Ladies and gentlemen, welcome to Coca-Cola İçecek. Ladies and gentlemen, welcome to Coca-Cola İçecek second quarter 2023 financial results conference call and webcast. I will now hand over to your host, Mrs. Cicek Ozgunes, Investor Relations and Treasury Director. Please, ma'am, go ahead.
Good morning, good afternoon, ladies and gentlemen. Welcome to our second quarter 2023 results webcast. I'm here with Burak Basarir, our Chief Executive Officer, and Andriy Avramenko, our Chief Financial Officer. Prepared remarks will be made by Mr. Basarir and Mr. Avramenko, accompanied by a slide deck. We will turn the call over to your questions. Before we begin, please kindly be advised of our cautionary statements. The conference call may contain forward-looking management comments, including projections. These should be considered in conjunction with the cautionary language contained in our earnings release. A copy of our earnings release and financials are available on our website at www.cci.com.tr. Following the call, a full transcript will be made available as soon as possible on our website. Let me turn the call over to Mr. Burak Basarir. Sir?
Thanks, Cicek. Good morning and good afternoon, everyone. Thank you for joining CCI's webcast. Andriy and I will take you through our second quarter operating highlights and turn straight into your questions. While the business environment continued to be challenging in most of our markets in the second quarter, we've managed to deliver our quality growth algorithm, delivering 3.4 percentage points EBIT margin expansion, reaching the highest ever second quarter EBIT margin of 20%. As you might recall from our previous quarter webcast, Turkey was hit by a devastating earthquake in early February. The repercussions on the economy and consumer sentiment continued in the second quarter. In addition, the severe macroeconomic challenges have continued to impact consumers in Pakistan, with some refreshing news coming later in the second quarter regarding a $3 billion of standby agreement with the IMF.
While many of these challenges had already been included in our business plan, some turned out to be more severe than expected, like Türkiye's earthquake. In this environment, CCI's business model proved its resilience and flexibility to adapt to rapidly evolving operating environments to continue creating value. On an organic basis, CCI recorded TL 23 billion net sales revenue with 56% growth, while FX neutral growth was 41%. Including the results of newly acquired Anadolu Etap in May and June, our reported NSR growth became 58%. On a USD basis, our NSR per case exceeded $2.5 per case, the highest level achieved in the last decade. Pricing was one of the critical factors, as discussed in our quality growth, while improving price, package mix, commodity hedges, and overall effectiveness and efficiency is also contributed.
EBIT grew by 90% to TL 4.7 billion, with a 20% EBIT margin. While the quality growth algorithm was intact, thanks to our proactive RGM initiatives and prudent OpEx management, volume was softer in our key markets, Turkey and Pakistan, which was offset by the double-digit growth of Central Asia and mid-single digit growth of our Middle East operations. Consolidated sales volume was down by 8.9%, while cycling a very robust 25% from a year ago. In line with our effective mix management, the share of IC in the total mix increased by 80 basis points to 26.3%, the highest second quarter IC mix since the COVID pandemic affected the on-premise channel four years ago.
Net income grew by 94%, reaching TL 2.4 billion, thanks to quality growth mindset in everything we do and establish financial management. Our markets have significant organic growth potential. Our number one capital allocation priority is to invest in our existing markets. However, since we have a solid balance sheet with low leverage, a strong talent pipeline, and operational know-how for low per capita markets development, we believe we're well positioned to expand our footprint to new geographies. As a strongly aligned bottler, we have initiated discussions with the Coca-Cola Company regarding the potential acquisition of Coca-Cola Bangladesh Beverages, as we recently announced. A binding decision has not been reached yet, but we believe that Bangladesh would be a perfect fit for our operating geography. On another front, we got one notch rating upgrade from Fitch Ratings to BBB.
This recorded one of the highest spreads to sovereign ratings globally and is a testament to our resilient financial and operational performance in a difficult macro landscape, with ongoing challenges in our key markets. We acknowledge the ongoing macroeconomic and our other external challenges in our geography. Global inflation remains elevated, with exceptionally high readings in some of our key markets, impacting, obviously, consumption patterns. Therefore, we keep our cautious stance on our full year guidance, reiterating the expectations, but highlighting that we know now anticipate the volume growth towards the lower end of our initial guidance. In contrast, the growth and the EBIT margin will remain intact for 2023. Next slide, please. We are happy that our growth strategy in high potential energy category drives results.
On top of the strong growth recorded in the previous years, we have doubled our energy volume again in the 2Q of the year. IC continues its steady improvement, while the total sales category remained flattish versus last year's, due to softer performance in juice. Furthermore, prioritization of multipacks of immediate consumption packages in the future consumption channels, robust on-premise channel execution, and mixed improvement strategy continue to yield positive results across all geographies of CCI, with more pronounced positive results recorded, especially in Türkiye and the Middle East. Accordingly, IC package share increased by 80 basis points and improved to 26.3% in the 2Q of the year. The share of the sparkling category reached 84% in the mix.
The sparkling category declined by 9%, mainly due to Fanta and Sprite's lower performance, while the brand Coca-Cola decline was a milder to 5.9%. In line with our value focus strategy, we continue prioritizing more profitable packs in the water category, reducing water volume by 15%. Next slide, please. Let's talk about on Turkey a little bit. While Turkey has been recovering from the repercussions of devastating earthquake faster than anticipated, the elections held in the second quarter have shadowed the visibility of shoppers in their purchasing power, along with the persistent food and beverage inflation. In addition, sales volume was negatively impacted, particularly in May and June, by the lowest second quarter temperatures recorded in the last five years.
Cycling two consecutive years of high teens second quarter growth, the sales volume of Türkiye operation declined by 9.4% in the second quarter of this year. The sparkling category volume declined by 8.1% on a year-on-year basis, and stills category declined by 3.8%. Energy drinks sales volume doubled on the other hand versus last year, thanks to Monster and Predator brands. The IC segment was resilient with flattish performance. However, the juice category experienced some headwinds. The water category was down by 18.8%, while more profitable IC pack share improved by four percentage points versus last year, in line with our value generation focus.
Performance of on-premise channel and increased share of IC packs performance at the home channel resulted in 41 basis points expansion of IC share in Turkey to 31.4%, exceeding the pre-pandemic levels. In the second quarter, we continued navigating historically high food and inflation, beverage inflation levels. Nevertheless, we managed our dynamic pricing discipline. As a result of our timely price adjustments, effective discount and mix management, and record high share of on-premise channel, Turkey recorded 82.2% net sales revenue growth in the second quarter, and 101.1% improvement in the NSR per case. A slight decrease in the gross profit margin of Turkey operation was offset by the OpEx management. Turkey's EBITDA margin, excluding the other income and expense, expanded by 116 basis points to 14.5%. Next slide, please.
Let me talk about the international operations. In the second quarter of the year, Central Asia continued its strong growth momentum, while the Middle East also grew, overcoming the previous quarter's competitive pressures. Uzbekistan, Tajikistan, and Iraq have posted a remarkable performance within the second quarter on the back of excellent improvement in the execution capabilities. Having dealt with one of the most economic crisis in the history, Pakistan registered a double-digit decline in the industry, while the CCAS volume was also similarly impacted. Central Asia's double-digit growth and Middle East operations mid-single digit growth was partially mitigated this, and total international operations volume was down by 8.7% on a year-on-year basis. The core sparkling category declined by 9.4% amid the lower performance of flavored sparkling brands, while the brand Coca-Cola was relatively stronger.
The stills category was up by 6%, with double-digit IC tea and triple digit energy drink performances. At the same time, cycling 21% stills growth from a year ago. The water category contracted by 6.2% in the second quarter of the year. The share of IC packages in the second quarter was realized as 23.2%, with 153 basis points expansion, due to strong on-premise channel performance and an increased share of IC pack offerings at the home channel. In our international operations, NSR growth was recorded at 44.5%, and NSR per case was up by 58.2%, thanks to the pricing adjustments in line with the inflation figures. Excluding the impact of the currency conversion, NSR was up by 20.5% on an FX neutral basis.
Proactive pricing and effective hedges of commodities resulted in gross margin expansion of our international operations. Accordingly, the EBITDA margin, excluding other income and expense, was also strong, reaching 25.9%, expanding over four percentage points. Next slide, please. Some of the key international markets in Pakistan, the sales, sales volume declined by 27.5%, cycling two consecutive years of solid second quarter performance. Inflation hit 50-year highs in the second quarters, eroding consumers' purchasing power. On top of it, excise tax increases, which required higher than planned price increases, impacting affordability. In the future, we believe the new marketing and consumer reactivation campaigns and the improving economic outlook will reignite the consumer's consumption activity in the second half of the year.
Uzbekistan continues to be one of the fastest growing CCI operations, recording 25% year-on-year growth compared to 29.5% growth a year ago. This momentum is maintained by improving distributor structures, cooler investments into the market, and better execution capabilities. The brand Coca-Cola grew by 28% in the quarter. Kazakhstan continued to deliver strong results, thanks to the well-established execution capabilities and strength of our brands. We operate on the backdrop of a stable macroeconomy. The sales volume in Kazakhstan was up by 3%, driven by 7% growth in sparkling category, which in turn grew on the back of 8% growth of brand Coca-Cola. I will leave the floor to Andriy for the financial review.
Thank you, Burak. While navigating a challenging first half of 2023, we concluded the second quarter with sound revenue and profit growth at the consolidated level. Net sales revenue increased by 58% in the second quarter. Excluding the favorable currency conversion input, FX neutral sales revenue increase was at 43%. This was primarily driven by strong execution in all operations, dynamic, dynamic pricing actions across markets, proactive revenue growth management initiatives, improving on-premise channel mix, and higher IC mix across most of the regions. As Burak also mentioned, we have two months of ETAP financials in our second quarter P&L. It's a profitable business at a small scale. But to provide like-for-like comparison, we also provide growth figures excluding ETAP. As such, organic net sales revenue growth was 56.3% in the second quarter, and 41% on FX neutral basis.
In Turkey, the gross margin decreased by 80 basis points to 33.4% in the second quarter of 2023 due to the lower volume, weakening Turkish lira, and timing of certain cost items, which will normalize during the year. We managed to mitigate this partially with timely price increases and favorable package and channel mix. Our international operations gross margin improved by 565 basis points to 35.9%. This was achieved by disciplined price increases, tight cost controls, and operating momentum in the majority of international markets. Accordingly, on a consolidated basis, gross margin expanded by 322 basis points to 34.9%, both on a reported and organic basis. Moreover, our consolidated OpEx as a percentage of NSR, was realized at 14.9%, improved by 16 basis points year-on-year, thanks to frugal OpEx management.
We achieved 338 basis points year-on-year EBIT margin improvement, reaching the highest ever second quarter EBIT margin of 20%. We had higher interest expenses incurred mainly from Turkish lira borrowings. Accordingly, net financial expenses were higher compared to the last year. Despite that, our net income grew by 94% to TL 2.4 billion in the second quarter. Next slide, please. Our determined focus on per unit case metrics continued to yield positive results. In the second quarter of 2023, consolidated net sales revenue per unit case increased by 57% to TL 47 on a FX neutral basis. Cost inflation continued to be high in our key markets. However, we managed to contain COGS per unit case increase at 50% in this environment, thanks to prudent and proactive procurement measures.
Successful hedging and pre-buying of sugar in international markets, as well as packaging materials such as aluminum and resin across CCI, managed positive contribution to managing COGS per unit case in the quarter. Our effective RGM and frugal cost management of both the COGS and OpEx, have paved the way for another record at EBIT level. Currency neutral EBIT per unit case growth has surpassed the NSR per unit case growth by a good margin this quarter and realized at 83% year-on-year. Next slide, please. In this challenging environment, with extraordinary headwinds in our key operating geographies, we're equally proud of both delivering record high figures of per unit case efficiency metrics and the way we managed to do this. First, our effective mix management has been delivering results steadily over the years, and this quarter was no exception.
We have recorded the highest IC mix of the last four years, reaching 26.3%. Second, our RGM measures to command the right pricing for optimal monetization of the value of the brands we operate, have paved the way for a US dollar-based record in NSR per unit case, with $2.5, thanks to dynamic and database decision-making approach. Finally, proactive cost management and commitment to frugal OpEx mindset, helped in further downsizing OpEx to NSR to 14.9%, which is the lowest figure in the last 10 years of CCI history. As a result, we have realized another record of EBIT per unit case at $0.5 and posted 20% EBIT margin in the second quarter, the highest ever second quarter performance.
While these are new achievements within CCI's own history, we believe CCI has still ample room to grow its per unit case metrics and margins over the long term. Next slide, please. In the second quarter, operating profits was up by 90.5% compared to the same quarter last year. The higher sugar prices in Türkiye and low base effect of second quarter of 2022 for all markets, created a drag on the margins. However, we managed to navigate these challenges with strong operational performance, effective hedging of packaging materials, timely price initiatives, and better channel mix. We also benefited from a favorable currency conversion. As a result, we reported TRY 4.7 billion EBIT in second quarter of 2023, and margin. On to the next slide, please.
As a result of our tight financial policy, the balance sheet health is intact despite the challenging operating conditions. Our net debt is at $518 million, which is 0.75 times of our EBITDA on a reported basis. The ratio was 0.68 times, excluding impact of Anadolu Etap acquisition. While Etap's debt is fully consolidated in our balance sheet, reported P&L includes only two months of EBITDA. Our balance sheet is fit to support our growth agenda. Even considering the planned cash outflows related to the Pakistan minority buyout, we expect net, net leverage to stay below one time, with positive free cash flow generations throughout the year. Our short FX position before net investment hedge is $458 million, which is only 0.9 times of our 12 months rolling international EBITDA.
We feel very comfortable if that short position stays around one time. The benchmark to international EBITDA is relevant, since international operations are constant dividend payers to our Turkey legal entity that carries most of the debt. If we also consider the net investment hedges, our short FX position is only $129 million. Therefore, our P&L is quite resilient to the impact of TL devaluations through FX gains and losses. Thanks to the proactive debt management, the average maturity of our debt is 3.5 years, and 42% of our current debt is scheduled to be paid in 2029. This creates an additional comfort zone to manage and plan our liquidity in the globally tight monetary conditions. Prudent financial management, maintaining healthy balance sheet, and strong liquidity position, will continue to be our financial priorities going forward. Next slide, please.
Finally, a brief overview of our commodity hedging initiatives for the current year and 2024. Although we don't expect an uptrend in prices as severe as the last year, we completed sugar procurement for 2023 for better visibility and planning purposes. On a consolidated basis, we have nearly 100% price visibility for 2023. In markets where the sugar can be hedged, namely Iraq and Jordan, we also covered 75% for 2024 calendar year. For the regulated market, where financial hedging is not meaningful due to local correlation, we are waiting for the crop to have market price visibility for 2024. On the aluminum, 2023 hedges give us 100% coverage, and we started looking beyond 2023 to lock in from favorable pricing levels for 2024. The aluminum hedging level for 2024 is around 40% now.
On the resin, our 2023 hedge coverage is around 86%. We are comfortable with this level for the moment. We have also hedged close to 20% for 2024 resin exposure and monitoring the market to increase the coverage at the reasonable price level. In total, the relatively sluggish pricing trends of packaging material in US dollar terms year on year, help to cycle low base of sugar costs, particularly in Türkiye, and mitigate margin pressures to some extent in Türkiye as well. Now, back to Burak for his closing remarks.
Well, thank you, Andrey. With the mixed feelings today, I need to inform you that this webcast is gonna be my last quarterly update on behalf of CCI, as the CCI CEO. As announced previously, I will move on to another group, holding as of September first, and Karim, who has almost 20 years of diverse experience in the Coca-Cola system in multiple regions, will assume CCI's role, contributing to its future success.
I have always been and will be a proud CCI citizen. We characterize a CCI as a purpose-driven, customer-focused, and diverse ecosystem to create value as we are in everything we do. While acknowledging our geography's challenges, the opportunities to create value are far more significant. I am confident that our digitally enabled omni-channel strategies, strong execution capabilities, and innovative product pipeline will continue to accelerate in our quality growth under Karim's leadership in the coming periods. Once again, I sincerely thank our people for having an agile mindset and being highly motivated in this journey as we strive to realize our vision to be the best FMCG execution player in our geographies. I would also like to thank you, our investors, committee, and all of the stakeholders for sharing and supporting our vision for the future.
Now, I can turn the mic to our moderator and open the floor for the questions. Thank you very much. Thank you.
Ladies and gentlemen, we will now start the Q&A session. If you wish to ask a question, please press star one on your telephone keypad. Thank you for holding until we have the first question. The first question comes from Ece Mandaci from Unlu Securities. Please go ahead.
Hi, first, I'd like to thank Mr. Burak Bey for all his support and wish you success in your new role. Thank you for everything. I have two questions. One is about the current outlook for the Turkish and Pakistan market. We see that there is some volume decline as of the second quarter, but you're also keeping your guidance, so we should assume some significant growth for the third quarter, right? In terms of number of transactions, we are seeing even a better environment, I feel like. Could you please give an update on the demand outlook for, specifically for these markets, Turkey and Pakistan? Second question is about the working capital. We are seeing an increase in the working capital in the last two quarters compared to sales, working capital over sales.
Is that related to the Pakistan business? Could there be some normalization or a decline in this ratios? That would be very helpful. Thank you very much.
Thank you for the questions. First, Türkiye and Pakistan outlook. Look, Türkiye, we know, had a very difficult 1st half, right? We are focused on normalizing and bringing business to growth. There are some signs in July that started improvement. That's why we have confidence, and we have belief that we can hold our overall guidance for the total company for the full year. Pakistan, as we all know, the first quarter was very good, but then in the second quarter, there were some unprecedented events in Pakistan, and the situation is not easy. We worked on sort of stabilizing the, what is happening with the business, with the category, with the industry, and continue to make some gradual improvements.
Pakistan may be a little longer story. We are in a more improvement path in Turkey. Overall, our goal and our plans call for rapid turnaround and coming back to growth in both operations. That's why we are focused on holding the guidance for the full year. Now, in terms of net working capital, there are few items that impacted that number. One of the important ones, as you all appreciate, is that driving top line and the way we drove it, particularly with significant proactive, in many cases, price increases, anticipating the significant deterioration in some of the markets and protecting the business, it sometimes involves some expansion of net working capital, and that is exactly what we did.
There were some smaller items in net working capital, but that is not given a material input. We expanded for the season, and now we are very much laser-focused on coming back to the numbers that we promised. I want to also underline that while we allowed some expansion of net working capital, particularly from the accounts receivable perspective, obviously, it's done in a very disciplined and secure manner, as we always do with the guarantees, pledges, and so on, protecting collectibility of accounts receivable. Next question, please.
Thank you. Yes, the first question comes from Hanzade Kilickiran from JP Morgan. Please go ahead.
Hello, thank you very much for the presentation, and Burak Bey, congratulations for your new role, and best of luck. I have three questions. The first one is about your guidance again. Do you see any upside risk in your EBIT, EBIT margin guidance post, I mean, very strong performance in the second quarter? How was your pricing this year versus the inflation? Because, I mean, you reached a record high revenue per unit case, but I presume this is partially driven by the product mix. I'm trying to understand the pricing pattern, and what are you expecting for the rest of the year. The last one, I don't know if you can, is it possible to give some sort of information about your ongoing talks for the acquisition of Bangladesh operations, and how big is this operation?
Thank you very much.
In terms of the guidance, I mean, with the events in I think in Turkey in the first half, and then gradual recovery at this point, and what is happening, what happened in Pakistan, has continues to happen in Pakistan, I think we will be very cautious in terms of guiding beyond the guidance that we just confirmed. And I think we sort of communicated that volume is sort of on a lower side of the guidance, the EBIT on the higher side of the guidance, but this is as much as we are comfortable to communicate today. Because there is so much uncertainty in the markets, and we are literally redoing the plans very often to make sure that we adapt in an agile manner to what's happening in our key markets.
On the pricing against inflation, I think from our numbers is, should be fairly clear that we took some pricing, add on above inflation in the markets, the US dollar per case average expresses this very clearly. Yes, there is some mix effect, but fundamentals of this growth is also taking pricing in anticipation of in some cases, due to commodities, in some cases, due to inflation and depreciation of the currencies that has, has been happening in the market, in the reported and the previous quarter, but also in anticipation of what may happen. That's why we took pricing at that level. I think it's, it should be evident that we took pricing at and above inflation in nearly all markets.
In terms of Bangladesh, the discussions continue. I think at this point, we disclosed as much as possible, given the level of, sort of, discussions, and as soon as we have more, we will obviously inform you. In terms of what I'd like to underline, obviously it's a, it's a really big country in terms of population. It's a country with very low per capita consumption of beverages, and I'm sure industry figures are publicly available. That's why we see it as a very significant long-term growth opportunity. In the total numbers of CCI, it, it's, it, it may not be, at the beginning, a very large operation, but the growth opportunity is very significant.
Okay, thank you very much.
Thank you. The next question comes from Cemal Demirtaş from Ata Invest. Please go ahead.
Thank you for the presentation. My first question is about the cost base. How do you see the impact of minimum wage increase and some fuel increases on your cost structure? Do you need further increases in the prices going forward, assuming that, you know, the current EBIT rates will remain? That's my first question. The other question is about the, you know, the summer trends. You mentioned, so, you know, Ece also asked also, but I'd like that, how do you see the trends in the tourism side? Because in tourism times and the hot summer, did you see any momentum in July and August? That's my second question. Congratulations to Burak.
It was very great to know you for a long time, and I also wish you the best. You are one of the best examples with consistent presentations. Thank you once again from the analyst and possibly from the investor's perspective. Thank you.
Okay, let's talk about cost base. I assume there's a question about Turkey. It's 35% of our business.
Yes.
In terms of the minimum wage and fuel, let's kind of take it step by step. Obviously, with the inflation that is present, right? Also which means the prices in the market increase for FMCG products, as well as compensation, salaries and benefits, and so on, increase in different companies in different places, or costs of people increase. This was something that we should forecast more or less, and so it's in our plans, and it has been sort of taken care of in our plans. In terms of fuel, this was more of more surprise than a minimum wage increase, let's put it this way.
Also we are processing those, and that's why the certain price increases that we have taken and so on. We are, we are focused on maintaining both return to growth and margins, obviously. Now on that side also, I would like everybody to think about what minimum wage increase does for the demand. From that perspective, it's actually a positive sign for us. In terms of the minimum wage and salary increases, we more focused on not on a cost input on us, but more on a demand potential that it creates for us. For us, from our perspective, it's net, net positive news. Fuel obviously is a, is a significant item, and as I said, through our price policy and focus on the margins, we are, we are managing that challenge.
We, we do not see it as a, going forward, as something that is materially, sort of, detracting us from achieving our goals for the year. In terms of the summer trend, yes, hotels are full, tourists are here. It's very good. It's good for Turkey. It's good for Türkiye, good for economy, therefore, it's good for us too. I just wanna emphasize, we consistently say this, that while tourist consumption is a small positive for us, where we see real positive from tourists is from general economic activity and general economic development, and demand for our secondary demand for our products from people who actually earn tourism and support tourism industry and so on. We see it as a net-net positive.
Tourism itself, yes, there is a good demand and, but this is, this is the primary input is relatively smaller for us than the secondary input from tourists, where we have a more broad-based demand for our products from, Turkish population.
Thank you. Thank you. The next question comes from Antonio Gomez, from Ninety One. Please go ahead.
Hi, thank you for your time. I was just wondering if you could elaborate a little bit more on the working capital point that you made. Are you implying that there's been a, you've seen a slowdown, a further slowdown in demand going forward and thereafter? Kind of how's your plan to get it back to, you know, what, the guidance of low single digit working capital to sales, given that it's seasonally -- it's even if, even though Q2 is seasonally, a more working capital intensive quarter, this quarter was exceptionally higher?
Yeah. Our networking capital, as you know, and our sales and so on, and, sort of so-called sell-in, so what we sell to the, to our distributors, to our dealers and so on, those who get some credit, it's at the peak of, well, at the end of first quarter and throughout the second quarter, right? We are going through right now, we, or we are reporting on a quarter where naturally our sales are highest, and, as a result, our sort of networking capital, if we- when and if we choose to use it as a lever to support, and in this case, we did for the pricing that we wanted to realize and, to maintain, sort of, high presence on the shelves and so on, and throughout the value chain, we chose to do it.
That subsides in the third quarter, and then it will be wrapped up in the fourth quarter. This is a natural cycle for us, and we are, as usual, in the third and fourth quarter, we start receiving cash from the market, and this is what will be happening and is happening right now. We do not see, at this time, a significant issue in this area. We're working on bringing it to the numbers that we, sort of, we guided you, in the past. It's all about collections.
Okay, thanks.
From the market at this time. Yeah.
Okay. Yeah, no, that, that makes sense. It is, it is seasonal, but it, it's substantially higher than... the jump between Q1 and Q2 of this year was substantially higher than it was in previous years, even on a U.S. dollar basis, which is why I'm asking. The second question I had is, on, you know, your financial strategy. You acquired ETAP in the second quarter. I'm just wondering, you know, what, given that your leverage is already quite low, what are you planning to use your free cash flow on going forward?
Yeah, our capital allocation, I think, is very transparent. First and foremost, we will continue to invest in our existing business. We grow the core, right? We have literally unlimited opportunity for our lifetime to grow business, core business in our existing territories. This is our primary focus, so whenever we see the opportunity to invest, we do invest. That's why our, we have the ensure significant CapEx as we guided, and we will continue to invest in our existing business. While there is a temporary slowdown or even decline in Pakistan, long-term Pakistan is a promising operation. We, we see high double-digit growth in Uzbekistan, and so on. Kazakhstan continues to grow, and it's a large business, and so on. We continue to invest in our core. This is, this is number one priority.
Second, we have capabilities, know-how, in terms of operations, in particular commercial operations, people are the best strengths to expand the business. This goes into different ways. In some cases, this is adding Monster energy drinks across our territories or starting Costa business in Turkey. In some cases, it's adding new territories. On acquisition side, you know, we have a pending closing of acquisition of 50% in Pakistan from the Coca-Cola Company that we intend to close as soon as possible this year. This is, this will require some deployment of capital, we are in discussions with the Coca-Cola Company to acquire Bangladesh, as we communicated earlier, this is another expansion opportunity.
Taking into account the tremendous growth opportunity which is there, going forward, we will need to invest into expansion to support that growth in that market. We are always on the lookout for reasonable fit for our business, what we can add to our portfolio in terms of territories and businesses. We are very prudent in terms of what we do, as I think the track record shows. We are very choiceful. We make very few transactions, with a very clear visibility on how we will create returns and net, sort of, base average or returns above base average cost of capital in the foreseeable future.
We will continue to look out for those, and we have an active dialogue with the Coca-Cola Company to make sure that we are within the consideration of their plans also, on the territories that make sense and fit from our capabilities perspective and geographic adjacency perspective. Now, beyond the expansion, we obviously focus on returning capital to our debtor, to our sort of. From financial point of view, repaying our debt as well as paying dividends. This will continue going forward. The leverage is important, and whenever we make acquisitions or significant investments in expansion, we are laser-focused on keeping EBITDA, or debt to EBITDA multiple to lower levels.
As we always talk about it, in our markets, it's very important to have very strong balance sheet and a relatively lower indebtedness to make sure that we can withstand any type of shock that can come in our markets. Our dividend policy is very clear. We will continue to pay and increase dividends going forward, so that's, you know our historical trend.
Okay, great. Thank you.
Thank you. Ladies and gentlemen, I would like to remind you, if you wish to ask any further questions, please press star one on your telephone keypad. Thank you. The next question comes from Hanzade Kilickiran from JP Morgan. Please go ahead.
Andre, I, I have a technical question on FX gains, if I may. I see you have carried nearly TRY 0.5 billion from comprehensive income to P&L. Will this continue in the rest of the year in case of stable FX? I, I, I'm trying to understand the technical drivers of this move.
I do believe this relates to the to the to our capital movements between the capital Movements of capital between our subsidiaries. So, this should not be a recurring item from that perspective. We financed Anadolu Etap, right? And this was the input from that movement. We brought capital to our Turkish subsidiary and then invested in Anadolu Etap. So from beyond that, this is sort of a one time impact, so I would not assume it as a recurring item.
Okay, thank you very much.
Thank you. Ladies and gentlemen, there are no further questions. Dear speakers, back to you.
Everybody, thank you very much for your kind words to me and your wishes. I would like to once again thank you each and every one of you. Maybe, you know, we've known each other for a long time, you know, since we did the IPO. I'm sure, you know, we're gonna be meeting again, you know, when I transition into another group. Once again, thank you for your interest in our company in CCI, and then we would love to catch up with you in others webcasts and occasions, and wish you all a great day. Thank you very much for your interest. Thank you.
Ladies and gentlemen, this concludes today's conference call. Thank you all for your participation. You may now disconnect your lines.