Ladies and gentlemen, thank you for standing by, and welcome to Doğuş Otomotiv's second quarter 2025 conference call on the 20th of August 2025. Please note that today's conference call is being recorded. After the call, there will be a chance to ask questions. At this time, I would like to turn the conference call over to the company's CFO, Mr. Kerem Talih. Please go ahead, sir.
Thank you very much, David, for your introduction. With our greetings in the name of Doğuş Otomotiv to all the participants. We are happy to welcome you all to our investor relations presentation for the outputs of the second quarter of this year. Considering that the presentation has been revealed beforehand, I am not going into the further details of some areas like sustainability or market information. June and Turkish automotive markets has already been revealed almost more than 10 days or two weeks ago. Instead of this, I will give more time for our operating financial outputs. After the recent interesting developments that happened this second part of this year. There are two good news that in our summary is that we are providing mainly maintenance of private three direct representations in Middle East and Europe. [audio distortion] Agreement with an Australian company in Iraq.
We will be expanding to strength Turkish markets. [audio distortion] Second, we have a letter of intent with some reason. These are two developments that we are happy to announce. As important as them or even more important than them, in line with our strategic alliance with Volkswagen AG, knowing that last year we have celebrated the 30th year of our distributorship as the sole representative of Volkswagen Group in Turkish markets. As an output of our continuous good relations with them, we also signed a letter of intent with the OEM in a way that Doğuş Otomotiv is going to be appointed as the distributor in the markets of Republic of Azerbaijan and Republic of Iraq, respectively. This is an important and major development for us and we are proceeding with the detailed organizational structural preparation, so on and so forth.
We will be informing our shareholders respectively when material developments arises. Coming to important takeaways. Our sales performance at the end of June this year is more than 10% better than the performance of the previous year, together with the sales performance of Škoda, and we have exceeded a sales volume of 93,000 units. Coming to sustainability, our risk score in Sustainalytics ESG score is better off as compared to previous year, and our risk score has diminished 2.5% to a level of 8.2 over 100. For the first time, we took our place in the Financial Times Sustainability Good Emerging Index , that we are doing our very best to be able to comply with the international standards in terms of sustainability and in the related fields. Coming to the financials.
I will just skip this part because I am going to go into further details in the financial part. Coming to automotive market. As I have said, I will go very briefly over it, knowing that the market performance has already been viewed respectively. Just as a glance of the performance of the July stand-alone performance, the size of the market has reached to a level of 107,000 units, which is the highest performance of this year. At this point, we must note that the rumors, or I am sorry, not the rumors, but the plans of the fiscal authority to increase the Special Consumption Tax for vehicles was already in the agenda, and it was waiting to be announced. So before the legislation has been activated, there was quite an increased demand to be able to buy the vehicles when they are relatively with the lower Special Consumption Tax rates.
In that respect, the performance of July was much beyond expectations. At the end of June, as you can see, the market is still performing better than the previous year, 5% better than the previous year, and to a level of 622,000 units. Among which we have sold, together with Škoda, almost 90,000 units. As you can see, as compared to previous year, our performance is better than the performance of the market itself. As have already been noted, the changes in the Special Consumption Tax regime, as you know, almost has turned out to be 80%, and mainly for EV cars. The Special Consumption Tax has been increased from 10% to 25%, so there is a 15% increase. Also for internal combustion engines, there is an average increase of more than 10%- 15%, respectively.
When we just monitor the market, the average price of the related vehicles has, let me say, more than 10%, which also had an influence on the second-hand and used car market, that there is an average price increase of 3%- 5%. That I would like to note at this point. Also, at this stage, as you can see, the performance of EV sales has reached a level of more than 85,000 units, which is definitely more than 3x of the previous year. So in the total market, the share of EV cars is 13%, and for Doğuş Otomotiv, it is around 5%. So, in line with our strategy of the OEM that we are following the developments in the market. In terms of market share allocation, we are ranked at the end of June.
We are ranked at the second position with a market share of 14.6%. Coming to July performance, which is that I prefer to go into the details since this is more up-to-date information. The retail market has reached a level of 733,000 units, 6% better than the previous year. We have exceeded, or we have almost touched 105,000 units. Among which, the EV share in the total market is 14%, and for Volkswagen Group, it is still 5%, respectively. Coming to, s orry, next page. Coming to the breakdown on brand basis. As you all know, our leading volume brand is Volkswagen passenger cars, and Škoda, and Audi respectively, which is followed by light commercial vehicles. As you can see, there are certain decreases in sales volumes. For Scania, it is stemming from vehicle availability.
For light commercial vehicles, it is almost same as the previous year that we are going to close this gap. For SEAT, as you can see, it is substituted with the increased sales volume of CUPRA respectively. In terms of market share allocation, again, at the end of July, we are still ranked as the second company in the market after Stellantis Group, with a market share of 14.4%. Coming to financials, our revenue, which was more than TRY 100 billion, has increased slightly to a level of 2% increase, so a level of TRY 105 billion at the end of second quarter. Our EBITDA and net profit are respectively lower than the previous year, despite the fact that our working capital and total assets have increased more than 20% and 14% respectively.
The major determinants of this issue is stemming from three or four major points. Number one, which is not only valid for Doğuş Otomotiv, but which is also valid for the whole Turkish automotive market, namely the normalization of gross profit. Just to refresh olden memories. The gross profit performance of year 2023 and 2024 was the highest years in terms of gross profitability. In that respect, we should be aware of this information when we are comparing the performance of the previous year. At this point, our gross profit margin is still better than the average of the historical performance of the company. Gross profit is definitely lower than the performance of the second quarter of this year or the whole year of year 2024, respectively.
The second influencing factor is the inflation accounting, that I will come into the details of it in the following page. The third influencing factor is the increasing in total financing costs, mainly which is driven by the foreign currency loss, amounting to almost TRY 2 billion, which is stemming from the devaluation of Turkish lira, driven from the foreign currency-based borrowings. Fourthly, as I have already provided the related details at the end of first quarter, in line with our social charity contribution program, we have taken over the responsibility to construct 1,000 flats in the earthquake region in the southeast part of Turkey, in Hatay. There is an incremental TRY 2.4 billion, one off effect in the body of total administrative expenditures.
In this graph, we try to consolidate all the variance factors that reconcile the profit of previous year at the end of June to the profit of June year 2025. At the first column, as you can see, the historical profitability performance was TRY 5.2 billion, which was indexed because of inflation accounting, and an additional TRY 1.8 billion is included. The historical comparative net profit figure has increased to a level of more than TRY 7 billion. The decrease in gross profitability that I will come in the next page, relating to the information of profit percentages. The normalization of gross profit has brought more than TRY 5 billion less income. The changes in operational expenditures is TRY 1.1 billion more than the previous year.
Among this, as you can see in the bottom of the page, in the footnote, the influence of sociocultural donations to Hatay region is TRY 2.4 billion. If you just eliminate this, the total variance would [inaudible]. The other influencing factor which worked to our advantage is the income deriving from our affiliated companies and business partnerships, which is more than TRY 1 billion. As I have already explained, the change in the financing activities is at the level of TRY 2.3 billion, among which TRY 2 billion is stemming from foreign currency loss. In line with all influencing factors, the change in the monetary gain and loss to our favor is TRY 1.3 billion less than the previous year. There are two influencing factor among this. One is the lower inflation rate, which decreases the indexation coefficient.
The second one is after the dividend payment and relatively less profit of the year, the index shareholders equity is relatively lower than the performance of year 2024. As a result of it, the lower profit drives less taxation. So we are going to pay TRY 2.1 billion less taxation. At the end of the minus and positive effects of those factors, we end up with a net profit of TRY 2.7 billion at the consolidated level. Coming to margins, as you can see, and just to refresh the memory of some, by the way, we have reached the level of more than 40 participants, and there may be newcomers in that respect. I just would like to remind the information that the historical average of our company's gross profit margin is around 5%-8%.
As I have said, the historical performance of 16% of year 2024, and in year 2023 it was more than 20%, which was the perfect storm that I named perfect storm conditions, within a period that there were lack of supply and enormous demand in the market, which was pent up. In that respect, noting that there is almost more than 5% decrease in gross profitability as compared to the second quarter performance of last year. Attaining a level of more than 10%, and especially at a level of 13.2%, is really a very successful result for our company, which is definitely much beyond the historical gross profitability margins.
Coming to OpEx over sales, our historical average. Again, at this point, I must note the importance of inflation accounting, because all the historical P&L figures are indexed to be able to represent them with the purchasing power parity of June in 2025. In that respect, this is also increasing the OpEx over sales performances. So within the body of [EE], both year 2024 and also both 2025, we have the influence of these sociocultural donations. In year 2025, the magnitude is TRY 2.4 billion, and last year it was TRY 1.3 billion. When we eliminate these two factors, the OpEx over sales figure is two point something level, which is definitely lower than the historical average of 5% of our company's history. Respectively, our margins are 7.7% and 6.3%. After taxation, our net profit margin has ended to a level of 2.6%.
Just to repeat those four influencing points is the normalization's gross profitability, increase in our foreign currency loss, increase in donation expenditures in the body of operational expenditures, and also the influence of inflation accounting coming from indexation are the most important driven factors at this stage. In fact, after giving all the related information relating to margins and also major P&L components, at this point, I do not have much to note in the detail of our income statement, knowing that I have already explained to you the important influencing factors. Coming to the performance of our associates, there are also good developments here. As you can see, the performance of mainly VDF company has proven a TRY 1.3 billion development. The contribution, which used to be TRY 1 billion negative, has turned out to be positive.
The almost 50% decrease is stemming from the effects of inflation accounting and also the deferred tax adjustments in the IFRS arena. Other factors are respectively not material in the body of our consolidated scheme. Having a look at the balance sheet. As you can see, we are experiencing an expansion in our total working capital, which is mainly stemming from, the increase in the total balance sheet side is stemming from the increase in the total working capital development. As you can see, despite the fact that we have less cash as compared to the year end, knowing that we have paid our dividends, the cash at the end of the year had been spent to be able to subsidize dividend payment. Our trade receivables are almost at the same level, but we have considerable amount of higher inventories.
When you just consider the graph at the right side of the page, the number of inventories has increased almost, doubled itself to a level of more than 15,000 to a level of 27,700 units. The reason beyond this is the normalization of sales, not only for Doğuş Otomotiv, but for all Turkish automotive markets respectively. Because as we are always trying to explain, a distributor company in such scale and magnitude should definitely be carrying a volume of inventories that will cover the sales performance of the forthcoming two months sales performance. In that respect, the turnover rate last year was quite high, which ended up with a lower inventory level. But having doubled it does not create any problem for that.
Also in the body of our total balance sheet, as you can see, the total liabilities has increased to a level of more than 40%, which is driven from the need to finance working capital requirements and some proportionally to subsidize the dividend payment. Coming to the details of the financing costs. As you can see, the main driven factors are the foreign currency loss coming from foreign currency borrowings, and also increase in the financial expense, namely the interest expense. Because at the consolidated level, the total borrowing of Doğuş Otomotiv consolidated balance sheet, our total borrowings has increased from TRY 14 billion to TRY 22 billion . That, as I have already said, which is in line with the expansion in the working capital requirements of our company. But also at this point, I must emphasize the fact that we are executing a very cautious financing and management.
From time to time, our level of liquidity may increase to a level that the liquidity may pay like 25%-30% of our total debt. In such volatile market conditions, we are on the edge of being cautious and to be ready for tactic market developments. Coming to financial performance at the last page. As you can see, our turnover in receivables has decreased from 31 to 27 days, which is a slight deviation. The major deviation in inventory turnover from 36 to 81 days is in line with the normalization, because there is more supply and less demand as compared to previous year. Last year, it was not easy to acquire a vehicle in a couple of months.
In that respect, all the vehicles that had been imported was invoiced to the dealer, and also used to be invoiced to the final customer in the retail area. Respectively, our payable turnover has increased to 61 days. As I can easily say that, these are all expected outputs in line with our financial and operational performance. At the end, our capital expenditures, in terms of million Turkish lira, is TRY 1.6 billion, which is almost the same, quite less than the previous year. Return on asset is 4% level, lower than the previous year. There are two factors. I have already spoken about the developments in P&L. Coming to balance sheet, the size of the balance sheet has increased in line with the increase in the working capital, and respectively, return on asset.
The decrease in the return on asset is an arithmetic output of what we have explained so far. Coming to sustainability and corporate governance. All those pages and affirmative information is the same as the end of first quarter. In that respect, to be able to put more time for your probable questions, I just would like to skip to the final page relating to 2025 expectations. By considering the performance of the first half of year, we have updated our market size and our sales performance to a level of 130,000 units, which used to be around 110,000 units without Škoda. When we add Škoda, it would definitely be more than 150,000 or 160,000 units, hopefully and inshallah, within a market which is definitely expected to be at a level of 1.2 million units.
We will continue to do our investment expenditures, either some digitalization, infrastructure, and test cars. Also, we will be keen on making the related investments in the electric vehicle charging stations, respectively, in line with the expansion of our sales performance in such fields. This is all from my side. We are more than happy to answer your questions if you have any.
Thank you. Thank you very much for the presentation. We will now be moving to the question- and- answer part of the call. If you have any questions and you are dialed in via the phone, please press star two. Press star two on your phone keypad. If you are dialed in via the web, you may also ask a voice or a text question. We will give a moment or so for the questions to come through. Once again, if you are connected via the phone and you would like to ask a voice question, please press star two on your phone keypad and wait for your name to be prompted. If you are connected via the web, you can also ask a voice question or send your question as a text.
Or later you can contact us by phone or by email. We are always ready to answer your questions.
Yes. We have one voice question from Cemal Demirtaş from Ata Yatırım. Please go ahead, Cemal. Your line is now open.
Thank you for the presentation.
[Non-English content]
[Non-English content] Kerem. My question is on the outlook. We see some tax increases. How does it go so far in August? What are your perceptions about the consumer trends on your side? That is my first question. Going forward, could you make any comment about excluding TFRS 29 numbers? How could it be in that case? Again, for the outlook, where do you think the margin approach going forward at a sustainable level? Thank you. Maybe last question is about this real estate site. Could you make any additional comment on that? Because now there is a part in your numbers with that acquisition, maybe if you could comment about that too, it will be helpful. Thank you.
You are welcome. Thank you very much, Cemal, for your questions. As I have tried to explain, the performance of July, with the expectation that Special Consumption Tax will definitely be increased, that we already had it, has just boosted the performance of July. So which definitely had driven some future demand to present day. But as of August, our sales performance almost at the mid of third week of August, is totally in line with our budget. By the way, this budget has been made at the end of May or at the beginning of June. So at this point, the influence of Special Consumption Tax had not been considered in a way that. So in a good scenario basis, our sales performance within our budget has not been adversely affected.
Knowing that the market has already reached to a level of more than 700,000 units at the end of July, reaching to a level of 1.1 million, 1.2 million can be named as a reasonable or easy target that we can achieve. Relating to the influence of inflation accounting, let me go to the reconciliation page. In fact, technically speaking, I can say that it may not be so healthy or in terms of competitive reporting standards, would not be so correct to speak about a figure without the effect of inflation accounting. But when you just had a glance of the reconciliation page, TRY 1.8 billion is coming from the indexation of previous year. The historical figure was TRY 5.2 billion.
There is not only relating to inflation accounting, but one time effect of this sociocultural investment is so important and material even for a company in the size of Doğuş Otomotiv . TRY 2.54 billion is coming from there. Also, minimum TRY 1 billion is coming from the indexation or our operational expenditures. So when you just add those figures, it turns out to be minimum TRY 6 billion, that without the effect of inflation accounting, the end of year performance would be more than TRY 8 billion. Relating to the consolidated company, Doğuş Real Estate company, I can say that there is no new news or specific thing that I would like to note on that. They are continuing their operations.
We are one of their major customers, and in line with some new real estate developments, we are planning to structure them in the body of our affiliated company. Sorry, what was your fourth question? I might have skipped that.
Sustainable EBITDA level going forward, Kerem Bey. Sustainable EBITDA levels in the new balance. Historically it was lower, and then it went up. Now, where do you think it should be staying when the things settle in terms of inflation? What is the reasonable level going forward?
In terms of gross profitability, knowing that we are for the moment at a level of 13%-14% at the consolidated level, and knowing that without this one-time effect of these sociocultural changes, our operational expenditures over sales is around 4%. So a figure of around 8% is a kind of normal EBITDA percentage for us, I can say. We will be doing our best to be able to sustain this figure.
As a follow-up related to your income from associates. TÜVTÜRK is coming down. When does it end? The TÜVTÜRK thing.
In August year 2027.
2027. Until then, we are going to see the demand on those sides, right? There is no decline in the income from there going forward.
Yeah, because they are continuing their vehicle inspection services in Turkish automotive market as the sole distributor. For the coming two years, they will continue to do so. In that respect, this consolidated contribution is not expected to go down. Knowing that at the end of the tender, there is going to be a new player effective from September year 2026, 2027, I am sorry. Then at this point, we will be seeing probably some positive contribution, knowing that this company already owns the majority of the working stations in terms of the available assets.
Thank you. One last thing about EVs. We see some price increase after the tax decision, like around 18%, 20%, 25%. How did it affect your sides? Because the major increases EVs in Togg or the Tesla or the others.
Not to a material degree, I can say the sales performance because when their Special Consumption Tax was around 15%, they were definitely relatively so cheaper than ICE cars, and it is still the same. They are still relatively cheap internal combustion engine. In that respect, we are not expecting a major shift in demand.
Thank you, Kerem Bey.
Because not only the Special Consumption Tax of EVs has been increased, also the minimum tax rate had already been increased to 80%. So the average price index of the Turkish automotive market, including EVs and ICEs, has increased respectively.
Thank you.
You are welcome.
Okay, thank you. Thank you very much. Just a reminder, final reminder to the rest of the participants. If you are connected via the phone, please press star two on your phone keypad and wait for your name to be prompted. If you are connected via the web, you can also ask voice question or send your question as a text.
I think
Yeah, we are seeing no further questions, so I will pass the line back to you, Mr. Kerem, for your concluding remarks.
Okay. Thank you very much for all the patience, all the I am the pilot, I am the passenger. I am in the plane, by the way. Just kidding. Thank you very much for your time and for listening to us. Hope to see you in the next [audio distortion]. Bye-bye.
Thank you. This concludes the call for today. Thank you and goodbye.
Bye.