To Sabancı Holding first quarter results webcast. Before we begin, please refer to our disclaimers. We have our CFO, Orhun, joining us today in today's webcasts. Without further ado, let me leave the floor to our CFO. Orhun?
Thank you. Thank you very much, Kerem. Good morning, good afternoon, everyone. We welcome you again to a first quarter call for Sabancı Holding's financial results for first quarter of 2026. We are more than happy to report another quarter of positive momentum in our financial performance. As you see on the right side of this page, we have reported a consolidated net income of TRY 318 million, which obviously given our size is not very large. Having said that, if you compare with the first quarter of 2025, we have seen over a TRY 4 billion swing, obviously, and therefore we're happy with this momentum.
Again, it also impacts positively our Return on Equity, which was at 2.1%, but swung in excess of 600 basis points compared to the first quarter of 2025. We're happy that this comes through positive operating profitability. In total you're seeing our EBITDA margin expanding by about 180 basis points. Obviously in some of our businesses like, you know, banking or et cetera, this may not be very meaningful. On a non-bank basis, we're also seeing about 98 basis points improvement in our EBITDA margin, which obviously is the real source of how we can deliver this financial performance momentum. We have about 30.5 billion Turkish lira of cash at the end of first quarter.
Obviously, we've received and paid dividends in the month of April as well. The number is pretty much the same as we speak, if not more. Our CapEx to sales stood at 11.8% non-bank CapEx to sales revenue. Our net debt to EBITDA, non-bank net debt to EBITDA was 1.7x , well within our, you know, policy range. This quarter was quite important because also we have seen two important, you know, portfolio moves. One of them was regarding Akçansa. Our joint venture partner, Heidelberg Materials, they're now in the process of acquiring Sabancı Holding's 39.72% share in Akçansa.
Obviously, that constitutes all Sabancı's shareholding over an enterprise value of $1.1 billion, which definitely is subject to, you know, customary adjustments at closing. Now, this is important for us because it gives us the ability to reallocate capital from this sale and of course deploy it elsewhere in our portfolio to support our strategic growth initiatives. We're also happy that on the building material side, we have the Çimsa platform, which we can grow on, and we feel is a global and scalable platform. Already has an international footprint that it has grown significantly over the course of, you know, past 4- 5 years, and now have a higher share of hard currency revenues. Separately, we are selling our stake in CarrefourSA, the food retail business.
That's 57.12% of the company that is held by Sabancı Holding. That comes with an enterprise value of $325 million, again, you know, subject to adjustments at the time of the closing. Now for those of you who have been listening to our strategic, you know, storyline over the years, you would know that, you know, food retail business has not been part of our long-term strategic focus. Although it's a great business obviously, and hopefully is going to continue being great. This also allows us an exit from a non-core segment by improving, you know, earnings quality, capital efficiency, and return matrix.
We estimate maybe on a pro forma basis, this could improve the bottom line of consolidated Sabancı Holding margin by between 100 and 150 basis points. Obviously also has an impact, positive impact on our return on equity matrix, again on a pro forma basis. This is in a nutshell what's happened in the first quarter. If we move to page five, again, as always, you would see the backdrop over which the results were materialized. Needless to say, we touched base to that when we talked about our annual results. The biggest item is the geopolitical risk, which on the top left corner you see the index shutting up quite significantly.
Obviously owing to, you know, the war in Iran, which impacted the oil and gas prices. That's on the top right corner. You know, shot up quite high. You see zigzags, basically that's pretty much in line with what's happening on the ground. For us, obviously, it impacts the inflation. Inflation since the end of the year has a pretty flattish curve, as you see, on an increasing trend even, and the policy rate has been quite flat, basically. The difference between the FX basket and CPI actually is again widening. Which is obviously also a function of, as you see on the right-hand side of this page, the interest rates, which is, you know, shown here, through the TLREF haven't, you know, come down.
In fact, it has gone up, compared to what we see, at the end of the year. That's the backdrop, macro backdrop, so to say. If I can take you to the next page six. If you, if you look at, again, a snapshot, you know, we've seen our combined revenues down by about 9%. Again, you know, the biggest contraction seems to be coming from the bank, as I said, it's difficult to measure the revenue in the bank, basically. In the non-bank business, we've seen a slight contraction of 2%, if you get to the EBITDA line, again, we've seen a real growth of 6% in the absolute EBITDA.
Again, you know, contributed in the same pace between bank and non-bank businesses, which is great because, despite what we see on the revenue line, it's important that we see this positive momentum in our operating profit levels, which again, from a margin point of view, has added 98 basis points on our combined EBITDA margin. Here, obviously, you know, Kerem is going to walk you through in detail. I'm pretty sure, for example, some of you must have listened to Akbank's call. I think, since the second quarter of 2025, Akbank has a very nice curve as to how they improved their net income margin so far, with obviously improvement in their, you know, fees income as well.
On the non-bank side, I think, it's important to say all of our segments compared to the first quarter of 2025 has turned positive, and the swing has been quite significant, especially in the energy side, which has been the major contributor on the non-bank. This is with the exception of, you know, what we report here as digital and other, and other is mainly the retail businesses. If you look at the consolidated net income, as I said, we reported a TRY 318 million of consolidated net income. Compared to last year, as you see in this graph, the swing has been pretty solid.
I think the important outtake from here is we're happy that the operating profitability has been improving, which indicates, if the conditions were to improve, especially in the second half of this year, which leaves us a lot of room for significant improvement, potentially. That margin improvement on the operating level, obviously, is an early indication, hopefully, for us to deliver better in the overall financial performance as well. On the next page, you see our operating cash flow moderating slightly, you know, compared to the first quarter of 2025. A part of that comes from the, you know, working capital changes from year-end to the end of the first quarter, and that part should, you know, normalize throughout the year.
On the right-hand side, you see how our return on equity has been moving in this very nice curve that has taken an S shape, but moving upwards, as you see, as we come to the end of the first quarter, where the consolidated return on equity stands now at 2.1%. Again, in the following page, as we discussed, our holding only net cash was TRY 30.5 billion at the end of the first quarter. As we speak, as I said, it's not less, maybe a little bit higher, you know, after having received and distributed dividends in Sabancı Holding. We continue a, you know, reasonably strong, you know, CapEx program. You see our non-bank CapEx to sales stands at 11.8%.
Despite that, given how our EBITDA has been developing, of course, our net financial debt to non-bank EBITDA stood at 1.7x . That's again, well below our policy level of 2x . The next page shows you the NAV, which stood at about TRY 10.4 billion at the end of the, you know, first quarter. Now, it looks quite similar now, as we speak. We still have a relatively high, you know, discount to our net asset value, which was about 57% at the end of April. You know, as of end of yesterday, I think it was more like 56 levels.
Again, on our NAV, it's also important to note that both the banking and financial services, as well as energy and climate technologies businesses contributed the majority, together delivering three quarters of our NAV as of end of April. With that, I will hand over to Kerem to walk us through the details of the segments. Kerem?
Thank you. Thank you, Orhun. Let me begin with the bank. Just to remind, the banking numbers presented on this page are based on BRSA financials, as the banks are exempt from inflation accounting. Akbank started the year solid, maintaining agile balance sheet that is capable of quickly adapting changing market conditions while maintaining its focus on long-term sustainable profitability. Core revenue growth was underpinned by renewed net interest income momentum, solid fee income, and well-executed treasury management. Through selective and risk-adjusted growth, Akbank continues to manage asset quality prudently. Furthermore, gross coverage remained solid at 3.7%, with the prudent build-up of additional provision buffers. While external volatility continue to create some short-term timing differences, the broader expected recovery in profitability remains intact.
Solid capital foundation with 16.1 total capital and 13.1 Tier 1 provide flexibility to capture growth opportunities while remaining resilient across cycles. As for the core metrics of the bank, in the first quarter, swap-adjusted net interest margin continued its gradual improvement with an additional 20 basis point quarter-on-quarter, supported by bank's well-structured loan portfolio and sound deposit mix. ROE was solid at 25.3%, and return on assets was 2.2%, thanks to Akbank's robust revenue generation capacity. During complex external environment, the bank's strong capital, adaptive balance sheet management, disciplined risk framework, and selective growth strategy continue to support that resilience. On the financial services segments, in the life business, growth continued to be driven by strong performance in credit-linked life and return of premium life products alongside the expanding pension fund base.
The pension business maintained its leadership among private players, both in assets under management and life and personal accident premium production. EBITDA was supported by growth across core life products and the maturing contribution from Medisa. In non-life, the selective profitability-focused approach was maintained prioritizing technical profitability and sustainable capital adequacy over volume growth. Within this framework, premium growth remained slightly positive, reflecting a continued focus on profitable segments rather than aggressive top-line expansion, while disciplined underwriting supported a strong capital adequacy ratio of 152% as of March 2026. Looking at the financial performance of the segments on an inflation-adjusted basis, top line increased by 6% year-on-year, driven by growth in the life business, while the selective approach in non-life moderated over our overall top-line expansion.
EBITDA growth was driven by life business as well, reflecting strong performance in credit-linked life and return of premium products alongside the expanding pension business and the increasing contribution from Medisa. In non-life, EBITDA remained under pressure, reflecting the impact of higher claims volatility and continued strategic actions consistent with the ongoing focus on disciplined underwriting and profitability. Bottom line performance showed a clear year-on-year improvement, with net losses narrowing significantly and approaching near a break even. This improvement was mainly driven by monetary gains and losses across the segments. Despite stronger pension performance, higher monetary losses and tax expenses pressured life business net income, while lower monetary losses supported a meaningful reduction in non-life losses. Let me now turn to our largest non-bank segment, energy.
Regarding the operational landscape on generation, production volumes declined by 5% year-on-year, mainly due to lower output from natural gas and lignites. However, additional wind capacity and the favorable hydro regime part to offset volume weakness, resulting in a balanced and higher return generation mix. Spot electricity prices dropped by 8% year-on-year in TRY terms and failed to offset the 25% hike in natural gas prices over the same periods. As of early April, the regulated price cap increased by 32% to TRY 4,500 , while natural gas prices for electricity generation companies rose by 19%. Capacity growth with total installed capacity now exceeding 4.5 GW, supported by an increasing share of renewables following over 600 MW of wind capacity addition under YEKA-II program.
To fund these investments, net debt to EBITDA reached 3.5x , which remains reasonable relative to selected peers operating in a similar CapEx cycle where leverage typically ranges between 4x and 4.5x . Additionally, commodities performance was supportive in this quarter, benefiting from effective positioning in a volatile market environment. In climate technologies, EBITDA contribution became more visible during the quarter, supported by incremental volumes from commissioned capacities within last year, with operating leverage improving as assets move beyond initial ramp-up phases. Enerji continued to deliver a solid set of results. Nominal EBITDA dropped slightly year-over-year due to lower contribution from retail and customer solutions operations as OpEx outperformance put some further pressure. Meanwhile, the new regulatory framework supported distribution performance, particularly through higher regulated asset base and financial income.
The company maintained its full-year guidance and stood committed to investment program despite more expensive financing than initially expected for 2026. Looking at the overall performance of the energy segment, distribution and climate technologies positively contributed to EBITDA margin. On the back of strong EBITDA, bottom line was further supported by monetary gains in generation, positive tax impact, including the suspension of inflation accounting in tax financials for the distribution business and step-up gain recorded in climate technologies. On the other hand, the suspension of inflation accounting had a negative impact on the generation business at the net income level. On Material Technologies segment, in Building Materials, the operating environment in the first quarter remained mixed, with softer domestic demand more than offset by continued strength in international operations.
Within this backdrop, Akçansa demonstrated resilience in its core regions and maintained operational momentum, while Çimsa continued to act as the segment's main growth driver, supported by its expanding international footprint, including its U.S. operations and the Mannok facility. Despite ongoing pricing pressure in an inflationary and high interest rate environment, disciplined cost management and increased use of alternative fuels supported operational profitability. In Tire and Tire Centric Solutions, the replacement channel was the largest contributor to domestic sales growth, both driven by consumer and commercial segments significantly recovering from last year's low base. Brisa continued to have a strong market position in its premium segment of HRD, leveraging differentiated quality and effective pricing. Building on this market positioning, year-on-year margin recovery in Q1 was supported by strong volume growth, product mix, price actions, and strict cost discipline.
In Tire Reinforcement and Composites, strong volume growth and favorable mix in composites segment, together with cost optimization efforts, supported a meaningful year-on-year recovery in profitability and a positive bottom-line performance. Within this overall improvement, the tire reinforcement business continued to operate in a challenging market environment. The gradual normalization following last year's disruption in Indonesia and along with insurance income recorded in relation to this disruption also supported the performance during the period. Material Technologies segment's top line declined by 2% year-on-year in Q1, while the EBITDA margin expanded more than 300 basis points to 12%, led by tire and composite operations. The increase in segment's net income was primarily driven by strong EBITDA pass-through, monetary gains, and lower financial expenses despite higher tax expenses, particularly at Akçansa. Let me now continue with Digital and Other segments.
In Retail Electronics, online sales continued to grow on a year-on-year basis in the first quarter, demonstrating a relative resilience of the online channel amid weak consumer spending. This has partially offset the impact of weak consumer demands. In terms of profitability, EBITDA margin improved slightly year-on-year despite ongoing competition-related pressure on gross margin and better OpEx to sales ratio reflecting tighter cost control. In the Food Retail segment, revenue generation remained under pressure due to weak consumer purchasing power despite continued growth in active customers. The growing contribution of alternative channels and franchise operations offset a part of the top-line pressure and supported mix resilience. Meanwhile, ongoing network optimization continued to weigh on top-line and profitability in the short term while strengthening efficiency and sustainability of operating model.
On the financial performance of this segment, in Digital, revenues declined year-on-year, while EBITDA recorded a limited improvement supported by cost discipline. At the bottom line, net loss widened compared to prior year and on lower sales performance and higher financing and tax expenses. In the other segment, revenues were slightly weak in a challenging demand environment and ongoing store network optimization efforts across retail operations. Despite a year-on-year improvement in electronics retail EBITDA, the segment's EBITDA turned negative, driven primarily by exceptional items recorded in food retail during the quarter, including fire-related asset write-downs. At the bottom line, despite higher monetary gains, weakness in food retail EBITDA and higher finance expenses pressured the performance. Well, this concludes our informational segments. Now I would like to hand over to our CFO, Orhun, for the closing remarks.
Thank you, Kerem. On wrap up, again, we see in this quarter two important portfolio moves as we discussed, our portfolio optimization, of course, comes despite this geopolitical volatility. Again, if you look at the Sabancı business, we believe our diversified sector mix, our diversified geographic mix, we are operating across 18 countries, a robust and healthy balance sheet, and our initiatives as to the cost efficiency and our organizational flexibility, we believe gives us a headroom for significant potential for improvement, especially in the second half of this year, should, of course, the conditions improve compared to what we've seen in the first quarter and probably in the second quarter of 2026 as well. With this, we would like to open the floor for questions. Thank you.
Thank you, Orhun. As for questions, please type to the Q&A section of the Zoom. Thank you. We have the first question. Thank you for the presentation. Do you have a forecast for electricity spot prices, PTF, for the rest of the year? In example, to 2026 MCP average due to holiday season in May, is it expected to stay at these lower levels? What about the June renewals?
Thank you very much, Pınar Hanım. Obviously, what has been critical in the first quarter was the fact that the hydrology was very strong. Last year, I think on technical terms, it was a very dry year. Therefore, you know, hydrology-driven generation was very poor. However, in the first quarter of this year, as I'm sure you must have also experienced, it was quite a wet period, and hydrology was very strong. Which is obviously good news. It improves our margins on generation, but it lowers the price as far as the market is concerned, because the higher that you generate from a lower cost resource, the lower the average prices has become.
I think in the first quarter as well, the prices were low, actually because of this mix of technology. Our estimation for this year in general, you know, was around $60 per megawatts. The first quarter was obviously lower than that. Back to your point, you know, come June and maybe in the summer, if the, you know, demand increases especially, and with the depending on how warm the summer is going to be or the utilization of air conditions or etcetera, that drives the demand. And if the mix changes towards, you know, higher level of average electricity prices, these averages could improve. Until then, it's difficult to say, basically, because as I said, what has driven the prices in the first quarter was mostly the, let's say, the mix of generation.
Thank you, Orhun. The next question from Cenk: Could you please further elaborate on what drove Enerjisa generation's improvements operating results? How much new capacity, base effect from last year, and one-off factors? What is full year EBITDA outlook?
Thank you, Cenk. Now, as I tried to say when I was answering the first question, the mix so far was one where hydrology was very strong. Now, that on one hand, is positive for our margins, but on the other hand, as far as the average pricing is concerned, it takes the prices quite low. That was one factor. The margin improvement, and hence the margin improvement, obviously. Secondly, the price cap has improved in the year, which I think rather than the first quarter, which may have some impact on rest of the year, and hence the answer to the first question. That's pretty much dependent on the mix of generation, where we drive obviously, the generation resource.
There was as you've seen in our announcement and disclosure that has been a reversal of impairment, I think on a net income level should have an impact of close to one and a half billion TRY, which came in this first quarter as well, basically. Not very much so on the you know, base effect in that sense. The only thing, as I said, that you can relate to is how different the hydrology has been between these two quarters.
The full year EBITDA outlook, obviously, you know, versus last year, all I can say is. By the way, the other thing, I'm sorry, that I need to mention is, the commodities business back to what Kerem was underlining is obviously improving better than how it was doing in the first quarter of 2025. This year, you know, we're going to have a much better, hopefully, you know, we expect a much better performance compared to last year on an EBITDA level. As you will remember, you know, we were looking at, give or take up to a $5 million, $100 EBITDA from our generation portfolio. We may fall short of that this year slightly, but compared to last year, we expect to see a, you know, important improvement.
Thank you, Orhun. Next question comes from Ilgin. Dear Kerem, Orhun Bey many thanks for the presentation. I have a few questions if I may, please. We observed an accelerated portfolio optimization in first half 2026. I understand there is more to come. What kind of overall cash improvement should we expect when all deals you have in mind are finalized? What kind of plans do you have for this cash? The second question for a follow-up question. Considering historical commitment to the cement sector and now Akçansa gone, what is the intention? Shall we expect growth to channel to Çimsa? The final question from Ilgin, can you share more details about the energy business in the U.S., given high power demand from technology sector, and how that is affecting the margins?
Thank you, Ilgın Hanım. As we've discussed, you will remember, and Kıvanç Bey has mentioned it a number of times, that although strategically there is no change in the direction of Sabancı Holding, in terms of execution priorities, there has been changes and differences, and one of them was an acceleration in these portfolio movements, basically. You've seen some, and you know, there could be more going forward. It's difficult for me to say, you know, what the exact amount of cash that we may receive. As I said, you know, those transactions are subject to, you know, customary adjustments at closing.
You know, we will obviously be cash positive after these transactions, and we would very much like to be able to deploy this cash to, you know, investments as per our investment policy. Just to remind you again, we expect to generate at least, you know, WACC + 200 to, I think, WACC + 400 basis points return on any, you know, incremental investment that we're making, and hopefully, that has an impact on the overall portfolio. On your second question, the answer is yes. As I tried to explain, we had two, of course, platforms for building materials, two great businesses.
Now we've chosen to grow over now the Çimsa platform, which again, as you will remember in the course of past five years, made a number of strategic moves, has now a production footprint in Spain as well as in Ireland, and increased its, you know, grinding capacity in the U.S. in addition to its terminals. Has now become the second, of course, largest white cement producer globally and has, you know, diversified into some specialty products like calcium aluminate cement as well. Yes, obviously, we will continue to be active in the building materials segment through now the Çimsa platform.
In the U.S., you know, our Cutlass II and Oriana projects have become fully operational this year, as Kerem was pointing out, positively contributing to the financial performance of our energy segment. We have now 500 MW operational through these projects and another 300 MW that's in the pipeline that is under construction, which are due to be operational, I think, by second quarter of next year. The energy prices, well, your estimation is obviously correct. I think as far as the, for example, data centers is concerned, the estimations indicate that it will add at about an 8% increase in the overall energy demand, annual energy demand, in the U.S., but not necessarily in the short term.
Obviously, for our, especially for our projects, we are, these have PPAs in place. Therefore we know exactly, you know, how we're going to sell and how much we're going to earn. What you suggest is an opportunity for us, especially going forward as we build new capacity in our U.S. business, which hopefully will obviously allow us to leverage such opportunities.
All right. Thank you, Orhun. A follow-up question from Cenk: Can you please provide an update on data center investments? What is the progress?
Thank you, Cenk. Now, data center piece or the digital piece, as you know, is our last, you know, the fourth segment that we're describing in addition to, you know, banking and financial services, energy and climate, materials and mobility. Now, obviously you will remember from our discussions, A, you know, we have still land available in the U.S. for, you know, potentially such investments. As I was answering the previous question, this segment, the data center growth is quite significant in the U.S.
I think for us it's quite likely if we pursue that route rather than, you know, It seems quite viable for us now to see if we could have a roadmap through which, we could use the real estate, maybe with the presence of our energy to participate in that, you know. Not necessarily consolidating a business at this stage, but obviously participating in that growth that will deliver hopefully returns. That's the international piece. I think given the market's structure in Türkiye, I think it's worthwhile assuming that any opportunity in the Turkish market could come through a greenfield, which obviously requires a longer term evaluation for us.
In any case, potentially with, you know, other parties as well, which will, obviously, you know, not only accelerate any potential outcome but limit the exposure as well. That's work in progress in a nutshell.
Thank you, Orhun. If you have further questions, please type it to the Q&A section of the Zoom. Thank you. Once again, if you have any question, please type to the Q&A section of the Zoom. I guess we don't have any further questions. Orhun?
Yes. Thank you very much. This concludes the our call for the first quarter of 2026, and my 20th quarterly call for Sabancı, and my last one. Until later, take good care of yourselves. Goodbye.
Thank you for joining. Goodbye.