Thank you. Good day, and thank you for joining us today in the Ülker Bisküvi's first quarter earnings session. Before we begin with the financial results, I would like to take a moment to share some important news with the investment community. As many of you may have seen in our recent announcement, we are pleased to welcome Özgür Kölükfakı as our new Chief Executive Officer. We are confident that Özgür Bey's strategic vision, deep industry expertise, and strong leadership will be instrumental. I know many of you are eager to hear directly from him today, and we will give Özgür Bey the opportunity to share his initial perspective shortly. Also joining us on today's call are Fulya Banu, our Chief Financial Officer. As always, we will begin with the prepared remarks, followed by Q&A.
With that, I would like to hand it over to new CEO Özgür Bey for some introductory comments. Özgür Bey, please.
Thank you, Beste. Hi everyone. Thank you for joining us today. It's truly a privilege to speak with you for the first time as the CEO of Ülker, and it's a pleasure to address you today in my first earnings presentation as CEO of Ülker Bisküvi. As you can see on the screen, this is a short journey of me up to now, and let me briefly introduce myself. My career journey began with electronics engineering degree from Middle East Technical University, followed by an MBA at the same university, and I have more than 27 years' experience in general management, marketing, and sales. I had the opportunity to have a diverse multinational career working at different functions and geographies, including Turkey, the Middle East, Africa, Russia, Central Asia, Europe, and the U.K.
I have worked both in emerging markets as well as developed markets at a local, regional, and global scope. Before joining Ülker, in my last role, I was the CEO General Manager of Hayat Kimya, responsible for Turkey and export operations. Hayat, for those who don't know, is a major player in fast-moving consumer goods sector, operating in tissue, hygiene, personal health, and home care categories sold in more than 100 countries. My last role at Unilever, as you know, Unilever is a global consumer goods giant, where I have worked for more than 22 years. My last role was the Vice President Foods and Refreshment Division, responsible for Nometraf Cluster. Nometraf stands for North Africa, Middle East, Turkey, Central Asia, Russia, Ukraine, Belarus, leading a diverse region comprising 35 countries.
Having worked across different geographies in these diverse leadership roles, I bring a deep belief in combining operational discipline with strong strategical thinking. Now, I'm here to continue and elevate the success journey of Ülker, a brand I have been passionately attached to since my childhood, as well as our iconic global brands, McVitie's and Godiva under the Pladis umbrella. At Ülker, I'm honored to lead a company that's rich in heritage, purpose, and innovation. Today, I walk you through our Q1 2025 results, our strategic focus areas, and our approach in creating sustainable shareholder value. Let me continue with the key messages that I would like to leave with you today. As you can see on the screen, I have six messages. To start with, we started 2025 with strong momentum in a challenging environment our world and region are going through.
Secondly, inflation and market volatility remain as the key challenges, but we are confident and determined to manage these challenges. Thirdly, we are doubling down on our brand investment for long-term growth of our business. Next, we remain disciplined and proactive in monitoring commodity markets, taking the most relevant procurement actions on time and in full. The next point I would like to leave with you is innovation and sustainability are our non-negotiables, which we will continue our momentum on as we had already done in the first quarter. Last but not least, we are evolving our portfolio to future-proof our business with critical transformation pillars on our innovation and digitalization agenda. Okay, so let's zoom into our initiatives that took place in Q1 in terms of innovation in our innovation portfolio.
Products launched in the first three months of the year already generated 2% of total Türkiye revenue that will rise to significant levels with the full distribution, visibility, and investment supports put behind in the near future. Internationally, product launches are gaining traction, especially in the Middle East and North Africa. Our localization model is proving effective, and we are adapting core SKUs to regional tastes. Looking at our Q1 performance in terms of the new product development, if you look at those MPDs launched in the last three years, these are contributing to 12% to snacking revenues in our Ülker Bisküvi portfolio. This figure is even more impressive when you consider the base effect of 2024's inflationary environment. Domestically, in Türkiye, MPDs drove 14% of revenues, a sign of strong innovation resonance with Turkish consumers. Internationally, we are still scaling with a 4% good contribution.
For the investment community, this is a key KPI for us, and it shows our innovation pipeline is healthy, aligned to consumer trends, and commercially successful. We are really determined to keep up the momentum of the innovation in the upcoming periods. Together with innovation, we also continued strongly our communication campaigns in our geography. We launched high-impact campaigns for Coconut, Ladybug, Beef Scramble, and Dunk Egg brands that anchor our snacking leadership. Our three campaigns are awarded with two golden and two silver EFI awards in Turkey. We are at the top of the list in our confectionery market in terms of the EFI awards. With over 36 million in reach and 367 million digital impressions, our media efficiency and brand salience remain best in class.
Kırşan's, the celebrity Alp Kırşan's campaign with Ülker Çikolata boosted the brand equity, which is evidence that our marketing isn't just creative; it also delivers high return on investment. Looking at some of the highlights in our corporate communications, our visibility in the media and consumer engagement continue to be strong. The "Yüreğiyle Yarışanlar" campaign in Turkish, of course, which means "Competing with Heart," exemplifies our commitment to authentic storytelling and social impact. As the main sponsor of the Turkish National Paralympic Committee, we are producing the "Competing with Heart" video series to bring the inspiring stories of national paralympic athletes filled with ambition and determination to a wider audience. It resonated deeply; the first two episodes garnered over 400 million views and earned coverage reaching more than 10 million people.
We also earned important awards. We were recognized by important awards in the landscape, LSEG's first place green check, and retained our top employer certificate. These recognitions support our investment case, reinforcing Ülker's reputation among consumers, regulators, stakeholders, and the talents. As you know, Ülker is at a really good place in terms of the sustainability agenda as a leading company in Turkey and the region, and our efforts also continue in Q1. First, in the ESG assessment conducted by the LSEG London Stock Exchange Group, Ülker ranked first in the food sector, outperforming all our competitors. We were also placed in the top 3% of the companies globally in the S&P Global Sustainability Index with an impressive score of 72. The 2025 Global Chocolate Scorecard was released, and we are extremely pleased to see that Ülker Pladis was recognized among the top 10 global companies.
On the ground, our environmental and societal initiatives continue with strong momentum. In Giresun, the Beyond Hazelnut program is progressing steadily, involving 200 farmers, half of whom are women. This is a very important and meaningful effort that we are putting in the region of the nut, where we also have a factory producing nuts and nut products for our products. Similarly, our regenerative agriculture in the wheat program is ongoing with the participation of 500 farmers. These milestones are not just achievements for today, but strategic steps towards securing a more sustainable future for all. In our people agenda, our people are our greatest asset. This is what we are believing in. We have been certified as Türkiye's happiest workplace for three consecutive years and top employer for the four years.
We saw a 10.7% year-on-year increase in applications, which is a perfect sign that we continue to attract top talent in Türkiye. Initiatives like mom mentoring, wellness talks, and iftar gatherings drive retention and productivity, which is also a sign of inclusion and diversity. We firmly believe an engaged workforce is a more innovative and resilient one. After this, let's move to operational performance. Looking at Q1 regional performance, Türkiye grew by 7.2% in revenue and 11.1% in EBITDA, outperforming peers in a tough consumer climate. As we all know, Q1 has not been an easy quarter in the world, in the region, and also locally, domestically in Türkiye. In this really volatile and difficult and challenging Q1, Türkiye's growth in terms of revenue and EBITDA is really a strong one. North Africa surged by 28.7% in revenue, showing strong momentum in Egypt and Algeria.
The Middle East remained relatively flat, while Central Asia declined due to currency devaluation and trade headwinds that we are all aware of. Export volumes softened due to challenging global context, as we have been already observing in the first quarter. Overall, we remain well-diversified and resilient in the challenging environment with our strong results. Looking at the Q1 revenue breakdown, domestic operations account for 74% of our revenue, a core growth engine supported by scale and brand loyalty. The remaining 26% international share is strategic for us, and we are happy to see that it is also rising. With TRY 27 billion in net revenue in this quarter, including TRY 7.1 billion from international, we are well-positioned to grow both organically and inorganically in selective markets. Looking at our market share, Ülker remains the biscuit market leader in Turkey with 34% market share.
Our presence in chocolate and cake is also substantial across MENA and Central Asia. These are categories with structural growth potential, especially as consumers' premium rise. We are dominating the Türkiye snacking market with a 34% market share. We are strong number one in Saudi Arabia and Egypt markets, and we are the strong second player in Kazakhstan with 14% market share. Now, I think we will speak about the financial performance, and I would like to leave the stage to our CFO, Fulya.
Özgür Bey, thank you so much. As you mentioned, we had a great start to the year for 2025, and I'm very pleased to share with you the details of our very strong Q1 results. Please note that, unless stated otherwise, all the financial numbers are for inflation-accounting applied numbers.
Q1 marked another quarter for top-line growth for our business, despite challenges marked by headwinds, volatilities, and uncertainties. We delivered solid revenue growth, while profit generation was better than expected. Before I dive into more details, let me share with you and remind you of the environment we operate currently and operated in the last two to three years. As you know, CPI and PPI have been extremely high in Turkey, which has started to stabilize starting this year. CPI and FX increases, not being in parallel, create extra burden on how we manage profitability and costs. Another challenge that we navigated very successfully is that we needed to, and also that we need to navigate going forward, is raw materials.
While we have made progress on the margin front, the input cost environment continues to challenge us, particularly in key raw materials like cocoa, sugar, and wheat. Cocoa has reached multi-decade highs, nearly tripling year-on-year due to structural supply deficits and what we have experienced, and this directly impacts our chocolate segment, which is one of our largest contributors to revenue. Sugar and wheat, we also needed to deal with volatilities and uncertainties. These input trends necessitate precision in pricing, and hedging, and procurement. While we have implemented selective pricing and hedging strategies to mitigate the pressures, the path through to consumers must be managed carefully to maintain competitiveness and volume retention. On the next page, first, I wanted to start to compare our numbers, Q1 numbers, where we left Q4 2024, which is Q4 2024. Comparing to 2024 Q4 last quarter, we achieved strong momentum.
Volume grew by 5% quarter-on-quarter, which is a strong recovery considering seasonal softness. Having increased 10% and, more importantly, gross profit and EBITDA jumped 33% and 20% respectively. This translated into gross margin improvement of 430 basis points and EBITDA margin expansion of 230 basis points. These results, again, validate our pricing strategy, mixed improvements, and operational discipline as we begin the year with a firm foundation. When we compare our numbers versus prior year's Q1, our volume decreased by 9% to 182,000 tons due to a high baseline normalization post-inflation. Revenue remains relatively stable. However, our gross profit rose by 4% to TRY 9 billion, improving our margin to 33.4% from 32%. Again, this demonstrates our ability to defend margins despite volume pressure.
EBITDA declined slightly, while net income reached TRY 2.4 billion, largely mainly driven by FX headwinds and higher financial expenses to decrease versus prior year's quarter. Net net, EBITDA is at TRY 1.62 billion, at a very healthy range, reflecting temporary working capital effects, but this is just the calculation from the pace of the balance sheet. From a governance perspective, the number goes down to below 1.30, which I will be going through on the coming pages. When we take a look on the breakdown by region, domestic versus international, our domestic operations were resilient with 7% revenue growth and 11% increase in EBITDA. Domestic gross margin rose from 19.2%- 19.9%, again validating how effective our strategies were implemented in terms of cost, pricing, mix management, and supply chain management. EBITDA margin has stayed at 21.5% in terms of domestic operations.
International operations revenue fell 17%, and gross profit fell another 17%, and EBITDA declined by 24%, but reaching to 21.5% EBITDA margin, which is still a very healthy EBITDA margin. Those were driven by FX volatility, regional softness, and also some impacts that impacted us in Central Asia as well. However, margin in international operations remained very strong. 21.5% is a very healthy EBITDA margin, and showing our strong cost-based and brand equity, delivering these very strong EBITDA margins both domestically and internationally. On the next page, we will be reviewing the performance by category. Category-wise, chocolate continues to outperform, now contributing 60% of revenue, up from 54% last year. Cake has stabilized, and the mixed shift supports margin resilience, and FX stability this quarter also tempered international revenue growth, especially in exports. On the next page, we shared EBITDA analysis, EBITDA margin analysis by region.
EBITDA contributions across our key international regions remain robust despite year-over-year declines. The Middle East led with 22.3% EBITDA margin and 13.8% of total EBITDA contribution. Central Asia saw margin pressure dropping to 12.8%, but still contributing 1.7%. This is mainly driven by macroeconomic conditions that took place in Kazakhstan mainly. North Africa held an 11.9% margin with 1.5% contribution. While absolute EBITDA declined versus last year, due to FX and demand normalization, our margin structure across these regions remains healthy, providing a strategic buffer against domestic volatility. On the balance sheet side, we also closed the Q1 with a very strong and healthy balance sheet and with healthy KPIs in terms of all key important highlights.
Our net net EBITDA stands at 1.29 per governance calculation, per governance performance, outperforming industry norms, and it shows a very healthy and very strong balance sheet in terms of net net and EBITDA leverage. The seasonal working capital, the increase in the working capital reflects some seasonality in the working capital, especially getting ready for the high-end demand summer season. Certain FX volatilities increased our working capital, but we still believe that the working capital base that we have by the end of Q1 is still healthy and strong, taking into consideration that we have a long cycle for future raw materials like cocoa. In terms of risk management, we have 60% of the open balance sheet position hedged, which shows that FX is not a problem anymore. $490 million open position is hedged.
In terms of debt financing, 64% of our financial debt is long-term, which provides us with a healthy liquidity runway and minimizes short-term financing risk. One other very important news that we shared this quarter is we continue to maintain a balanced capital allocation policy. The board of directors has proposed an approximately $77 million dividend distribution subject to General Assembly approval. We believe that this reflects our confidence in our free cash flow generation and our commitment to returning value to our shareholders while preserving capacity for strategic investments and debt services. In summary, our balance sheet remains robust, liquid, and flexible, well-positioned to support both operational growth and shareholder returns in 2025. Back to our CEO to talk about our outlook.
Okay. Thank you, Fulya.
As you can see, I think what we have seen in financial terms is really strong results, which also gave us the confidence to come up with a dividend proposal to be signed off at the General Assembly, which will be appreciated by our shareholders. Looking at the outlook, looking forward for our guidance for 2025, we project net sales growth of 3% ± 100 basis points, and EBITDA margin expected to be at 17.5% ± 50 basis points. We are really confident in these targets based on the robust Q1 trends, our innovation traction, and continued cost discipline. As we move forward, we will focus on managing input costs and scaling high-margin SKUs. We are building a company that delivers not only quarterly results but long-term compounding value.
We really remain confident in our strategic direction and position Ülker for sustainable long-term growth. As Pladis, we are a well-established global company that brings together Ülker, McVitie's, and Godiva families. As you can see on the screen, our founders in the past made meaningful statements, which is putting product and happiness at the core of whatever we do in our business. We are one of the fastest-growing snacking companies in the world, delivering happiness in everybody through our brands and products. We merge our company's promise of bringing happiness with everybody with our vision of make happy, be happy. Purpose-driven companies and brands achieve sustainable success by making a positive impact on people's lives and creating value. With this belief at Ülker, we operate with a clear, timeless purpose to make people happy and nourish their lives. This is not only a CSR slogan.
It's embedded in how we approach product innovation, market execution, and people management. In a volatile consumer landscape, purpose-driven companies like ours have proven to be more resilient. We serve over more than 100 markets, and our focus remains on delivering happiness in everybody, which translates to long-term brand loyalty and consistent revenue growth. Moving forward, my goal as the CEO is to place this purpose at the core of our business, driving purpose-driven growth and value creation. Let's move to the next. I think there is a Murphy effect on the slide.
There's a technical issue.
Okay. Let's wait. I think we are good in time.
Just give us one second. Apologies for the technical issue. We're working on it.
Okay. No problem. Okay. Let me rewind on this slide.
I was saying that moving forward, my goal is really to place this purpose at the core of our business, driving purpose-driven growth and value creation. I call this 5H growth model based on five key pillars of what I call 5Happiness Growth. Firstly, this is consistent happiness growth. We will reach more consumers with our iconic and strong brands, Ülker, McVitie's, and Godiva, through effective innovations, continuing to deliver happiness with everybody. Secondly, it is competitive happiness growth. We will further strengthen our competitiveness in Turkey, Central Asia, the Middle East, and North Africa, providing even greater value to our consumers and business partners. Thirdly, it is profitable happiness growth. We will ensure to reach more consumers with our highest-quality products at affordable prices. At the same time, we will enhance operational excellence through strategic investments in digital transformation and artificial intelligence. Fourthly, sustainable happiness growth.
With our deep commitment to our planet, society, and people, we will continue our sustainability journey with determination. We will play our part to create a more livable world. Lastly, but not the least, people-centered happiness growth. This is the most important pillar for me because at the heart of this journey lies the people. While bringing happiness to our consumers with our brands, we will continue to prioritize the happiness of Ülker Bisküvi employees and all stakeholders in our ecosystem. Together, by fostering mutual trust, collaboration, and dedication, we will get stronger powered by our collective intelligence. Thank you for listening to us, and happy to have any questions you might have.
Thank you, Özgür Bey. We will pass to you.
Thank you. Thank you very much for the presentation. Apologies for the brief interruption with the slides. We are now moving to the question-and-answer section.
In the meantime, we are opening a quick survey for our web participants. Your feedback is highly valued and greatly appreciated. Without further ado, for questions, if you are joined via telephone, please press star two on your keypad to ask a voice question and wait for your name to be prompted. If you're connected via the web, you may submit either a voice or a text question. I'll just give a minute or so for the questions to come in. I'm seeing questions already lining up. Our first question comes from Basha Kömber from Sakaryad Hülym. Please go ahead, Basha. Your line is now open.
Apologies, looks like Basha disconnected. We will move to the next voice question from the line of Evgeniya from Barclays. Please go ahead. Your line is now open.
Hello. Can you hear me? Yes. Okay. Good.
Thank you very much for the presentation and congrats on your new role, Özgür. I have several questions I would like to go, I would like to ask them all at once. My first one is, could you please, again, touch on what was the driver for volumes decline in first quarter? My second question, there was a significant increase in inventories. Is it a seasonal increase? I do not think that in previous first quarters, we saw a similar increase. Just trying to understand what happened there. Finally, could you please provide a breakdown of your cost of sales in terms of what is the percentage of cocoa costs in there and other materials, other raw materials like wheat, sugar, etc.? That would be very helpful. Thank you.
Hi. Thank you very much, Fulya, for the question and your good wishes. I appreciate that.
Let me try to answer the first question and then leave it to Fulya to answer the others. In terms of the volume decline, it's affected by the market contraction in the main categories that we have seen, which is based on a strong base of Q1 2024. There is also some seasonality and also transition of Ramadan at a different period versus the Q1 of this year. Overall, we do not think that there is a kind of continuous impact in the market. We believe that in the upcoming quarters, it will turn into positive as we have seen in the other years. We feel confident that the market will regain back to growth. As the leader of this market, we will continue to really lead the market with market development and continue to gain market share. The second question was about the inventory increase. Maybe, Fulya, you can elaborate on that.
Yeah. I can answer the second and third question. I'll start with the third one. Our cost of sales breakdown is not public. We do not disclose it publicly. If you follow- up, we'll try to give you a range of whatever we can. It is not simply, this is not precisely publicly disclosed, which I cannot give you any numbers. Related to inventory, the increase in inventory is related to rising the prices of key raw materials. The drastic price increase in cocoa and the significant cocoa shipments during Q1 impacted our inventory numbers. Just to give you some numbers, compared to Q1 2024, cocoa unit prices increased 147% in terms of GDP. It is like an in-part currency number. Compared to Q4, the unit price increased just 35%.
There is a huge impact in cocoa prices that impacts us. That's number one. The second one is, as I have already shared with you, the cocoa supply is a long cycle, and there might be some shifts and delays and timing issues in terms of the cocoa shipments and supplies. What we have experienced in this quarter is most of the shipments came by the end of Q1, which we could not use in terms of manufacturing since it came after March 20 and so on. In terms of procurement, the numbers also increased. We procured more than what we procured last compared to last year in 2024, all included, and it increased total inventory number. That's how I can summarize what that was.
Thank you very much. Do you expect normalization throughout the year? Also on cocoa, given that you are using hedges, is it right to assume that your volumes are safe for this year? It's just a question of timing, and the timing might be delayed sometimes.
Yes. The volumes are safe for this year. We feel very comfortable in terms of this. Related to timing, we do not expect these bulk shipments that come towards the last one week or two weeks of the month. That is not what is expected throughout the year. We expect a normalization. Again, the cocoa price is almost tripled. The total numbers may increase. It is a huge growth cycle that impacts our definitely working capital. Please also take that into consideration in your calculation.
Okay. Thank you.
Thank you.
Perfect. Thank you. Thank you very much. We are now moving to the next voice questions coming from Erica Ive from Metlife. Please go ahead, Erica. Your line is now open.
Hello. Thank you for taking my questions. The first one would be on a lower EBITDA margin than last year. I was wondering, all considered, do you expect a slight increase in leverage this year from where we are now?
Thank you for the question. Our objective is to maintain a very healthy net EBITDA number. We do not disclose an exact net EBITDA number that we expect to end the year. Our objective is to maintain this healthy level and to have a very strong balance sheet throughout each quarter of the year. Therefore, you can assume that having a very strong, healthy net EBITDA number is one of our objectives. We do not disclose the exact number of this health.
Understood. Understood. In terms of dividends, the $77 million payout, I guess, is expected this year, correct me if I'm wrong. Will it be fully covered by free cash flow?
Yes. Approximately $77 million is expected to be distributed this year upon the approval of our General Assembly, which will take place beginning of June, which we have already announced. Upon the approval from our General Assembly, we expect to distribute it also after the General Assembly within the coming weeks or months. Yes, it will be provided for by our cash flow, and it will be paid in Turkish lira, by the way. It is just converted to US dollars to give you a sense of the total FX amount. We feel very confident and comfortable to make the payment through our cash flow.
Thanks. And then I wanted also to ask, I saw that the EBITDA has been also impacted by higher marketing expenses. Is it that you've been investing more in innovation and fundamentally promotion and marketing?
Yeah. I think, as we already mentioned in the presentation, in order to drive consumer pull and also support our innovations and our core brands, we have increased the percentage of marketing investment in our P&L. With that, we are believing we will create more market development for our consumers, which will also scale up our further growth.
That's good. Finally, could you give me a little bit, provide a bit of color on current trading? You said it is strong. Is it in line or stronger than what you've seen in Q1?
Can you please repeat the question? I don't think we understood well because of the line.
Yeah. Could you provide some color on current trading?
Sorry. You said current trading environment?
Yes. Basically, what you're seeing in terms of sales, fundamentally, volumes, and sales.
Yeah. I think now we understood. Okay. As I said earlier, Q1 was a challenging quarter globally, not only regionally, not only locally, but globally, as we have all observed. We had also some seasonality facing of Ramadan and this kind of impact. Having said that, we do not see a fundamental issue in the pool of the consumers. With our market development efforts, which we already started to see in April, we believe that the consumer pool will not be impacted seriously. The market will return back to growth in terms of volume. As the leader of the category, we will continue to grow the market and gain market share.
This is how we build our plans for Q2 onwards.
Thank you. It's all from me.
Perfect. Thank you. We just want to acknowledge all of the questions coming in. Our next question is a voice question from Muharrem Gulsever from KCA. Please go ahead. Your line is now open.
Thank you very much for the presentation and congratulations on your new role, Özgür. The guidance suggests 16.5% EBITDA margin for the remainder of the year, operating achieved more than 20% EBITDA margin in the first quarter. Is this a very conservative guidance, or this is what we are seeing as the current trading environment suggests? That's my first question. The second one is, the deterioration in working capital in the first quarter is the largest one we have ever seen in Ülker's history, almost 300.
Within the other quarter-on-quarter increase in working capital requirements, mainly coming from inventory. Fulya mentioned that this is primarily driven by the cocoa procurement and prices, as far as I understand. What should we expect for the remainder of the year for the working capital? Thank you very much.
Muharrem Bey, thank you very much for the two questions and your good wishes. Highly appreciate it. Thank you. Let me answer the first question and then leave it to Fulya to answer the second one. In terms of EBITDA guidance, you are right. We have given 17.5% EBITDA guidance, ± 50 basis points in our guidance. In preparing this guidance, we consider various factors, including inflation, foreign exchange trends, local and global macroeconomic indicators, and geopolitical developments based on the latest forecast that we have.
We are hopeful to go to the upper end of this window, 18%+ , hopefully. Based on all these indicators, we would like to remain in this 17.5% ± 50 basis points, which we still believe is a very good guidance in this very challenging environment in Q1. Looking at the different plays in the market, their results in the first quarter, I believe Ülker Bisküvi stands at a very strong position, not only on the net sales growth, but also on the EBITDA performance. We really remain confident and determined to drive for further EBITDA for our shareholders in the upcoming quarters.
Regarding your second question in terms of working capital, let me start with the inventory.
Inventory impact or unfavorable impact on inventory is driven by mainly two factors, which is the shipment that came by the end of March due to facing and shifts of the shipments that came very late and which could not be used in terms of manufacturing. The second one is, as you know, cocoa prices have increased significantly, which started to impact the inventory amount. I have also given the example a couple of minutes ago that compared to Q1 2024, cocoa prices increased by 147% in terms of GDP, hard currency. Compared to Q4, it increased by 35% again in terms of hard currency. That is one component. The other component related to trade receivables is related to seasonal effects and sales growth and a business, as usual, temporary outcome. We expect it to stabilize and normalize in the coming quarters.
Again, working capital is an important priority for us, and it will continue to be an important priority for the rest of the year as well.
Okay. Thank you. Thank you very much.
Thank you.
We will now move to the next question from Jamal Demitra from Atayatirium. Please go ahead. Your line is now open.
Thank you for the presentation and congratulations for the good result. And of course, congratulations for dividends. And thank you, Özgür Bey. It's nice knowing you. And we believe you will add a lot to the company. Thank you again for the presentation. My question is, most of the part has been answered. But again, I would like to reiterate one thing about the margin side. You have around 17.5%. But as Muhammer mentioned, in the first quarter, it was 20.3%.
It implies around 16%-16.5% margin in the remainder of the year. Is that a fair assumption, even though we think that you are cautious or conservative? I would like that to be elaborated further. The second question is about the FX position you have. You still have a healthy net position. I would like to understand your FX position. As of the first quarter, you have $192 million+ EUR 347 million short FX position as of the closing. What would be the effect in the second quarter, or do you have any action to take on that front? Thank you again. I would like to congratulate you about the dividend because since 2011, it is the most significant dividend distribution by Ülker. It really welcomes in terms of corporate governance and everything. Thank you again.
Jamal Bey, thank you very much, first of all, for your good wishes. Highly appreciate it. Let me try to answer the first question. Then leave it to Fulya for the next one. Before coming to that one, I also would like to underline the dividend, which we have paid after many years. This is also proof of the confidence that we have in our business and our future potential of our business, which I believe is a sign for our shareholders as well. Hopefully, by the approval of this dividend in the General Assembly in early June, we will be able to release from our cash flow this nice dividend to our shareholders. Reiterating on the EBITDA, you asked that question. Actually, my answer will remain the same. We stay at 17.5% ± 50 basis points guidance in terms of EBITDA.
This is regard based on all the various factors that we have embedded in our forecast, including inflation, foreign exchange trends that we anticipate, local and global macroeconomic indicators, the raw material fluctuations that we have and we will expect to have, and the geopolitical developments. Of course, we will all strive to drive more for our business and for our shareholders. At this stage, we believe this is the realistic window, plus minus. Please make no mistake that, of course, we will make sure to strive for the better end of it, 18%+ . This is the current guidance that we believe is the right guidance at this stage.
In terms of open position, we have a policy to have a closed FX position on the balance sheet between the 60%-80% range. We are currently at 60%.
We plan to maintain this 60%-80% policy rate going forward. Depending on the total amount, I cannot give you an exact number, but this is the policy. I think it can be calculated very easily.
Thank you, Fulya.
Thank you. Thank you.
Okay. Thank you. Thank you very much. We are now moving to the next voice question from Yejide Onabule from Barings. Please go ahead. Your line is now open.
Hello, there. Thanks for the presentation. I have a few questions. First, on the weakness in the international business, is that just driven by Ramadan, the fact that Ramadan was in Q1 this year and Q2 last year? Or are there any other fundamental drivers? Do you expect this international to recover for the rest of the year?
The second question is, I just really wanted to understand your raw material hedging because looking at all the raw materials, apart from maybe one of them, they're all trending higher, higher prices. Could you just tell us, for instance, for cocoa, are you fully hedged on your supply for this year, your supply needs for this year, or do you still have more that you need to buy in the spot market? Any other important raw materials, if you can just talk about your hedging there. In terms of price increases, could you talk about what happened in Q1? Did you increase prices in the domestic market or in the international market? Just talk through how you're thinking about price increases for the rest of the year, given all the commodity prices are higher. In terms of leverage, do you have a leverage target?
Because you mentioned you want to keep a healthy leverage profile. Do you have a net debt-to-EBITDA target? And then finally, on your refinancing, I think the debt that you had coming due was some bank debt. Are you in advanced stages of refinancing that debt? Do you think you could come back to the bond market to refinance any of the short-term debts that you have? Thank you.
Thank you, Yejide, for your questions. Let me start with the first question. In terms of the weakness in international markets that you have asked, actually, in terms of the performance on international markets, we believe we had a good performance because it was really a competitive growth. We increased our market share in most of our markets internationally. Also, despite the decline in top-line metrics, our gross profit improved by 2.5%. That is also a good sign.
What we also did was we also increased our brand investment, which was also another good sign, investing into our brands, which also gave us the competitive advantage in order to gain market share in this very critical period of Q1. Overall, we believe that our business is healthy. What we see in terms of the net sales decline is below the market reality. In the upcoming periods, we will continue to grow above the market, continue to gain market share, and to continue to have a healthy profit growth. I think this was the answer to your first question. You asked also about the price increase. Obviously, we do not disclose the price increase, our internal operational elements here. What I would like to highlight here is our approach, our general approach.
As Ülker pledges, we are doing the best in our efforts in terms of operational excellence to have the best costing in order to reflect the least into our prices, all those volatility in the raw materials and increasing cost. We really make sure to have the best possible operational excellence efforts to minimize the cost exposure and reflect it to our price increases. This is what we have done in Q1, which seems to be working as we have done in the past. This is what we will also do in the future to really do our best in the operational excellence, minimize the cost increases to our consumers, and provide the best quality products to our consumers with the best possible P&L. I think this is our general approach on price increase.
Regarding your other questions, in terms of raw materials, we feel very comfortable in terms of cocoa, oil, and nuts, coverages, and hedges. For wheat and sugar, which is procured mainly locally, we are also at a very safe place to sustain the operational continuity and business continuity. Regarding debt financing, our syndication is due on April 2026. Of course, we are currently preparing our strategy and assessing all the options. We do not say we will never come back to bond market again. We are assessing all the options, and our strategies will be prepared very shortly. Once we mandate what we are going to do, you will also hear from us.
Just as a follow-up, when you say you're comfortable with the cocoa, oil, and nuts, you mean you're fully hedged for this year?
Yes. We are pretty much 100% close to hedged, yes, you can say.
Okay. In terms of the leverage, I think you forgot to answer that one. Do you have a very leverage target? Could you possibly tell us where you think leverage could be peaking?
No, this is not the expectation. Our key priorities to sustain are very strong balance sheet positions going forward. One of the key KPIs for that is net debt to EBITDA. We do not disclose the exact number in terms of net debt to EBITDA. What I can share with you is to have a very strong balance sheet. Net debt to EBITDA number should be at a very healthy level. This is our key priority. This is going to be a key priority going forward as well.
You can feel comfortable that net debt to EBITDA is not going to peak.
Okay. Thank you very much.
Great. Thank you. Thank you. Thank you. Just a final reminder for the audience, for any remaining question, please press star two on your keypad. If you're connected to the web, you may also ask a voice or submit a text question. Next question is from Ali from Gedik Yatırım. It's a text question. How does the trading environment compare before and after the end of March in Turkey?
Thank you, Ali Bey, for your question. Let me take this in terms of the trading environment compared before and after the end of March in Turkey. Of course, we have completed one month, April.
What we see in April is more promising than what we have seen in quarter one, which is good news for the market and also for us as Ülker Bisküvi. This is what I can say for the timing in terms of the market environment. Based on my experience in this type of challenging times in the world and in the region, we actually stay at a kind of lucky category, as being the snacking category, because the consumer insight is in this kind of environment, consumers tend to decrease their spending in the high-value items like fridge, car, house, big investments. They just hold or they just decrease. At the same time, they would like to give themselves some personal pleasures, personal happiness in their impulse behaviors or in their in-home consumption.
That is where we step in, actually, providing the small happiness for our consumers. As we have in our purpose, we are here to really make people happy with our products, providing them the best quality products through our best brands in the snacking market. As we had seen in the past, we believe in this current context, this will also work on our opportunity as a tailwind for our category. Reading the market insights, being close to our consumers, we would like to also continue providing them the best offers through our brands and products to drive also happiness for them and happiness for our business and happiness for our P&L.
Perfect. Thank you. Thank you very much. At this point in time, we are seeing no further questions. I would like to pass the line back to Olga's team for concluding remarks.
Thank you.