Ladies and gentlemen, thank you for standing by. I'd like to welcome you to Şişecam 2024 year-end consolidated financial results audio and webcast call on the 28th of February, 2025. At this time, all participant lines are in listen-only mode. Today's call will feature a presentation by the management team, followed by a question-and-answer session. Without further ado, I'd like to pass the line to the CEO of Şişecam , Mr. Görkem Elverici. Please go ahead, sir.
Thank you. Good afternoon, ladies and gentlemen, and welcome to our 2024 year-end earnings results webcast. I hope everyone is well since we last spoke, and today I'm together with our CFO, Gökhan Güralp, and our IR Director, Hande Özbörçek. I would like to hand over to our CFO, Mr. Güralp, for the review of our 2024 full-year results.
Thank you very much, Mr. Elverici. Good afternoon, ladies and gentlemen. I would like to thank you all for joining us today. In today's webcast, we will be first walking you through our 2024 year-end financial and operational results by presenting business line individual performances. Afterwards, we will be providing details regarding our cash position and capitalization. Operational and financial review will be followed by Şişecam's approach to sustainability, where we will also update you about the recent developments. As always, we will be pleased to take your questions at the end of the presentation. Please be reminded that the presentation and Q&A sessions may contain some forward-looking statements. Our assumptions and projections are based on the current environment and thus may be subject to change.
Before we start presenting our company's 2024 year-end results, it's necessary to remind you that pursuant to the Capital Markets Board decision, Turkish corporates, including our company, are subject to IAS 29 inflationary accounting provisions since the end of 2023. The 2024 full-year financial and comparative 2023 results that we will present in today's call contain the financial information prepared and audited in accordance with Turkish Financial Reporting Standards by the application of IAS 29 inflation accounting provisions and are finally expressed in terms of the purchasing power of the Turkish lira as of December 31st, 2024. At the end of the operational and financial review section, you may see a display of our key financials without IAS 29 impact. While reviewing our audited figures, we will provide our unaudited key financials without the impact of IAS 29 as well. Slide four displays our key financial results.
As can be seen on the first graph, we ended the reporting period with TRY 185.6 billion consolidated revenue. Overall performance relative to the previous year's volume sales persisted, notably in our Architectural Glass and Glass Packaging business line s. While Chemicals segment sales performance remained unchanged compared to the volumes delivered in 2023, Glassware and Industrial Glass business units rather experienced a decline on the same basis due to the cyclical nature for the former and seasonal variations and lighter product deliveries requests of OEM clients for the latter. The increase in product pricing, on the other hand, was pertinent to regions where signs of better demand at client industry level were evident. Consequently, our sales teams exerted maximum effort to pass through deriving costs by meticulously monitoring the demand trends from various perspectives, including but not limited to the product category and regional dynamics.
Based on 2024 year-end data, the annual increase in CPI index came in at 44.38%, while our reporting currency depreciation against hard currency basket stood at 16.3%. This gap between the inflation rate and the change in the value of reporting currencies in international operations relative to the Turkish lira continued to adversely affect our revenue growth. Accordingly, our consolidated top line moved south by 15%. On the other hand, an annual growth of 29% was recorded in our consolidated revenue based on without IAS 29 figures. Our profitability was marked by a decline that was largely driven by a series of interconnected developments. Although we managed to keep the gross profit margin throughout the year around 23%, which was also the main record in the last quarter of 2023 from a year-on-year perspective, it went down by 500 basis points.
Increased direct labor costs as a precaution of a high inflation environment elevated production overhead, and the inflationary accounting practices that resulted in slow-moving inventory values were experienced throughout the year. This was particularly pronounced in our Glassware and Industrial Glass business line s. These operations naturally entail high inflation levels, with the former supplying to retailers and wholesalers and the latter dealing with substantial backlogs for its OEM clients' long-term projects. Higher inventory data outstanding intensified the cost of goods sold, compounded by the implementation of IAS 29. Prolonged inventory holdings are susceptible to inflated costs, yet the pass-through mechanism remains limited by contractual obligation and market dynamics. Consequently, net realizable value calculations necessitated the recognition of inventory impairment provisions due to costs exceeding market prices, thus creating an additional dilutive impact.
Meanwhile, thanks to the higher capacity utilization in the majority of our glass operations, especially for the region with improving demand conditions, our total cost of goods contracted by 10% in Turkish lira terms compared to 2023 index figures. The decline in EUR/USD rate has significantly reduced the value of our Europe-based operations and affected our export revenues. Additionally, with nearly 50% of our cost of goods sold price in Turkish lira, yet only contributing 40% to our consolidated revenue, this disparity between the inflation rate and the depreciation of Turkish lira has exerted a dilutive effect. Consequently, the overall gross profit margin saw a downturn compared to 2023. Excluding the impact of IAS 29, on the other hand, our gross profit margin came in at 29%. Operating expenses, which are composed of two-thirds selling and marketing expenses and one-third general administrative expenses, rose by 2% year-on-year.
Please be reminded that our Incoterms, as our clients preferred us to deliver their orders to the final delivery point rather than collect them from our facilities. This sales model resulted in a high proportion of selling and marketing expenses in our overall OpEx and leads to elevated nominal figures compared to similar scale of a company operating under the Ex Works principle. While indirect labor costs, recorded under general administrative expenses and accounted for 29% of our consolidated OpEx, went up by 22% on a year-on-year basis due to the impact of high inflation environment. Transportation costs that composed 33% of our OpEx contracted by 13% thanks to effective supply chain management. However, despite a minor nominal increase in OpEx, our OpEx-to-revenue ratio came in at 25%, up by 400 basis points on a year-on-year basis. This was because annual change in consolidated revenue lagged Turkish lira inflation rate.
As a company holding 60% of the glass production capacity and the majority of synthetic soda-ash production based in Turkey and generating 41% of its revenues from its domestic market with a significant export capacity, Turkey represents the largest share in terms of operational expenses. Our regional breakdown of the profit and loss statement underscores the region's significance in our consolidated figures. The discrepancy between the inflation rate and the depreciation of Turkish lira against a basket of hard currency adversely affected the region's results. Inflation-driven increases in operational costs were evident but could not be entirely transferred to domestic market operations. While export pricing followed a downward trend, the value of such sales was only subject to 16% appreciation throughout the year. Consequently, the region's OpEx-to-revenue ratio increased from 18% to 24% in 2024. Depreciation expenses-to-revenue ratios stood at 8%.
EBITDA for the period amounted to TRY 13.9 billion, with an EBITDA margin of 7%, down from 21% in the prior year. At this point, we do invite you to see the details provided on the impact of inflation IAS 29 on our general items, profit-loss items, included as a footnote in our financial statement. Notably, if we were to report an adjusted EBITDA figure by excluding IAS 29 impact, the figure would be TRY 31.4 billion, accounting for its dilutive effect of TRY 17.5 billion. The decline in EBITDA margin was also in relation due to lower reported net other income from main operations and net income from investments, largely impacted by fluctuation in FX rates on trade receivables and payables and on fixed income securities investments.
As you may recall, in 2023 period and Turkish lira depreciation against the hard currency basket was 60%, whereas in 2024, the depreciation was only 16.6% on the same basis. Lower gains from FX-protected deposits, as they were unleashed in the second quarter of 2024, and notably, lower gains from investment property revaluation due to inflation accounting have also contributed to the decline. Excluding the impact of IAS 29, consolidated EBITDA recorded at 25.7 billion Turkish lira, translated into a margin of 15%. Parent-only net income was 5 billion Turkish lira, down from 25 billion Turkish lira, and resulted in a net profit margin of 3% versus 11% in 2023. We recorded a monetary gain of approximately 16 billion TL, up from 6 billion TL in 2023 due to an increased portion of debt used for working capital and capital expenditures financing.
This year, we recognized TL 2.6 billion deferred tax income compared to a deferred tax expense of TL 3.4 billion in the prior year. The shift from a deferred tax expense to income was due to a change in accounting methodology, with the implementation of inflation accounting effective from the end of June on the statutory accounts. Deferred tax assets related to reinvestment incentives were utilized to offset income taxes for 2023. However, the change in accounting methodology led to lower profit before tax, resulting in additional deferred tax assets in 2024. Net income for the period without IAS 29 was TL 13.4 billion. Moving on to slide five, we will review the segmental breakdown of our consolidated top line and EBITDA.
Our portfolio of operations has remained balanced over the years, with glass operations generating two-thirds of our top line, yet the significant role of the Chemicals business line , which is a hard currency play, was further supported with the full consolidation of the operative soda ash production facility in the U.S. in 2021. Chemicals business line emerged as the largest contributor to our consolidated revenue and EBITDA in 2024, with 23% share in the former and 51% in the latter. Our Architectural Glass business line was the second highest performer in our portfolio, as well as the largest performer among our glass businesses in terms of its top line and EBITDA generation capacity.
The business unit, with its 15 active production lines in Turkey, Europe, India, Russia, as well as a line in Egypt with partnership with Saint-Gobain throughout the year, generated 22% of our consolidated revenue and 33% of our consolidated EBITDA. Glass Packaging business line, with its nine production facilities and 25 furnaces located in Turkey, Russia, and Georgia, was ranked as the third largest contributor, accounting for 20% of our consolidated revenue and 27% of our EBITDA. From our glassware operations, with 10 furnaces in six facilities, three of which located in Turkey and the remaining half in Bulgaria, Russia, and Egypt, we generated 13% of our consolidated revenue. However, the business line had a dilutive impact on our EBITDA, given negative EBITDA profitability due to unfavorable demand dynamics leading to higher days of inventory outstanding and amplified exposure to high inflation.
Industrial Glass business line, accounting for 11% of our consolidated revenue, contributed negatively to our EBITDA generation due to difficulties in passing through cost increases in our TL-based auto glass operations with OEM clients and local currency depreciation lagging the cost inflation considering the pure hard currency nature of auto glass operations, which comprises measure of segmental performance. Energy segment performance resulting from our electric trading operations came in with 9% contribution to total revenue but had created a slight decline in our EBITDA. On slides six and seven, we aim to present the key takeaways regarding the full-year performance of our main business lines individually. This will provide a concise summary of how our glass and chemicals operations have performed in comparison with the prior year from both operational and financial perspectives.
Throughout 2024, the Architectural Glass business line demonstrated steadfast resilience amid macroeconomic challenges, including persistent inflation and constrained financing access of client sectors. This resilience is attributed to strategic efforts targeting the construction and renovation markets across multiple regions. A disciplined approach to inventory balancing and production optimization continues to be maintained in order to effectively respond to fluctuating market demands. Production levels saw 9% increase year-on-year with 85% capacity utilization rate and total output reaching approximately 2.8 million tons. Turkey played a pivotal role, contributing approximately 63% of the total plate glass output, thanks to the introduction of a new auto glass dedicated production line. The European Union region contributed 21% to consolidated production, with Russian and Indian operations serving the remaining 16%. Geographical diversification enabled the business line to mitigate region-specific challenges and capitalize on varied market dynamics. Consolidated sales volumes experienced a robust uplift, increasing by 11% year-on-year.
Turkey was the primary driver, accounting for 61% of total sales volume, buoyed by domestic demand thanks to re-urbanization efforts, particularly in earthquake-affected areas, mobility in renovation projects, and strategic import protection measures. Export channels also peaked with 23% increase in volume turns bolstered by new client acquisition in Latin and North America and the alleviation of previous logistic constraints. In the European region, sales volumes showed resilience despite a sluggish construction market driven by renovation activities and 3.3% year-on-year. The region's share in the overall sales volume stood at 21% as competition and macroeconomic headwinds persisted. Meanwhile, Indian and Russian operations collectively reported a 19% sales volume increase, driven by post-cold repair production in India and stable demand in Russia, accounting for 18% of total sales.
Despite a challenging pricing environment characterized by an abundance of low-cost imports and decreasing energy costs, particularly in Europe, the business line managed to navigate through with strategic pricing adjustments. Notably, with a late-year rise in Euro-based average product prices, thanks to adaptive pricing strategies in response to market conditions, limited the annual price construction at 7%. The business unit's focus on regional diversification, capacity optimization, and strategic market positioning enabled it to overcome significant macroeconomic and industry-specific challenges, thereby aligning with the broader organizational objectives. As a result, revenue from the business line decreased by 9% year-on-year to TRY 41 billion, and the EBITDA margin came in at 11%. Industrial Glass business line, encompassing automotive glass encapsulation and glass fiber operations, encountered a dynamic landscape that impacted its financial and operational performance. The automotive glass and encapsulation subsegment, which significantly influences the business line's financial metrics, recorded mixed results.
Despite a robust start in the first quarter with a 10% year-on-year sales volume growth, driven by recovery in Turkey's automotive industry and increased demand from OEMs, the subsequent quarters faced challenges attributed to seasonal variation and lighter product deliveries per OEM requirements. Full-year volume sales performance recorded at a 3% decline compared to 2023. Nevertheless, the auto replacement glass channel consistently contributed, maintaining its share at 15% of the automotive glass and encapsulation revenue. In the glass fiber subsegment, there was a notable 30% year-on-year sales volume increase in the first quarter, given successful portfolio expansion and customer acquisitions in export markets. However, as the year progressed, sales volume growth moderated, and the domestic market faced persistent pricing challenges due to intense competition from local imports, triggering strategic responses, including anti-dumping investigations initiated in the third quarter to protect local producers.
Performance in the export markets was adversely impacted, given weakening cost advantage. Full-year sales volume indicated an 8% increase on a year-on-year basis. As a result, the revenue recorded by the business line decreased by 10% year-on-year to TRY 20.5 billion, and it had a negative EBITDA margin of 9%. The landscape was quite mixed, marked by global economic challenges, geopolitical fluctuations, and weakening consumer sentiment, leading to increased intensifying savings tendency for the Glassware business . These factors collectively influenced by domestic and international operations throughout the year. Consumer sentiment becoming more focused on essential product purchases every day, and a challenging retail environment where the headwinds faced in the domestic market. Strategic marketing efforts during key events like Ramadan, Mother's Day, and holidays were exploited to mitigate such unfavorable dynamics, resulting in minimal underperformance of domestic volume sales to HoReCa and national retailers and store channels over the years.
However, the retail and wholesaler channels to which approximately half of the domestic sales are indirectly experienced declines due to clients being discouraged from increasing inventories, given high interest rates and constrained credit access. Sales to the Turkish market contracted by 9% year-on-year. Internationally, the business line navigated fluctuating demand across various regions. The European market remained sluggish, particularly in retail channels, although there was growth in discounted markets. Export growth was notably driven by enhanced production capacity at the Eskişehir plant operation from the second quarter, leading to a reallocation of product customer strategies. Despite challenges such as geopolitical tensions and changing import regulations in the MEA region, international sales saw a mixed performance, with notable resilience in HoReCa and B2B channels, and limited sales volume declined to 6%. Throughout the year, the Glassware business line implemented price adjustment was through regional inflation and cost of production changes.
While the unit sales volume experienced a high single-digit decrease on a year-on-year basis, the average price per ton went up by 7% in USD terms, demonstrating effective pricing adjustments. As a result, the business line recorded TRY 23.3 billion net external revenue, 8% lower compared to the prior year. It had a negative EBITDA margin of 4% due to the highest days of inventory outstanding. In 2024, production marked a steady increase for our glass packaging business unit, driven by strategic capacity enhancement at key facilities. The annual average capacity utilization rate was consistently maintained at around 94%, with a total production reaching 2.5 million tons and increase of 9% from the previous year. Turkey and Russia remained the primary production hubs, accounting for 56% and 41% of total output, respectively.
The operationalization of the fifth furnace at Eskişehir plant and capacity additions in Georgia were significant contributors to this growth. Consolidated sales volume exhibited a notable increase, culminating in a 10% year-on-year rise. Turkey's domestic sales led the growth with 18% higher volume, fueled by increased non-alcoholic beverage consumption and new customer acquisitions resulting from strategic capacity allocation, in addition to the domestic demand bolstered by wage increases. However, exports from Turkey faced headwinds, moved along a declining trend due to weak demand in Europe and geopolitical challenges in the Middle East and Africa. Russia's performance was underpinned by a strong demand for glass packaging in the beer sector, driven by the launch of new beer brands, better consumer sentiment, and growth in domestic tourism.
Aluminum can supply constraints, as well as a shift in consumers' preferences away from premium alcoholic beverages, given the tripling of excise tax rates on wine and champagne sectors, also positively impacted the volume sales performance. Accordingly, international sales moved up by 5% in volume terms year-on-year. Throughout the year, price adjustments were implemented to reflect changes in production costs and inflation. Turkey experienced low double-digit price increases, while Russia saw one mid-single-digit adjustment in local currency. Variations were observed in average price per ton in USD terms, due to regional market dynamics and product needs. These operational results translated into 38 billion TL net external revenue, 4% lower compared to the prior year. The business line's profitability margin came in at 10% level in EBITDA terms. Lastly, our Chemicals business line .
The year began with a mixed outlook for soda ash demand, showing signs of recovery in China thanks to increased activity in the electric vehicle and solar glass sectors. However, demand remained subdued in Europe and stable in other regions. Throughout the year, our soda ash production and sales volumes experienced variances driven by strategic responses to market dynamics. Annual production stood at 4.6 million tons, with a capacity utilization rate of 90%, marking a decrease of 2% on a year-on-year basis. Despite the general trend of oversupply and declining prices, reflecting the high base YOY coinciding with slower economic activity and capacity expansion, especially in Asia, we managed to maintain year-over-year volume sales performance in line with the annual change in output level. Domestic sales in Turkey were robust throughout the year, supported by strong demand from the flat glass and packaging industries.
However, international sales were challenged by weak European demand and logistical constraints, such as a flood in Bosnia affecting railway transportation. Despite these obstacles, strategic realignment and enhanced market penetration, particularly in the Middle East and Africa, bolstered export performance. The chromium chemicals segment continued its positive trajectory from late 2023 and sustained growth throughout the year, which led to 27% higher sales volume over year-over-year. This was largely driven by strong international performance, especially in South America, Afghanistan, and India, despite domestic challenges related to currency fluctuations and high interest rates. The segment benefited from an expanded client portfolio and a better chromium sector outlook. Pricing pressures persisted across both soda ash and chromium chemicals due to oversupply and reduced energy costs. Soda ash prices showed minor quarter-on-quarter improvements but remained 23% lower over year-over-year, reflecting the elevated price levels of 2023.
Similarly, chromium chemicals faced a 21% decline in average USD prices per ton due to competitive pressures and changing market dynamics. Resultantly, Chemicals business line reported TL 43.2 billion revenue, a decrease of 24% year-on-year, and 16% EBITDA margin. Moving on to slide eight, with our production facilities located in 14 countries, diversified operations portfolio, and wide range of products, we continue to cater to our clients across the globe. Despite the significant challenges posed by disparity between hyperinflation and relevant currency depreciation, which still adversely affects our competitiveness in export markets and eroded our export revenue, we successfully maintained a 59% share of international sales in our consolidated top line in 2024. Export revenue, 53% of which was generated from sales to Europe, stood at $962 million. Including revenue generation of Şişecam facilities located in the region, Europe accounts for 29% of our top line.
US market exposure through sales from US natural soda ash operations, as well as exports, stood at 12%. Accordingly, our developed market exposure came in at 41%. On slide nine, you may see the details on our liquidity position. Following the Eurobond issuances executed by our fully-owned subsidiary, Şişecam U.K. Limited, with a total sum of $1.5 billion and the tender of $328 million worth Şişecam 2026 notes in the second quarter of 2024, we ended the year with $1.7 billion cash and cash equivalents, including $142 million financial assets, of which $98.4 million Eurobond investments, primarily consisting of a Turkish corporate Eurobond and Eurobonds from a Turkish and foreign financial maturing in 2025 and 2026. Gross debt stood at $3.7 billion, with a term structure of 74% long-term to 26% short-term.
78% of gross debt is denominated in hard currency and 93% of remaining balances in TL. The interest rate structure comprised of 92% fixed to 8% variable. The hard currency share of cash and cash equivalents, including financial investments, stood at 75%. Our net debt position amounted to $2 billion, translated into a net leverage ratio of 5.2 times. On the other hand, based on non-IAS 29 results, which provide more accurate data to follow the trend in our business operational performance and financial position, 2024 year-end net debt and full-year EBITDA figures indicated a net leverage ratio of 2.8 times, which is slightly above our comfort zone, yet within the limits of our covenant. As a final note, TRY 31.4 billion, adjusted to IAS 29, impact EBITDA figure translated into a net leverage of 2.3 times.
This ratio is significantly below the covenant threshold, serving as a solid testament to management's present evaluation of our company's performance. As of 2024 year-end, we had a net short fixed position of TRY 14.1 billion, with 110 million long in USD and 387 million short in EUR. Moving on to slide 10, we recorded TRY 30.1 billion CapEx compared to TRY 30.3 billion in the prior year. The distribution of CapEx across business line is as follows. Our Flat Glass segment capital expenditures accounted for 35% of the total investment, with a primary focus on the new greenfield flat glass facility and furnace, as well as the new flat glass furnace in Tarsus. Glass Packaging business line has a 30% share in total CapEx with the greenfield facility project in Hungary, and the payments for the expansion process in Turkey as the main components.
Glassware segment contributed to 9% of total CapEx, mainly in relation with cold repair undertaken in Eskişehir Glassware Facility. Chemicals segment represents 8% of total CapEx, with investments addressing to improve operational efficiency and maintenance of our plants in Turkey and USA. In December 2024, we achieved a significant milestone toward global leadership in soda ash industry by acquiring full ownership of our ongoing natural soda ash investments in the U.S. Our stake in Pacific Soda LLC has increased to 100%, and our direct ownership in the Wyoming operational facility has increased to 51% for a total amount of $285 million. Cash payment in relation to this transaction was executed on January 2nd, 2025.
Given the current market conditions in Europe and the 2025 forecast, we are accelerating the cold repair of our Northern Italy flat glass float line, beginning in February 2025, to efficiently manage the production sales inventory balance and boost profitability. Additionally, we will suspend production at the factory's laminated line as of March 2025. These actions are projected to contribute 8-10 million EUR to EBIT, thanks to increased capacity utilization at our other flat glass facilities in Europe. We ended the reporting period with a cash inflow from operating activities of TRY 31 billion compared to TRY 58 billion in the prior year, mainly due to lower reported net profit for the period and non-cash adjustments. Including the monetary loss on cash and cash equivalents, we recorded a negative free cash flow of approximately TRY 31 billion.
On slide 11, you may see our key financial result impact of IAS 29, which we have already walked you through at the beginning of this webcast while we were providing details on our audited financial results. Yet, we would like to add that our total assets and total equity have grown by 38% and 21% respectively compared to 2023 year-end. In the following section, we will update you with some key developments in our sustainability agenda. On slide 13, our Care for Next Sustainability Strategy guides Şişecam Sustainable Transformation with three key focus areas. We continue our efforts to achieve the 2030 and 2050 goals set within the framework of our Care for Next Sustainability Strategy, which we announced in 2022.
Moving on to slide 14, after the review conducted amongst the companies listed on the Borsa Istanbul, Şişecam has maintained its place in the BIST Sustainability Index for the period of January to December 2024. As a result of the comprehensive evaluation conducted by Refinitiv, which is used in the BIST Sustainability Index assessment, our score is A minus. Additionally, in 2024, we published our 2023 sustainability report, which has been prepared using the GRI methodology, continuing the practice we have followed since 2013. Moreover, for temporary methods in the report, we received data validation services from an independent organization. This practice not only contributes to our transparency but also provides an opportunity to understand and assess the broader value impact and outcomes of our sustainability performance management and reporting. Furthermore, we have already started the activities for sustainability reporting for 2024.
Our 2024 sustainability report, to be published in 2025, will be prepared in accordance with the Türkiye Sustainability Reporting Standards. Moving on to slide 15, we would like to share with you some key developments in 2024 that support our sustainability agenda. Recently, we introduced the Plant of the Future initiative at the Glasstec 2024 fair. Operating with a code-based open innovation model, this initiative will enable the integration of innovative solutions developed with environmentally friendly production models and cutting-edge technologies into all production processes. We believe it will make significant contributions not only to Şişecam but also to the industry as a whole. In addition, we conducted a water risk assessment to identify, evaluate, and manage potential risks related to water usage and available throughout our operations.
We also carried out a project aimed at calculating Şişecam's scope 3 emissions at the company's level and establishing a structured data collection and analysis process for the entire Şişecam value chain. We held the Şişecam Global Supplier Summit with the team united to collaborate, where we met with our partners. The summit prominently featured the theme of sustainability. The sustainability focus session comprehensively covered topics such as reporting and disclosure requirements related to sustainability, digital solutions, and the critical role of supply chain collaboration. On slide 16, to enhance our collaboration and sharing networks, we continuously review our memberships. In this context, we have rejoined the trade association Glass for Europe, which represents Europe's flat glass sector. Glass for Europe brings together multinational companies and thousands of SMEs across Europe to represent the entire building glass value chain.
Additionally, we have become a member of the Business Council for Sustainable Development Turkey. In April 2024, we also became a member of the European Industrial Alliance on Small Modular Reactors, a platform established by the European Commission to support the development of the first SMR units in Europe by the early 2030s. We aim to monitor, implement, and enhance our environmental, social, and governance priorities, aligning them across our entire value chain. Thus, we have revised our responsible supply chain policy, which ensures that we met with our suppliers and business partners within the framework of universal ethical principles. Supplier applications are accepted through the Şişecam Supplier Portal, and we expect our suppliers to adhere to the same principles, respect human rights, and act responsibly towards the third parties in accordance with the Şişecam Supplier Code of Conduct and the Şişecam Code of Conduct.
The percentage of suppliers accepting the Supplier Code of Conduct reached 62.2% in 2024. As part of the Supplier Sustainability Development Program launched in 2024, we have started sustainability audits for prioritized suppliers. The 15th European Society of Glass Technology Conference took place in the United Kingdom in mid-July. At the sustainability sessions of the conference, our Şişecam teams presented sustainability at Şişecam Glass Recycling with its fundamental requirements and Recycled Glass Integration fundamental research for optimal batch composition. Additionally, in June 2024, as part of the Barclays ESG Emerging Markets Corporate Day event organized by Barclays, we engaged with a total of 13 investors across four sessions.
At this event, we shared Şişecam Sustainability Strategy, 2030 and 2050 targets, ongoing projects related to these targets, developments for 2022 and 2023, performance on ESG platforms, key components of our glass decarbonization roadmap, and the anticipated environmental benefits of our US soda ash investment with the investors. Thank you. We may now start the Q&A session.
Thank you. We'll now be moving to the question and answer section. If you'd like to ask a question, please press star 2 on your phone and wait for the prompt. To ensure participation from all attendees, we kindly request that you limit yourself to one question and a follow-up question per turn. For additional questions, you may press sSr 2 to rejoin the queue. We will pause briefly to allow questions to come in. Our first question comes from Evgeniya Bystrova from Barclays. Your line is now open. Please go ahead.
Yes. Hello. Can you hear me? Yes, we can. Please go ahead. Yeah. Thank you very much for the presentation and for so many details provided in the slides and also verbally. So I have, I mean, I know you asked us to limit our questions to just one, but maybe two smaller questions. So my first question is about CapEx. What's your outlook for 2025? What are your plans regarding that? Any color will be very useful. And maybe connected to that question is, so regarding your U.S. operations and given that you've taken over the Pacific project, could you please provide any updates regarding what's the timing on that project, potential CapEx, and also if there will be any changes to plant technology used for that project? I know that previously you were planning to use solution mining.
So now with the soda ash project, or Ciner Group, what will be the technology used there? Thank you very much.
Thank you, Evgeniya. So for the CapEx, you know that we have last year also shared that we are doing a type of dynamic investment management. And for this year's targets, the CapEx will be limited with the EBITDA at maximum. So the standard on the CapEx will be 100% linked to the maximum level as EBITDA. So we already made a very slow start to CapEx spending, especially in the first quarter. So based on the performance of the budgets for each respective quarter, we will see the amount of CapEx that can be used for the upcoming period. So rather than giving a distinctive number, I believe this serves the purpose better.
Coming to the U.S., to share with you a very recent development that we will be most probably by the end of today obtaining the environmental impact study approval that will be helping us, that we will be coming through to the end of the permitting process. For sure, once everything is completed, we will also inform all the markets based on this. This will give us an opportunity that within the upcoming three to four months' time, we can kick off with the construction. For the technical part, there are no changes that are expected. We will stick to the solution mining. We already have the solution mining within our application process approved by the necessary authorities.
Thank you very much. Maybe just a quick follow-up. You said that your CapEx will be 100% linked to EBITDA generation.
So shall we assume that basically whatever you generate in EBITDA will be also going spent on CapEx? Is that what you're saying?
Perfectly right. And there is a very strict prioritization. So the ongoing large greenfield programs are the only prioritized ones. But for sure, their speed will be linked to two things: the generation performance and the market condition.
Okay. Thank you very much. I will go back into the queue. Thank you.
Thank you.
Okay. Thank you. Our next question comes from Cemal Demirtaş from ATA Yatırım . Your line is now open. Please go ahead.
Thank you for the presentation. My question is very much related to the outlook. Especially in the fourth quarter, we see that margins remain under pressure. Maybe it's one of the lowest levels we had seen. Of course, we have inflation accounting impact. But where do we stand now?
Do we expect some recovery during the year, or should we assume that the trend will continue in the first half of the year? Thank you. In terms of pricing and the margins. Thank you.
So this has a shorter and very long version. So if you excuse me, Demirtaş , I will stick to a rather shorter one. So the thing is that for the margins, as Gökhan Güralp very much stated, provided by each respective segment, especially in glassware and auto glass, due to a couple of differentiated reasons, the margin erosion was way beyond what we experienced in the other segments. Especially for the major business lines, if I may call, considering chemicals, flat glass, and glass packaging, the margins are expected to be at least as far or in better performance when we compare with the last quarter.
As you have already seen that the company has been able to push up the volume to some extent. Together with this, we have already announced in almost each and every segment increased pricing levels. What's the most important thing is that rather than especially Turkish geography, European markets is the key for the pricing and the margin environment. After a very long time, we have been able to both announce and implement price increases in flat glass in the European region, which we have already done to some extent in glass packaging and chemicals segments also. Just to give you a brief outlook, we can say that the demand seems to be very mildly positive compared with the last quarter.
But as I keep on making the same remark again and again, if this doesn't continue for consecutive two quarters, I believe it is still too early to say that demand is picking up. But considering the timing and the period of the cycle, there are expectations in the market that especially through to the mid-year in the European region, the demand will pick up to some extent, but we will see rather a mild one or a stronger one. So I believe all the geopolitical things and the Trump administration and their discussions, and especially the ongoing tariff wars, will also pave the way to understand the market's confidence and in return, the demand pick up, whether it will be a mild or a stronger. I hope that helps.
As a part of this question, do you have any sense of the inventory levels in the region?
Is it low inventory or high in terms of the cycle? So in order to associate with the outlook, do you have any measure in the sectors that you can calculate the inventory levels just roughly as a perspective? Thank you related to that question.
So for the details during the meetings with the IR teams, they can provide you further distinctive and specific answers to the questions you may have. But starting from the early days of the crisis, you can very easily see that the company has been managing the stock levels based on the production, the demand, and the inventory levels balance. So only to be linked with this, we have already seen that to improve the productivity and to optimize our existing production footprint, just to give you an example.
Although we were implementing a price increase, we also coupled this with taking the cold repair of Northern Italy flat glass line to an earlier time. So we will continue to stick not to increase the inventory levels anyway further than where we are standing. And the sales and marketing teams are putting all the efforts to direct the inventories to differentiated routes so that we improve where we are standing. But when you look at our inventory to sales percentages, you can see the levels that we are in at the nominal level are very much comparable to our ordinary course of business.
Thank you. Thank you very much.
Thank you, Cemal.
Okay. Thank you. Our next question comes from Erica Ive from MetLife. Your line is now open. Please go ahead.
Good afternoon. Thank you for taking my questions.
The first one is just to go back to CapEx in 2025. So to understand better, when you say the link with EBITDA, does it mean that if you generate, let's say, let's assume 500 million of EBITDA, you will spend 500 million in CapEx? Shall I think in these terms? And then also notice the working capital. You had a sizable working capital inflow this year. How much working capital as well in terms of change movement shall we expect for 2025?
So you're perfectly right on your assumption. So we are directly linking our CapEx spend based on the EBITDA that has been already being generated. And the other dimension, as I shared with you, is the speed of the investments are for sure linked very much with the supply and demand balance and the demand improvements that we are seeing in the market.
So there is a differentiated answer for each and every greenfield we have based on its respective market conditions. But your main assumption is 100% right. And based on the working capital, as we have shared with you, this is one of the, if not the main concentration area that we have. So we are very much committed to improving the cash conversion cycle. So we have been already kicked off through to the end of last year, I should say, a specific program where there are specific targets for both improving the balance sheet KPIs and also the P&L KPIs by margins. So the heart of this improvement program is very much directed into our net debt to EBITDA levels, plus the working capital that is being consumed by the company.
So what we are consuming as of now, which the levels are almost around 34%, is higher than our ordinary course of business due to numerous reasons. But due to the business realities of our industries, as you know by heart, the levels have been roughly around 30% in the ordinary course of the business. But considering the cycle continues to extend, our main target is to try to get the working capital first to the ordinary course of levels and to find additional rooms to improve our position.
Thank you. If I may also squeeze in, in relation to the question in relation to the ceasefire in Ukraine, would you benefit from the reconstruction? Would you potentially supply glass to Ukraine?
So there will be an additional demand, meaning that for all the market players, there will be an additional demand generated, meaning pricing improvement plus capacity utilization.
So we will need to see how this tension will be eased and then what are the treaties that are in place. But for sure, for the overall European market, I should say, there will be a benefit for most of the players, especially the ones in the proximity, and we are one of them.
Thank you. That's very helpful.
Thank you so much, Erica.
Thank you. Our next question comes from Egor Fedorov from ING Bank. Your line is now open. Please go ahead.
Hi. I think my questions have actually been already answered. Well, just shortly, how would you see your leverage in the end of this year? And how do you see free cash flow for this year in terms of quarter by quarter? Should we expect huge negative free cash flow generation as it was in 2024, or there will be decent improvements on this side? Thank you.
So rather than providing quarter by quarter numbers, I can say that linking our CapEx spending to maximum to the EBITDA levels and improving the margins are mainly directed on improving our net debt to EBITDA position, both on the nominal and after inflation accounting figures. As you perfectly know, those are not the levels that first, that we are used to, second, that we planned. So this has been happening as our CFO has told the story in very much detail, especially due to the inflation accounting interest rate usage against the TL devaluation. So with this new normal and understanding the new reality being TL to be in an undervalued position for some time, we immediately link our realities based on this and we plan in our strategic planning and budgeting purposes to improve our net debt to EBITDA levels.
So those levels are not the ones that we are used to. So each and every effort, as I said, and a specially designed program has been initiated to improve net debt to EBITDA and working capital consumption levels.
All right. Thank you.
Thank you, Egor.
Okay. Thank you. Our next question comes from Gustavo Campos of Jefferies. Your line is now open. Please go ahead.
Hello. Yeah. Thank you for the presentation. I first wanted to ask about your covenant calculations. Should we use the 2.3x net leverage or the IAS 29 5.2x net leverage? And what is your covenant limit? I'm just trying to understand the methodology here a bit better with the banks. Thank you.
I will continue with your question and try to answer your question also. By the way, our covenant is an incurrence covenant, which means there isn't any restrictive application.
But by the way, of course, there are several restrictions. But the applied inflation accounting and with the application of that accounting method, we didn't consider in EBITDA calculation the monetary gain loss impact coming from EBITDA. And without adding these impacts, we reached 5.2 times. But as management, we are looking at the net debt to EBITDA calculation without application of inflationary accounting, which means for us, the covenant is around 2.8 times. And on the other hand, in application of inflationary accounting, the impact coming from EBITDA items are reflected to monetary gain loss account. If we add these monetary gain loss impact to EBITDA, which we are calling adjusted EBITDA, afterwards, the net debt to EBITDA amounted to 2.3 times. But as management, we are focusing on 2.8 times, which is non-IAS 29 application.
Okay. So just to confirm here, 2.8 times is your incurrence covenant net leverage, and you use a non-IAS 29 net leverage methodology. Is that it?
Yeah. Yes. Sure.
Okay. Just a quick follow-up here. Where do you expect net leverage to go into 2025? Let's use net leverage currently at around 2.3. Where do you expect it to be at the end of the year? If you could give any outlook, any perspective, it would be very helpful.
Yeah. As your comment on the CapEx side, we limited the CapEx side with the EBITDA generation. And this will also roadmap for us in net debt section because we are focusing on also working capital in order to decrease the net debt. On the other hand, by limiting the CapEx with the EBITDA generation that we will do in 2025, the net debt level will be calculated accordingly.
By the way, we try to keep, and our main aim is to keep the net leverage around 3.5 times as it is accomplished in our bonds.
Okay. Understood. Thank you. And last quick question here. You have 22% of your debt denominated in Turkish Lira, right? Are you expecting to pay down this debt to avoid paying such hefty interest expenses in this coming year? Or should we expect your total debt to this Turkish Lira debt to remain in the capital structure? Any guidance there would be very helpful. Thank you.
Just to quickly answer, based on the market expectations and the respective environment conditions, for sure, we are doing the necessary swap to decrease the cost of financing on us with the available opportunities.
I'm sorry. So one, could you repeat what you said? And two, are you saying we should expect?
As we have done before for the TL portion or any other respective currency, we are doing the respective cross-currency swaps to for sure optimize our finance costs.
Right. Right. Okay. I see here you paid around $500 million in interest expenses in 2024. Should we expect that amount to be somewhat lower because of your hedges or because you might reduce some of your debt? Is that a correct assumption?
For sure, we are trying to improve all of our cost base, starting with the finance cost while trying to improve the pricing and the margin environment. So you can link anything based on this for sure, including the financing cost.
Okay. Thank you very much.
Okay. Thank you. And in the system, we have four questions left. If you excuse us, we will take the next four questions and then complete the call.
Please, let's go ahead.
Okay. Thank you. Our next question is from Antonio Jan Segura from BCP Securities. Your line is now open. Please go ahead.
Can you hear me?
Yes.
Yes. We can hear you.
I wanted to ask about the EBITDA without the inflation accounting figures because from what you showed, EBITDA without inflation accounting increased 40% on a quarterly basis. So I just want to understand what was the driver behind this increase of 40% QoQ in a currency basis.
We will need to go over your assumptions. So let's do it in detail because apart from some specific segments, on the overall, there has not been improvement on the overall margins from quarter- to -quarter. So our expectation is starting with this quarter, there will be an improvement in the margins but in the nominal ones before inflation accounting.
But this has not been the case for the last quarter.
Thank you.
Thank you.
Okay. Thank you. Looks like we have a follow-up from Evgenia Bystrova from Barclays. Your line is now open. Please go ahead.
Yes. Thank you very much for allowing me to ask me another question. It's actually a follow-up to the covenant question. As far as I remember, in your bond documents, you have a covenant of 3.5, as you also mentioned. And as far as I remember, it should be calculated based on reported audited financials. So I would assume those include IAS 29 adjustments. So could you please provide a comment on that because you said that you base your covenant calculations excluding IAS 29? So I just want to understand how it works. Thank you.
Yeah. Sure. You are right. In both prospectus documents, the covenant is calculated based on Turkish accounting standards, which is also including application of inflationary accounting. Also, accordingly, the covenant is 3.5 times. Yes. You are right. By the way, as management, we are following the results without application of inflationary accounting. That's why I mentioned that 2.8 times calculated from non-application of inflationary accounting is our management follow-up. Sorry. 2.8 is your internal target, or it's a covenant on banking facilities? 2.8 is resulted from the financial statements applied non-inflationary accounting. So that's why 2.8 is still above the comfort zone that we have as management, but still is below the bond covenant calculated as mentioned as 3.5 times. Just to provide additional clarity for management purposes, we stick to before inflation accounting numbers so that we can compare years against years and the performance and keep a track of this.
But for sure, as I mentioned at the beginning part, this is not an area that we feel ourselves comfortable or we believe that we can even go up to 3.5. This year's specific programs and the budgeting or budget tracking systems are perfectly designed and are being implemented to improve the net debt to EBITDA level. So the clarification we were trying to provide was for management purposes, it is easier to track and manage the business before inflation accounting numbers so that we can keep a track for the overall operations of the wider geography. I hope we can be able to provide you what our perspective is on this.
Thank you very much. Yeah. From our perspective, it would be much easier as well without inflationary accounting. But you also mentioned 2.3 as your net leverage without inflationary accounting, and now you're saying 2.8. I'm just confused. Could you please clarify that?
No. No. That was an additional information to provide. This is something that is being widely discussed as of now, whether this additional income should be included to EBITDA or not. And there's a chance that the standards might be changed to include those numbers. We are just trying to provide all differentiated reports. So it is hard for yourselves, not easy for the company's management also to keep a track of many different ways of describing the numbers, I should say. But just to provide further clarity on you, our CFO has provided after inflation, before inflation, and including the additional incomes, what the net debt to EBITDA looks like. So we are keeping a track of all of them and managing and trying to improve the net debt to EBITDA, looking on each and every differentiated perspective we have.
Yeah. Got it. Thank you very much.
Thank you.
Okay. Thank you. We also have a follow-up from Erica Ive from MetLife. Your line is now open. Please go ahead.
Thank you for taking my additional question. I would like to know what is the dollar amount of your gross debt position and cash position as of year-end?
$3.7 billion is our gross debt.
In cash?
Cash is equivalent to $1.7 billion. So net debt is equivalent to $2 billion.
Okay. Okay. Perfect. $2 billion is better. So basically repeating $3.7 billion gross debt to $1.7 billion cash, and as you said, therefore, we have $2 billion of net debt. Thank you very much. And EBITDA, do you have also the amount of EBITDA? Because it's quite difficult, obviously, with this accounting in dollars.
And with application of IAS 29, the EBITDA amounting to around $400 million.
Okay. Perfect. And then also going back to the cash flow generation. So now if I take TRY 500 billion of EBITDA, is it fair statement? Deducting interest paid of around TRY 450 million, I don't know if it's fair assumptions there, then you have left TRY 50 million, then you got tax. So let's say that you are breakeven, and then you got a small, relatively a bit of.
Sorry to interrupt, but for the sake of time and for the details that we will need to go through, if you will excuse us, I will encourage you to reach to our IR department so that we provide you all the further details in all the dimensions that you might require.
Okay. We'll do. But just in brief, then, to summarize, you basically expect to still generate a negative free cash flow.
Okay. Erica, if you can on a high-level basis provide it, let us try to come with a quick answer.
Okay. All right. Thank you very much.
Thank you.
Thank you so much.
Thank you. We have a follow-up from Egor Fedorov from ING. Your line is now open. Please go ahead.
Yeah. Thank you so much for coming back to me. On the debt side on the international debt capital markets, do you have any plans or are you considering any new issues for this year? So this is the key question and maybe a suggestion from my side. Well, we are, of course, different analysts from different sectors like credit and equity.
But maybe, well, to make a little bit our life a little bit easier, especially on the back of this inflationary accounting system, maybe your IR department company make some homework in terms of producing some kind of maybe US dollar denominated or equal accounting, so it would be a really clear and, well, transparent financial, so we could have excluded a lot of unnecessary questions, so it would be really clear, especially if you have more export revenues, and why not to report in or at least to provide some information a little bit detailed in the U.S. dollars or euro denominated figures, so it would be really healthy and really, well, useful for us. Thank you so much.
Thank you. We took your constructive comments, and we will do what is required.
With inflationary accounting, unfortunately, nobody's life is easy, but we will do our best at least to make your life easier so that you can keep track. So for the transparency, that is one thing we keep at the heart of all our IR and finance activities. So we will try to also link with you to get your further detailed comments how we can improve. And second thing, as of now, there are no plans to come to the debt market within this year or sometime soon. But if there are any plans, for sure, through the right channels, we will inform all the markets. Yeah. Sure. Thank you so much for your answers.
Okay. Thank you. And with this question, I believe we can sum up our call. In the name of the overall team, I would like to thank you all for your interest and your detailed questions. And we will try to, as we did in this call, provide you with further details so that each and every investor or analyst can easily understand what are the reasons of the outcomes that financials are happening and how the management of the team is fighting and managing that. So thank you to all of you, and hope to see you soon in the upcoming web call.
This concludes the call. Thank you, and have a nice day.