Ladies and gentlemen, thank you for standing by. I am Paulina, your Chorus C all operator. Welcome, and thank you for joining the Tüpraş conference call and live webcast to present and discuss the first quarter 2026 financial results. At this time, I would like to turn the conference over to Mr. Gökhan Dizemen, CFO, and Miss Özge Arcasoy, Head of Investor Relations. Miss 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 Gökhan Dizemen, CFO, team members from Tüpraş IR, and financial reporting departments. Over the next hour, we will first go over our operational and financial results of the first quarter of 2026. We will continue with the Q&A session. I'll 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 the first quarter of 2026.
We will go into detail for each subject on the following slides. Moving on to Tüpraş highlights for the first quarter of 2026. Starting with the top chart, our capacity utilization reached 95% in the first quarter, marking the highest first-quarter level since 2017. Despite the highly volatile macro environment, we maintained uninterrupted operations and high utilization, clearly demonstrating the strength and resilience of our system. A relatively lighter maintenance schedule, combined with our disciplined operational planning, translated into higher production and supported our sales volumes. Moving to the second chart. We continue to see resilient domestic demand in Türkiye, particularly supported by gasoline and jet fuel, while diesel demand remains steady. We continue to leverage our strong production and operational capabilities to ensure that we are well-positioned to meet domestic demand in a reliable and consistent manner.
Finally, the bottom chart highlights our strong financial discipline and cash management. Solid operational execution and effective working capital management supported a strong gross cash position of $2.9 billion at quarter end. Going forward, approximately $300 million is allocated for the second installment of our dividend payment and $600 million for the remaining CapEx, both of which are well supported by the current cash reserves. This strong liquidity position reinforces our ability to navigate volatility, sustain operations, and continue delivering value to our shareholders. Let's now walk through the key global developments of the first quarter of 2026. On the map, we are looking at the growing impact of disruptions around the Strait of Hormuz, one of the world's most crucial oil transit routes.
Roughly 20 million barrels per day of crude and refined products flow through the strait, within which 6 million barrels can be rerouted, a significant portion remains exposed to disruption. The assets shown on the map highlight the increasing operational, security, and logistical risks around this region. Several refineries, ports, and oil fields have been partially or temporarily disrupted due to ongoing attacks and security incidents. While not all outages are publicly disclosed, the market is reacting to targeted strikes on energy infrastructure, increased drone and missile activity, and growing risks around export terminals and logistic hubs. These disruptions do not necessarily result in full shutdowns. However, reduced operating rates or precautionary slowdowns are sufficient to tighten the market further. More broadly, ongoing tensions are contributing to a fragile operating environment for both upstream and downstream assets. As a result, product balances are being impacted globally.
Europe remains particularly exposed due to its structural dependence on the Gulf region, accounting for approximately 40% of jet fuel imports and 10% of diesel imports. This dependency has translated into elevated European crack margins in diesel and jet fuel. More than 80% of jet fuel exports from the region go to Europe. Nearly 60% of LPG is directed to India. About 90% of naphtha and half of fuel oil are shipped to Asia. From a demand perspective, higher price levels may introduce some pressures, particularly in price-sensitive segments. However, this may partially be offset by seasonal strength as we enter this high season. Logistical constraints, infrastructure risks, and elevated insurance and freight costs suggest that tight market conditions may persist in the near term. Looking ahead, normalization may come with a lag.
As you know, we covered 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. Starting with the global picture, crude oil inventories have increased over the last five years, mainly driven by Asia Pacific. On the contrary, inventories in Europe and the U.S. have remained relatively stable. This regional divergence suggests that Asia has been proactively building a buffer against supply uncertainties, while Europe may face tighter conditions if disruptions persist. On the middle distillate side, Europe remains structurally tight. Since February, mid-distillate stocks have fallen below both last year's and five-year average levels, mainly due to ongoing geopolitical tensions, supply disruptions, and refinery outages in the Gulf region. This tightness has pushed crack margins significantly above historical levels.
While high prices may create some demand-side pressures, the combination of high season demand and continued product tightness supports a constructive outlook for margins. Now taking a look at the bottom row, Turkish markets. The central bank maintained a tight monetary stance in the first quarter, with policy rates remaining elevated at around 37%. Supported by prudent policy management, a positive real interest rate environment is sustained. At the same time, flight numbers and automobile sales indicate that underlying demand remains resilient. On the demand side, Turkish fuel demand increased by 2% in the first two months of 2026 year-on-year. Gasoline demand grew strongly by 13.2%, supported by the increasing share of gasoline-powered vehicles, while jet fuel demand rose by 5.5% on the back of strong aviation activity. Diesel demand, on the other hand, remained broadly flat.
Let's take a look at crack margins for the first quarter of 2026 in comparison to previous years and five-year average on this page. In the first quarter, diesel crack margins averaged $34 per barrel, which was significantly higher year-on-year, exceeding the five-year average, mainly supported by ongoing supply constraints and refinery outages. Jet fuel cracks averaged around $43 per barrel in the first quarter, surpassing the five-year historical range. Crack margins reached all-time high at $106 per barrel in March, highlighting the tightness in the market. Gasoline cracks averaged around $14 per barrel, marking a year-on-year increase in the first quarter, supported by elevated cost base. High sulfur fuel oil cracks averaged around -$15 per barrel in the first quarter, down by $7.4 per barrel year-on-year, reflecting the impact of increased supply. Moving on over to the crude price differentials.
Differentials appear parallel year-on-year and show tightening from April onwards. However, these differentials are quoted on an official selling price basis and do not fully capture the increase in logistics, price, and insurance cost, which started to rise from March amid disruptions. Hence, the underlying economics are more nuanced than implied by the headline differentials. Starting with the production volume, let's check Tüpraş operations. Our production in the first quarter of 2026 was 6.8 million tons, significantly higher than 2024 and 2025 levels. We operated at a capacity utilization rate of 95%, marking the highest first quarter rate in the past decade. For the crude distillation, we achieved a capacity utilization rate of 88%, and the utilization rate for processing other feedstocks stood at 7%. Moving on to the sales.
In the first quarter of 2026, our domestic and international sales were respectively 5.5 million tons and 1.8 million tons, summing up to 7.4 million tons in total, which represents a 15% year-on-year increase and marks all-time high first quarter levels. Our domestic sales grew by 20% year-on-year, supported by strong diesel and jet fuel sales increasing by 24% and 16% respectively. Let's move to the electricity operations. This slide summarizes electricity production and sales activities of Entek and Tüpraş in the first quarter of 2026. Total zero-carbon electricity generation capacity increased by 8.3 MW, reaching to 418.9 MW this quarter. In 2026, 36% of the electricity generated was from hydropower, 41% was from wind, and the rest was CCGT and solar.
The EBITDA contribution of the sales from production of electricity declined by 77% in the first quarter year-on-year due to the soft pricing environment and the impact of last year's low reservoir base. Total zero-carbon electricity from production stood at 236 GWh, within which 21% was sold to feed-in tariff, which is $73 per megawatt-hour. The rest was sold to the spot markets. I'll hand the floor to our CFO for a closer look at our financials.
Thank you, Özge. Good evening, everyone, and thank you for joining us today. This is my first earnings call as the CFO of Tüpraş, and I'm pleased to walk you through our financial performance and key drivers behind our results. Before diving into the details, I would like to highlight that we are operating in a more transitionary environment with evolving market dynamics and ongoing shifts across the global energy landscape. Against this backdrop, Tüpraş delivered a strong first quarter, supported by solid operational execution and a resilient financial performance. Let's take a look at the P&L items in detail for the first quarter of 2026. Within the IAS 29 standards, all financials that are provided in this presentation and in our quarterly financial report is calculated with inflationary adjustments.
Additionally, the financial figures for 2025 first quarter have been scaled up by a factor of 1.31 in accordance with March 2026 CPI in order to reflect the purchasing power of the current quarter. Revenues came in at TRY 258 billion, approximately $5.8 billion in the first quarter, up 24% year-on-year. This increase was mainly driven by higher capacity utilization at Tüpraş and a stronger product price and margin environment versus Q1 last year, supported by supply disruptions following the closure of the Strait of Hormuz. Cost of goods sold stood at TRY 237 billion, with higher production volumes affected by narrowed differentials. As a result, gross profits stood at TRY 21.6 billion, up by 25% year-on-year. Operational expenses were increased by 18% in the first quarter, mainly due to higher sales volumes and personnel costs.
Loss from other operations mainly reflects lower FX losses on trade payables, as the Turkish lira depreciated by approximately 4% in the first quarter of 2026, versus 7% in the same period of 2025. Income and loss from equity pickup was recorded at TRY -83 million due to constrained quarterly profitability resulting from timing effects. In the first quarter of 2026, we recorded higher financial income of TRY 1.5 billion due to the increased cash position. There was a TRY 2.5 billion negative impact coming from monetary loss, which is parallel year-on-year. As a result, we recorded profit before tax of TRY 10.4 billion in the first quarter of 2026, more than tripling year-on-year.
Effective tax rate increased in the first quarter as inflation accounting continues to be applied under IFRS, while removed from statutory financials, widening the gap between reporting frameworks. Below profit before tax, we recorded TRY 6.6 billion of tax expense, and as a result, we recorded a TRY 3.7 billion in net income in the first quarter. Now for EBITDA. Our reported EBITDA materialized at TRY 16.7 billion. We recorded TRY 5 billion positive inventory effect. Our EBITDA CCS materialized at TRY 11.8 billion. Now, moving on to the next slide. Let us look at profit before tax bridge. As you can see from the waterfall chart, improved crack margins led to TRY 11.3 billion positive impact. A TRY 3.5 billion negative impact comes from narrowed differentials, including the increased freight and associated costs compared to last year.
Energy costs increased compared to last year due to the natural gas price hike of April 25, as well as the higher capacity utilization in 2026. We recorded a net negative impact of TRY 1.1 billion this quarter. Increase in OpEx items is mitigated with the increased FX and interest gains, neutralizing the overall effect. All in all, 2026 first quarter profit before tax materialized as TRY 10.4 billion. Now let us look at financial highlights. Our net debt -to -EBITDA materialized at - 1x as of the first quarter. Cash and cash equivalents and financial liabilities at the end of the first quarter stood at TRY 129.9 billion and TRY 55.2 billion respectively. We ended the quarter with TRY 74.7 billion of net cash, preserving our strong net cash position.
Our working capital requirements to that TRY -7.2 billion as a result of our ongoing effective cash cycle management. As of the first quarter of 2026, we continue to apply our secure FX position policy and ended the first quarter with only $14.8 million short position managed through disciplined FX management policy. On this slide, we would like to sum up some key figures for this year and compare them with our 2026 guidance. The net refining margin was $9.4 per barrel in the first quarter, exceeding the upper range of our guidance despite the low season. Our capacity utilization rate was 94.5%, in line with our guidance. Our yearly production and sales reached 6.8 million tons and 7.4 million tons respectively. We spent $93 million in the first quarter in terms of CapEx.
Now, looking at the maintenance calendar for 2026, we have periodic maintenances in all of our refineries. Our FCC revamp project was completed in this quarter. Overall, there are no major plant maintenance operations this year 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 the details, following a strong momentum in this quarter, we expect a solid operating environment given the seasonal strength ahead. That said, the first quarter reflects a limited portion of recent market trends, so we anticipate that the full impact will be more visible in the second quarter. We remain fully flexible to update our guidance should we see a sustained market improvement. We keep the $6-$7 per barrel net refining margin guidance for now.
Regarding production and sales figures, there is no change in our expectations. 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 around $700 million. This slide concludes our presentation. Now we can proceed with the Q&A session.
The first question is from the line of Anna Kishmariya with UBS. Please go ahead.
Good day. Thank you for taking my questions. I have several. Probably starting with the crude availability into May, if you can comment on the current environment. What are the prices that you managed to secure crude at? Is it differential or is it premium? Are you able to secure crude in general? That would be the first question. Second would be around the net refining margin. I have a bit of a trouble to reconcile it, comparing with your clean CCS EBITDA, for example, comparing to the previous quarter and the year. Can you guide me through what is included and what was affecting net margin in first quarter? Finally, around the jet margins. I think you have the long-term contracts on the jet side, so the margin contribution will be visible with the lag.
Can you confirm that from second quarter, we will see record jet margins environment that we saw in March and April, for example? Thank you.
Thank you, Anna, for the questions. Let me start with the first one, which was related with the crude availability in the market. In fact, in the first quarter, as we mentioned during the presentation, we achieved around 95% of capacity utilization, so it was a good quarter for us in terms of the capacity utilization. As you all follow, the war in Iran and the closure of the Strait of Hormuz have triggered one of the most severe energy disruptions in history. Around 2 million barrels per day global oil supply transits from Hormuz, as Özge mentioned during the presentation. In addition to this, roughly 10% of the global refining capacity is located in the region, and around 1/3 of this capacity has been damaged, either by drone or missile attacks.
What I can say is that, as Tüpraş, we have limited direct exposure to the region in terms of our crude supply. On top of it, operating one of the most complex refineries in the EMEA region provides us significant flexibility in our crude slates. Each month, we evaluate more than 100 crude options. Over the past decade, we have deliberately diversified our supply sources and added new crude supplying countries, including U.S., Guyana, Norway, and Colombia. In addition to this, as you may know, we have a trading office in London. This trading arm also provides us additional optionality for spot crude purchases, as well as feedstock procurements such as HVGO, which is heavy vacuum gas oil, and ASRFO, atmospheric straight run fuel oil. These feedstocks can be processed in the refinery as substitutes for crude.
We could also switch from crude to those feedstocks. On top of it, supply security and operational flexibility are the main drivers of our strategy. By putting these two drivers at the core of our refining strategy, we think that we are very well-positioned to adapt our operations in this evolving market landscape if need be. All in all, as mentioned, we haven't faced any supply problem in Q1. Regarding your second question on the net refining margin, we can say that it has three main components, as you may follow in our previous conference calls. One is the crack margin, the second one is the differentials, and the third one is the OpEx per barrel, obviously. NRM, the net refining margin, is an indicator of the operational performance. We monitor it in order to compare us with the international refineries.
Overall, when you multiply the NRM by the total production in a given quarter, you obtain a figure that is an indicator. It doesn't exactly equate to the EBITDA. This figure may be sometimes higher or lower than the EBITDA. It very much depends on the monthly production cycle as well as crack volatility, as the pricing may not be adjusted immediately. As I said, it's a metric that we follow up for a like -for -like comparison with the other European refineries. It doesn't exactly equate to the EBITDA. Regarding your question on the jet margin. Yes, we have seen jet crack margins rose to around $100 per barrel in March. At Tüpraş, we were able to capture a portion of this increase in the jet margins. Given the pricing mechanism in Turkey, there's a lag in our domestic sales of jet.
Because of this lag, we'll be also capturing a portion of this increase in the upcoming months in the second quarter. I hope this clarifies your questions. Thank you.
Thank you.
The next question is from the line of Sashank Lanka with Bank of America. Please go ahead.
Yes, thank you. A couple of questions from my side. The first is on your CapEx. Your annual guidance is $700 million, you did $ 91 million. Just wanted to check the run rate or how the pickup would be for the remaining three quarters. The second one is can you also talk us through your effective tax rate, which obviously came higher this quarter? Can you talk us through the accounting method there? Thank you.
Regarding your question about the CapEx, our first quarter mainly is the low season. In the first quarter, we spend less on CapEx. This is our company trend. We will be aligned with our CapEx plans as we explained in the end of the fourth quarter 2025. You may think about it like this. Around 1/3 of our CapEx will be for our electricity investments. Another one fourth is for a tanker purchase in our subsidiary, and almost half of it is for the sustainable refining investments. We are fully aligned with it. When you look at the trend, it is normal for us to spend relatively less compared to other quarters throughout the year.
Regarding your second question on the effective tax rate, let me try to explain it because it's a technical issue for us that stems from the removal of inflation accounting from statutory financial statements. Inflation-related adjustments are no longer reflected in the taxable income statement in Türkiye that are used to calculate cash tax payments. Obviously, this increases the reportable tax base and consequently the statutory tax expense. The only thing that is critical is that to the extent that these differences between statutory accounts and IFRS arising from inflation accounting are temporary, they are subject to deferred tax. This is one thing that IFRS requires. We need to allocate deferred tax from the temporary differences between the statutory accounts and IFRS. Deferred tax normally and typically normalizes the effective tax rate in our IFRS financial statements.
However, in the case of Turkish application, inflation adjustment differences related to equity items are not temporary and therefore they are not subject to deferred tax. As a result, these adjustments are creating the key driver regarding the higher effective tax rate for Tüpraş. In other words, maybe let me try to explain it from an economic perspective. Under IFRS, we recognize the CPI index increase in the cost of equity as a monetary loss. This is a loss item that's been recognized under IFRS. For equity, you index it with the CPI, and this is creating a monetary loss under IFRS account. On the other hand, this is not something that you can deduct from your tax base in the statutory accounts. Which means that you're paying higher tax compared to the IFRS results so that your effective tax rate is higher.
That is the economic explanation of the higher effective tax rate for Tüpraş.
Thank you. Thank you very much.
The next question is from the line of Ricardo Rezende with Morgan Stanley. Please go ahead.
Hello. Thanks for taking my question. If I may, just to confirm, that tanker that you mentioned, is that a tanker that we're going to buy last year and then it's good to this year? If so, has there been any changes on the price you're going to pay, or are we talking about the same amount of last year? On the second question, you mentioned about the trading operations when talking about feedstock as well. Would you be able to comment a little bit on just the trading environment that you're seeing for some of the products during the first quarter and then in April, and how was the performance of your trading segment? Thank you.
Hi, Ricardo. Regarding your tanker question, yes, this is the one that we postponed from last year. We are kind of monitoring the pricing environment right now. It's really hard to have any distinct visibility nowadays due to the overall disruptions. Therefore, our plan is to make the purchase that we postponed from last year. However, it's all based on the price. It's the pricing issue at the end.
When it comes to our trading organization, actually it's been established as an asset-backed trading arm of Tüpraş in order to trade the barrels that's being produced in Tüpraş, especially the export barrels. On top of it, spot crude needs as well as some feedstock needs of Tüpraş are traded through this organization, are basically supplied through this organization. All in all, the main aim of the organization is to have an asset-backed supply and export activity through London. That was the first target of the organization. Within some value-at-risk limits, which are limited for us, they also trade third-party volumes around the volumes that's being produced or required by Tüpraş. Overall, the impact of the trading activity within the whole financial statements of Tüpraş is minuscule.
What they do is they basically create so much optionality for Tüpraş in terms of crude purchases and feedstock purchases, as I mentioned in the first question. Thank you.
Thank you.
The next question is from the line of Ekimhan Can from HSBC Asset Management. Please go ahead.
Thank you so much for the presentation. First of all, Gökhan Bey and Özge , congratulations for your new roles. My first question is about the sales volume in the domestic side. Your sales volume seems strong thanks to domestic demand in the first quarter. Are there any delays in domestic fuel price hikes? Are prices fully reflected outside of the escalator mechanism? My second question, you mentioned that you have many choices in suppliers. How do you see the outlook for the freight and insurance costs in the different regions? Thanks in advance.
Hi, Ekimhan. Regarding your question about the domestic pricing, our pricing mechanism is still intact. We are capable of reflecting the pricing as it is moved with the crack margins. Except the jet pricing, because it has a different contractual obligation. In terms of gasoline and diesel, you are well aware of the pricing mechanism of daily multiplication with the current FX spot rate, then you reflect the prices if it is up to a certain point or down by a certain point. We are still comfortable with it. We are not encountering any difficulties in terms of any change in pricing mechanism. We do not expect that to happen for the necessities of the market structure. On the pricing side in the domestic environment, we are very comfortable. Also we see the resilient demand in Turkey as well.
With regards to your second question on the supply side, as I mentioned in the first question, supply security and operational flexibility are of paramount importance to our refining strategy. Consistent with this approach, as mentioned, we have diversified our crude supply sources over the past decade and tapped into new supply countries like U.S., Guyana, Norway, et cetera. On top of it, as you know, we operate two coastal refineries, run one of the most complex refineries in the EMEA region, which provides us additional flexibility, obviously, and have pipeline purchasing options. These capabilities provide flexibility to redirect our supply sources when needed. Ultimately, this is an optimization issue. We have to compete for barrels in the market, competing for barrels in the market comes with a cost. On top of it, we have the insurance and trade costs increased in this period.
As I said, this is an optimization issue. As long as the crack margin environment supports that cost, we will continue to optimize our system using crude sourced globally from a diversified set of countries. With the cost side becoming more visible, especially from May onwards, we will be in a better position to assess the full impact of the recent geopolitical developments. Thank you.
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 your participation in our first quarter call of 2026. Before we conclude, I'd like to share a few closing remarks. The first quarter was shaped by a complex and evolving macro and geopolitical environment. Ongoing global uncertainties, particularly around regional tensions and trade dynamics, have continued to influence market sentiment and commodity flows. More recently, developments around the Strait of Hormuz and broader geopolitical dynamics have further increased volatility, especially on the supply side. While these developments were only partially reflected in the first quarter, we expect their impact to become more visible in the second quarter. From both an operational and financial perspective, we delivered a strong first quarter, demonstrating solid financial strength alongside high utilization and operational flexibility.
The quarter once again highlighted our ability to run our system efficiently under varying market conditions, and importantly, we do not see any operational constraints as we move into the second quarter. At the core of this performance is Tüpraş's operational flexibility, supported by our ability to source crude efficiently and our high complexity configuration, which allows us to adapt quickly to changing market conditions. We are also pleased to have successfully completed our first installment of dividend distribution with a total payment of TRY 20 billion, underlying our continued commitment to shareholder returns alongside disciplined capital allocation. Looking ahead, we expect market volatility to persist. We have a strong track record in navigating such conditions and remain confident in our ability to respond effectively as the environment evolves.
What differentiates us is not only our ability to navigate volatility but to operate effectively within it, and consistently capture value across different market conditions. This is supported by our high utilization, operational flexibility, and disciplined approach to managing our system. We entered 2026 with strong momentum in the first quarter, demonstrating our resilience, financial strength, and long-term vision. We move forward with confidence grounded in operational excellence, disciplined capital allocation, and a prudent approach to adapt in an evolving environment. This allows us to remain measured in our decisions, maintain flexibility as conditions develop, and continue to focus on sustainable value creation. We appreciate your time and trust in our company. Thank you all for listening to us today, and wish you a great evening ahead.