And gentlemen, thank you for standing by. I am Yeliz, your host coordinator. Welcome and thank you for joining the Arçelik Conference online webcast to present and discuss the full year 2024 financial results. At this time, I would like to turn the conference over to Mr. Barış Alparslan, Arçelik's CFO, Ms. Mine Şule Yazgan, Finance and Executive Director, Ms. Celal Aliş, Capital Markets Compliance Senior Lead, and Mr. Sezer Ercan, Investor Relations Senior Lead. Mr. Barış Alparslan, you may now proceed.
Thank you very much. Good morning and good afternoon, ladies and gentlemen. Welcome to our full year 2024 financial results webcast. This presentation contains the company's financial information prepared according to the current IFRS and application of IAS 29 Inflation Accounting Provisions. We start with the highlights of 2024. Beko generated EUR 428.5 million revenues with a gross margin of 27.6% in 2024, reflecting a 15.4% gross sales year-on-year in real terms, mostly due to European MDA acquisitions. Acquired entities closed above TRY 1.2 trillion in gross profit margin in 2024. In Turkey, we observed a robust demand in both wholesale and retail markets in MDA and air conditioning segments throughout the year, whereas international demand remained weak despite some improvements. After a period of three years, slowdown commenced and ended in the European market. APAC region remained challenging in 2024.
Our OPEX over sales ratio is 26.2% for the full year, implying an increase of 1.4 point year-on-year, predominantly caused by increasing personnel and marketing and selling expenses. The impact of the acquired operations on our OPEX is approximately 0.5 points. We recorded a weaker EBITDA compared to last year, with a margin of 5.3% for the period. The diluted impact of the acquired operations is measured approximately 1.1 points in 2024. Please note that our EBITDA adjustment excludes non-transaction expenses regarding Europe and main transactions. Our net equity capital over sales ratio as of 2024 year-end is 21%, reflecting a remarkable improvement of 4.6 point year-on-year in the contribution of the acquisitions. Our leverage is 3.8 times as of year-end, with an increase in our borrowings, including EBITDA . This figure reflects an improvement compared to last quarter, mostly improved cash generation.
We started the decision of Public Oversight Authority dated October 26, and provided a breakdown of monetary gain and loss of full year results for years 2024 and 2023 in our financial report. According to this breakdown, TRY 6.8 billion per quarter of monetary gain booked for the year 2024 was due to inflation impact over inventories. Therefore, when the related amount is added back on top of our EBITDA, our Monetary Gain and Loss adjusted margin is calculated as 6.8% and 9.6% for 2024 and 2023, respectively. This adjustment leads to a leverage of around three times as of 2024 year-end. Please note that this is a performed adjustment, presuming pricing of inventories at least in line with the inflation figure, and the aim is here to roughly decipher the impact of inflation impacting on the operating margins.
In 2024, we delivered a 15.4% of revenue growth year-on-year in real terms, recording TRY 428.5 billion total of consolidated revenues. Inorganic growth was the main driver, whereas local sales remained flattish and international sales were slightly poor. Our gross profit margin for 2024 is 27.6%, which is 1.7 points lower year-on-year, due to mainly pricing pressures, intense competition, unfavorable euro/dollar parity, and also higher manufacturing costs as compared to last year. The company recorded an adjusted EBITDA margin of 5.6% on a yearly basis, due to lower gross profitability and higher OPEX as mentioned. In 2024, on a yearly basis, local sales increased by 18.6% in euro terms. Drivers of the growth were volume increase and price contraction mixed almost evenly. However, real figures in particular reflect the flattish performance in local markets year-on-year.
This is simply because the growth in specialized sales period was substantially greater than the change in the FX rate. International revenues increased substantially by 0.3% in euro terms year-on-year, with a key contribution of inorganic growth. Acquired entities contributed to the sales of roughly EUR 3 billion for the year. Organic sales volume remained flattish as the challenging pricing environment in international markets remained unchanged throughout the year. However, figures encouraged fresh growth, 24.7% growth in international markets. You may see the quarterly figures below, which reflects a similar performance in comparison with the previous year's last quarter. On the right-hand side, you can see our regional sales breakdown. EMEA share in total revenues declined to 32% in 2024 versus 37% last year. Europe now constitutes approximately half of the consolidated revenues, which impacts all transactions.
Western Europe's share in total revenues was 33%, down 24%, whereas CIS and Eastern Europe markets had 16% and remained at that rate. Revenues generated in APAC region dropped to 10%, whereas it was 15% in 2023. Africa and Middle East region generates almost 8% of total revenues in total, which corresponds to roughly 1.29% between these years. You may see quarterly figures as well on the left-hand side. In 2024, demand of domestic markets in the MDA6 was robust. Our total volume grew by 6.3% in line with the market on a yearly basis. The Q4 figures reflect a much stronger growth, around 23% in sales volume, whereas the output of the market in the last quarter. However, in real terms, the increase of particular revenues in the MDA 6 segment was much limited due to sales campaigns and product mix in Q4.
Volumes in air conditioning segment reflects a growth toward 20% in line with the market. In Q4, we underperformed the market in terms of sales volume. Our retail TV sales volume increased by 14.2% compared to last year, which is twice an underperformance on a yearly basis. Similarly, Q4 figures reflect a substantial decrease compared to the same quarter of last year with an underperformance. Relatively poor sales in TV segment, combined with a decrease in professional supply solution segment due to the performance of the tenders for smart boards previously held in Q4 of last year, have suppressed overall local performance in Q4. In 2024, with flattish local revenues in real terms, we generated EUR 138.9 billion revenues in Q2, where MDA6 demand remained solid. Net growth in air conditioning was strong, unlike declining TV sales volume.
Overall, the share of the domestic market in total business corresponds to 30% of total revenues for the full year. Using the organic share in consolidated revenues in full year 2024, revenues generated in Europe increased over 66.0% year-on-year in euro terms with the contribution of the acquired operations. Consumer demand in Western Europe substantially recovered throughout the year in terms of sales volume. Unit growth as of November end was 1.6 percentage points, a further recovery in Q4. However, there is no growth in euro terms on a yearly basis. In key markets such as the UK, Italy, Germany, Spain, Belgium, and Austria, solid growth has been observed in sales volume. However, slowdown continues to confront all the leaders of the pack. Having 50% share in total sales revenue, we observed market leadership with a slightly improved selling ability in the market in 2024.
Meanwhile, in Eastern Europe, demand growth was solid throughout the year. Major markets in the region pointed to substantial growth in November 2024. In Eastern Europe, having 16% share in total sales, Beko maintained its market leadership despite underperformance in the region. Revenues generated in Africa and Middle East region accounted for 8% of consolidated sales in 2024. In euro terms, sales within the region grew almost 20%. Key drivers of the growth were the contribution of acquired main operations and solid growth in African markets. Defy demand in Africa region remained robust and resulted in growth in Defy sales revenue over 10% in euro terms for the year 2024. Domestic sales growth exceeded the growth in exports both year-on-year and on a quarterly basis. These figures implied 10% growth in terms of units in euro on a quarterly basis.
As another key market in the region, demand in Egypt was robust throughout the year. Beko Egypt sales growth figures were from 8% and 9% respectively in units and euro terms respectively, despite the challenges in market conditions. Quarterly figures show a slowdown in demand in Q4 compared to the same period last year in Egypt. On the other hand, having 10% share in consolidated revenues, APAC home appliances landscape remained challenging throughout 2024. Revenues generated in the region reflect a decrease over 2.5% for the year in euro terms, whereas strong demand in Pakistan and Bangladesh showed some decline. In Pakistan, sales revenues showed robust growth both in euro terms and sales volume in 2024, corresponding to 20% and 17% increase respectively. On quarterly basis, numbers reflect lighter growth both in volumes and euro terms.
In Bangladesh, revenue growth over 2% succeeded in euro terms compared to last year, whereas volume growth was slightly higher. In Q4, growth was stronger compared to the same period of last year. In 2024, trend in raw material prices were different from metal and plastic side. On the metal side, raw material prices declined slightly compared to last year's average prices. This was mostly due to global demand, high policy rates, and lower energy costs. We expect a similar price level in 2025 on the average, albeit gradual increases quarterly. Average plastic raw material prices were relatively higher throughout the year despite the gradual decline in the second half of the year. This was due to weak demand, slowdown in growth, and lower capacity utilization in production. We do not expect a major change in prices on average in 2025.
Now, I hand over the webcast to Mine to present the financial performance.
Thank you, Barış . Here is the summary of our full year 2024 financials as per inflation accounting for both yearly and quarterly comparisons. Our consolidated revenues were TRY 458.5 billion in 2024, reflecting 15% growth annually and 5% decline quarterly compared to the same quarter last year. Gross profitability is weaker both on a yearly basis and compared to the same quarter last year. Margins are lower by 1.8 and 1.2 points respectively. However, numbers showed an improvement in comparison to the previous quarter, roughly around 0.5 points. Our operating profit and adjusted EBITDA margins were substantially weaker in 2024 and Q4 due to the lower gross margin and growth in OPEX. Operating margin declined by 3.2 points year-on-year and 2.1 points quarterly.
On the other operating income, expense account shares substantial amount of items both on income and expense side in Q4. On the income side, we have recorded an income from the purchase price allocation regarding Europe and main acquisitions, corresponding to roughly EUR 17 billion. On the expense side, we have recorded a lot of expense over EUR 11.8 billion due to restructuring efforts. The combined impact of these items has supported the bottom line both in Q4 and 2024 full year results. Net financial expenses grew substantially by 46% year-on-year and doubled compared to the same quarter last year. This is mostly due to increased net interest expense in line with growing debt and increasing hedging costs. However, the improvement in financial expenses in comparison with the previous quarter is noteworthy, a point of 18% decrease.
A bottom income has been reported in the last quarter's monetary gain due to the recalculation of net monetary position resulting from the indexing of foreign subsidiaries' shareholding by the parent company. The recalculated amount has also been adjusted to the previous year's financials. As a result, we have recorded a monetary gain in the amount of EUR 7.1 billion in the last quarter, adding up to EUR 15.8 billion in full year 2024 results, which supported the bottom line. The figure for 2023 was EUR 22.7 billion. Consequently, we posted a net loss of EUR 2.2 billion before minority in year-end, which corresponds to minus 0.5% net margin. Decline is 6.1 points year-on-year. Finally, with a margin of 5.3%, we have recorded an Adjusted EBITDA of EUR 22.9 billion in 2024. We have excluded transaction-related one-off expenses amounting to EUR 229 billion due to adjustments.
Corresponding amount in the last quarter was 88 billion EUR. Adjustments for 2023 and the same quarter last year were EUR 1.2 billion and EUR 436 billion respectively. As of 2024 year-end, we had increased of 9.8 billion EUR in net debt and leakage adjustments. Our leverage is 3.3 times, which matches our covenants. We have succeeded to meet the required level by increasing our factoring and early collection amounts above our ordinary utilization of the tool to improve liquidity. However, we anticipate an intrinsic improvement on the leverage side as the other operational performance starts to support EBITDA throughout the year. You may find the details regarding our debt currency breakdown and effective interest rates for our loan and bond portfolio on the figure at the right-hand side with a total borrowing amount of 238 billion EUR and an average duration of two years.
Our average effective EUR/USD funding rate, including loans and bonds, were 42%, 5.2%, and 8.5% respectively. On the bottom left-hand side, you may see our cash currency breakdown for the amount EUR 1.4 billion as of year-end. With well-diversified cash holdings among currencies, our cash and cash equivalents were EUR 50.8 billion. 35% of our total cash is in EUR, 21% in USD, EUR, and in EUR, whereas the other currencies correspond to the remaining 29%. Euro denominated borrowings constitute 41% of our total borrowings, whereas USD and EUR denominated borrowings correspond to 21% and 24% respectively. On the debt matrix side, in our notional cash pool utilization, the short-term cash management instruments utilizations are excluded. Less than one-third of our borrowings is due 2025 end. As of 2024 year-end, our long-term borrowings comprise more than 55%, whereas short-term borrowings correspond to 45%.
It was vice versa as of last year-end. On the upper left corner, you can see our adjusted EBITDA margin reach, narrowing gross margin, and increasing OPEX were the main drivers of a significantly lower margin of 5.3% in 2024. The change in DNA had a positive impact over yearly EBITDA margin, where one of its adjustments had a negative impact on calculations is transaction-related one-off items that are larger in 2023. On the upper right corner, our net working capital to sales ratio of around 21% for 2024 might be seen. The ratio was 25.6% for the previous year, which reflects an improvement of 4.6 points year-on-year. The wins from the quarter operations were core improvements in net working capital. Please note that having the 12-month rolling data in the yearly results, now we use 12-month average net working capital in calculation.
On the lower left corner, you can see our per capita sales ratio of 5.4% for 2024 end, which implies an increase of 0.7 point year-on-year. This was mainly due to adjusted and advantageous investments that we have completed in 2024. Finally, at the lower right corner, you may see our free cash flow figures. Due to free cash generated from operations and higher capital expenditures, we have generated negative free cash flow of approximately EUR 8.7 billion in 2024 versus the negative amount of EUR 18.1 billion in 2023. As we have stated in previous quarter, anticipating an improvement in cash generation capability in 2025. Now, I'll leave the floor once more to Barış Alparslan for our guidance.
Thank you, Mine Yazgan. So here you may see our guidance and exit figures for the year 2024.
With no real growth in local revenues in Turkish EUR terms and 40% growth in international revenues in EUR terms, we partially met the guided number for 2024 on the top line. Slightly less than expected contribution of acquired operations and slower recovery in international demand were the main causes of the deviation. On the EBITDA margin side, we failed to meet our latest guidance, missed by 0.5 points. This is mainly due to more than expected depreciation in EUR/USD parity after the U.S. elections and slightly slower recovery in international markets. We partially succeeded to meet our guidance for net working capital over sales ratio with a slight deviation around one point for the year 2024. Finally, we met our capex guidance around EUR 400 million with an actual amount of approximately EUR 325 million in 2024.
Here you may see our 2024 guidance based on our recent forecast and expectations for the year. We expect our local revenues to flourish in real terms by the end of the year 2025. In international revenues, our expectation implies a growth of approximately 15% in EUR terms, corrected by full year contribution of acquired operations compared to three quarters last year. With a significant improvement in profitability, we expect an EBITDA margin around 6.5% in 2025, backed by positive impact on company holdings and synergies as we move forward with further necessary actions for more efficient operations. We expect further improvement in our net working capital over sales ratio to go below 20% by the end of the year. Finally, our guidance for capital expenditures is approximately 300 million EUR for 2025.
As we've proposed in the previous quarters, we estimate savings of approximately EUR 140 million through eliminating roughly 10,000 office positions across our global operations within the three years ending. Here you may see the recent updates and realized figures in 2024 year-end. So far, we've completed almost half of our planned role eliminations as of by the end of 2024. That concludes our presentation.
The first question is from Elena Vystovaya[Distorted audio] with Barclays. Please go ahead.
Thank you very much for the presentation concludes and the results. I have several questions. I would like to go one by one. So my first question is regarding your margins. So in the first quarter, it seems that your margins were poorer than you initially expected. So what was the reason for that?
Also for your 2025 guidance, could you provide a breakdown of how much savings you're going to generate in 2025 that would fit into 6.5% guidance? Thank you.
Sure. As explained as part of the presentation, the main reason in decline in margins is mainly EUR/USD parity, ongoing pricing pressure, especially in the international markets, a high level of interest rates in the domestic market, and relatively low consumer sentiment, and higher manufacturing costs on the back of real increases in salary and wages. When it comes to your second question of the expectation of savings, especially from the turnaround operations on the EUR side, we expect around EUR 100-150 million of cost savings and synergies in 2025 that will be factored into the margin guidance. Thank you. So 100-150 million? EUR 100-150 million. Yes. Yes.
Okay. Also, so my second question is regarding your cash flow generation. I mean, you reported slightly lower cash flow, but generally cash flow was 92% after the quarter. So I was just wondering what was the driver of that? And maybe my final question, if you had plans to finance some of the short-term debt with particular facilities, could you please provide an update on your progress on that front? Thank you.
Sure. On the cash flow generation side, tight control inventories and accelerated collection, we believe we see was the main reason of extended cash flow generation. And in September and November, in particular, the European market was pretty strong. And for the local domestic market, it continued to perform relatively well, contributing to the EBITDA generation. And on the CapEx side, we were in line with the guidance. Altogether, they left a benign cash flow generation and reduced leverage environment.
When it comes to the refinancing of our funding, so we do not have a major redemption in 2025, and we do not expect any major capital expenditures. That's why the refinancing will be mainly on the net working capital-related short-term debt, on which we do not expect any problem given our expanded credit limits in local markets, domestic bond market, and the short-term borrowing environment, especially in the bilateral lending. We also have several plans to extend the duration of our funding structure, on which Mine Yazgan can provide further details in case of any need.
Do you plan to include those expansions, duration expansions year-end this year?
Yes. I mean, as the new debt funding facilities like DCAs and other synergies will come on stream, our duration will be extended as we refinance the short-term debt. Right now, it's on the average around two years in terms of duration.
Okay. Thank you very much.
You're welcome.
Next question is from the line of Hanzade Kılıçkıran with JPMorgan. Please go ahead.
Thank you very much for the presentation. I want to give a follow-up about these savings in 2024. So how many production plants have been closed so far? And how many plants are you expecting to close in 2025? And I wonder if these expected closures in 2025 also include the EBITDA guidance or your EBITDA guidance is based on the existing footprint plan closures. So I would try to understand the impact outside of the EBITDA margin if you close other plants in Europe.
Sure. In terms of planned closures, we've completed the closure of Yate in the U.K. as of 2024 year-end. For our Polish operations, the ones that are announced in Łódź and Wrocław, we expect to conclude within the first half of 2025. And right now, the synergies that we expect with those closures are already built into our EBITDA margin guidance. And the remaining part is, as we announced, has been completed in the consequence. For Italy operations, the discussions are ongoing, and you can follow up on the announcements as we follow through.
Actually, my second question. So your public guidance is EUR 300 million. Does it include the Italy guidance and the take about Italy?
So as it pertains to Italy, as you know, this is a highly sensitive topic for current political discussions. And the negotiations with the regulatory authorities are ongoing. But while calculating our synergies, we've already built in or factored in our turnaround-related costs and CapEx to our synergy calculations.
That EUR 300 million is actually merely a restatement of the required turnaround efforts and CapEx for synergies. And they include not only capital expenditures, they also include operating expenditures, IT-related expenditures, and/or capitalized R&D-like expenditures. So that's why I do not consider this as merely CapEx. And the CapEx guidance that we provided already includes CapEx-related items in compliance with Italy.
Okay. So in 2024, if you proceed on Italy, we won't see extra charges, right? I mean, it's already considered in your guidance.
So just yeah, sure. And to be honest with you, and also as provided in the relevant disclosure notes of the audit report, we have fully provisioned when it comes to our turnaround operations going forward, including Italy, Poland, UK, etc.
That's why you should not expect any more, let's say, extended expenses that would be hitting the P&L in 2025 when it comes to those operations.
Okay. So that means everything has been provisioned this year. I mean, since you've been here.
Yes. As it pertains to the EU turnaround operations.
All right. Thank you very much. And one final thing about this, I mean, production plant closures. I'm trying to understand when you move all these production facilities, how much savings I mean, how much do you save in margins side? I mean, can you really compare the Chinese manufacturers in Europe afterwards?
Yes. I mean, these are our calculations. And we're not closing all the factories per se. These are the ones that are mainly related to the dryer and cooking factories, as announced in Wrocław, which are in the UK.
And we do not provide a full breakdown of the expected synergies when it comes to production, procurement, R&D, or HR admin redundancies. But the high-level number that I provided to you is mainly related to production, procurement, R&D, as well as HR admin redundancy. So with impact positively both in GP and OP eventually.
I mean, the prices in the UK, I can see that you can price Beko very closely with Chinese partners. So when you move Wrocław and Turkey, is it reasonable to assume that you can also price Wrocław close to Chinese manufacturers in the segment? I mean, there are different segments. It would be more competitive in 2025.
Wrocław is our brand that will be positioned on a highly premium basis. That's why I don't think that would be a Chinese benchmark is not the right benchmark for.
You don't have any plans of introducing the entry segment in this sense?
We have different plans like Indesit for the entry segment. And for the premium segment, we have Wrocław, Hotpoint, depending on the location that we have. Wrocław, for example, Hotpoint in France, Hotpoint in the UK. So it depends on the region as well.
Okay. So Indesit in Italy, right? I'm confused.
Apologies.
Indesit is currently produced in Italy, right?
Indesit is produced currently in Italy, yes.
All right. Thank you very much.
You're welcome.
The next question comes from the line of [Name unclear] , please go ahead.
Thank you for the presentation. My focus is about domestic side. I don't know if I missed it. You expect to see a 15% market versus a 15% Turkish lira revenue growth. How do you think the volume and the pricing side will be for this year?
What are the initial signals for the first half of the year? That's my first question. The second question is related to negative monetary side and the restructuring costs you record. Maybe you can just repeat that part. From here, I see TRY 17 billion from the acquisition and other income. I see TRY 11 billion for the full year regarding the restructuring. Could you just give us a concrete number for the fourth quarter and the total year specifically in order to understand the effect of these two main factors in the quarter? Again, after this, we can ask you a question about the monetary gain.
Sure. In terms of outlook for the future, in accordance with our guidance in local sales, we do not expect significant growth in real terms.
Here, we see a diminishing dependable household income and limited monthly employment availability are the main headwinds we expect. Considering the high base impact in the first half, especially the forward demand in the first quarter before elections, figures for the first half are expected to be under pressure from our perspective. However, as the policy rate starts to come to a point of saturation, we expect to see a growth in demand in the second half of the year. As you see, Turkey is always an active market and a constituent of an economy. There is always more hope and more options for Turkey, especially on the volume side. When it comes to your second question, the negative goodwill, yes, I confirm the numbers. The positive impact of negative goodwill is TRY 17 billion.
And for restructuring costs, on which we provide a detailed breakdown under note 27 of the audit report, it is TRY 11.8 billion. That's provided on a geography and nature basis. And to be honest, this is a very detailed table where you can see the provision and levels. And they are related to the same transaction and are recorded the same year, 2024. The essence of negative goodwill is obviously the consideration of transaction was 25% of Beko Europe operations, and we acquired 75% of Wrocław operations. And as part of the purchase price allocation study, all the fixed assets, etc., the grants, etc., the intangibles were revalued. And the difference between those two, the consideration and the acquired operations, has resulted in that number. And we also, as part of the purchase price allocation study, have also cross-checked the common revaluation methodologies such as discounted cash flow, etc.
These numbers do not include synergies as part of the methodology. And it shows the magnitude of the bargaining price that you get in that transaction. And on the flip side, we have our restructuring costs. Those are calculated based on our reliable estimate of probable losses that we expect going forward over the next couple of years, which are like the background conditions behind it. And they refer to the announcements. They match the announcements that we made so far in 2024, and we keep updating our disclosures as they fall due. And I presume you're going to ask for the monetary gain and loss that was recorded as one of the facts. Yes. Sure. Yes. That's my other question. And you've given details in, one, I think, the footnote. And I think here, I see, especially when we put we don't have an exact calculation.
We have, but at least for the first nine months, we had purchasing power of year-end. We have around TRY 11 billion in monetary gain in nine months. When we come over here, we have an additional TRY 6 billion in fourth quarter. Just to further elaborate on that side. So the impact, do you give any? Right. Do you have any other questions that I can answer those?
The other one question is, when you give this footnote, do you say that looking at this footnote, if you were not applied, if you didn't apply inflation accounting, your income would be TRY 2.5 billion less. Is it a fair just comment? Or do you share anything about that in the IFRS 2009? What would your net income be?
Sure. I mean, just to start from scratch, as you know, on the back of many of our audit procedures, we're reviewing our accounting policies, and in line with the guidance of our auditors, we've reclassified the income to inflation accounting on the international subsidiaries under the equity movement table, with no net impact on the equity. And there is also, as you also realized, there is also obviously no impact on the operational line items, and the impact was before that adjustment. The impact was handled under the currency computation adjustment, whereas it's now reclassified under monetary gain and loss, and that's the essence of the increase. So given this is a yearly impact, one-off impact as of the last quarter, you should actually distribute this incremental number throughout 2024 and come up with an adjusted, let's say, percentage of sales figure for monetary gain and loss.
When you project going forward, obviously, the indexation I don't know whether you're projecting monetary gain and loss, but the indexation levels will obviously change. They will decline on the average throughout 2025. They can change on a monthly basis, but on the average, we expect them to be lower on the type of lower announced inflation figures. Going forward, I mean, once you come up with an adjusted number for 2024, you can the best way, in my view, is to wait for the first quarter of 2025 to see the monetary gain and loss numbers as % of sales, and then project going forward for 2025. Okay.
I think we need to further maybe elaborate the very question.
Sure. Sure. We can always take it offline for further questions.
You can track so you know the quarterly total monetary gain and loss numbers. And then you have that impact for the last quarter, the one-off impact. And you can actually decompose and decipher the net incremental number. And you can distribute it to 2024, the first of the full year, as one-off reclassification, and then extrapolate from that on the back of especially for Q1 results. It can help you with that to understand it better. Also, related to the income and goodwill, we are not going to see another incentive going forward. We will see restructuring costs, maybe some numbers to that number for the full year or more, or any indication on that.
Are we going to see in the first quarter, first half of the year? Could be assumed. Or is it like a three-year process? You already completed the first half of it. I would like to understand how we are going to see the bottom line going forward.
Sure. As I responded to the previous question, the restructuring provisions are large income. So you should not expect anything related to the PPA and/or provisioning of such magnitude. There might be some things here and there, but we have taken a large one-off COVID provision for 2024. So you should expect I won't say less, but almost minimal to none P&L volatility under other operating income and expenses as it relates to the provisioning, restructuring, or PPA, etc. So the expenses that will come will be on an accrual basis going forward, not provisions. And we will obviously unwind those provisions with the zero impact on the P&L. They are already handled in 2024.
And the last question, maybe you answered it already if I missed it. But related to international parts, you have 50% in FX terms. What would be the driver, the pricing side versus the volume side? Again, and in which regions we are going to see improvements? And just the China factor, the European factor really is additional pressure on exporters. And when do we expect the recovery to have some momentum on companies like you that have the export potential and the growth potential? Currently, that level is high when we look at it like this, and it's reflected to your share price.
So I think that should be the catalyst. And you are at the level of a big investment or restructuring. There are many headwinds. When do you think you will see some light at the end of the tunnel?
So to answer your first question, as you know, the closing of the Beko Europe transaction was done as of April 1st in 2024. So the numbers do not include the first quarter results of Whirlpool. So the main reason for the year-on-year increase of 50% is mainly related to that. We do not expect a major change in volumes and/or in pricing. Having said that, obviously, on the recovery in Europe, and ECB's actions, as you know, have already started to stimulate the consumer demand. And that's why, I mean, having inflation slow down and backed by the lower legislation in Europe, we expect relatively higher growth in sales volume. That would be, of course, balanced by the pricing pressure in terms of competition. But as you know, we have all these brands right now, Whirlpool, Hotpoint, Beko Indesit, and the main strategy is going to be position themselves.
Then just to nullify the impact of the pricing competition. So the silver lining or the light at the end of the tunnel has already started to come on stream, especially when it comes to Europe, in some regions, as I mentioned, like the UK, Belgium, etc. In our case, I think more to come. But it's not, especially the first quarter, it's not going to be easy. But when I look at the initial results, I mean, we're more or less in line with our expectations. And rate cuts will be the main drivers going forward, which we see the hopeful signs when it comes to ECB.
Thank you, Barış.
You're welcome.
The next question is from the line of [Unclear Name] with Ata Asset Management. Please go ahead.
Hi. Good evening. Thank you for taking my question. On the first quarter, we did a presentation. I wondered if you could confirm what the injection of XR[EBITDA] was in the fourth quarter in Europe and just trying to understand what the incentives change once year-on-year.
Why didn't you have an excellent presentation to start with?
Yeah. It wasn't on your presentation.
Can you repeat your question? Because I didn't catch that number that you asked me.
Sure. Just the adjustment of XR in the fourth quarter in Europe and how much it was in year-on-year.
We publish our results in Turkish lira. Let me tell you the number, which is TRY 4.9 billion in the last quarter of 2024. In terms of margin, it's 5.3%, and that includes the extraction of one-off expenses related to the transactions. In total, that number is TRY 629 million, and that is also in our audit report. Without this, the number is 5.3%, but on an adjusted basis, the margin is 5.3%.
Okay. If we look at last year on a quarter-by-quarter basis?
Last year, it was TRY 5.7 billion, and this is an indexed number, so based on the current purchasing power. On the adjusted EBITDA margin, it was 6.3%.
Okay. With respect to your guidance, obviously, you're providing the final estimate for 2024, but the fourth quarter was still relatively weak. You've got to count on the first quarter. It will not be easy. Should we expect that margin to come in from the second quarter? Is there an improvement to start from the second quarter or the third quarter when we expect the year-on-year margin improvement to come through?
Sure. When we look at the seasonality as well, I think the second and third quarters, when the rate cuts will roll globally, we'll begin on the continuous increment. I think the two quarters will be much more determining. And as I mentioned, and I also provided some high-level numbers on the synergies, that would be incremental to the operating profit. I think you can easily calculate with the number, and when you project the revenues going forward in line with our revenue growth guidance, you will more or less end up with around 0.8%-1% margin improvement on the back of our factored-in synergies. And obviously, the inflation accounting, the impact of inflation accounting will also abate when we proceed to 2025.
But this will be balanced on the gross profit level vis-à-vis the pricing pressure that might continue, at least for the first half, as you rightly pointed out. So overall, we've spent a lot of time coming up with that guidance, and we've wanted to provide you with 6.5% for 2025 for the entire year on an average. And as you rightly pointed out, we expect it to gradually recover towards the after and after year.
Okay. That's helpful. And then there was an article introducing that you may increase your investments in Italy from EUR 110 million to EUR 300 million. I understand that you were in discussion with the government on that number. In terms of the additional investment that you make to Italy, is it likely to fall primarily in 2026 rather than 2025?
The questions around Italy, as I mentioned, it's a process that is dictated by political interactions, and as I said, that number, we do not consider it as an increment on top of what we've already provided. Obviously, disclosures come in arrears and gradually, and that number is not only related to capital expenditures, as I said. We've already factored in and/or projected going forward expenditures related to our operations in Italy, as I said, be it IT, be it operating expenses, be it capital and/or R&D expense, and this number is actually a restatement of the total expenditures that we expect over the next five years, which is a long-term period going forward.
And when you look at our guidance, and maybe you would recall that in our previous webcast, I mentioned that the end of the expansion CapEx programs like in Bangladesh, the transfer of Çayırova to Manisa, etc., as they are finished or almost finished now, going forward, our capital expenditures will be mainly around maintenance CapEx that we expect. And including those expenditures, I think more or less the number that I provided in the guidance would include all of it.
Okay. I understand. And then with respect to the basic question, you raised EUR 500 million at the Beko level in 2024. Would you expect to need to raise any more in 2025 or 2026? 500 million dollars or euros? Euros. Euros. I think it's euros, yeah. You raised EUR 500 million in Beko. Would you expect to raise any more from that level?
I think you're either in terms of the situation we've done in August and a follow-up towards the end of the year. We do not. Okay. We're not in need of a long-term funding, per se. I think it's something people expect that. But just to extend our duration, and if we are able to lock in relatively low interest rates in conventionalized lending such as ECA, as I mentioned before, then we'll hit the market. But to be honest with you, we're not in need of any long-term funding. And our first redemption will come on May 2026 for our green bond, and September 2028 for our zero bond issuance that was done back in September 2023. So for 2025, we're not in need of a major redemption. So we're fully covered on that respect.
With an average duration of three years, we're really very comfortable in terms of funding needs going forward.
Thank you. And then lastly, you mentioned that you had accelerated the expansion in the fourth quarter. Could you elaborate on what you expect your factoring during the quarter? Do you expect to add to it, or should you expect some reverse discounts or discount benefit in the fourth quarter?
It was a mix of both early discounts that we're getting from our distributors and/or factoring. And the factoring interest rates are really highly favorable, ranging from 100-150 basis points in terms of spread. And we're actively using that. This is actually the beauty of that industry, highly scalable and/or net working capital-heavy, where you can play around with your trade receivables going forward. But that does not mean that we've depleted our net working capital.
It's just mainly based on the seasonality. As I mentioned, September and November results, especially in Europe, were very, very strong. That's why these actually refer to the collection of this turnover towards the year-end. We continue to actively use such facilities, credit limits, as we also migrated Wrocław operations. In a nutshell, that's part of the funding synergies that we were expecting. Secondly, we've been pretty strong in controlling and reducing our slow-moving inventory levels, and especially the raw materials inventory levels towards the last quarter. That strategy is going to continue within 2025. It's extremely stringent on our inventory management going forward. Just one note, as I mentioned that in the previous webcast, is, as you know, with the migration of the Wrocław balance sheet, we actually had to remonetize itself, especially on the net working capital.
When you look at the per capita[Distorted Audio] generation in 2024, we want to repeat what they are mainly one of, in my view, and the impact of that has been really reduced throughout the last quarter, as promised. It is that the negative net working capital investment on the back of the migration of Wrocław balance sheet and the ongoing capital expenditures were the main culprit. These won't repeat in 2025, and we have already seen with current activity the positive impact throughout the last quarter. So on a cash conversion basis, 2025 will be highly favorable in our view.
Okay, and is there a number to raise the factoring balance at the end of the year and also in the same sort of expectations for the quarter? Just to get a sense of how we're actually changing that during the quarter.
I have the flow numbers, but Mine is now looking at the balance, the stock numbers as of the quarter factoring.
Yeah.
Sure. Okay. Perfect. Thank you.
Now, in the fourth quarter, the number was not really very different from the third quarter in terms of factoring. It only discount contributed the bottom line, like around EUR 500 million, which were EUR 387 million in the third quarter.
Thank you. That's great.
You're welcome.
Question is from the line that's from Gustavo with Jefferies. Please go ahead.
Hello? Can you hear me?
Yes. Very well.
Okay. Thank you. Yeah. I just wanted to confirm a few things I was looking at your Outlook slide. And just doing some simple math here, you expected like 400 actually, you generated around TRY 430 billion in revenue in 2024 in Turkish lira. So that equates to around EUR 11 billion.
You expect 15%, right, growth in FX for 2025. So applying your margin, your expected margin of 6.5%, you have an expected P&L of EUR 850 million. Is that a fair nominal number? Did I do the math correctly here as far as your 2025 expectations in nominal terms?
Your math, per se, is correct, but I cannot comment on the exact number that you mentioned, as you can imagine.
Okay. Okay. All right. My math is correct. Thank you. And that you know that the dynamic will be mostly driven by cost savings and integration, right? You mentioned that pricing conditions may remain somewhat challenging in 2025, right? So most of any upside, as far as your financial performance and your profitability, will come from the cost side. Is that correct?
That is something about on the pricing side, we will also have our brand, as I mentioned, in terms of positioning of the brand. We'll effectively utilize Wrocław. In every segment, we have a relevant brand to shake off the competition. As you know, in Turkey, we are price leaders, so we're pretty strong on the integrated supply chain network. In Europe, we're putting a lot of emphasis on the positioning of our brand. This year was a trial period, but in 2025, we'll be much more comfortable in fighting off competition. We expect to nullify or eliminate relatively negative impact on the pricing. Having said that, and as you rightly pointed out, the main impact of the year will expect to come from synergies we have with the acquisition on the cost side and on the operating expenses side. It's a mix of both.
Understood. Understood. Yeah. Thank you. That's very clear. Secondly, I was just like, if you could provide a quick comment on your expectations on net debt, as well as around EUR 2.4 million, right, in terms of the end of 2024, are you expecting that to change materially one way or the other throughout this year and into the end of 2025?
I cannot comment on an exact level, but in terms of capital leverage, we expect it to be reduced, of course, substantially on the back of reduced interest rates and high cash flow generation. I think we can more or less calculate the cash flow generation, including the interest expenses. But be careful when it comes to the cash interest expenses, because when you look at the P&L, there are some non-cash expenses like work accounts, etc.
On the back of high inflationary environments, that number actually comprises a relatively large chunk of total net financing expenses that you see on a recorded basis in the P&L. I think it's a relatively easy task. When I look at the comparison with this and that, you're doing a good job in tracking such numbers. You have to help out on an offline basis, of course, given the constraints of confidentiality.
No problem. Yeah. That's very helpful. Two last questions from my side. I'm looking at your project here around EUR 300 million. You said this is all just focused on maintenance activities at the moment. Could you provide some breakdown of discretionary and maintenance activities in these outlooks? That would be very helpful.
I can state that it's mainly maintenance. But of course, there are some leftovers and transfers in 2024 in terms of conventional CapEx. And as I mentioned, as it pertains to the turnaround CapEx for Wrocław's structuring, but it's mainly related to maintenance CapEx in our existing factories. And new product investments as well. I wanted to mention, actually, not in one of the previous questions, the question was whether only Italy factories produce in the CIS. I mean, predominantly yes, but there are cross-sourcing initiatives in some regions. We also produce in the CIS branch. Not only Italy, but predominantly yes. But cross-sourcing requires new product investments, which has already factored in our CapEx figures.
All right. Yeah. Understood. That's also very helpful. Thank you. The last question here, I'm seeing your debt breakdown, your total debt breakdown. And there's still a portion of funding that is in Turkish lira, which could be viewed as expensive, right, given the current conditions in the market right now. Are you expecting this currency breakdown in your funding to change, perhaps increasing Turkish lira, or do you see it like it's probably going to stay where it is into 2025? That's my last question. Thank you.
You're welcome. When it comes to traditional lending facilities, the level of duration is relatively low. Let's say some funds occasionally there are some domestic funds which are like one- or two-year duration. They will be a small portion of our typical funding, which means on the back of reducing interest rates, we're able to refinance and reprice them very quickly. So these are mainly short-term. And when it comes to alternatives, and we've started at the end of 2024, is to utilize these facilities.
And the interest rates have started to fall below 30%, which is a favorable number. So I think, and this is how we project in our minds this year, is that the impact of the reduced interest rates will have a really positive impact for this year in terms of financing expenses, starting from Turkish lira. We're not locked in on Turkish lira, so we can easily reprice them. We're also keeping a close eye on our expectation of these risk. And that's why we're not. We have almost zero concern about lending and rollover of our lending facilities.
All right. Thank you. Thank you again for taking your time.
You're welcome. Thank you for the question.
Next question is from the line of [Unclear name] with Nuveen. Please go ahead.
Yes. Thank you for the call. There's most of my questions been answered here. Curious, with regard to your margin outlook, I am curious about what your expectations are in terms of raw materials pricing going into 2025, particularly on the copper side. And also curious about your assumption on euro-US dollar parity into 2025 that you're using to guide it.
Sure. On the average, we do not expect a major change in raw material prices on both sides, neither in metals nor in plastics. Demand-supply balance in those raw materials point to a similar environment, many times to average levels. And in terms of euro-dollar parity, I think current levels more or less reflect our expectation. Obviously, everybody was expecting that they will be falling towards one or below one. But I think, as you can also follow, closely follow from the political statements, especially on the US side, there's always a barrier or floor to that number.
I think the rate cuts are going to go hand in hand going forward. I think there might be some downside, but the parity levels currently reflect more or less what we expect for this year. They are also relatively in line with what we have budgeted or projected from this year.
Thank you.
You're welcome.
The next question is from the line of [Unclear Name] . Please go ahead.
I do have my hands full, but I'm a bit lost in all these numbers on the website, so I'm trying to understand. When you say that it's something called increased cash flow, do you mean that increased cash flow is going to turn into positive in 2025?
Y es. That's our expectation.
All right. Is there any possibility that you can also guide us about your working capital needs? I mean, I know you put the number as persons with revenue, but I think it's based on IAS 29, so it might be a bit different. Are you planning to generate some capital inflow from working capital in 2025?
I think the base case would be it should go in line with the change in sales, more or less, and we also always, in our projections, factor in some improvements. A couple of days in some areas, some relatively more aggressive, especially on the inventory side. It's a never-ending target, but obviously, both on the payables and the receivables side, the market is relatively known, but on the payables side, the workflow operations have really benefited in terms of extending our trade payables. I'm 100% sure you can follow that from the numbers and as percentage of sales numbers as well.
This is mainly related to the supply chain finance that we migrated. In your base case, you can see it in a relatively in line with the percentage change in sales going forward.
All right. Okay. Thank you very much. Finally, on this one, I understand you feel I mean, you seem to be talking about refinancing in 2025. All these short-term loans are going to be refinanced in 2025 then, right? It's probably tax-share [Distorted Audio]loans.
We've redeemed some of them, especially high-interest rates that we see at every opportunity. This is what we've done back in the last quarter, especially. We've redeemed the high-interest on the hard currency side. In 2025, when I look at our credit limits versus the utilization stock in the local market, it is like a 90% gap between those numbers, and that excludes non-cash loans.
That's why we're really comfortable. The market is open in terms of credit limit utilization. We do not have a large chunk that will come in 2025. We'll manage it in conjunction with our net working capital needs, which is always flexible. And you can juggle between your receivables, extending your payable terms, inventories. And currently, the sell-in/sell-out balance is pretty well, especially on the channels, both in Türkiye and in Europe, most countries. And that's why we can generate cash out of the core operations, plus revolving credits, plus overdrafts, plus bilateral lending. So we really do not expect any major funding issues in 2025.
Okay. So it's basically a comparable capital requirement in 2025.
Yes. Absolutely. Zero.
All right. Thank you very much.
You're welcome.
The next question is a follow-up question from [Unclear name] . Please go ahead. Thank you again.
My question is about my frustrations about the parity side and the raw materials side. What about the labor side, especially in the Turkish side? We have the high service inflation versus maybe lower product inflation. How does it affect your competitiveness in the global area? Do you see any improvement going forward on that side? Because you have a 23% EBITDA margin without one-offs this year. And next, in 2025, you expect some improvements. What would be the main driver of that improvement? Just the base effect, or you expect some additional, the pricing or some overcooking? Basically, I'd like to understand the labor side. How Turkish production is effective? And of course, you have a comparison in your activity in Europe and other markets. So could you just compare the competitiveness in terms of labor cost? Thank you.
I think it's widely known now that the exporters, Poland's exporters, be it on the textile side or be it on the consumer durables and/or automotive, they are suffering from high labor costs in hard currency terms on an hourly basis, and you see the news every day and the questions from the unions or regulators, etc. We do not. I think when I look at the last couple of years, obviously, the increase in wages of most of the workers has been profound and had a profound impact on the profitability and gross profit margins of exporters, and in the back of declining inflation, our expectation is the worst is over on that side. I think, obviously, it will be highly dependent on the political agenda going forward.
Having said that, even if something, a welfare share in the center is factored in, it will be relatively lower compared to the last years where the inflation rates were hovering around 60%-65% numbers. So that's why we also see some signs that, if any, the salary or wage increases are now done on a forward-looking basis on the inflation ratio versus the actual inflation or historical inflation. So there is some understanding, as we see, going forward. But obviously, the levels are pretty high, almost in line with our Romanian and/or Polish operations. It is a general issue which has been voiced over at every opportunity from the exporters. We do not expect any major worsening from that situation. If any, if there is some real devaluation in Turkish lira, obviously, it will have some impact, some positive impact on EBITDA going forward.
But certainly, we are lacking in the turnover base. And there's a corresponding hit if it normalizes going forward above inflation on the bottom line, given hard currency-denominated lending. So it works both ways. There is a short-term impact, and there's a long-term impact. It all boils down to pricing, to be honest with you. If you're able to pass through those costs, then it is relatively easier on the back of a relatively low inflation environment to pass through such prices. I think the channels of all these levels will also normalize going forward. So do not expect, but do not expect a major benefit from that phenomenon or macro tailwind. Our main expectation for the year is from our own synergy production, turnaround operations, and normalization of our operation on the back of integration studies and the ramp-up of recent investments such as Egypt, Bangladesh.
These will really contribute heavily going forward, and if any macro support will come, that will definitely come on top of the numbers that we've already shared in terms of guidance. We can expect that.
Thank you, and one last question about the Whirlpool Beko, which is for Europe operations, I can say. How fast do you think the process goes right now in terms of regulations? Because from time to time, in such mergers or acquisitions, you face some regulatory issues. So far, I think there is no problem. Or in the future, do you expect any difficulties on that, or you expect it smoothly? It's just you're in a process, and sometimes the Competition Board or other organizations delay on some issues. So do you see any risk of slower-than-expected integration?
I think we've come a fair way in terms of executing, especially on the UK and Poland side. As you can follow from press releases, announcements, news, etc., we haven't experienced anything. I think it couldn't go smoother than that, to be very honest with you, and the same applies to Italian discussions as well. As you can see, obviously, operations in Italy are much larger, and it will take some more time, as you can see, but they're always in a constructive way, so we haven't experienced any roadblocks so far, and it's been executed successfully, I might say, and in a very, very short time period, so it's been really accelerated. As you can see, we've completed all major provisioning as of 2024, including the PPA benefit that we got from the transactions.
So it was a clean-up in 2024, which I believe we're starting 2025 with a really clean state. And we will be significantly focused on our core operations, on the operating line items. And we have all the means. We have enough SKUs, capacities, brands I mentioned before as well, and enough human capital. We'll continue to execute on our strategy, but we haven't experienced any major issues so far. So it's going to be successful, in our view, collectively.
And maybe the one last question about the inflation accounting side. Did you make any sensitivity regarding the pace of inflation decline for 2025 in terms of the margin effect? Because right now, we see declining inflation, decreasing declining inflation. So we assume that the effect will be positive on the margins going forward, sector-wise by proportion. Are all other factors the same?
Just declining inflation could have a positive effect on your margins. Is that a fair assumption, or did you make any study on that? That's a fair assumption, obviously. But as I said, it's also a risk classification between the MGL as it pertains to the inventories and the gross profit. So that's why we're trying to mention at the outcome of the webcast the impact of the inventory-related MGL to the margins on a pro forma basis so that you can see that. But it's not merely a request. So when you look at the profit before tax and/or line items that are after MGL, you see the result. I mean, excluding financing expenses, so to speak, and bonds. But when you just only focus on the operating line items, yes, it's a fair assumption.
But you have to look at every part of the P&L just to make a correct approach to the margins that we have and compare it against our historical margins. That's what we're trying to tell both the creditors, the market, and the investors. And that was the essence of our script, if you're all good.
Thank you.
You're welcome. Thank you.
Ladies and gentlemen, there are no audio questions at this time, so we will move on to our webcast participant questions.