Ladies and gentlemen, welcome to Şişecam first half 2022 financial results audio and webcast call. I will now hand over the call to Şişecam CEO, Mr. Görkem Elverici.
Thank you. Good afternoon, ladies and gentlemen, and welcome to the review of our first half 2022 earnings results webcast. I hope everyone is well and healthy since we last spoke. Today I'm together with our CFO, Mr. Gökhan Güralp, and our IR Director, Ms. Hande Özbörçek. For the review of our first six months results, now I would like to leave the floor to our CFO, Mr. Güralp.
Thank you very much, Mr. Elverici. Good afternoon, ladies and gentlemen, and thank you for joining us. In today's call, I will first walk you through our 2022 first half financial and operational results with the performance review on a business line basis. Afterwards, I will continue with our cash position and the capital allocation. Operational and financial review will be followed by Şişecam's approach to sustainability, where I will remind you of our strategy and provide you 2022 year- to- date progress report. Before I start commenting on our results, please be reminded that all the figures I will be providing do include the contributions of the two acquisitions we have made in the last nine months, namely US Natural Soda Ash business, known as Şişecam Chemicals Resources, and Italian refractory material producer, Refel.
For the audience to better compare our first six months performance with the prior year's results, I will also be providing an organic and inorganic breakdown. As always, we will be pleased to take your questions at the end of the presentation. Please be reminded that our presentation and Q&A session may contain some forward-looking statements. Our assumptions and projections are based on the current environment and thus may be subject to change. Moving on to slide three. We ended the first half of 2022 with a record-breaking top line.
Thanks to vivid demand of all our clients' industries, strong consumer sentiment, as well as the dynamic pricing model that we previously introduced for select operations and implemented across all our business lines on the first day of this year, we managed to attain TRY 40.2 billion revenue, up by more than three times year-on-year. Organic revenue growth stood at 174%, while Natural Soda business and Refel added TRY 5.2 billion to our top line. 84% growth recorded in euro terms translates into EUR 2.5 billion consolidated revenue.
Despite the quite challenging, high inflationary and uncertain global environment, and the steep rises in our production costs from raw materials to energy and labor to packaging materials, our gross profit margin went up by 300 basis points to 39%, thanks to our cost management strategies as well as the contribution of US soda ash business. Our adjusted EBITDA has tripled in TRY terms. Organic EBITDA growth stood at 169%, given TRY 1.1 billion of aggregate U.S. natural soda and Refel contribution. We ended the reporting period with 28% adjusted EBITDA margin, down by 100 basis points compared to the level recorded in first half 2021.
Larger scale of operations, fully utilized capacities accompanied by a wide ranges of product portfolios and hedging contracts on both, natural gas and electricity in EU-based facilities, on steam coal for Turkey-based synthetic soda ash production facility, and on commodities such as silver and palladium used in auto glass production processes, not to mention the seller's market dynamics have all supported our profitability. Backed by the below-the-operating- line FX gains and deferred tax income driven by tax incentives on the fixed asset revaluation implemented in the first quarter, as well as on capital expenditures and FX-protected deposits throughout the first six months, our adjusted parent owner net income moved by 229% to TRY 9 billion. The acquisitions' combined contribution to our earnings was slightly less than TRY 200 million.
Euro-based increases in one-off gain-adjusted consolidated EBITDA and parent owner net income were 76% and 92% respectively. On slide four, you may see the individual performance of Şişecam operations portfolio components, and on slide five, their shares in Şişecam consolidated figures. I will be presenting the two slides in a combined manner. As you may see, our portfolio performance was supported by all five business lines, thanks to sales volume growth and seller market dynamics. Chemicals business line took the leadership and brought in the highest contributions on both the top line and profitability levels. Architectural glass, on the other hand, stood as the largest EBITDA margin generator. Auto glass contributions to our revenue and EBITDA was limited compared to other glass business lines, not because of broken demand, but due to the hardship to maintain clientele have been through for at least a year.
With the exception of Architectural Glass, we have experienced the start of profitability normalization trend across all our operations portfolio, mainly due to production cost increases, which have gradually become visible on our cost of goods sold, as well as selling and marketing cost increases driven by our accelerated logistics and freight rates. Architectural Glass business line had overperformed the prior year, thanks to rapid demand growth. Consolidated sales volume moved north by 7% on a year-on-year basis. Value-added glasses were once again the preferred product category in all geographies we have been present as local manufacturer as well as supplier through exports. Supported by all client industries from construction to white goods and home appliances, total sales volume booked by our eight lines located in Turkey recorded an annual growth of 16%.
Since the exported products share in Turkey-based production lines output was flat at 15% year-on-year, exports were mostly made by the wholesalers with processing capabilities. As you may guess, the most desired product types were the energy-efficient ones and solar glass. In Europe, bonus schemes in transforming construction materials into more energy-efficient ones have kept the demand for construction and renovation activities alive in spite of surging raw material costs, which is leading to heightened final product pricing. Still, Bulgaria and Italy facilities combined sales volume were almost unchanged on a year-on-year basis, mostly due to production constraints and low inventory levels.
On the flip side of the coin, rising concerns on macroeconomic growth and respective monetary responses have put some pressure on our client industries operations in India and in Russia, not to mention the Ukraine war, which has a negative impact on the latter's sales performance. Consequently, Architectural Glass sales went down by 11% year-on-year in these regions. The business line having recorded 209% annual growth in net external sales stood as the second largest top line and EBITDA contributor. Thanks to the favorable global pricing environment, Architectural Glass segment EBITDA margin went up by 100 basis points to 34%. I am sure you all consider the risk of a pause and even a slowdown in highly volatile European markets. You may think of product flows to Europe from low-cost countries.
We have different contingency plans, yet the one that we can share at this point is based on supplying our primary premium accounts and to channel more value-added products to the region. As you all know, automotive industry has long been challenged by supply chain and logistics disruptions. Ukraine war has put further pressure on the industry, and O-I has responded by a series of strategic decisions ranging from exiting Russia to temporarily halting production in EU zone. Saving electronic chips for high-margin models through the cancellation of lower segments came in as the new tactical move of German and French automakers and helped the industry to meet the demand to some extent. Throughout the first half, auto glass business line has fully utilized its capacity at all locations. Supported by both the OEM customers backlog and auto replacement glass demand, sales volume went up by 4%.
Period end, top line indicated 88% annual growth in net external sales, thanks to also the renegotiation discussions with our main clientele. Our portfolio component that is most prone to consumer sentiment have outpaced the prior year on the basis of net external revenue and nominal EBITDA. Thanks to strong commercial and consumer demand and increased sales volume to HoReCa channel, as well as the dynamic pricing practices, net external value revenue recorded by the business line increased by 133% to TRY 4.3 billion. Meanwhile, revenue split between domestic and international sales came at 56%-44%. Glassware segment's contribution to Şişecam top line and EBITDA stood at 11% and 8% respectively.
Our glass packaging operations generated a top-line growth of 129%. Unsurprisingly, domestic demand for glass packaging continued to be extremely robust, leaving not much room for exports. Still, total sales from Turkey facilities went up by 9%. On the other hand, non-Turkey facilities have recorded 3% contraction on the same basis, mostly due to secondary impacts of the Ukraine war, such as label and cap deficits, and also the decisions of European breweries to cease production of one or more brands in Russia. Consequently, glass packaging ended the period with 1% annual growth. The lifting of 25% customs duty on colored glass containers imports to Turkey, effective from June, nourished the core of our glass packaging contingency plan, grounded on importing such products from Russia at competitive rates as it is the lowest cost region in our portfolio.
The plan will allow us to continue feeding our domestic market, while in the meantime, pave the way to further satisfy our export market with the output of Turkey-based facilities. Last but not least, our chemical business line revenue grew by 387%, and organic growth stood at 186%. Synthetic soda ash sales were almost flat year- on- year, yet on the back of strong demand from client industries, accompanied by further tightened supply due to increased production and logistic costs and shipment delays, we have seen the global pricing moving north consistently. In turn, our product prices went up by 37% in USD terms. US-based natural soda ash operations outpaced the prior year on the international sales volume associated with the impact of direct sales to customers and 46% product price increase in USD terms.
With the incremental production capacity we took online in our Turkey plant, our synthetic soda ash capacity increased by 50,000 tons to 1.5 million tons. Together with the natural soda ash capacity that is fully consolidated in our financials, our global soda ash production capacity went up to 5,015,000 tons. Chromium chemical sales contracted by 4%, mostly due to logistic constraints, while steady demand at the end client industries and the global cost inflation have led to an expeditious rise in pricing of all product types. Accordingly, annual increase in product price stood at 52% on average in USD terms. In the first six months of the year, consolidated top line and EBITDA contributions of chemicals business line came in at 30% and 35% respectively. Moving on the next slide.
With our operations in 14 countries, wide range of products in all business segments, and strong export capabilities, we continue to cater our products across the globe. In the first half of the year, we have generated 62% of our revenue from international sales. Export revenue, 48% of which was recorded on sales to Europe, stood at $478 million. Including revenue generation of Şişecam facilities in the continent, sales to Europe accounted for 30% of our top line. Combined with the U.S. market exposure through exports, and also sales from US soda ash facility, our sales to developed markets came in at 43%. On slide seven, our strong liquidity position was sustained in the reporting period too.
We ended the year with $1.3 billion cash and cash equivalents, including financial investments, namely the Eurobonds and FX-protected deposits. Net debt position stood at $996 million, and our loan leverage was sustained at 0.9x. Our standard debt was $2.3 billion, up by $270 million, with a term structure of 47% short and remaining long, and an interest rate structure of 56% fixed and remaining variable. Excluding hard currency and hard currency-denominated financial investments, we carry 77.2% of the cash and cash equivalents in hard currency, as we continue to be short in TL to preserve our loan position in the hard currencies and to fund our Turkish operations.
Şişecam's net long FX position came in at $257 million. As of June 30th, we are $697 million long in US dollar and EUR 453 million short in euro. Moving on to slide eight. We have booked $189 million CapEx in the first half of the year compared to approximately $107 million in the first half of 2021. Considering the advances given for our investments and the cash payment we made for Refel acquisition, total cash outflows stood at $257 million. Our working capital went up significantly due to inflated costs and currency devaluation getting stronger. Operational performance has led to TRY 6.8 billion higher net income on a year-on-year basis.
Hence, we ended the first half with a positive cash free cash flow of TRY 460 million. On a final note, we decided to invest in a new 180,000 tons per year capacity float glass furnace and a new 20 million square meters per year capacity energy glass processing line within the site of our greenfield flat glass investment in Manisa, Turkey. As it was announced, estimated cost of the investment is approximately EUR 185 million, including also working capital needs. We plan to take the investment online by the end of 2024. The investment rationale is our aim to nourish our leading position in the rapidly growing Turkish energy glass market, as well as to further strengthen our competitiveness in evaluating export opportunities.
Moving on to the next slide. I would like to continue with updating you on our corporate sustainability progress. As you would recall, we have launched our CareforNext 2030 sustainability strategy in the first quarter of this year. Under this strategy, we have 11 material ESG issues supported with clear target goals, which are covered under the pillars of protecting the planet, empowering society, and transforming life. In support of these objectives, our growth journey with structural changes have been allowing us to align our executive action to our corporate sustainability strategy in a fully integrated and accountable manner. In fact, we tied our leadership compensation to ESG metrics in terms of incentivizing our executives to improve performance on these issues in a measurable way. Moving on to slide 10.
We have issued the ninth edition of our sustainability report for the year 2021 back in June. As a first of its kind practice at Şişecam, we have benefited from verification and assurance services by a third party on our sustainability progress and indicators. This practice not only allows us to build on our transparency, but it also builds on our confidence by understanding and evaluating the broader value impacts and outcomes of our sustainability performance management and reporting. The verification consisted of data validation of 10 sustainability KPIs within the framework of Global Reporting Initiative. The practice had a coverage of 48 manufacturing plants of Şişecam by on-site, and comprehensive audits took place among 10 facilities in three different countries. Let me share some of the key achievements of the year.
Because of our recycling and reuse practices through manufacturing operations, we have saved eight million cubic meters of water. Our savings in energy in the same year is equal to 600,000 GJ. As part of our excellence model in waste management, we have continued robust implementations of waste segregation at source, supported with end-to-end digital monitoring practice in the selected plants. We are once again proud of having a measured achievement far beyond our target on the used glass cullet. In the reporting period, we have reached 26% of glass cullet in glass packaging production, despite having operated in most challenging countries with deficits on glass cullet supply. The achievements under the Empowering Society, we have provided a total of 47 hours of training per employee across Şişecam.
The ratio of our women employees increased to 23%. Out of this figure, women executives have a representation of 26%. We continue to incorporate robotic process automation into management processes and overall equipment efficiency into operational processes. We have generated 7,762 MWh of energy from our homegrown renewable energy sources. We use 28% of our R&D budget directly on sustainability-linked developments. Moving on to slide 11. I also would like to share brief highlights on the current and future milestones. In the vision of becoming a net zero company by 2050, our data gap analysis have been completed for value chain emissions of Şişecam. We will continue with in-depth analysis of mitigation potentials to unleash across our value chain.
As part of our leadership contribution on the International Year of Glass, we have been supporting several initiatives and we pioneer some others which take place in several countries. With an aim of exploring opportunities in reducing our environmental and social footprint, starting from product design phase, we have finalized the life cycle analysis studies and in-house capacity building activities for selected products from the segments of flat glass and automotive glass, glassware, glass packaging and chemicals. As mentioned earlier, we have deployed our strategic goals to C-level executives. Our microsite on sustainability is now ready and will be launched soon this month, which covers A to Z content of ESG topics.
Before I end my words, I would like to thank you and our entire stakeholders for placing confidence in us and towards our growth journey that co-creates a shared sustainable value. Since I have completed sharing the comments and slides with you, now we can move forward with the Q&A session.
Thank you. Ladies and gentlemen, the Q&A session starts now. If you wish to ask a question, please press zero one on your telephone keypad. Please be informed that there can be a short silence while questions are being registered. Thank you. The first question comes from Cemal Demirtaş from Ata Invest. Please go ahead.
Congratulations for very good results. My question is rather related to the following quarters. How do you see the outlook for the, you know, at least the third quarter and fourth quarters? Any indication domestically or internationally related to recession? I see that your margins in the chemical side look impressive. Do you think those margins whether, you know, those margins are sustainable or not? Thank you.
Thank you, Cemal . First thing is, looking from where we are standing and considering that we are also almost halfway through the third quarter, I can say that, although there is very mild softening that is happening on the demand side, I can say still the demand is strong and it's a seller's market. For sure, we need to consider so many geopolitical crisis happening at the same time, plus the worldwide expected recession, which when each and everyone around the globe is expecting a recession to happen, as it is the case that we experienced before, there is a high or increased chance that the demands may continue to slow down.
The thing is that when you consider what is the level of demand and what is the amount of capacity or the available supply in the global markets, not only in our own industry, but also in so many other industries, still I believe we should be able to have a strong second half in many of the sub-industries that we are operating in. For sure, there might be some volatilities differentiated between the geographies, but we have to see whether the expected recession is similar to a perfect storm where some of the market players are expecting or a milder one. Unfortunately, it is not bound to what we can do with our own operations, but it is more on the geopolitical scene, including the central banks and the government's decision.
For sure, we are getting prepared, or I should say we are already ready because when you look at what the world has been going through, and Şişecam specifically, since the beginning of the pandemic and even considering the geographical volatilities we are experiencing in our Turkish operations starting from, we can say easily from 2018, we are already in a crisis management mood. We will continue with this. Every day, all the executive team is going after what could be the alternative scenarios that we should put in place when there is a softer demand in the market.
Until the day we see that there is a real sign coming from the markets that the supply and demand balance is moving into the unfavorable areas for suppliers like ourselves, we will continue to deliver the better results. Looking at the soda ash market. As it is a supplier to main markets like glass and chemicals industries. As long as the demand continues to be strong, for sure, the delivered results will continue to be strong. As I mentioned, it is totally based on what will be happening elsewhere in the world, especially in a business like soda ash, where you're catering globally.
Thank you. As a follow-up, related to your financials, we see financial income in the second quarter versus loss in the first quarter. Could you further elaborate that? The other question is related to your effective tax. We see lower effective tax. Should it be attributed to the international operations? These are my last two questions. Thank you.
I can say the financial gain is mainly coming from currency moves that are moving in our favor, plus the deferred tax incomes that we have been able to generate due to multiple reasons, but the most, the strongest one being the tax incentives that we have been able to put in place with the new investments that we have announced. Can you please come back with your second question for the international one? I couldn't get it.
You know, my question was about the effective tax rate. The first question was related to financial income type versus, you know, first quarter to second quarter. The other one was related to the effective tax, and I think you just explained it. It could be attributed to international, sorry, deferred tax income, I guess.
Yes. The main reasoning we can say deferred tax and some tax incentives that we have been able to utilize, especially starting from the beginning of this year.
Thank you.
Thank you, Cemal.
Thank you very much. Ladies and gentlemen, let me remind you again. If you wish to ask a question, please press zero one on your telephone keypad. Once again, if you have any comments or questions, please press zero one on your telephone keypad to enter a queue. Thank you. The next question comes from Kayahan Demirak from AK Yatırım. Please go ahead.
Hi. Thank you very much for the presentation and opportunity to ask questions. Could you give us some color about the impact of this rising natural gas prices in Europe on your operations? I mean, the prices are very cheap, relatively cheap in U.S. Also, Turkey should be more competitive. How do you see this going forward for your Europe-based operations?
I believe this will be a right topic that we can expand ours on. To give a summarized answer, first thing is the pricing, the second is availability. For the sustainability of natural gas and some alternative energy types that are suitable for us that we can continue our operations in our furnaces. I can say that we have done each and everything to mitigate our risks, and we feel ourselves as comfortable as we can be, considering everything happening at the same time that we will continue our operations. Plus, for the pricing, we have almost 70% our energy prices, especially in Europe. That is one of the areas that we can continue to feel ourselves much more comfortable.
I need to mention that all the hedging contracts are getting smaller and smaller by the year. Most of the hedging contracts are until the end of this year. For sure, we are looking for additional opportunities to secure both the pricing and sustainability of our energies, not only in Europe, but for all around the globe where we have the operations. U.S. market seems to be one of the most beneficial ones, but I need to remind you that if there's an energy crisis globally, for sure, when the demand goes up, especially the private suppliers are looking for better opportunities to utilize the opportunities that are there in the market. We are also trying to hedge our positions in U.S. also similar to the rest of the world.
It is the demand and supply balance, plus cost and pricing balance that you're utilizing in each and every business line and in geography. I don't want to go into that for each and every specific segment, but please let me remind that the dynamic pricing models we are using are securing us as much as possible for keeping us with the margin targets that we put in place. We believe and will continue to do our best operationally to keep up with our margins as long as it is possible, and it could be digested with the markets by the demand parameters. I hope this is comprehensive enough.
Thank you. As a follow-up, I understand you're making dynamic price adjustments somehow based on cost plus. I mean, assume that you don't have any hedges and you're purchasing energy at the current market price, what would be the impact of that situation on your margins?
I can say easily that the margins will be hurt to some extent, and it is differentiated by the energy's percentage in the overall inputs. For further details, you can reach to us, our IR team, so they can provide you some ranges of impact that might happen in differentiated business segments. Let me remind that looking as an overall, the chemicals industry, especially soda ash, will be the most hurt one, followed by the flat glass, then glass packaging due to the amount of consumption that they have in natural gas.
Okay. Thank you. As one more thing, I mean, given the high energy prices and high labor in Europe, could we assume that I mean, the costs in Turkey is very competitive compared to Europe, and you can increase the exports in the current environment if the domestic market, let's say, was weak?
I believe it will not be fair to make this comment considering the logistics costs. The thing is that when you look at in some segments, selling to the proximity, especially with the surrounding conditions, is much more profitable than anything else. For sure, when you look, cost-to-cost , that might be the case. Let me remind you that the customers also have all the information and know-how that we have, so that they keep on bargaining on the prices that you have on the costing side.
I believe it is much more fair to say that we are trying to do the cherry-picked sales, especially for our international sales, while trying to keep the balance of keeping our markets and especially our main customers is supplied enough so that they can continue their business, especially in the main markets that we operate in.
Okay. Thank you. That was very helpful.
Thank you. The next question comes from Ergun Unutmaz from Individual Investor. Please go ahead.
Thank you. Since two years, we are living unprecedented events, and Şişecam navigated through turbulent times into great success. When it comes to recent financial results, one thing is clear to me, cost efficiency and pricing power. You managed to utilize those at the same time. That's great. Before my question, I would like to share my appreciation. Thank you very much, Görkem Elverici, on behalf of Şişecam for this success. My question is on energy crisis and market share in Europe, which you have already touched upon. Due to soaring prices, many European companies are having trouble nowadays here. Is this an opportunity for Şişecam to enhance its share in these markets, or is the vulnerability of Şişecam based on energy prices spread by having an edge on this energy prices crisis? Thank you very much.
Thank you very much, Ergun . Before providing an answer, first, I would like to thank for your kind words and compliment. Also I need to remind that we are waiting for your reviews of our financials that you will post hopefully within today or tomorrow. Well, looking at the market dynamics, I can easily say that in almost all of the segments, this is the seller market. We are able to sell everything that we can produce plus transport. There is a challenge as you know, still ongoing for the supply chain.
Although it has been easing to some extent, in the last couple of months, still I can say that it's an issue, especially considering that, there's a huge conflict going on in our surrounding region. For us to grow our market share, you know that we are continuing to build some greenfield so that we are getting our share and increasing our market share with the increasing demand in differentiated geographies. We have already kicked off our investment in glass packaging for Europe. That will provide us an increased market share beyond what we have been getting from exports from both Turkey and Russia until now.
Also some of the capacities that we are building in Turkey for architectural glass plus the energy glasses, the flat glass plus the energy glasses will be directed to the international markets, especially to the European one. Apart from some possible acquisitions that will be done, you know, cherry-picked manner like we did before, that might happen in the coming future. Unfortunately, it is not easy to say that we can continue to grow our market share, especially in Europe, considering that with the increased market expectations, especially starting with Turkish market, it is not easy to provide additional capacities to the European market.
Considering what is going on in the European market, we would like to also manage our risks well and mitigate any dependency to the European market or anything that might happen in any of our main markets in the coming future. That's why we are trying to continue to diversify our markets for each and every business segment. Wherever there is an opportunity, especially for optimized return generation, for sure, considering the customer relations and delivering up to our commitments on one side, but we will continue to stick to our strategy to be able to agile enough and flexible enough to cater to anywhere around the world based with our financial and operational targets.
Thank you very much for the comprehensive answer, and I will do my best for the report. Thank you.
Thank you very much, Ergun.
Thank you. Ladies and gentlemen, if you have a question, please press zero one on your telephone keypad. Thank you. There are no further questions. Dear speaker, back to you for the conclusion.
Thank you very much for your attendance for our half- year results. As we have tried to summarize, we are living in a totally volatile world where there is volatility in almost everything. I need to remind, starting with our board and especially executive teams and operational teams, we are trying our best to get prepared for any additional volatility that might come and to take all the necessary risk management and risk mitigation actions to continue to deliver strong results. I hope everyone will keep to be safe and healthy until we meet next time, where we will be discussing, hopefully, again, a strong year-end financial result. Thank you very much.
Ladies and gentlemen, this concludes today's webcast call. Thank you all for your participation. You may now disconnect your lines.