Ladies and gentlemen, thank you for standing by. I am Kelly, your Chorus Call operator. Welcome, and thank you for joining the Ford Otosan A.Ş. conference call and live webcast to present and discuss the first quarter 2024 financial results. At this time, I would like to turn the conference over to Ms. Gül Ertuğ, Chief Financial Officer, and Ms. Bahar Efeoğlu Ağar, Head of Investor Relations. Ms. Ertuğ, you may now proceed.
Thank you very much. Greetings to you all, and thanks for attending our call. Welcome to our 2024 first quarter financial earnings presentation. In this call, I will have my team with me, Bahar, Ünal, Duygu. Together, I will first start by giving the key highlights on the first quarter. We will follow on with Bahar on the details of the performance. We will touch on certain key achievements since our last meeting with you. We will go through the detailed financial results, and at the end, we will provide you with our guidance and open up the space for questions and answers. If we proceed to the next page, please, Bahar. Thanks very much. After an all-time record year in 2023 in Turkish automotive markets.
Coming to 2024 first quarter, we see in the industry that the domestic sales also increased around 24% growth in the first quarter. Within the industry, the increase, this growth is mainly coming from factors such as the base price increase in the Special Consumption Tax exemption, which was applied to the disabled individuals. This supported demand. Also, you know, we had the local elections, and before the local elections, there was a period for pull forwards of the domestic demand in the pre-election periods. Of course, we are seeing the tightening of the monetary policy with the new macroeconomic precautions taken. But the pre-election period, we have witnessed some demand increase. Also we can say that all of the OEMs operating in the market had improved vehicle availability.
The combined effect of all of these actions has turned the market into a demand-driven market rather than a supply-driven one. In this environment, if we look into Ford Otosan's performance, our domestic sales unfortunately decreased by 8%. If you compare our market share with respect to the same period results of last year, in fact, it reduced to 7.9%, from 10.5%. The key reason to this action was in fact the launch of our Courier vehicles within our Craiova plants. You will remember from the last talks with you, unfortunately, we had suffered some launch-related issues and some launch deferrals at the end of the year. Within this quarter, the distribution of the vehicles from Craiova to export markets was okay.
However, the pipeline filling within the Turkish domestic market was falling behind our expectations of our projection. That's why we had a market share drop on the LCV. What I can say is, as now we witness the results of April and the ongoing trend in May, we can very happily see that the vehicle has made its way into the market, and it is being perceived in a quite positive way. We are expecting to reverse this action. The bad news of market share that happened on LCV, we do not expect it to continue. This was the issue with the extended ramp up.
Also in Ford Trucks, we have witnessed lower year-over-year sales in the same periods due to the increased vehicle availability and I would say a fiercer pricing environment, competitive, much more competitive environment in the market. The MCV segment, this is our most healthy and most successful segment. Our sales almost doubled in MCV. For the MCV segment alone, our market share reached to 35%. Overall, commercial vehicle market share ended up being 22.5%, and we are maintaining the third position in the ranking within the market. Our renewed products, flagship products of Transit and New Custom, are very healthy. They are perceived very well in the market.
Also, the passenger vehicles, our sales on the passenger vehicles went up 60% year-over-year as a result of the better availability in our entire product lineup. If we look into the export markets. In the export business, our total sales volume increased by 11%. This is also a sign that the demand for the new, newly launched vehicles of Custom and Courier, the demand is strong over there. If we look into the capacity utilization ratios, as the launches come into the picture, the pace of production has increased to the expected levels, the projected levels, and this shows its result in the capacity utilization rate increase, which is above 90% in our plants.
The only exception is the Eskişehir plant. Over here, in fact, for the truck business, we were also undergoing an important regulatory change. The ADAS advanced driving assist technologies related HCV launch, we had some deferral on that one. That's why you see the capacity utilization a little bit less than the other ones. Now the launch of our ADAS units and the launch of our F-LINE is in place. Over on the HCV segment, the truck segment, we have a very strong and healthy product line ready. As a result of all of these combined actions, if we look into our EBITDA and PBT per vehicle, we see around EUR 1,800 and EUR 1,700 respectively.
I have to state that 2023 was an exceptional year. In fact, in our earlier talks, we had highlighted to you that this exceptional results we are projecting some level of normalization on this. We see that impact on the realization of the 1Q final financials. We said that there is the shift of the overall product mix is moving in the direction of exports, where exports are a little bit less profitable than the domestic markets. Within the domestic market, there is better availability for all of the demands, and this is putting a pressure on the pricing ability. Also, as we see the macroeconomic mitigating factors to combat inflation, we see that the financial expenses are increasing with the interest rate hikes.
Also, even though these actions are moving along, currently, there hasn't been a big drop yet in the inflation. That's why the labor and production processing-related costs are subject to high inflation still. As you very well know, at the end of the year, we had moved into the inflation accounting. As we roll the impact of the inventory carrying into our financials, we see that the cost of goods sold related numbers are deteriorating, then we also include that impact. Overall, I should say that still, given these conditions, we have managed quite a healthy quarter. If we move to the next page, I would like to just very quickly touch on our position, our production position and presence in both Turkey and Romania.
In this period, we continued to be the biggest auto producer in Turkey, and we have been the second largest producer in Romania. The three-quarters of Turkey commercial vehicle production is conducted by us. Fourth commercial vehicle sold in Europe, this success is due to our plant. Having said this, I'd like to leave the floor to Bahar for further details in the results. Please, Bahar.
Thank you, Gül. Hello, everyone. Thank you all for joining us today. Let's take a look at how we and the domestic market perform in the first quarter after a record year. As a general view, a normalization is expected for the market in 2024 after all-time high sales last year, also Gül mentioned briefly. We also considered this correction while shaping our guidance, which we shared with our year-end financials. However, despite strong base year impact, in the first quarter, the market grew by 24% year-over-year. We believe that three main reasons support this performance. First of all, we have seen a pull-forward demand in the pre-election periods due to further tightening in the macroeconomic environment. Other reason can be counted as the improved better vehicle availability in the market.
The last one is the disabled citizens and their relatives were benefiting from the increase in the base prices for the special consumption tax exemption. When we look segment by segment, we see strong growth in both passenger and medium commercial vehicle sales, which 33% and 63% increase respectively. We have seen around 25% and 13% decline in HCV sales. We believe that the main reason behind this performance was the lower availability in those segments. On the other hand, in line with the assumptions, it seems that the correction in the market started with the 22% decrease in sales in April, and this trend may continue April onwards. We will follow the development in the upcoming months closely. Let's see how Ford Otosan perform in this market environment.
In this period, our domestic sales slightly decreased year-over-year, and we maintained third position with almost 8% market share. On the other hand, our market share in total commercial vehicles declined year-over-year, and we attained around 23% share despite our strong sales in MCV segment with our flagship products, best-selling products like Transit and our all-new Custom, new generation Custom. I should say that this performance was primarily driven by the lower availability in the HCV segment, in our HCV sales, due to the extended ramp-up period of our new Courier. We expect better HCV sales in the coming months, which was already starting to recover in April.
You can see it from the recently announced Automotive Distributors Association's data as well. Additionally, although the competition has increased and the pricing ability has decreased in the market in this period, our profitable focus in passenger cars and profitable growth strategy in commercial vehicles has continued. Let me also give some update on our main export markets. When we look at the first quarter figures of ACEA, despite again strong base year in the European markets, 12% and 5% growth was recorded in van and passenger vehicle markets respectively. According to the recently announced data, which was announced today, the growth has accelerated in April in passenger vehicle segment. We can say that rising fleet demand, improved vehicle availability and aging vehicle park, this is valid for both van and PC segments.
In Europe, they are also effective in this performance. In this environment, Ford was able to sustain its leading position in the commercial vehicles market with the support of our products, our renewed products actually. Proud to share that as of Q1, as for Otosan, we produced 73% of Ford's European CV sales. Also from passenger vehicles contribution perspective, we continue to contribute Ford's performance with our best-selling Puma model, which is the smallest SUV in PC segment. We were producing 88.8% of Ford's PC sales in Europe in this period. Within this year, by gradually launching our zero-emission models, zero-emission variants in Custom, Courier and Puma, we expect to support Ford's performance in also electric vehicle market as well.
Before hand over to Gül, once more, I would like to highlight our efficient, flexible, low cost, high quality production and engineering capability. Considering the current pace of electrification, with our fully integrated manufacturing centers, we should keep this in mind that we are able to produce ICE plug-in hybrids and all-electric models on the same platform, and we do not have dedicated investments for electric vehicles. Thank you all for listening. Gül, the floor is yours. You may continue with the other parts.
Thank you. Thanks very much, Bahar. I think Bahar made a very nice gesture. There is on the screen now you are seeing a result we are collectively, the entire Ford Otosan team is very proud of. We have successfully completed our inaugural Eurobond issuance in Ford Otosan's history for the first time in April. We have issued our $500 million dollar Eurobond targeting foreign investors with a five-year maturity at 7.125% interest rate. This is a five-year maturity 144A/Reg S Eurobond. With this milestone, we also I'd like to thank the team for their hard work, and I'd like to once more welcome all of our investors in this audio call.
We see not only equity investors, but also debt capital markets investors. Thanks again to them. We were rated by Fitch Ratings as BB+ and by S&P with BB-. Within this journey, we have organized roadshow meetings in London, New York and Boston with the participation of over 75 institutional investors. At the end of this roadshow, we received demand exceeding $1.5 billion, and we were able to achieve the lowest interest rate observed in Turkish bond issuance arena since January 2022. This success, we believe, is a significant demonstration for the confidence the global investors showed in us. We would like to once again thank the investment community for the trust and support.
I believe with our performance, which is now further, we will look into the further details of the financial status through Ünal's presentation and with our guidance. We will keep up the projected view in order to continue this journey in a successful way. Thanks again, and I think now I pass it over to Ünal.
Thanks, Gül. Hello, everyone. Welcome again. This is Ünal Arslan, corporate finance leader. I'll talk about some financial highlights and some key metrics in our first quarter financials. Looking at our revenues, Gül and Bahar already discussed about our volume evolution versus our previous year quarter one results. Looking at here, while our domestic sales volume decreased by 8%, our domestic revenues fairly remains flat. That's compared to first quarter of 2023. That's because of mostly ongoing pricing discipline that we have been talking in our previous quarters as well and favorable product mix. Looking at export revenues are up by 12% year-over-year, whereas volumes in parallel increased by 11%.
Mainly that's supported with the renewed models of Custom, our new, brand new, product Custom and Courier. As a result, our total revenues increased by 9% year-over-year to TRY 124 billion due to 8% year-over-year increase in volumes despite, of course, lower heavy commercial vehicle sales units that we discussed previously. In this period, the share of our export revenues in total revenues increased to 79% compared to previous year's first quarter. That is in terms of revenue favorable, but in terms of profitability, the margins unfavorable mix for us.
Overall, looking at our profitability, EBITDA, operating profits and PBT, as we discussed in our last couple of calls, quarter three, quarter four of previous year, our profitability margin is normalizing quarter one of this year. That's in line with our expectations as I said. The main reasons for that normalization is, first of all, the strong base year impact. As we all know, 2023 first quarter and second quarter, partially third quarter, was really extraordinary in the Turkish domestic market. Lower pricing capability in the domestic sales due to the intensive competition in the pre-election, election period. Increased share of export revenues, as I just mentioned, that's the mix issue in total. Extended ramp-up period in our new vehicles, especially in the Courier, and the introduction to the Turkish domestic market.
On the other hand, last thing that I can say here is our net income, on the other hand, increased versus prior years. That's mostly because of the inflation adjustment, monetary gain, figure. If we move to next page. What we see in our margins that's parallel to what I have told in the previous page, our operating margin EBITDA and EBITDA margins decreased around 1.5-2 percentage points. That's mostly, we see that as a normalization. Looking at our historical margins, that's not, our current first quarter margins are still really solid and strong. Looking at our per unit EBITDAs and PBTs, we are 1,000...
We have EUR 1,850 and EUR 1,728 for EBITDA and PBT, which are still, I can say strong, in terms of per vehicle profits. In terms of costs in the next page, what we see is, in this period, especially in the first quarter of this year, labor and production costs continued to increase due to, high inflation and, exchange rate, let me say, volatility. Raw material costs also increased, in that period. Inflation is, has increased, but, looking at the last, you know, six, seven months, it's kind of stabilized. Because of the, monetary tightening policies, we expect it to go down in the, coming months.
In that period, we increased our production volume by 5% versus previous quarter. In the next page, we see the model breakdown of our sales volume. We already discussed, Gül and Bahar gave detailed information about that. What we see here is, in terms of PC, we sold higher volumes compared to previous quarter. LCV, mostly because of our new model Transit, Courier introduction to the Turkish domestic market, we are behind our targets. Looking at March and ongoing months, we can say that the production and introduction to the market normalized, and we expect it to be higher in the coming quarters.
In terms of balance sheet and cash flow, we have a really solid balance sheet that's in line, very parallel to our previous year's balance sheet figures. In terms of cash flow, we have a healthy cash flow position. We can say net cash from operating activities is higher than our capital spending, which delivers positive free cash flow to us. More detail in the next page, debt profile and financial ratios. I already talked about cash and net financial debt. Looking at our financial ratios, all our ratios are healthy compared to previous year. Especially looking at net debt over EBITDA, which is stipulated by some of our long-term investment loans as a cap of 3.56.
It's 1.1 in the first quarter of 2024. Very much aligned with previous quarter, year, even below previous year. As for Ford Otosan, I can say that we have a very solid financial profile with low levels of indebtedness and a strong cash generation capability. As I said, our positive operating cash flow and positive free cash flow shows our financial healthiness. From here, I think we have the last page of our presentation, which is the guidance, and I leave the floor to Gül.
Thank you very much, Ünal. We are approaching the end. On the guidance, in fact, we kept our guidance as it is. We didn't show a change over here. Even though, in the first quarter, especially on LCV, we were coming from behind, now that we see the strong interest in the vehicle and the ramp-up related issues are resolved, the pipeline fill-up from Craiova to Turkey has been done. We believe with the successful healthy structure of the products, we will attain what we were targeting. We kept it as it is, even though we are seeing that there is monetary tightening. Since the election period, in fact, some level of like, softening in the demands in Turkey.
Regarding the Ford Trucks issue, we had seen also some fierce competition and some level of slowing in export markets. Over there, since we have the HCV vehicles ready and the F-LINE ready, the new markets in the export growth, export expansion plans are on plan. Due to all of these combined effects, we have kept it as it is. Also for this year, we have to notify that we are planning to launch gradually the zero-emission models in Transit Custom, Courier, Puma within our product lines within the course of the year. They will also support our international sales and contribute to Ford's success, especially Ford Pro's success in Europe. This is the reason why we didn't change anything.
Of course, we will keep on following very closely and if we see any need, if we see any change in the dynamics, we are following closely to make the necessary adjustments. Currently, we feel confident that these are achievable. In line with that, our investments, we are keeping them on track. As things stand currently, we do not see any need to change or delay our shared CapEx guidance. I think with that, we are coming to the end of our presentation, and we can open up the discussion for your questions and comments.
The first question is from the line of Bystrova, Evgeniya from Barclays. Please go ahead.
Yes. Hello, thank you very much for the presentation. Congrats on the results and congrats on your recent bond issuance. I have a related question. Do you foresee any financing needs in the future? Do you plan to maybe come back to the market, recently in the short term? Or, how do you plan to finance your CapEx? Thank you.
I believe maybe you were one of the people who listened in to our presentation at the time of roadshow. In fact, over there we made a statement, and I will say that we are still keeping on track with that. Yes, we are planning to come back because if you have seen that presentation, you will remember that within Ford Motor Company and Ford Otosan's strategic move, especially with the electrification journey and growth journey of Ford Otosan, together with the Craiova related actions, in fact we will be. Currently, we are in a heavy CapEx period, and it will continue for some time. The operating cash flow, the cash flow from the business is healthy.
However, since the Eurobond area is a very good diversified source of funds and a place where we want to utilize, we will be coming back.
Perfect. Thank you very much.
You're welcome.
The next question is from the line of Kemal Demirtaş with Ata Invest. Please go ahead.
Thank you for the presentation and congratulations for good results. You know, very highly congratulating your success in, you know, the Eurobond issue. I guess it's good rates. I think it's a
Thank you.
Very good success, I guess. My question is about the domestic market side. You know, your guidance is around 800-900 thousand levels of total vehicle markets, which implies that-
Mm-hmm.
You know, during the following eight months, the average will be less than 7%-7.5%, 7,000 levels. We haven't seen the signals yet, but do you see any? In April we see, but we see that in May it's a little bit stronger. I would like to hear some color on that from your side. You know, you had been, you know, cautious in the past, but this year it looks more cautious, you know, when I look at your past performance.
Mm-hmm.
When do you think we will see the indications if we are not receiving it right now? That's my question. Related to that, the profitability now with inflation accounting and, you know, the around 8.1%-8.4% EBITDA margin, what might be the with the current, you know, the balancing in the domestic and what might be the sustainable EBITDA margin for you? I am asking that too. The last one is about currency. We know that, you know, the currency is not a big factor, maybe in terms of, you know, the margin side.
If the current TL or EUR/TL levels sustain stable at current levels or little TL depreciation, do you expect further deterioration in the margins in the second half of the year? You know, what's your perspective for that? Thank you.
Oh, okay. Thank you. Thanks very much. Thanks for the congratulations. Let me take your questions in an order. First, you started with the Turkish domestic industry. In fact, the first three-month view of the industry, if you look at it at a run rate, like year adjusted run rate perspective, in fact, it was strong. For the rest of the year, thinking of our current vehicle success and the vehicle take-up in the market, the dealer showroom interest and the success of the vehicles, we are really thinking that our vehicles will catch up, even if we had that LCV-related problem over there. We think it will catch up. However, you also said you approach this in a little bit conservative way.
The reason for that conservatism was last year, in the last quarter, we had some launch-related issues, and once they were resolved, we very well see in the first Q that even if the launch actions were done, the filling of the pipeline took some time. On the earlier discussions, in fact, I had informed you that we are very careful. We have big scrutiny on our launch of the vehicles. We call it okay to buy or from our perspective, it's okay to sell. We are very careful to make it in a coordinated and very sure manner. That's why, and since this year, we will also be going through several launches. We wanted to keep it conservative. This is something internal.
From the external environment, because of the macroeconomic conditions and the monetary tightening policy, the policy and precautions taken against inflation, we still think that there is a possibility for the softening and slowing down of the market. However, at least from our perspective, with the success of our vehicles, we aren't seeing that. In fact, it is giving us some hope. That's why, that is the reason why we are not changing anything. We will keep on following up with the market. Currently, things stand okay. You asked about our sustainable margin. Within these conditions, of course, the availability being high, the competition being high in the market and there is a, let me say, more fierce environment for the pricing actions.
Our EBITDA, the way we reported, we also told you that impact of the mix of the export is increasing. As like we have Puma vehicles, the mix of the passenger vehicles changing, those are bringing some normalization into this rate. That's why we could say that the sustainable level margin will be around high single digits. This is the guidance we are providing. I'm not breaking it down into further details, giving like passenger this much, electric this much, ICE this much, because this is how we are managing our books. That's why you can think that the sustainable margin level will be at high single digits%. Sorry, what was your last question about? One more thing.
About the currency side, you know,
Sorry.
If Turkish lira remains strong, should we expect, you know, deterioration in the second half of the year related to, you know, both domestic and international side?
Right. In fact, as we look into carefully how the management of the financial management is looking into the environment, we see that there is a really serious work towards combating inflation. That's why the highly valued, let's say, Turkish lira is— We expect that to continue, which in turn, in fact, this is not a very good signal for exporters because it is meaning that the inflation hasn't come down a lot, so the cost base is still going up. But when you translate it into a euro value, it is gonna be more expensive in euro terms. That is giving us a headwind. However, please note that especially on the export business, our business model is cost-plus methodology.
You can interpret it as, like a take or pay. We have investment recovery guarantees. For the vehicles we sell, of course, we try to maintain the cost by utilizing our strong muscles on efficiency and innovation. We force the costs down against this macroeconomic environment. We do our best. That is why, in fact, Ford Motor Company is taking us as a strategic partner. We are hand in hand for the strategic growth of the both of the countries. In this environment, we are protected thanks to our business model. That is not hurting us in terms of our recoveries. Of course, this is not a blank check.
We are very well aware that if the economic environment is not helping our cost status, we have to do additional efficiencies, which is coming through our nimbleness, our investment efficiencies to bring down the costs. So far, we think we are doing a healthy business. We are not hurting Ford's business because you think it's also the delivery, the quality, the supplier availability. The effect of Turkey is not just okay, here is a contract manufacturer site. There are other things we are including in this business. Also, we need to mention that we have important involvement in the engineering, R&D development of the certain vehicle and platform derivatives, as well as the investment side of it.
In fact, this was the reason why Ford also wanted us to utilize our abilities in the Craiova plant. That's how it's managed. This is a win-win business case for both of the parties. In short, I can say that, thanks to our business model, we can, we are protected against that. For long-term competitiveness, of course, we are taking some strategic action to make sure that this competitive position is protected.
Thank you. Thank you, Gül.
You're welcome.
The next question is from the line of Hazade Çelikıran with JP Morgan. Please go ahead.
Thank you very much for the presentation, Gül. I have two questions. The first one is about Romania. You previously highlighted that Romania will no longer dilute your export margins when export contracts are renewed to include the investment recovery. When do you expect this to be effective? I mean, could this be also a reason of slightly passive normalization in the margins in the first quarter? Second, can you also provide your total EV sales in your mix? Thank you.
Thank you. Thank you, Hazade. For your first question, the Romania, you know, we did the Courier. Next generation Courier investment was done towards the Craiova plant, Romania plant. Since now we have the Courier production in place, the investment recovery is regarding the Courier production. Now they are in place. That's why I can say that notification has now happened. We are seeing the impact of it. In fact, we are seeing the good news of it. However, due to this ramp-up issues we had, the slowness in the ramp-up, like in the Q4, we had a deferral in the launch. Within this year, especially in the domestic markets, the filling up of the pipeline took a little bit longer than we originally anticipated and wanted.
However, if you look into the export markets, in fact, it is managed as projected. Over there, I can say that we do not see bad news. However, we have, like, in the BEV related actions, the launch related and quality related issues in their resolution, we had some problems regarding the pace. We are continuing with their resolutions. For your second question, regarding the EVs. In the overall electrification, I can say that we see some level of drop. The electric vehicle take-up is happening a little bit slower than originally anticipated. However, this didn't adversely affect us because in especially our lines in Gölcük, Yeniköy, we do not have a special dedicated line, a different plant for an EV vehicle.
We treat the BEVs, PHEVs, MHEVs or ICEs, all of these vehicles as a form of powertrain. Since all of these different powertrains are produced on the existing line of the vehicle line, we don't have an issue in the interchangeability of it. We don't have special setup related issues. That's why if the demand comes for the ICE versions or the PHEV versions, we can convert quickly. With that impact, we didn't see bad news. However, the overall EV, yes, I can say that the EV take-up is happening a little bit more slowly.
Thank you very much, Gül.
You're welcome.
The next question is from the line of Kemal Demirtaş with Ata Invest. Please go ahead.
Another question about the inflation accounting side. We're now trying to adapt, you know, this, new accounting, related to inflation accounting. Could you give us some maybe, you know, like, small hints about the following quarters? If the current currency and the inflation level stays, what kind of effects should we expect going forward? I know that it's not very clear to say anything, but at least, you know, how do you see the inflation impact, inflation accounting impact, going forwards? The other one is related to statutory accounts. We think this accounting, you know, this, inflation accounting and in the statutory accounts, will it have any positive impact on your tax payments?
Because the basic philosophy behind the inflation accounting was, we are not earning as it's because of the inflation when you get the inflation out, then the profitability should be lower. The basic argument was to pay lower taxes for the companies. That was the starting point. We don't know how it's affecting the companies yet. In the banks, they are not applying, they're gonna pay higher rate. Do you see any lower interest or lower tax payments for the year? One other statement took my attention by the economy minister.
They mentioned that, you know, many major companies are benefiting from strategic investment incentives because of their, you know, significant investments. The economy minister mentioned about some, you know, the minimum corporate tax levels, like 15% or something. I don't know what he meant with the details. My question is, you are paying some taxes, but in the past, you know, you have huge investment incentives. Are we gonna see the positive impact or, you know, do you expect any change in the, you know, the taxing environment? Thank you.
Thank you very much. In fact, let me be mindful. I don't think we can provide too much forward-looking statements, but I also understand you are trying to understand our business and model the business as accurate as possible. For that one, like I will give the word to Ünal for further details. But what I can say is, in fact, this monetary gain has been basically due to our asset base, the asset base being revalued. We are in the CapEx period. We are making investments. This action, the asset revaluation, gave us a overall monetary gain. Let me give the word to Ünal so that further he can maybe, to the extent possible, to the extent we can give information, he will provide some details for inflation.
Yeah.
accounting and statutory books. Please, Ünal.
Yeah. Thanks, Gül. Thank you, Kemal , for the questions. In terms of, I mean, your first question, forward looking the rest of this year, inflation accounting impacts on IFRS financials. Basically, very basically, of course, you know that it's, this is a very complicated accounting methodology, but very basically that has two major impacts on not only our, but all companies' financials. The first one is on the income statement. I can give you some information about that. That's mostly important in terms of, especially for our business inventory turnover. Our inventory turnover is good. We are turning our inventory in a good pace, you know, I can say. That limits the inflation accounting impact on our cost of goods sold.
Of course, I mean, the increase in the inventory aging may have adverse impacts in the cost of goods sold and financials in terms of profits. On the other hand, the second major impact is coming from balance sheet. That is, mostly because of the position that you hold, we hold in our balance sheet. We are, as for Otosan, as we all know, in a highly monetary liability position. Looking at our previous year, 2020 year-end results and first quarter of this year's results, because of that revaluing, as Gül had already mentioned, revaluing our assets, non-monetary assets, that brings us a monetary gain in terms of our, you know, PBT, profit before tax financials.
In the coming periods, to your question, of course, it's hard to give a very solid direction, but as I said, it will depend on how we, you know, manage our inventory and how our balance sheet position will be. Of course, balance sheet position will not change. That's what I can say. Looking at our monetary asset and liability position, it will not change significantly. That's as much as I can say in terms of, let me say, IFRS balance sheet and income statement position. Very basically, we are expecting a similar, you know, position in the rest of the year. In terms of statutory accounts and tax payments, you are right.
I mean, the reason of the inflation accounting is not because of the reducing the tax payments, but you know, to reflect the actual profitability figures and statutory, for statutory books, that's correct as well. It is impacting the tax payment figures. As for Otosan, you know, we, although we had huge profits, we also have a very big investment incentives in our balance sheet. So that investment incentives gives us a huge deferred tax assets in our balance sheet. Because of that, we looking at our historical tax payments, we are in cash paying really low taxes.
Still having a big investment incentive stock, let me say, at hand, this inflation accounting change in the statutory books may impact our, you know, taxable profit levels, but will not have a big impact in our tax payments. Very basically, that's what I can say. For your third question, regarding your third question, the ministers saying about increasing the tax rates, etc., it's not a certain thing as long as we know right now. That's related to, I think, I believe OECD Pillar Two, that's 15%, at least 15% taxing the income in the source country. As far as I know, we know, it's still under discussion. If it comes, most probably it will come, by the way, but how what will be the implications?
How will be the methodology? That's not certain yet. It's early to comment on that, what will be the impact, but we are closely following it very closely. Hope those answers your questions. Thank you.
Yeah, it answers quite well. This 15% thing is because, you know, in my view, if you put the minimum 15%, it's like, you know, getting the rules to applying new things.
Mm.
Which may, you know, even be against the constitution in normal times. That's why, you know, this headline, I was wondering whether it is including the incentives, you know, because incentives are there. If you ignore it or, you know, if they limit to 15%, then it means you are still holding your investment incentives, but it will take several more years to maybe accrue those incomes. Maybe that's, you know, the headline was kind of confusing for me. Thank you. Thank you for your answers.
Thank you. Thank you, Kemal.
Okay, there are no audio questions. We will now move on to our webcast questions. The first question is from the line of Dmitry Ivanov with Jefferies, and I quote, "Thank you for the presentation. Could you please discuss the contribution percent of the Romanian Craiova plant and the group's gross profit or EBITDA in first quarter 2024, and expectation EBITDA or gross profit contribution for the full year 2024?
I believe I answered that question to the best I can on the earlier one when we were answering Hazade Hanım's question. Since we are not breaking down the EBITDA on either plant level or vehicle line level, the only thing I can highlight is it is in line with our expectations, and it was essentially the profitability support of the Romanian Craiova plant would be coming with the introduction of the Courier vehicle, and it happened. It is within our mix of the product. It is in line with our expectations. Maybe this is a little bit less than what you expect, but I think that's the most I will be able to share at this point in time.
Thank you. Moving on to our next question from Ali Duman with Glass Lewis, and I quote, "I would like to ask a more generic question around sustainability governance, please. How well is Ford Otosan prepared for the green transformation and CBAM, Carbon Border Adjustment Mechanism? Is this matter considered or handled on the governing body level in terms of risks, opportunities, and the potential financial impact? Thank you.
Thank you very much. Ford Otosan is very keen on sustainability related targets. This is like in line with the Ford Motor Company's overall journey to carbon neutrality. Also you, I'm sure you know, Koç Holding has important considerations around that one. For maybe further details, if I defer this to Bahar. Bahar, can you comment on that one?
Sure. Thank you, Gül Hanım. From the Carbon Border Adjustment Mechanism perspective, yes, all of our preparations are ongoing, and we submitted our first CBAM report for our Ford Trucks and Craiova operations. Right now we are analyzing our its potential financial impact on us.
Okay. Thank you. Our last written webcast question is from André Rosa from Banco Finantia. Good afternoon. Thank you very much for your presentation, and congrats on the results. Can you please provide more detail on your revolving short-term debt?
Can you elaborate a little bit more on the question? Like, what, like, other than the financial reporting, what kind of detail is being asked, if I may ask? Let me defer to Bahar and Ünal. If there is further things that you can elaborate on that one, please, feel free to do so.
Maybe, Gül, what I can say here is. Again, I mean, this is not a very open question, very clear question, but to me too, what I can say is, you know, we always have some level of short-term debt in our balance sheet, and we are revolving those on needs basis, let me say. We are, you know, very credible, maybe the most credible company in Turkey. So the local loans, we never face any problem. Of course, the interest rates changes according to the, you know, current policy interest rates, but we don't have any problem here.
What we can also mention is, we already discussed and gave information about, and you all know that, we tapped into the bond market as well. One reason for that, going to bond market is kind of, you know, adjusting our debt terms, payment terms and extending them. That will help us, you know, also reduce our short-term loans maybe, in the coming period. That's what I can say, right now, Gül Hanım.
Thank you. Yes, certainly. The Eurobond has had the intention of diversifying our portfolio. At the time when Turkey, of course, now the liquidity markets are open, but earlier, like 1.5 years ago, when we had issues regarding the funding liquidity due to some maybe unorthodox policies, we had received some short-term debts from the, some being from the local banks. Like in instances, the period was short, the interest rate was high. Now, the Eurobond is going to give us the chance to retire that and make that restructuring in a much more favorable pattern. Yeah, thank you. Thank you, Ünal.
Thank you. Ladies and gentlemen, there are no further questions at this time. I will now turn the conference over to Ms. Ertuğ for any closing comments. Thank you.
Thank you very much. Thanks for your questions and interest. This has been a really enjoyable discussion with you. If there are further other things that you feel is maybe unanswered over here, you didn't have the chance to, or the people listening to the recording of this event, we will be here as the investor relations team, as the CFO office. We will be happy to answer your questions if there are further more. You can just feel free to reach out to us. Thanks very much. Until next time, take care of yourselves. Thank you.