Ladies and gentlemen, thank you for standing by. I'm Konstantinos, your conference call operator. Welcome, and thank you for joining the Koç Holding conference call and live webcast to present and discuss the second quarter 2022 financial results. At this time, I would like to turn the conference over to Ms. Sinem Baykaloz, IR Manager at Koç Holding. Ms. Baykaloz, you may now proceed.
Thank you. Welcome, and thank you for joining us today. This is Sinem, IR Manager of Koç Holding. I have here with me our CFO, Mr. Polat Şen, our IR Coordinator, Nursel İlgen, and our Finance Coordinator, Fatih Sertemir, to go over the presentation and answer your questions during the Q&A session. I would like to note that our presentation and the Q&A session might contain forward-looking statements and assumptions based on our business environment as we see it today, and they might be subject to change. Please remember, you can access the replay of the webcast on our website after the call. Now, I would like to hand over to Mr. Polat Şen to start the presentation. At the end of the presentation, we will have a Q&A session. Mr. Polat Şen?
Thank you very much, Sinem. Welcome, everyone. Today, we are going to look at the highlights of the first half of this year. On slide three, you will see today's agenda, and let's start on slide four with some key indicators for Koç Holding. I am proud to say that we had a solid first half year despite all the challenges that we had. The war between Russia and Ukraine and continuing problems in the supply chain accelerated inflationary pressures across the world. These led to significant rate hikes from global central banks. Now, there's an increased concern for a global recession scenario. Despite all the headwinds, real economic activity in Turkey remained relatively resilient in the second quarter. However, we started to observe a slowdown in the domestic demand. On the other hand, export activities continued to be supportive.
I believe we, as Koç Holding, have a proven track record of managing volatility. Our resilience, strong financials, and intact fundamentals are the reflection of our diversified portfolio, agile management, and prudent risk policies. We run stress tests both at our subsidiaries and Koç Holding level and closely monitor the risk metrics and liquidity conditions. We encourage our companies to obtain additional liquidity from the markets whenever we observe the early signals of an approaching market volatility. In the first half, we preserved and even improved our conservative levels of liquidity, leverage, and foreign exchange position. On the left, you can see sectoral breakdown of our diversified portfolio as of end of June. The major change versus the previous quarter is the increased share of the finance segment from after 18% additional share purchase at Yapı Kredi. On the right, you can see the breakdown of our combined revenues.
We are the largest exporting group in Turkey, with our exports accounting for around 7% of Turkey's total exports. Therefore, 30% of our revenue is coming from international sales. If we also include Tüpraş, which runs an FX-linked commodity business, 58% of our revenue is hard currency denominated. Moving on to slide five, you can see the evolution of our net cash in the first half of this year. At the end of the year, we had $275 million of net cash at the holding level. Considering our dividend income and other items such as management fees, operating and financial expenses, currency conversion impact, and purchase of additional 18% of Yapı Kredi Bank shares, our net cash position at the end of June 2022 became $127 million, including the Yapı Kredi Bank 18% investment. On slide six, you can see the main pillars of our solid balance sheet.
As you all know, prudent management has always been a key focus area in Koç Holding. As we have discussed, our net cash position stood at $127 million, including Yapı Kredi 18% investment. Around 90% of our $1.6 billion of gross cash is in hard currency. Keeping an efficient level of liquidity has always been our approach, and it allows us to maintain our resilience. With our agile management, we sustained our healthy balance sheet despite the market volatility. In terms of our funding at Koç Holding level, the only debt we have is the two Eurobonds outstanding as of end of June. We strictly apply and regularly monitor prudent risk management policies at each of our portfolio companies and on a combined basis.
Looking at our liquidity metrics on a combined basis, our current ratio is 1.2 times, and our net financial debt to EBITDA, excluding the finance segment, is at one time. In terms of FX, we have a policy of keeping natural position, as you all know, and we remain well within our risk management rules. Now, I'd like to hand over to Nursel to go over the details of our groups. Thank you, Nursel.
Thank you, Polat Bey. Okay, let's move on to sectoral developments in the first half of the year. As usual, we'll start with energy and Tüpraş on slide eight. The energy segment's contribution to Koç Holding's consolidated net income is solid in the first half, thanks to strong domestic demand, robust refining margins, and higher capacity utilization despite sharp hikes in energy costs. The domestic demand for refined products remained strong in the first five months of this year. Jet fuel sales surged 58%, gasoline sales increased 34%, while diesel sales declined 1%. In the first half, Tüpraş's domestic and international sales volume were up 14% and 35% respectively, resulting in 16% higher total sales volume. Net refining margins reached record high levels driven by the historically high crack margins. Net complex margin increased to $27.1 per barrel from zero in the first half of 2021.
Ongoing post-pandemic demand recovery and supply issues stemming from the Russia-Ukraine war resulted in record high mid-distillate cracks. Diesel crack margin increased to above its last five years' first half average with seasonally high demand, while post-pandemic demand recovery continues and supply shortages exist with decreasing Russian exports to Europe. Similarly, jet fuel cracks increased above its last five years' first half average, supported by limited mid-distillate supply as well as ongoing recovery in the number of global flights. Gasoline cracks were also strong with the ongoing demand in driving season and higher feedstock costs. In the first half, Tüpraş's overall net refining margin amounted to $13 per barrel, compared to $3.3 per barrel during the same period of last year, mainly due to better cracks, wider differentials, inventory gains, and higher capacity utilization despite hikes in energy prices. Tüpraş's capacity utilization reached 92% in the first half.
In light of these ongoing strength of the cracks, Tüpraş revised its 2022 net refining margin guidance to $13-$14 per barrel, from $8-$9 per barrel. On the LPG side, total consumption decreased slightly due to a 13% decrease in cylinder, while demand for auto gas slightly increased 2% year on year in the first five months. Total sales volume of Aygaz, the leading player in the LPG sector, was 1% up in the first half despite a 17% decrease in cylinder sales. Okay, let's move on to slide nine and discuss the developments in the auto segment. Our companies sustained their strong performance in the first half of the year. Auto segment's contribution to consolidated net income was TRY 5.2 billion.
The main drivers of this robust performance were favorable product mix, solid export contracts, as well as OpEx control and pricing discipline despite softness in domestic and export markets. In the first half, we witnessed a 9% decrease in domestic auto sales, mainly due to accessibility issues for the semiconductors. Compared to the first half of last year, passenger car sales and light commercial vehicle sales decreased 10% and 6% respectively, while heavy commercial vehicle sales were 3% up. In the first half, our market share in the domestic market increased 2 percentage points to 27%. That was mainly on the back of market share gains of Tofaş in the PC and commercial vehicle segment and market share gains of Ford Otosan in the commercial vehicle segment.
On the export side, in the European market, we saw a 14% decrease in PC sales and a 24% decrease in LCV sales in the first half. The such performance was mainly due to ongoing supply chain disruptions, impact on production, and headwinds in the macro environment. Our group market share in the exports increased 3 percentage points year on year to 45% on the back of market share gains of Ford Otosan. In the first half, Ford Otosan's export sales volume was 19% higher, while Tofaş witnessed a 7% decrease in its export volumes. Favorable product sales mix, pricing discipline, and currency tailwinds due to weak Turkish lira supported total revenues of both Ford Otosan and Tofaş. Export revenue growth was strong for both companies. International revenues were supported by Euro-denominated cost-plus contracts and, in the case of Tofaş, also by take-or-pay.
Total revenues of Türk Traktör, our tractor company, increased 59% in the first half. Türk Traktör registered a strong performance in the export market with a 9% increase in volumes and a 91% increase in revenues. Its sales volume in the domestic market was 25% down, and the domestic sales revenue booked an increase of 46%. In light of these developments in the first half, Ford Otosan decreased its export sales and production expectations for this year. Tofaş, on the other hand, increased its domestic sales volume expectations. In line with this revision, Tofaş also increased its retail sales and production volume expectations while decreasing its export sales for the full year. Türk Traktör now expects a higher CapEx for the full year. The details of the company's guidance can be reached on page 22 of this presentation, and I'm leaving the details for page 22 for slide 22.
I'll also go through Otokar, the leading bus and defense company in our portfolio, very briefly. Otokar also booked a very strong first half. Domestic revenues more than doubled, while international revenues were 88% up, and the share of international revenues constituted around 61% of total revenues, and total revenue growth was 96% in the first half. Moving on to slide 10, let's look at the consumer durables segment. Consumer durables segment contribution to consolidated net income was up 10%. Revenue growth continued to be strong, and contribution of newly acquired operations was supportive. However, increased costs due to global challenges were reflected on the margins. Turkish white goods sales decreased 8% in the first half, while the export markets increased 1%. In the domestic market, despite weak wholesale units, retail was quite strong in the same period, mainly due to consumers' expectations of further hikes in product prices.
Let's dive deeper into our Arçelik numbers. In the first half, domestic revenues increased 91% thanks to effective pricing despite a 12% decrease in unit sales. Similarly, international revenues, which constitute around 70% of total revenue, increased 135% on the back of inorganic growth, FX impact, and organic growth. Looking at the key metrics, our Arçelik managed to attain healthy levels. The company's working capital-to-sales ratio became 28.3%. Leverage also stayed at comfortable levels despite share buyback and increase in working capital funding. Regarding 2022 expectations, consolidated revenue growth expectation has revised upwards from more than 80% to more than 90% on solid positioning in the domestic market and performance in international markets. And in order to reflect higher costs, our Arçelik revised its EBITDA margin guidance to around 10% from around 10.5% before.
Finally, let me also briefly talk about the finance segment and developments at Yapı Kredi on slide 11. The finance segment was once again the largest contributor to consolidated net income with TRY 10.6 billion. Yapı Kredi recorded a strong top-line performance on the back of continued improvements in its net interest margin and fees. Its fundamentals remained intact. According to BRSA Financials, the bank's net income more than quadrupled year on year to TRY 19.2 billion in the first half. Return on tangible equity was 50% in the same period. Net fees and commissions produced a significant 76% growth, supported by the increasing number of transactions and digitalization. Cost growth was below inflation at 7% year on year. As a result, the bank continued to improve its jaws, with further widening to 144% in the first half. Turkish lira-driven growth continued in both loans and deposits.
In the first half, total loan growth was 27% year to date, and total customer deposit growth was 25% year to date. The bank's strategy to focus on value-added segments such as Turkish lira small ticket lending and sticky individual demand deposits continued. Share of retail loans increased to 58% in total, FX adjusted cash loans, while the share of demand deposits in total consumer deposits became 42%. Net cumulative cost of risk, including currency hedge, was at 92 basis points. Conservative coverage levels were preserved across all stages, and the total coverage was 5.7% on a consolidated basis. Yapı Kredi remains comparable in terms of liquidity, and looking at the total liquidity coverage ratio of the bank, it stands at 152% as of the end of June.
In terms of capital, Yapı Kredi continued to operate with more than 470 basis points buffers on its capital ratios compared to regulatory requirements, with close to 350 basis points contribution from internal capital generation. Capital Adequacy Ratio and Tier 1 ratios stood at 16.7% and 14.6% by June end, respectively. Okay, if we move to slide 12, I will walk you through the overall results of the group, incorporating all of the segment trends we just discussed. On a combined basis, Koç Group registered TRY 582 billion in revenues, TRY 52.3 billion in profit before tax, and TRY 46.1 billion in net income. Consolidated net income amounted to TRY 22.2 billion. I would like to note that the minority interest of the finance segment decreased in the second quarter after the additional 18% share purchase at Yapı Kredi Bank.
On slide 14, I would like to briefly talk about some of our unlisted companies. I'll start with Entek. As we have shared with you in April, we have evaluated that Entek fits perfectly well within Tüpraş's strategic goals within its current installed renewable capacity and growth plans. Within the scope of its strategic transition plan, Tüpraş aims to reach a zero-carbon electricity generation portfolio of approximately 1 gigawatt by 2030. In addition to the alignment of Tüpraş's growth targets with Entek's current portfolio and growth targets, we also took into account the potential synergy opportunities between the two, considering that both companies are engaged in production in the energy sector. We also aim to create value by using Aygaz existing equity and borrowing capacity while focusing especially on international LPG investments and other business areas such as cargo distribution instead of using resources for Entek.
In this context, we evaluated that the most suitable positioning of Entek for achieving strategic goals within the Koç Group would be under Tüpraş. Accordingly, Koç Holding will transfer Entek shares to Tüpraş and become an indirect shareholder in Entek through a higher stake in Tüpraş. Similarly, Aygaz will spin off Entek and reduce its capital, and in return, Aygaz shareholders will receive Tüpraş shares for each canceled Aygaz share. Tüpraş will increase its capital and distribute the new shares to Koç Holding and shareholders of Aygaz, and they become the owner of Entek. Consequently, Koç Holding's effective ownership at Tüpraş, to be taken into account in the NAV calculation, will increase to 42.07% from 39.27% upon the completion of the transaction. Koç Holding, Tüpraş, and Aygaz will have extraordinary general assemblies due to this transaction on the 25th of August.
We think that this transaction will support the long-term sustainable value generation of Koç Holding to its shareholders. As any added value that may occur in energy group companies, it will also affect the results of Koç Holding. Moving on to Opet, the fuel distributor. Opet has 18.8% market share in gasoline products and 24.2% in diesel products as of end of May, thanks to its well-established dealer network. Opet operates with the goal of being the first choice of the consumer in the fuel distribution sector in Turkey through its expanding station network. Otokoç, it makes the largest contribution to our NAV among the unlisted assets, as you know, and it is Turkey's leading auto retailing and car leasing company and number one company in second-hand sales. The strong appetite for budget-friendly second-hand vehicles in Turkey continues to be supportive for Otokoç.
The company is Avis Budget Group's biggest licensee, and it is the most important investment partner abroad. All in all, Otokoç improved its total revenue by 88% in the first half to TRY 15.1 billion and booked an EBITDA margin of 19%. Its book value increased 93% year on year to TRY 7 billion as of the end of the first half. Now, I would like to talk about Sendeo. Sendeo is keeping up with the fast-growing e-commerce and cargo distribution businesses and benefits from Aygaz's existing dealer network, facility infrastructure, and home delivery experience. The company reached 81 cities in the first quarter, and the company achieved a daily distribution of around 45,000 packages in July 2022 through its eight transfer centers and five distribution warehouses. As disclosed earlier, Sendeo targeted a total of $60 million investment until 2025.
Now, I would also like to briefly talk about a newly founded company, which is WAT Mobility. As you may remember, we repositioned WAT and bought it from our Arçelik to have a direct ownership. WAT is engaged in the production and sales of engines, engine components, power transmission equipment, and also service systems, and as a very good example of synergy creation among the portfolio companies in the light of our strategic priorities, WAT, together with Opet, Otokoç, and Entek, established a new company called WAT Mobility, and that company called WAT Mobility will operate in the field of electric vehicle charging stations. We are very excited to enter this business, and this company has a target of rapid expansion throughout Turkey in terms of charging stations, which are also critical importance for electric vehicles.
In this regard, the company aims to leverage the strong dealer and service network of the Koç Group companies across Turkey in its expansion strategy. I would like to leave the floor to Polat Bey for concluding remarks. Polat Bey.
Thank you, Nursel. On slide 16, you'll see the evolution of net asset value discount, which we believe to be unwarranted given our strong fundamentals that we have just discussed. Although we maintained our strong financial profile and prudent approach with a track record of sound liquidity, our NAV discount has been widening significantly. Unfortunately, Koç Holding's current NAV discount and the discount to its listed assets do not reflect the strength of our fundamentals. As discussed previously, we are not happy with this deeply disconnected valuation. Yet, we will continue to focus on value-accretive projects at Koç Holding via active portfolio management.
We closely follow the megatrends in the world, such as climate change, tech acceleration, consumer transformation, and disruption of changing demographics. We do believe that all our large-scale strategic initiatives and investments in line with our global growth vision will further reinforce our position and be reflected to our share performance once the external factors related headwinds settle down. As the largest investment holding company in Turkey and being active in diversified sectors, we manage our balance sheet to ensure that we always remain resilient against market volatility. Our performance in the first half is a testament to the resilience of our diversified portfolio supported by our prudent management approach. Going forward, we will continue to prioritize maintaining the solidity of our balance sheet no matter how challenging market conditions are.
Our meticulous management of liquidity in such difficult times will let us be more prepared to act upon opportunities and make us even stronger in long term when markets normalize. So I would like to thank all of you for listening, and we can open the floor for questions and answer session. Thank you.
The first question is from the line of Zakir Rabbani with Barclays. Please go ahead.
Hello. Thank you very much for the presentation. I just have a question about your Eurobond maturity next year. Obviously, you're in a good position to just repay that out of cash if you wanted to, but have you thought about refinancing that Eurobond, or is there a certain interest rate or yield at which you would be interested in doing a refinancing? Thank you.
Thank you very much for the question.
Obviously, it's a very volatile environment that we are living in right now. If the Eurobond redemption would be today, I would have said that we would just pay it out. But to be honest with you, it's really not easy to foresee what's going to happen in the next six to nine months period. And now that we see the CDS of Turkey is going down a bit, we are hopeful about the future. But as you have rightly pointed out, we do not need to refinance our Eurobond because we don't really, I'm just assuming that we are not going to need for any investment or something until that time. We can pay it off, and we don't think that we would be financing ourselves with tough market conditions when we are approaching to the end of our Eurobond.
Okay. Thank you.
There are no audio questions at this time. We will now proceed with our webcast questions. The first webcast question comes from the line of, actually comes from our webcast participant, Timur Ünallı with Goldman Sachs, and I quote,
"With Tüpraş moving to net cash position, what is your expectation regarding potential dividend income from Tüpraş for the next year?" Thank you very much.
As you know, Tüpraş had four billion accumulated losses in 2020 and 2019, and we cannot pay dividends in the last two years, but thanks to the strong performance of this year, these losses have been already covered, and in terms of dividend income expectation, it's really too early to say something about, but of course, we have a, Tüpraş has a dividend distribution policy.
You can also see that in the past, whenever Tüpraş made profits, they have been distributing quite an amount of it. So our expectation is that if Tüpraş keeps its strong financials until the end of the year and being able to pay any dividends, they will be moving in line with their policy of distribution of dividends. And it is, as long as I know, I can remember, it's 80% dividend payout policy they have.
The next webcast question comes from Koray Pamir with Ünlü & Co, and I quote, "Thank you for the presentation. Can you provide an update on the prospect of commercial vehicle battery production investment with Ford Motor Company and SK On?"
This is battery production that you are asking, as long as I understand. The discussions are still ongoing.
We are trying to come up with a business plan that all three parties can agree on. Then we will start into the discussions of a shareholders' agreement or a JV agreement, let me say. So at that point of time, what I can tell is that we are still working on it, but it is moving positively. We don't really see any. I can't say that today we are ready to sign or we are not going to do this, but the discussions are ongoing.
The next question comes from the line of Hanzade Kılıçkıran with J.P. Morgan. Please go ahead.
Polat Bey, thank you very much for the presentation. Actually, one of my questions has been asked, but I just also want to make a follow-up on the Entek transaction to Tüpraş.
So I understand that after this transfer, you are increasing your stake in Tüpraş to 42%. But is there any one-off income, I mean, gain generated from this transaction? I mean, what is the valuation attached for Entek during the transaction?
Nursel, can you take this question, please?
Sure. Yeah. Hi, Hanzade. As you said, Tüpraş, the share of Koç Holding in Tüpraş, it is going to increase to 42.07%. And regarding any one-off gains and etc., any income statement impact? No, because this is an intergroup transaction, and there won't be any impact in our income statement.
Okay. Thank you.
Ladies and gentlemen, there are no further questions at this time. I'm going to turn the conference over to management for any closing comments. Thank you. Thank you very much for all participating in the call.
I'm sure that you have already listened to our main subsidiary's earnings calls, so they have already answered a lot of questions, but I am really happy to share that our results are very positive, and it also has proved that there is a positive outlook, let's say, for Koç Group, and our expectation for the remainder of the year, of course, it's really hard to come up with an expectation, to be honest, within this environment, but as I told you in one of the questions, that we are happy to see that the CDS is decreasing, and this is going to be helpful for the whole economy, and also it's going to be positively affecting Koç Group as well. I would like to thank everyone who has attended the call, to our team in Koç Holding and all the participants. Thank you very much.