Ladies and gentlemen, thank you for standing by. I'm Paulina, your Chorus Call operator. Welcome, and thank you for joining the Tüpraş conference call and live webcast to present and discuss the fourth quarter 2025 financial results. At this time, I would like to turn the conference over to Mr. Doğan Korkmaz, the CFO, Mr. Levent Bayar, Investor Relations Executive Director, and Ms. Özge Arcasoy, Head of Investor Relations. Ms. Arcasoy, you may now proceed.
Hi, everyone. Good evening from Tüpraş headquarters in Istanbul, and welcome to our teleconference. I am Özge Arcasoy, Head of Investor Relations. I'm here with Doğan Korkmaz, CFO, Levent Bayar, Executive Director of Enterprise Risk and Investor Relations, and team members from Tüpraş IR and reporting departments. Over the next hour, we will first go over our operational and financial results of the fourth quarter 2025, then we will continue with the Q and A session. I draw your attention to our cautionary statements. During today's presentation, we will make forward-looking statements that refer to our estimates, plans, and expectations. Actual results and outcomes could differ materially. Please refer to our financial reports and material disclosures for more details. These documents are available on our website. In the next three slides, we will provide you with a brief summary of the key highlights regarding fourth quarter of 2025.
We will go into detail for each subject on the following slides. Now let's take a look at 2025 global market and company highlights. In the first quarter, global energy markets were under pressure due to ongoing geopolitical tensions and new regulatory measures, including expanded sanctions on Russia and additional tariff implementations. On our side, while operational performance in sustainable refining remains strong, we continued advancing our strategic transition plan. We completed the acquisition of the solar power plant license and land in Romania, strengthening our zero-carbon electricity portfolio. We also paid the first installment of our dividend payment. In the second quarter, global markets were shaped by electricity outages in the Iberian Peninsula, OPEC+ production adjustments, and heightened security concerns around the Strait of Hormuz. These developments tightened the supply conditions and resulted in lower global inventory levels.
In this environment, we maintain operational flexibility and advanced key strategic milestones. We updated our strategic transition plan in line with the evolved global trends, secured a $500 million club loan, marking our first sustainability-linked financing transaction. Additionally, we signed Türkiye's first domestic SAF agreement with Turkish Airlines, reinforcing our leadership in the energy transition. In the third quarter, operational disruptions intensified globally, particularly following drone attacks on Russian refineries and unplanned refinery outages. The heightened demand and supply disruptions in high season resulted in elevated crack margins. Jet fuel demand reached record high levels. We effectively captured this favorable margin environment through high capacity utilization and operational excellence while also completing the second installment of our dividend payment. In the fourth quarter, sanctions on Russian energy companies were imposed in November by U.S., and in December by U.K. The continuation of drone attacks affected the overall output.
Also, ongoing scheduled maintenances and unexpected refinery outages created spikes in crack margins in November. Gasoline crack margins were above the five-year range throughout the quarter. During this period, we have maintained our disciplined operations and benefited from the high crack margins. On the sustainability front, we signed a SAF supply agreement with Pegasus Airlines and achieved significant results in CDP's Climate and Water Security assessment, earning AA- scores. Overall, 2025 demonstrated our ability to operate resiliently in a volatile environment, capture margin opportunities, execute our strategic transformation, and continue delivering value to our shareholders. Now moving on to Tüpraş highlights for the 2025 fourth quarter. The top chart shows the structural shift in our gasoline sales mix towards the domestic market over the past years. Türkiye's gasoline demand increased by 15.8% in the first 11 months year-over-year, marking the third consecutive year of a double-digit growth.
Gasoline demand today is more than the twice of the 2021 levels. In response, we proactively optimized our sales mix, reallocating volumes from exports to the local markets. Over the past years, we optimized our refinery configuration and target to gradually increase our gasoline yield. This proactive positioning enabled us to preserve operational flexibility and efficiency. We continue to implement further initiatives aligned with this strategic direction. Today, we announce our 2025 dividend proposal totaling TL 33 billion to be distributed in two installments. With this distribution, cumulative dividend payments over the 2023 to 2026 period implied a combined yield close to 40% based on the current market capitalization. At the same time, we invested $1.2 billion over the same period, demonstrating our strong operational cash generation and disciplined capital allocation. Finally, the bottom chart highlights the tangible and externally validated improvement in our sustainability performance.
We ranked ninth in S&P Dow Jones index among 68 companies in our sector. We are also placed in the top 6% in FTSE4Good and top 10% in Sustainalytics within the oil and gas sector. Most notably, our CDP score improved from C to A- within a single year, marking a significant achievement. As you know, we'd cover this section in two main components: as developments in the global oil market and developments in the Turkish market. Let's start with the global oil market. At the beginning of this year, additional sanctions led to supply concerns and initially pushed Brent above $80 per barrel. This increase was alleviated with OPEC+ production increase decision. Towards the end of the second quarter, with the increased production, with the increased tension around Hormuz Strait, the prices showed volatility.
By year-end, although drone attacks on Russian refineries and further sanctions created supply concerns, the overall impact on crude prices remained limited due to adequate global inventory levels. With our inventory hedging policy, we effectively managed this volatility on our financials. Looking at the Refining balance, the second chart highlights the widening gap between global oil demand growth and net refining capacity additions. It is important to underline that the net refining capacity chart reflects only refinery openings and closures, excluding petrochemical additions. As we move into 2026, global oil demand is expected to gradually increase while net capacity additions remain limited. This suggests a structurally tight refining environment in the medium term. Now taking a look at the bottom row, Turkish market. The Central Bank of Türkiye maintained a tight monetary stance, keeping policy rates elevated at around 39.5% during the quarter.
Inflation has shown signs of moderation compared to earlier in the year, resulting in a positive real interest and rate environment. This position broadly aligned with the global monetary policy environment, where central banks continue to prioritize inflation control. On the demand side, Turkish fuel products demand remains strong. Gasoline demand increased by 15.8%, supported by the growing share of gasoline-powered vehicles in the passenger car vehicle park. Jet fuel demand rose by 14.7%, driven by strong aviation activity. Diesel demand showed more moderate growth in comparison. Let's take a look at crack margins for the last quarter of 2025 in comparison to previous years and five-year average on this page. During the fourth quarter, diesel crack margins averaged $28.4 per barrel and higher year-over-year. This increase was primarily attributed to geopolitical disruptions creating supply constraints.
Jet fuel cracks averaged at $25.8 per barrel, significantly higher year-over-year, reaching as high as $37 per barrel in November due to constrained supply and high demand. Gasoline cracks averaged $19.9 per barrel in the fourth quarter, surpassing the five-year historical range. This increase was mainly driven by the unexpected refinery outages and high demand despite the low season. HSFO cracks averaged around -$9.8 per barrel in the fourth quarter, down by $2.40 per barrel year-over-year, with the supply increase in the market while still remaining above five-year average. Moving over to the crude price differentials. The OPEC+ decision to increase production in 2025 has limited effect on differentials because much of the incremental supply comes from light sweet crude, whereas complex refineries are currently seeking heavier grades. Differentials continue narrowing until the fourth quarter.
By year-end, differentials slightly widened due to seasonality and higher stock levels. Starting with the production volume, let's check Tüpraş operations. Our production in fourth quarter of 2025 was 6.7 million tons parallel year-over-year in line with low season. We operated at a capacity utilization rate around 93% in the fourth quarter and captured strong margin environment. Moving on to the sales. In the fourth quarter of 2025, our domestic and international sales were respectively 6 million tons and 1.5 million tons, summing up to 7.5 million tons in total. Our total sales were parallel year-over-year. Our gasoline sales were up by 10% year-over-year, while diesel sales were down by 3%. Let's move to the Electricity operations. This slide summarizes electricity production and sales activities of Entek and Tüpraş in the fourth quarter of 2025.
In 2025, 51% of the electricity generated was from hydropower, 33% was from wind power, and the rest was CCGT and solar. The EBITDA contribution of the sales from production of electricity decreased by 42% in 2025 year-over-year due to poor hydrological conditions during the summer, which was the driest season in the past 65 years. Total zero carbon electricity from production stood at 1,086 GWh , within which 35% was sold to feed-in tariff, which is $73 per megawatt hour. The rest was sold to the spot market. Let's move to the financials. Let's take a look at the P&L items in detail for the fourth quarter of 2025. Within the IAS 29 standards, all financials that are provided in this presentation and in our quarterly financials report is calculated with inflationary adjustments.
Additionally, the financial figures for 2024 fourth quarter have been scaled up by a factor of 1.31 in accordance with December 2025 CPI in order to reflect the purchasing power of the current quarter. Revenues came in at TL 206 billion, equivalent to almost $4.8 billion in the fourth quarter due to 9% decline in Brent price. Cost of goods sold stood at TL 185 billion, affected by narrow differentials. As a result, gross profit stood at TL 21 billion. Operational expenses were up by 50% in the fourth quarter, mainly due to timing shifts between quarters and partly with the increase in personnel expenses due to collective bargaining agreements and one-off items recognized in the fourth quarter under IFRS, which are not recurring costs. Whole year operating expenses declined by 4%.
Loss from other operations is impacted by the FX loss from trade payables, as Turkish lira depreciated by approximately 3% in fourth quarter. We will be recovering this through sale of inventories counterbalancing as natural hedge. Income and loss from equity pickup decreased due to a lower contribution from Opet year on year and stood at TL 132 million. In the fourth quarter of 2025, we recorded lower financial income of almost TL 1.4 billion, mainly due to the decreased net interest income with lower rates. There is a TL 0.8 billion negative impact coming from monetary loss, significantly lower year on year with the decline in inflation. As a result, we have recorded TL 11.2 billion of profit before tax in the fourth quarter of 2025, 26% higher year on year.
Deferred tax item increased in the fourth quarter as inflation accounting continues to be applied under IFRS, while removed from statutory financials, widening the gap between reporting frameworks. Hence, we record a high deferred tax item in this quarter. High deferred tax item is partially offset by the one-off realization of CapEx incentives during the quarter. Below profit before tax, we have recorded TL 4.4 billion tax expense, and as a result, we have recorded TL 6.8 billion in net income in the fourth quarter. Now for EBITDA. Our reported EBITDA materialized at TL 14.7 billion. We recorded TL 0.6 billion negative inventory effect. Our EBITDA CCS materialized at TL 15.3 billion. Now let us look to the profits before tax bridge. As you can see from the waterfall chart, improved crack margins and our ability to benefit from these have led to TL 12.2 billion positive impact.
TL 8.6 billion negative impact comes from narrow differentials compared to last year. There is a TL 1.2 billion positive impact coming from inventory. Due to higher prices, energy cost increased, and we recorded a negative impact of TL 1.8 billion this quarter. Decreased net interest income and FX losses caused by TL depreciation has a cumulative negative impact of TL 2.5 billion. There is a TL 0.7 billion positive impact coming from lower monetary loss. All in all, 2025 fourth quarter profit before tax is materialized as TL 11.2 billion. Now let us look at financial highlights. Our net debt to EBITDA materialize at - 0.9x as the end of fourth quarter. Cash and cash equivalents and financial liabilities at the end of fourth quarter stood at TL 107.2 billion and TL 50.2 billion respectively.
We ended the quarter with TL 57 billion of net cash, preserving our strong cash position. Our working capital requirements stood at TL 9.4 billion due to the seasonal changes in supply mix and relevant terms. As of the fourth quarter of 2025, we maintained a balanced FX exposure, ending the period with a nearly square position. This reflects our effective foreign currency risk management and natural hedge coming in from FX-based pricing mechanism. On this slide, we would like to sum up some key figures for this year and compare them with our 2025 guidance. The net refining margin was $8.60 per barrel in the fourth quarter, bringing the yearly figure to $7 per barrel, exceeding the upper range of our guidance. Our capacity utilization rate was 93.6%, which is within our guidance of 90%-95%.
Our yearly production and sales reached respectively to 26.9 million tons and 29.4 million tons. We spent $476 million parallel to our guidance in CapEx. Now looking at the maintenance calendar for 2026. We have periodic maintenance in all of our refineries. Our FCC revamp project in İzmir is expected to be completed within the first quarter. Overall, there are no major maintenance operations this year, and that will significantly impact production capacity, which can be followed from the total expected production volume in our guidance. On this slide, we have our expectations for 2026. Now looking into detail, we expect the crack margins to perform parallel to 2025 levels above historical averages, and hence our net refining margin guidance in 2026 is $6-$7 per barrel. Regarding production and sales figures, we expect approximately 29 million tons of production and approximately 30 million tons of sales.
We expect capacity utilization to be within the range of 95%-100%. Our consolidated CapEx target for 2026 is $700 million. This slide concludes our presentation, and we can now proceed with the Q and A session.
The first question is from the line of Kishmariya Anna with UBS. Please go ahead.
Hi. Hopefully, you can hear me. Thank you for the presentation. I have a couple of questions, if I may. Starting probably with the differential moves. You mentioned that at the fourth quarter they shrank, towards the year-end, expanded a little bit. Can you provide a bit more color around what was going on with the differential? What is your outlook in first quarter? Did the differential expand over the first weeks of the first quarter? Any color on that side would be very helpful. My second question will be around the expenses one-off that you mentioned for the OpEx. Can you share again, a bit of color around what was the one-offs related to and what was the magnitude of the one-off and that will not be recurring items. Probably finally, the CapEx. Your CapEx provides for the step-up year-on-year.
It is in line with the strategy, can you maybe provide us a bit more clarity around which projects will you spend most this CapEx for, and do you include the vessels for the Ditaş in this CapEx estimate? Thank you.
Thank you for your questions. This is Doğan speaking. I'm starting with your first question as to the differentials in the last quarter and our expectations for the coming future. When it comes to differentials, obviously OPEC and OPEC+'s moves are really important. They have announced production increases, and much of the additional supply really comes from the light sweet crude, whereas complex refineries like Tüpraş' are currently seeking heavier grades. Although the overall supply has been rising in the last quarter, the market really remains short on the grades it really needs. On the top of that, throughout the year, the ongoing security concerns and supply constraints caused especially regional supply imbalances, and kept benchmark prices elevated for these kinds of specific heavy grades. Additional sanctions obviously played a great role in narrowing the differentials in the absence of Russian crude.
Middle Eastern grades have been really on the rise for some time. One obviously positive piece of news was the reopening of the Kirkuk pipeline. With the additional supply that is expected to increase, it is, by the way, happening gradually after two and a half years of closure. We anticipate differentials to be softened a bit. Obviously when it comes to the expectations on the differentials, all the things that I have mentioned in regards to the things that have happened in 2025, the ones which were politically driven, it is hard to forecast for the next year, especially in regards to the security concerns. If you exclude them, OPEC not having an additional decision on the increase on supply or decrease in that respect. We're not expecting any additional narrowing of differentials.
Anything will be probably on the widening side with the current development, including Kirkuk, as I have mentioned. In terms of the operating expenses, mind you, there has been a pickup in the operational expenses in the fourth quarter. Talking about one-offs, as they usually occur in the last quarter of each and every year, partly because of operational preferences as well. A substantial part of the increase in our operating expenses for the last quarter, for example, is coming from additional spending on maintenance activities. Usually in maintenance, pretty much like CapEx, most of the things are happening at the end of the year because it's the off-season. It's right after the driving season, and it's right before the harsh winter comes. It accumulates usually in the last quarter. You can count them as one-offs.
Depending on obviously how heavy your maintenance is for the whole year. Within the year, the seasonality of the maintenances are usually inclined towards the last quarter. This year, there are a couple of other seasonal issues in the last quarter. If you compare it with the last quarter of last year, obviously, there has been a pickup in personnel expenses. We do make two adjustments, first being at the beginning of the year. The second is, again, in line with inflation, obviously in the second half, at the beginning of the second half. Usually the contributions to third parties, including donations to any other funds that we do, they usually happen at the end of the period, once you make sure your budgeted expenses are all in place.
Again, in a year-on-year basis, on an annual basis, there has been a drop in operating expenses by 4%, only a slippage towards the fourth quarter, that is. In terms of CapEx, half of this CapEx that we have announced for 2026 is coming from refining. That part of CapEx is pretty much in line with what we would normally spend, what we have spent in the last couple of years. The remaining half is mostly heavy on green electricity expansion projects. Remember, we have announced very aggressive growth in green electricity. In our first transition plan, we were expecting the total capacity to be around 1 GW at the end of 2030, but we brought it forward to have that level at the end of 2026, at the beginning of 2027.
All the investments that we already announced, including the one in Romania, will mostly happen this year. Close to half of our expenses in CapEx goes to Entek and the major projects under Entek. Around $ 100 million will go to ship purchases of Ditaş. This is a slippage from last year. Remember, we had decreased our total CapEx in 2025 due to a decision on our side to postpone the acquisition of a tanker from 2025 to 2026. That $ 100 million is really coming from there. All in all, that will be a total of TRY 700 million, but it's pretty much in line with what we had announced to be postponed from 2025 to 2026 by decreasing our 2025 actual numbers throughout the year.
Thank you very much. Maybe one follow-up regarding the differential. Can you comment around Russian crude after the new sanctions? Do you still purchase any of the cargoes, and do you plan to purchase them in 2026? Thank you.
Thank you for your question. Obviously, we have a very strong and well-established compliance framework in the company, supported by dedicated teams that closely monitor international sanctions. There has been quite many changes in sanctions imposed by different parties in the second half of the year, including U.S., U.K., and European Union. We don't engage with companies listed on these SDN lists. We structure our operations in compliance with applicable sanctions and our internal compliance policies. By the way, our refinery structure allows us to process a wide range of API gravities. We have a very diversified range of supply sources. Our refineries are mostly coastal refineries, looking at the weight of our total capacity, obviously, and that gives us the ability to source crude oil from various global regions. We can sustain our operations even if there's a requirement to shift our supply origins.
Our priority is, as always, to ensure full compliance with all applicable regulations while maintaining the stability and efficiency of our operations. What we do, obviously, we make decisions on a cargo-by-cargo basis, considering the price, the applicable regulations, and our needs at the time. We check ourselves with all the SDN lists applicable to our geography, and that includes U.S., U.K., and European regulations. Rather than those SDN lists, in the case of European Union regulations, there has been an additional request as to not to have Russian origin crudes for the products to be exported to European Union. To comply with that, we separated our refineries, and our İzmir refinery is not having any Russian crude Therefore, it is the only refinery in our overall portfolio to export to European Union.
Thank you very much.
The next question is from the line of Villari Giuseppe with Morgan Stanley. Please go ahead.
Hi. Thank you for the presentation, for taking our questions. We have two, if we may. The first one is on the Kirkuk pipeline. You were mentioning that recently restarted. We're wondering if you could comment on the crude flows you're seeing there now currently, what levels of volumes would you expect for this year, 2026? Secondly, a little bit more of a technical question actually about if you calculate the Refining EBITDA from the Refining margins and then looking at the sales volume, I think you get to a higher number than the consolidated EBITDA in dollars. We're wondering, is there something there that we're missing in terms of a Forex impact or something else? Is that the OpEx sort of one-offs you were mentioning? Thanks.
Thank you for your questions. The pipeline from Iraq, remember, was closed since 2023. Now that there's an agreement, it regains its role as a very important pipeline for us. It is obviously not expected to operate at full capacity immediately. It started modestly, around 200,000 bbl per day. Mind you, throughout these years when the pipeline was closed, there has been improvements in Iraq's own refining setup portfolio as well. Therefore, part of the grade that had been exported in the past, I presume, is being used domestically in Iraq as well. That might be a part of the reason why there is a limited supply from the pipeline. There has been slight changes in the API of the export grade as well. That might be, again, due to lighter ends being used domestically there as well.
Finally, but most importantly, the current differential of Kirkuk is not as narrow as we would historically expect. We're in different times at the moment. The competition is less of an issue, probably for Middle Eastern producers at the moment because of all the things that we have mentioned previously, including security issues, sanctions on Russia, and so on and so forth. For the future, obviously, we're keen on getting the maximum out of the pipeline when it is obviously feasible, profitable for us. Obviously it will take some time for the full capacity to be reached, and us to utilize it to the maximum.
For the net refining margin part, I believe you were asking for this year, right, Giuseppe? Just to make clear.
Actually for the quarter, fourth quarter 2025.
For the fourth quarter. Okay. Net refining margin gives you a sense of operational performance. We are keeping this an indicator in order to be able to be comparable with the international refineries as well. When you multiply this net refining margin, which is an average figure, with the total production within that quarter, what it gives you is an indicator, not necessarily the exact EBITDA, but a figure that will hover around the EBITDA. Sometimes it is much more than the EBITDA, sometimes it is less than the EBITDA. It depends on the monthly production cycle rather than the multiplication of average NRM to the total production. That's why it differs.
The indicator that we provide you is really an indicator for the production and the profitability of the production. Whereas the P&L is an accumulation of the actual sales and the actual rate of sales for that period, which might not be necessarily pretty much equal to the produced amounts in each and every product.
Okay, perfect. That's super helpful. Thanks.
The next question is from the line of Lanka Sashank with Bank of America. Please go ahead.
Yes. Thank you very much for the presentation. I think I have a question related to the net refining margin here again. When I look at your presentation, you have $8.6 in Q4. Q3 was $9.7. When we compare the quarterly crack margins, they were significantly higher in Q4. Just I'm trying to reconcile this and understand the difference for this, because we had cracks up in Q4, especially in November. Any guidance, any detail around that would be appreciated.
The reason for that it is due to the narrowing differentials. When you look at the net refining margin, it encompasses the crack margin differentials and also OpEx per barrel. When you look at the last quarter, and well, year-over-year, we have narrowing differentials. As the last quarter being the low season, our OpEx per barrel increases in line with that when you look at the capacity utilization. When you consider all these factors, even though crack margins are high, that's correct, but the narrowing differentials are taking a partial of that crack margin, and the increased OpEx per barrel takes an additional part. At the end, we still remain with an elevated net refining margin capturing the profitability, but it does not signify the exact increase in crack margins.
Okay. Yeah. Thank you. That's very clear.
Ladies and gentlemen, there are no further questions at this time. I will now turn the conference over to management for any closing comments. Thank you.
Thank you once again for joining us this evening for our final earnings call for 2025. Before we conclude, I'd like to share a few closing remarks. It's fair to say that we delivered a very strong year, both operationally and financially. Our net refining margins materialized below our guidance, profitability exceeded last year's level, and we maintained a solid cash position throughout the year. This performance reflects our operational excellence, disciplined cost management, and our ability to optimize product yields in a supportive demand environment. In light of this performance, we are pleased to announce a dividend payment proposal of TRY 33 billion for 2026 to be distributed in two installments. Over the 2023, 2026 period, our cumulative dividend yield has approached to 40%, and our 2026 proposal implies close to an 8% dividend yield.
This demonstrates our strong profitability, solid financial standing, and continued commitment to disciplined capital allocation and sustainable shareholder returns. Looking back at 2025, the global landscape remains volatile. OPEC + production decisions, geopolitical tensions, regional disruptions, and relatively tight monetary policies, they all shaped market dynamics throughout the year. While global growth progressed at a measured pace, limited refining capacity additions and resilient transportation fuel demand supported the market. Although margins have moderated from peak levels by now, current market dynamics suggest that stabilization may occur at levels structurally above past cycle averages, assuming supply discipline and demand resilience continue. In other words, normalization does not necessarily imply a return to historical levels. What differentiates us is not only our ability to navigate volatility, but our ability to transform within it. While we captured market opportunities throughout high capacity utilization and operational excellence, we continued advancing our strategic transition plan.
We secured our first sustainability-linked financing, signed SAF agreements with leading Turkish aviation companies, and further improved our ESG scores. Overall, 2025 once again demonstrates our resilience, our financial strength, and our long-term vision. We now move forward again with confidence, grounded in operational excellence, disciplined capital allocation, and a clear roadmap for sustainable value creation. We appreciate your time and continued trust in our company. Thank you all for listening to us today and wish you a wonderful weekend.