reason behind lower tax rate?
Yes, sure. As we said, Wortbl didn't have any impact on the tax rate because we haven't included any P and L items. So but besides, if you just look at the Turkey operations, as you know, there are 2 major incentive lines that we have been benefiting in Turkey. 1 is the R and D incentives, which where R and D expenditures are deducted from the corporate tax base. And the second one is the investment in incentive, which is provided as a reduced tax rate.
In Q2, our R and D expenditures were high. And also, we have invested on we have the amount of investment that we have made in June 2, which are subject to incentives, have increased. Therefore, the effective tax rate just in Turkey reduced compared to Q1 with 4 points. Actually, this has decreased effective tax rates of consolidated figures to that to the level that you see around 12.7%. So if you look at quarterly, 15% to 7%, which is including the impact of that benefit R and D benefit and investment in central benefit.
Sorry, did I see the wrong number? I see that your effective tax in second quarter was TRY 40 2,000,000. Am I wrong? TRY 42,000,000,
which is 7.3% of the before.
Yes, yes. That's correct, right? That's 7%. Yes. Okay.
I'll just get back to your first question, Jamal Bey. About the revenue growth, If I mean, Turkey is not affected actually. Turkish growth is not affected from the acquisition. So we guided 30%, 25%. Before now, we are guiding 30%, mainly due to inflation and price increases and also some unit increases as well.
On the international side as well, last time, we guided 10%, more than 10%. So I think that we are going to be in the bracket of 10% to 15% organically only. So in order to go up to 35% on FX terms, this is the effect of the actually the acquisitions. Okay. So 10% to 15% international and Turkey side is 30% versus 25% in the past.
And there is no contribution from GURPOL, right, into Turkey numbers? No, no. There is no. It's all exports from Turkey. Okay.
Now it's more clear and helpful. Thank you. Thank you.
The next question is from the line of Kilikiran Hazanda with JPMorgan. Please go ahead.
Tolatve, Oskambi. Thank you very much. I have some technical questions. I just want to be clear about this. So are you going to consolidate Hitachi for the full year, so on a 12 month basis?
Or you are going to consolidate the P and L of Hitachi starting from only July 1?
Yes. The second one you said, the P and L is going to be consolidated for 6 months only as we are acquiring the company on 1st July. But of course, the balance sheet is there's no time issue with the balance
sheet. Is it possible to share some sort of insights about the first half performance of Hitachi? So what type of volume growth the company has experienced? What was the margin in the first half of the company?
Yes. As this is not our results, I am not able to give you full disclosure on that one, but I can tell you that it is better than 2020 results. In terms of growth and in terms of profitability. Both of them are has positively surprised us. That's what I can say.
Okay. All right. And despite the acquisitions, I can't see any adjustment on CapEx. So does it mean that you are not planning to do any sort of CapEx in Whirlpool or Hitachi in the rest of the year?
Yes. As I told you, our teams are still working on integration. We have 2 integration management offices, IMOs for both acquisitions right now, working on it. There will be some CapEx requirement, but we do not have anything that we have approved yet. I do not think that we are going to be starting spending CapEx money within this year.
Most probably, the if there will be, I think there is going to be small amounts, but the main spending is going to be coming in 2022, which I will be sharing with you at the end of this
year. All
right. And final question is about pricing in the rest of the year. So the cost inflation I mean, cost has just inflated with your Q2 from margin perspective. So it will continue probably in Q3 and Q4, right? Do you think that the market is good enough to reflect these potential cost increases into prices, both in Turkey and Europe?
I mean, the rest of the market, I mean?
Yes. The situation is different in different countries. I have to tell you that in Turkey, until now, actually this quarter, only quarter 2, we have increased prices almost mid- to high single digit price increases. In Europe, we have made again mid single digit price increases in euro terms this time, this quarter only. In Pakistan and South Africa, we have again made high single digit price increases in local currencies in this quarter.
In quarter 3 and quarter 4, we most probably are going to be in need of some more price increases as we are going to still see some raw material impact. And also in Turkey, as you said, some inflationary issues. In Turkey, we already have made a mid single digit increase in the beginning of August already. And we are watching for the remainder of the year if we are going to be in need of making some price increases. Price increase is all about the raw material passing on the raw material increases.
So but the most important effect here is, as I tried to explain, how the competitors are going to be moving. So we do not want to lose market share, of course, in any of the countries that we operate in. So we are closely monitoring the situation, and everybody has a different pricing cycle on the raw materials. We have enjoyed our pricing cycle in quarter 3 and 4 and quarter 1 of this year. Some other companies are enjoying quarter 1, quarter 2 of this year.
So but at the end of today, everybody is going to be balancing at a level, which is going to be more competitive to each comparable to each other. Right now, the prices are moving so quickly that I cannot say that the competition every competition competitive companies are at the same level. But at the end of the day, everybody is going to come to the same level, and we will see the situation after that. But until then, we are planning to push the price increases as much as we can or as much as the market can take it. But right now, we do not in some of the markets, we are having difficulty in pushing the price increases.
This is Turkey is included to that as well. In some of the markets, it is there is still some room that we can use. But in each market, we are trying to evaluate the situation 1 by 1, not to make a mistake at the end of the day. As I told, we do not want to lose profitability, and we do not want to lose the market share at the same time. So it's a delicate issue for each market.
Thank you very much, Felipe.
Thank you.
The next question is from the line of Groupe Berenna with BGC Partners. Please go ahead.
Good evening and thank you for the opportunity to ask questions. I have 3. The first one is about the EBITDA margin outlook in the remainder of the year. Your new guidance suggests that you expect around 10% EBITDA margin in the second half, which is similar to what you achieved in the second quarter. But I was wondering if we should expect this margin to get worse before it gets better or whether you see a significant difference between the 3rd and the 4th quarters of the year?
My second question is about the net debt. I'm looking at Slide 14 and you have the net debt including the Whirlpool impact and the payout. And I see that the difference is around SEK 3,300,000,000. So SEK 14,000,000,000 including the Whirlpool impact and then SEK 10,700,000,000 without. That seems a little bit high to me.
I thought you paid around EUR 78,000,000 and I was wondering if you could clarify that difference. And finally, Whirlpool's P and L in the first half, is it loss making? And is this going to be a significant drag on your second half net profit? Thank you.
All right. I'll take the first and third question, and I'm going to ask Uskam to answer the second question, Bernal. I'll start with the 3rd one, which is easier. We did not take over the workflow operations as a loss making business. It is a profit making business right now.
But of course, we started the operations very it's very recent, just been 1 month now, but the situation is that it's not a loss making business for us. And as I told for Hitachi, it's the same situation with the Whirlpool as well. We see significant synergy opportunities, which we are going to be 1 by 1. Some of them are easy to pick up. Some of them takes a lot longer project to utilize the improvements.
But our expectation is to have a better picture than what we have acquired. About the first question that you have about EBITDA margins on yes, there is a deterioration. As I told, we are we have already increased prices in Turkey by 5% in August, around 5%.
And
we are also increasing prices in some of the other markets, and we have already done some of them at the beginning of July in some of the countries. So we are going to see the positive impact on this one. From Q2 to Q3, the prices raw material prices did not increase as it increased from quarter 1 to quarter 2, let me say. And in terms of quarter 4 discussions that we have with the suppliers right now, to be honest, we do not really expect an increase anymore in quarter 4. So our expectation is to start the normalization, maybe stagnant into quarter 4, but after that quarter 1, we expect some normalization in 2022.
But I can say that 3rd quarter EBITDA is going to be my expectation is that it is going to be around this level and because the price increases take time and the reflection takes time. But quarter 4, our expectation is some more growth in the EBITDA margin in order to get to the guidance levels that we have.
And this is also taking into account that 3rd quarter typically is the strong quarter in terms of sales. And so you expect 3rd quarter margins to be lower than the 4th quarter because of this raw material pricing issues?
Yes. Mainly about raw it's not any raw material, it's about pricing as well. The effect of pricing takes time to push. So that's why I said like that. Yes, quarter 3 is a powerful quarter, but I have to say that in the beginning of July, our factories, we used the annual lease in July mainly.
So the July month in terms of production overhead, it wasn't the most effective month because of this situation, because we wanted to stabilize our inventory levels as well. And starting from August, actually, we expect, again, a high capacity production and high profitability and also some more price increases to come. So that's why I expect, again, maybe a little bit slightly more than what we have in quarter 2. And in quarter 4, we expect a better result. That's what I can say right now.
But again, it's really hard to make predictions for quarter by quarter. Our expectation, our guidance about our EBITDA margin around 11% should be the one that we should be sticking to. It can really move around.
Okay. Thank you.
Oscar?
Yes. As you see in the Slide 14, the net impact of the acquisitions we have shown as PLN 3,400,000,000. If you look at the breakdown of it, EUR 78,000,000 is paid to Vorpal, which is around PLN 800,000,000. And at the same time, we have acquired actually, we have started to consolidate the last day of the month for Verpo. That means there is some cash of the entity that we acquired, which is around TRY 450,000,000.
So the net impact is around TRY 350,000,000 from Verpl acquisition. And we have paid $343,000,000 to Itachi, which is around TRY 3,000,000,000. There is no consolidation in the balance sheet as of June, so it's a transaction completed at the first day of July, but we have made the payment on 30th June. So therefore, the net impact is EUR 3,400,000, EUR 3,000,000 coming from Hitachi and €400,000,000 roughly coming from Verpu.
Understood. Okay. So Hitachi is Hitachi acquisition has been paid as of July as of June 30, that's why this figure is high.
Yes, both are paid as of June 13.
Okay. Thank you. That's very clear.
Thank you.
Our next question is from a follow-up question from Kuve Beyena with BGC Partners. Please go ahead.
Yes. I just wanted to ask one more question about free cash flow generation. This year, there are ups and downs as the acquisitions go. So year? Are we going to see some improvement over there or versus the first half, but definitely probably not versus last year.
But how do you see the outlook in 2022 given that all the acquisitions will have been completed and everything would be in the numbers?
Eskom, will you take that or shall I?
I can take that. So we have explained that the working capital level at the end of last year was not a sustainable level. Therefore, we expect a deterioration in our free cash flow because of the working capital need. And in Q1, we have seen this impact high compared to Q2. In Q2, the free cash flow is slightly better than last quarter.
And if you look at the total of the year, with the impact of the acquired companies, which where we estimate the working capital needs will be lower. Therefore, it will take after the 25% level, which means we will see a positive figure compared to last two quarters when we look at the Q3 and Q4.
Thank you very much. Our next question is from one of our webcast participants. From Mr. Unaril Guem from Goldman Sachs. And the question is, hi, thank you for the presentation.
Do you expect worse than previously percent despite Hitachi having no WC needs? Thanks very much.
Actually, in the net working capital sales ratio, we have guided for 25%. In Q1, we have seen 27 and this quarter, it's 27 again. So with the impact of the acquisition and partially improved of the current business, we estimate it will be close to 25%. And if we have higher sales coming from the acquired companies, for sure, there will be a positive impact. But right now, we think it will be close to 25%, but most probably lower than 25%.
Thank you. We have a follow-up question from the line of Dimitvaske Amal with Atan Bas. Please go ahead.
Sandeep, just a question about the payments for Hitachi. You paid in the last day of the quarter. Did it have any effect because it's a huge number? Did it have any effect on your FX position, the closing? I'm just curious about that.
Thank you.
Actually, it did not have any impact on as of June, but it will impact July and coming months because we will have our position will change with that paid amount. So that means our income generating from the loan position will decrease significantly.
Thank you. And another question about the domestic market trends, July August, how was the sell in and sell out rates and the inventory levels? If you give us some color, maybe you gave it, but possibly I missed or Let me give information about the domestic side.
Actually,
the second quarter was quite positive in Turkey. Only one of the issues that we had, you may remember at the Mother's Day time, there was a lockdown, and this lockdown really affected our FDA sales. And that created more than expected inventory in the whole chain, including us and the dealers. But other than that, actually, our inventory level is very healthy, I have to say, both our inventory and the dealers' inventory as well. We have been especially the heat in July beginning of August has affected very positively our air conditioner sales, and it has really decreased our air conditioner inventory as well.
And in terms of sales, the sell in and sell out ratios still seem very healthy and strong actually in Turkey. We do not really see a big negative impact. But starting from now, actually last year's 3rd and 4th quarters were very effective as well for sales. And I think that we are going to be measuring ourselves with the quarter 3 and quarter 4 of last year, which is a high base for us. But I think that we are going to be able to close to what we have achieved or more than what we have achieved in last year for the remainder of this year.
So we see still very strong. Inventory is very strong. Only STA inventory is more than our expectation. But other than that, it seems healthy. Thank you.
Ladies and gentlemen, there are no further questions at this time. I will now turn the conference over to Mr. Shen for any closing comments. Thank you.
Right. Thank you very much, everyone, for attending our earnings call of quarter 2. If you have any further questions after you evaluate our results, please feel free to contact our Investor Relations team. We will try to get back to you as quickly as possible. Thank you very much.