Hey, participants. This is Hakan, Group CEO of Tekfen Holding. Welcome to earnings call of 2023. Here today, we will be presenting you the results of 2023. To start with, results have been relatively lower than probably the expected values. As is always the case, there are always reasons and actions taken to ease the burden of the potential issues on our results. Today, my presentation would focus more on those issues rather than the already shared numbers and financials. I hope everybody is able to see my presentation. We have consolidated our presentation into three categories. We will be starting with the consolidated financial highlights, followed by results by segment. Those are more or less what has been already shared with you. The highlights would include more deeper information about the reasons of the results and the actions taken to reduce the burden of those potential issues on our results.
This year is a special year. I know that I am among the financial community, and I am not sure whether it is wise to comment the IAS 29, is the fair way of representing the financials or not. To enable a fair comparison, we have included a representation of our results, both with IAS 29 correction included and without it. Regardless whether IAS 29 inflation adjustment is included or not, this year has been a relatively difficult and problematic year because of the issues that I am going to present in the upcoming minutes. From a profits point of view, the margins and the absolute amounts have been lower, and in the inflation-adjusted cases, minus, both for EBITDA and the earning before tax comparison.
If IAS 29 inflation adjustment is not applied, which would enable a comparison with the previous years, then our EBITDA would remain positive but still low in comparison to what it was in the previous years. If I make a representation of the results by segments, meaning contracting, agri, industry, investment, and then consolidated, we would see that from a turnover making point of view, with the inflation-adjusted figures, all groups have been lower than what they were in 2022. But especially in comparison to our consolidated financials in the previous years, this year, because of the reasons that I am going to explain in the coming slides, our agri industry also had a bad year, and of course, the financial impacts of our agri industry's result had an adverse effect on our consolidated financials. I am just letting some people in the waiting room. Yeah.
From the highlights for the contracting group point of view, this year, a focus on operational cash flows has taken place. If I proceed with the issues that has taken place during the course of the year, in our NFE project in Qatar, we have written a provision for the end of project loss of $ 130 million. It has been a major reason that has impacted our financials adversely. From our project that has been already concluded in Qatar, the Al Thumama Stadium project, in line with our discussions with the client, that is a JV, we have collected $50 million for our share, and that has been booked accordingly.
For the pipeline project that we have been doing for the client, Aramco, in Saudi Arabia, we have collected almost $19.5 million as a result of our compensation negotiations for cost increase for the previous periods. The discussion for the big loss, which is around about $210 million, still continue with the administration of the client. As far as our longstanding receivable from SOCAR for the Baku Olympic Stadium is concerned, we have been able to collect the full receivable, which is $54.5 million. As far as our old Libya project is concerned, we have received the first installment of $6 million. For the remaining $15.2 million, there has been a payment plan whereby the outstanding receivable will be paid by the customer.
As far as our Kharampur project in Russia is concerned, we have been unfortunately not able to reach a consensus with the client. In order to protect our rights from a law point of view, we have initiated the arbitration proceedings against the administration. As well as the restructuring of our portfolios concerned, we have completed the merger of Tekfen Construction with GATE. We have completed the merger of Ceyhan Steel Factory with TİMAŞ, which would enable us to serve our customers for their steel structure, pressure vessel, and heat exchanger needs from a single organization. From a strategic approach point of view, we have completed sales of some non-core assets, such as our Topkapı land and some of our other idle assets. We have offices in countries. Of course, our expectation from the offices were to initiate new business developments.
In line with our new strategy, some of the offices in the other countries where the strategic focus is not on that specific country, those offices have been closed. From an organizational point of view, we have made organizational changes for the central management of support and shared services, talking about financial services, accounting, human resources, IT services, purchasing, legal services, to achieve synergy and cost savings between the contracting group. Since this Qatar project, NFE, is much of an importance as of its impact on our financials, we have decided to dedicate a single space for it. For the time being or as of end of December 31st, the financial completion of the project is at 39%. This significant loss has been mainly due to delays in the establishment of temporary camps, workshops, warehouses, and office facilities, as well as during the mobilization project.
Actually, those cost increases has already taken place during the startup of the project. As the new management as we have seen the estimated end of cost of the project, in line with the rules of the TFRS, we have booked a provision for the end of the project cost being $130 million. As a result of this significant loss, we have made changes in the management, including the top management of the company and project management. The project management has been completely changed. Negotiations are ongoing with the administration of the client and efforts to reduce the project losses through increased project efficiencies and savings are continuing at the administrative and the workforce levels.
From a backlog point of view, in line with our new strategy, we have not voted or we have not been voluntary for projects whereby we are not sure about the profitability level. You would recall that during our strategic presentation, we have already presented that we have identified the discipline and the geographies that we would be for the period that we would be active. You would recall that we have named our strategy as shrink and grow. During this shrink process, we have decided to limit the geographies as well as the disciplines of the new work that we would be volunteer to undertake for. In line with that, the backlog has been reducing. Nevertheless, there are discussions going on with various clients that gives us the hope that a healthy business would hopefully be granted in the course of, hopefully first half of 2024.
As well as our highlights for agri industries concerned, here we have already included quite some statistics in our package, so I'm not going to go over them. But one thing that we would like yourselves to know is that, starting with the COVID and then continuing with the Russian-Ukrainian war, as you all would recall, prices of fertilizers has gone wild for some raw materials and finished fertilizers up to four, five folds of what they were during before COVID. As the impacts of COVID and Russian-Ukrainian war has stabilized, the price of natural gas in Europe turned out to be stable and to their pre-war levels. This has brought in a normalization of the prices of fertilizers, which in return impacted the whole industry.
Toros, being the biggest producer of Turkey and always working with a certain level of raw materials, semi-finished materials, and finished products, naturally impacted from this downturn. So a normalization in the financials of Toros naturally has taken place. Another reason about the low financial results of Toros is probably due to the fact that Turkey had two consecutive elections this year and the previous year. During the election time, the farmers representing quite important elector base, there's been policies to keep the local fertilizer prices at reasonable levels. One major policy from the government was to restrict the exportation of fertilizers, which in return has caused the fixed expenses of Toros, our fertilizer company, to not being able to distribute among a higher volume of products. This normalization had not impacted only Toros, but had adverse effect all around the world for fertilizer companies.
We have consolidated the biggest fertilizer companies of the world, Nutrien being the biggest, Yara, Mosaic, second, third, CF, fourth, and Uralkali, fifth. Those are official reports that yourselves can also collect from the internet. But as you can see, when those companies' results compared with the previous year are compared, there's quite a trend in terms of their EBITDA results. If somebody takes an average out of all those figures, which would probably stand somewhere in between -55% to -60% . So I would conclude that for Toros, this is a local case, the elections and the exportation of the fertilizers being kept under pressure and limitations. This is then combined with the global normalization of fertilizer prices, where everybody, each and all players of the fertilizer industry had been affected from the same trend. You can also compare the results of Turkish fertilizer companies.
We didn't include those here. We found it more convenient to present you the biggest players because somebody could easily comment that others are smaller players, and it's not wise to compare them with Toros, which is twice the size of the second competitor. If I continue with our last group, being the investments group. This is actually where our efforts for the restructuring has been more consolidated. First of all, we have established a real estate company under the name of Tekfen Real Estate Company, whereby all the mentioned assets, Tekfen Tower, Ulus, Akmerkez, are consolidated under a single entity. Depending on the market conditions, this consolidation and this establishment would give us opportunities. It might be either an IPO or other financial opportunities to use those assets for the financing of our projects in line with our strategy. We have a project in Berlin named Dahlem.
Over there we have two sections, a small section and a big section. But as a general, we have commenced the marketing and sales activities for this project, and we are aiming to complete the sale of all assets of our Berlin Dahlem project by the end of 2024. We have an issue with the valuation of SOCAR Polymer. Over there, we need to confess that we are a silent partner, 10%. This stake was acquired with the thinking of enabling us a base to reach to a know-how for our polypropylene project of that time. The valuation is being conducted by a third party, one of the Big Four. Whatever comes from the valuation of the Big Four, we are just booking our relevant share.
We also do receive the reports, and we know the reasons of the deviation, but I believe that that would be too detailed for the purpose of this meeting. In line with our strategic plans to focus on the activities on renewable energy, we have established a new company. We have signed for the share transfer of a renewable wind energy facility called Marmara RES. Approval from the competition authority has been finalized, and transfer proceedings and closing proceedings are ongoing. One of the most important pivots of the new strategy and the transformation project is our green ammonia project.
These investments and enabler to reach know-how would not only enable Toros to be able to produce green fertilizers in line with the expected Carbon Border Adjustment Mechanism of Europe by 2026, but also would be an enabler for our construction group to be a service provider of such projects elsewhere in the world. I was telling you that we have had a focus on the operating cash flows and the balance sheet management. In line with that, you would see that as far as the trade receivables are concerned, the overdue part of the trade receivables have been shrinking in line with our receiving of the payments from especially SOCAR for the Baku Stadium project. As well as trade payables are concerned, you'll see that we have paid most of our not due debts.
Our overdue debt is more or less of the same levels as it was a year ago. As well as the net cash position movement between closing 2022 and closing 2023 is concerned, one good trend has been our receiving of the collections from Baku Stadium, Topkapı Sales, Libya, then making payments from our contracting group. Then in line with the high interest rates, we were using the supplier finance for Toros Tarım, especially for the raw material purchases from the contractors. As the hedging costs has raised, increased extensively, as it became cheaper to use credits and finance those supplier purchases, we made a policy change over there, and in line with that, our balance sheet changed accordingly. We have paid dividends. We have spent $61 million for our capital expenditures. The closing balance in line with those transactions has been -$40 million.
One focus that I would like to share with you is the analysis of the P&L EBITDA for our construction company. This is the full year analysis. Indeed, it is very unfortunate that the negative development of the NFE project in Qatar, when combined with the reversal of our 2022 bookings is so huge, namely $140 million, it balances out all the good developments in the other projects, namely the stadium, the Libya, Iraq, Kazakhstan, the project that we are doing for Toros Tarım, the consolidation part that comes from Ceyhan Steel Fabrication Plant, the part that comes from Azerbaijan, ACE platform, and whatsoever. So this last slide finishes my presentation. As said, the focus has been more trying to give you insight of the operation with the highlights that has been presented. Hopefully, I've been able to answer some of the questions you might have had.
Nevertheless, we are more than ready as a team to answer the questions that you might have now. So if there's anyone that would like to raise a question, we are ready to accept your questions and try to answer them.
Hakan Bey, hi. This is Haydar from Marmara Capital. Hello? Hello, do you hear me?
Haydar Bey, [Non-English content]
Okay. Thank you for the presentation.
Haydar Bey, can you please repeat your question?
Yeah. I just said hi, and thank you for the presentation. I have a couple of questions. First of all, you have provisioned for these Qatar projects, $139 million or whatever at the end of last year. Since then, what is the completion percentage, and do you think that amount is enough to cover your losses for the remaining part of the project? That is my first question.
Haydar Bey, sorry, we had a problem with the voice. Can you please repeat your question? Sorry for this technical disruption.
Yes. Your $130 million provision for Qatar project was made at the end of 2023. What is the current completion percentage of this project, and do you think that $130 million is enough to cover the losses expected until this project is fully completed?
Haydar Bey, thank you for your question. There was a technical issue, and I do not know if you can hear my voice.
Yes, I can hear you.
Okay. I was in Qatar end of March. We are currently, as far as the completion is concerned, 46%. We have developed a new follow-up technique for this project. We are trying to follow up this completion to make sure that we are following the right completion rates through different angles. I would say I am 95% sure that this would be enough to cover end of project cost. This 5% is left as a proxy as a provision for anything that unexpectedly can happen. The weather conditions have started earlier to be at very high levels earlier than anticipated. We know that when it gets over 50 degrees, our expected efficiencies are more or less at their 50% level of what they are otherwise.
But as I was also presenting through my presentation, we are also having various discussions with the clients, both commercially, there are several aspects. If positively, we are able to succeed in a positive ending with those negotiations, that would bring in significant cash flows and can help impact to the project. When I combine those two things, I would say that I am feeling comfortable with the $130 million.
Hakan Bey, what about other projects that you are currently undertaking? Do you expect any provisionings from other projects?
Actually, Haydar, as I was showing on this last graph of various projects, EBITDA impacts for 2023, we are more or less making money for the rest of the projects. There are one, two projects that we are negotiating. We are in line. We are still negotiating with the client for the end of the project cost. But those are relatively small projects. One of them is a local project. Their impact in the worst case would not be significant.
Okay. My last question is related to the, again, construction segment. How much monthly cash you burn in terms of operational cost in the construction segment? Can you give us some numbers about your restructuring efforts on the construction, like how did workforce change and what do you expect to take place over the next two years in the construction business?
Currently, we are burning like $ 1.5 million-$ 2 million per month. I do not have the exact figures with me, but I think we are sharing the workforce figures in our report. Nevertheless, if you cannot reach them, I can share with you the figures. To give you an idea, the efforts are twofold. The first chapter is for the headquarters for the indirects. Over there, our saving has been close to 100 people. With all the shrinkages, the people that we have been terminating their positions in the company. There has been another saving on the headquarters of the total construction group that for accounting, human resources, IT, whatsoever, positions have been merged so that instead of four people, we are using three people.
As well as the projects are concerned, in essence, we know that most of the inefficiency takes place during mobilization and demobilization phases. We are now paying a high importance, especially to demobilization phase of our projects, which are on their termination phase already. So making it sure that people are leaving when their responsibilities are over. I said, you can pick the numbers either from our presentation or if you cannot reach, we will be happy to provide you the figures. Last to mention, we have closed those representation office, the one in Morocco, the one in Algeria. Then we had one in the Philippines. The one in Russia has been not entirely closed, but most of the people has been laid off. When you decide to close a representation office, there are legal procedures that you ought to follow, and it takes time.
Most of the burden on those foreign representation offices has been taken off already. Unfortunately, the impact is not entirely visible in 2023 results because all those actions have taken place by August or July, whereby due to one-off payments and the closing, one-off costs, the saving impact would be more visible on 2023, 2024 results.
Thank you, Hakan Bey.
Any other questions from the participants? Muharrem Bey, buyurunuz.
Thank you very much for the presentation. I have a couple of questions, if I may. The first one is regarding your share buyback program. I want to have a better understanding how you make the executions. What is the philosophy on this buyback program? Because generally we observe two type of buybacks from the corporates. One is just giving a signal to the market, and the other one is really supporting the share price. But on your executions, on your share buy program, it is a little bit confusing for us. I do not know why you are stepping in some days, and even if the stock is really weak, you are not stepping up. Can you please provide us some information on the share buy program? My second question will be regarding the restructuring process. You already announced that you hired Dom Capital.
What is the timetable on the research program? I do not want to say deadlines, but how should we expect these restructures to be announced in the coming period? Thank you.
Sure. Thank you for the question. First one is probably a little bit more difficult to answer, because we have decided to implement this share buyback. There is an echo.
Muharrem Bey, can you mute yourself?
Sure.
We have decided to implement this program on a dynamic base because Turkey had quite a or Borsa Istanbul had also quite a chaotic time in between. You would recall that we have started actually by making some buybacks to support. That is probably part of your question. To support our share price, whereby we believe that not at all the current share price is a good representation of the holding value. Nevertheless, as the chaotic part of the Borsa Istanbul, as we observed, that the chaotic part of the Borsa Istanbul is dominating our efforts for the support. We have decided to halt for a while.
Actually, we were waiting for the announcement of our year-end results, thinking that the uncertainties that are also brought by the local elections will be up and forward taken off the table, and we would be able to proceed with our program. That is the first part of it. Your second question was about Dom and the search for a strategic partner. Over there, we are proceeding with Dom. We have decided, in order to give a better image of ourselves as the company, as the professionals, and even to accelerate and increase the quality of the process to make a VDD study. Currently, we are more or less in the final stages of the VDD study. We have identified some potential strategic partners.
If we are joining our forces with, then we would be able to reach at the strategically important catch-ups that we were searching for. This is a process and there is quite some progress in that. All in all, our target is to have a clearance about the process latest by beginning of fourth quarter or end of fourth quarter of 2024. This is such a process that once you start and once you are engaging yourselves with a shortlist of potential strategic partner candidates, then regardless you have a VDD or not, they might want to have the DDs themselves. Then there would be a discussion of roles and responsibilities, a joint commercial business plan, whereby all parties would make sure that the efforts are at the levels that there is synergies and there is strategy, and there is complementary parts involved in the process.
There will be negotiations by the nature of the process. This is why we are expecting the program to be over by latest end of Q4 2024. This is it. Any other questions from the participants?
Thank you for joining our call.
Hi. Can I also ask some questions? My question is regarding potential collections. How much do you expect to collect in 2024, and what is your expectation for cash or net debt position at the end of the year?
I need to be very transparent and honest on that. This is something that is very difficult to give a target about it. If I may answer your question by dividing our expected cash flows into two parts. One part is from Russia. The situation in Russia is quite difficult. We are starting an arbitration process. The client was a JV of Gazprom and BP. It happened so that as soon as the sanctions have started, BP has left the company, and it is very difficult even to get a reply to our requests. We will see how the legal system in Russia is going to work. The expectations would be more from the legal than from the commercial proceedings.
As well as the other claim from Aramco about our Haradh project is concerned, I would say we are having reasonably logical meetings, having meetings quite frequently, whereby both parties are having the same understanding for the reason of the claim. After that, there would be negotiations and commercial negotiations. It is very difficult to predict where we are going to land. But one thing that is quite different in Saudi than Russia is we are still quite active in Saudi. We are still active in the new tenders of Aramco. Aramco is still an oil and gas company, and Tekfen has been a traditional supplier of Aramco, especially for the pipelines. Given these reasonings, I am expecting a payout, but I would refrain myself to make a commitment about level.
We will be naturally transparent, and as soon as the negotiations are at a level, we will let yourselves know. Did you had, I am sorry, did you had a second part of your question before we-
Okay. Thank you. I also asked the net cash, expected net cash position, but I guess it is not also possible to give some guidance.
Yeah, because this is going to be quite important in the year-end net cash position of the company.
Okay. Thank you. I also have some question on the strategic transformation of the company. I also think that the government is working on some incentives for green transformation projects. Do you expect to get some incentives for your green energy and other projects?
Yeah. First of all, government is providing quite some incentives for big industrial projects. There are very open examples of that. Green hydrogen and green ammonia is of such important proceeding for the carbon footprint reduction of the world that not only Turkish government, but as well other institutions like European Union are providing incentives for that. The financial community is very eager to finance bankable projects, whereby we claim that our project with the ecosystem that we have in Tekfen Group, meaning that we have our engineering group, we have our own manufacturing unit, which would be able to produce the storage facilities, heat exchangers. We have our own construction company. The breaking point in other projects is off-takers. There are financial institutions, private capitals that want to invest on hydrogen and ammonia, green ones, but they can't find off-takers.
But in our case, in our ecosystem, we have the biggest ammonia consumer of Turkey, being Toros, and Toros is already in a need to have access to green ammonia for their potential exports to European Union. That would provide us, I believe that quite some favorable incentives as well as financing means for our green hydrogen and ammonia projects. As I said, once we are able to do it, this would provide a transformation basis of our construction group as well. Because when you go ask, it's not easy to encounter many construction companies which have successfully completed such constructions. Thank you.
Okay. Thank you. It's very good. I think you are the only company or the largest company that plan to undertake such project. Is it right?
To the extent that we know, there are two small-scale projects, one in Mersin, the other one in Bandırma. Those are very small scale. It's very difficult to call them commercial. Whereas ours, by the size that we target as of today, is going to be 20, 30, 40 folds of the other projects that are on discussion or on the newspapers today.
Okay. Thank you. Thank you again.
Welcome.