Thank you, Rafal. Hello, everybody. This is Beste from Ülker Bisküvi Investor Relations. Welcome to our third quarter and nine months financial and operational webcast. I am pleased to announce our CEO, Özgür Kölükfakı, who is joining from London, and our CFO, Fulya Banu Sürücü, is with me in the room. Now I leave the ground to our CEO, Özgür Kölükfakı, for his opening remarks. Özgür Kölükfakı, please.
Yes. Thank you. Thank you, Beste. Good morning, good afternoon, everyone, and welcome to Ülker Bisküvi's third quarter and nine-month 2026 results webcast. Thank you for joining us. As Beste mentioned, I am joined by our CFO, Fulya Banu Sürücü, and our investor relations team from Istanbul office, and I am joining from London as I am on a business meeting. Please note the forward-looking statement disclaimer. Our outlook reflects current assumptions and remains subject to market conditions and other uncertainties. Unless stated otherwise in this presentation, the financial results and prior year comparisons include inflation accounting and are expressed in Turkish lira purchasing power at 30 September 2026. We will identify supplementary figures excluding IAS 29 separately, and we will also indicate that during the presentation when we do that.
I will begin with our business highlights and operating developments across our regions, and then our CFO will then take you through the financial performance, inflation accounting, and the balance sheet. We will conclude with the outlook and our growth priorities before taking your questions. Let me start with the nine months highlights before looking at the innovation and operating developments that shaped the quarter and the opportunities ahead. Here on the screen, you see our key messages. Our Türkiye business grew well in the third quarter, supported by back-to-school execution and new products. For the first nine months, our consolidated volume as Ülker Bisküvi grew by 0.6% and consolidated snacking volume by 0.9%. Across exports and international operations, snacking volume increased by 4% despite the geographical challenges, especially in the Gulf region, and despite of all the tension in the Middle East.
Revenue increased by 19.4%, excluding IAS 29. On the reported inflation-adjusted basis, revenue was TRY 95.7 billion, almost TRY 96 billion, down 8.8% year-on-year, and net income was TRY 4 billion, excluding IAS 29, and TRY 2.7 billion on the reported basis. Fulya will explain the effects of inflation accounting alongside the operating performance. Innovation contributed 9% of snacking revenue, broadening consumer choice and creating additional growth opportunities. Our health and wellness brand, Go Ahead, is extending our presence in the growing health and wellness trend, an important part of our portfolio transformation. Covenant-based net debt to EBITDA stood at 1.45x, and promotional competition, inventory inside our updated full-year outlook.
In this current context, we maintained our leadership in Türkiye with 34% volume share across biscuits, chocolate, and cake, and gained share in the broader snacking market, which we find extremely healthy in this challenging context in order to look at the future with more confidence, because the consumers are really consuming more and more our products. These are encouraging signs of the strength of our brands and their continued relevance to consumers. For the future, our direction is clear. We are strengthening our core brands, developing the portfolio around consumer needs, and improving productivity across the business. Our consumer reach and experience teams give us a strong platform to build on through effective commercial investment and closer alignment between supply and demand. Now let's move to the next slide. We continue to refresh our portfolio in both Türkiye and international markets.
The products on this slide extend familiar brands into new flavors, formats, and consumption occasions. In Türkiye, innovation supported our back-to-school activity and helped keep our portfolio relevant to consumers. Internationally, the launch broadened the choice we offer across our established biscuit and chocolate brands. We are evaluating these products through their consumer response and commercial contribution, with affordability and quality of growth remaining central to our decisions. Our approach combines accessible price points in the core portfolio with differentiated products for specific consumer needs, and we aim to extend the relevance of our established brands while being selective about where we deploy innovation resources. Next slide, please. Health and wellness, as I said at the opening, is a growing trend and an increasingly important opportunity in our snacking business. Consumers are looking for products that fit their well-being goals while delivering the taste and convenience they expect.
We see this as an important part of the next generation of snacking, and our brand Go Ahead gives us a dedicated platform to participate in that growth. Since December 2024, we have expanded from fruit and nut bars, fruit, nut, and protein bars into additional new formats, including protein chips, and very recently launched high-protein bars and granola bars. That breadth allows us to address different needs and occasions through one recognizable brand. The range is developing alongside our established biscuit, chocolate, and cake portfolio. Consumers make different choices at different moments, and our opportunity is to offer appealing options across those occasions. Go Ahead brings a clear health and wellness focus to that wider portfolio. The September and October launches shown here extend beyond the third quarter reporting period and demonstrate the continued development of this platform.
We are building our presence in a growing consumer trend with tangible products already reaching the shelves. This is an important part of our portfolio transformation. It combines our experience in product development with new formats and nutritional propositions. We will build on the platform as consumer needs and snacking occasions continue to evolve. Next slide, please. Innovation is already making a meaningful contribution to the business. New products accounted for 9% of total snacking revenue over the first nine months, with a contribution of 10% in Türkiye and 6% internationally. These figures show how new products are refreshing the portfolio and broadening consumer choice. They give us a platform to extend successful propositions across more occasions and markets. Our innovation capability allows us to build on familiar brands while responding to new needs, including the growing interest in health and wellness.
We will continue to support the products with the strongest opportunities to develop and scale up. Our brands grow through the trust they build with consumers and communities. Alongside our commercial activity, we continued our partnership with the Turkish Paralympic Committee through the World Para Youth Games in Mersin. We really find this as a very, very meaningful activity. We also announced the global nutrition model under our Happy People, Happy Planet strategy. This provides a shared framework for product development and reformulation, connecting our nutrition agenda with the growing importance of health and wellness. Our engagement with the World Cocoa Foundation, including the President's visit to Topkapı, our factory in Istanbul, supports our relationship across the wider food industry. Together, these activities reflect a business that is investing in its brands, its communities, and the long-term relevance of its portfolio. Our people provide the capability and energy behind execution.
We received the Happy Place to Work Award for the fifth consecutive year and achieved a score of 96% in the Top Employers 2027 assessment. We extended employee assistance coverage across our white-collar workforce, continued our leadership programs, and introduced an early career development program. We are also developing clearer career paths for factory foremen and digitalizing HR processes through People Plus. These initiatives support capability, continuity, and effective decision-making across the business. These programs support the capabilities needed to deliver our business priorities. Clearer career paths and stronger leadership development help teams take responsibility for decisions and work more effectively across functions. Our AI transformation is moving from preparation towards focused application in priority business areas. We are focusing on programs such as revenue growth management, supply chain management, field sales, and financial and strategic planning.
These are the four focus programs that we are working on in the AI platform. During the quarter, we faced priority use cases across 2026 and 2027 and shortlisted technology partners for pilot preparation. Collaboration with our AI steering committee and our parent company, Yıldız Holding, continues as we develop these applications. The intended business benefits are practical: better pricing and promotion decisions, closer alignment of supply with demand, and more effective execution in stores. We will test these applications and scale those that demonstrate value. This provides a further opportunity to improve how we operate and support productivity over time. Let me now turn to our operating environment and the performance across our markets, starting with how shopping behavior is evolving in Türkiye, which is our flagship country. The data on this slide shows how strongly affordability is influencing shopping decisions.
Promotional sales gained share in every category shown in the total supermarket data for the nine months to September. For sweet biscuits, promotional volume share increased from 30% to 38%, a rise of almost 8 percentage points. In cakes, the increase was again almost 8 percentage points. In solid chocolate, again, it rose from 43% to 47%, almost 4 percentage points. Shoppers are also visiting more stores, as you can see on the second chart here. The average reached 3.5 stores over a four-week period, almost a month in 2026, compared with 3.3 in 2025 and 2.5 in 2022. This is consistent with consumers comparing offers and seeking value across retailers, and this chart shows it very clearly.
For Ülker, our back-to-school execution and product launches helped domestic snacking volumes grow by 2.4%, but the higher promotional share in the market put pressure on net revenue per ton and profit margins. Our commercial response is to keep our products accessible while improving the effectiveness of promotional spending and managing the balance between market share, profitability, and our brand strength. Our regional footprint gives us access to different markets and consumer opportunities. This year, those markets have also faced different pressures on profitability. Türkiye and exports are shown both with and without IAS 29, while the overseas regional growth figures are in local currency. We are sharing these figures without IAS very transparently with you today. In Türkiye, revenue grew by 18.1% excluding IAS, while EBITDA declined by 7.2%. On the reported basis, revenue declined by 9.9% and EBITDA by 37%.
The return to volume growth is encouraging, while promotion intensity and inventory costs continue to affect our margins. In the Middle East, revenue increased by 3%, while EBITDA declined by almost 40%. Regional conflict has affected demand and raised packaging, freight, and insurance costs. Our teams are adapting the offer and execution to local consumer and channel conditions. North African revenue grew by almost 8%, while EBITDA declined by 21%. Demand has been uneven, and regional instability has affected commercial conditions and logistics. Our market presence provides a base to develop the portfolio as we manage these conditions. Central Asia remains a demanding market. Revenue declined by 2.9%, and nine-month EBITDA was negative. Competition from Russian-origin products and movements among the ruble, tenge, and US dollar have constrained pricing flexibility. Especially, I would like to highlight the ongoing ruble devaluation while tenge, the local currency, is appreciating.
As there is no customs border between Russia and Kazakhstan, our main operational unit in Central Asia, we keep seeing lots of parallel trade, low-cost products flowing from Russia. This puts additional pressure on our business in terms of growth and profitability. Türkiye exports delivered revenue growth of 21.3% excluding IAS, while EBITDA declined by 19%. On the reported inflation-adjusted basis, revenue declined by 7.4% and EBITDA by 50%. Across all regions, our focus is on pricing discipline, promotion efficiency, and better returns on sales. Our geographic presence remains an important source of long-term opportunity. Türkiye contributed 70% of nine-month revenue, and international activities 30%. With the consolidated total, Türkiye exports represented 13%, while the Middle East 11%, and North Africa and Central Asia approximately 3% each. Our footprint gives us a sizable domestic base alongside the international growth opportunities.
It also allows successful products and capabilities to reach consumers in additional markets. We see opportunities to extend successful products and capabilities across this footprint while adapting the offer to local consumer needs and price points. We can combine our production and innovation capabilities with local market knowledge to develop that opportunity. A successful proposition in one market can provide a starting point for another, with the format and price point adapted to local demand. This is what we will keep doing in the future as well. Our brands continue to hold meaningful market positions. Through September, our volume share in Türkiye was 34% across confectionery business. The other figures on this slide refer to specific categories: 27% in Middle East biscuits, 11% in North Africa biscuits, and 15% in Central Asia chocolate. They should be read within those category definitions.
These positions provide a strong base for our commercial actions. We will continue to balance consumer affordability and market presence with the need to improve returns. Our category positions give us a foundation for recruiting consumers and strengthening preference for our brands. The commercial priority is to convert that position into sales that generate sustainable returns. Innovation, availability, and the right offer for each channel support the continued relevance of our brands. In the broader Turkish macro snacking market, our volume share reached 18.4% for the first nine months, compared with 18% in the same period for last year. This means it is a gain of 40 basis points in such a competitive environment. This measure uses a broader market definition than the categories on the previous slide.
The gain is very encouraging evidence of consumers continuing to choose our brands, supported by our focus on the core products, innovations, and commercial execution. This is what I found really healthy for the future of our business. We have a strong platform to build on as we continue developing the portfolio and improving productivity. I will now hand over to Fulya, our CFO, for the financial performance.
Thank you, Özgür Kölükfakı. Good afternoon, good morning, everyone. Thank you for joining our meeting today. Let me take you through our financial performance for the third quarter and the first nine months of 2026. While our reported financial performance reflects significant inflation accounting effects and challenging market conditions, we continue to demonstrate volume resilience, maintain financial discipline, and actively manage our balance sheet as we navigate through this very challenging environment. Let me start talking about our inflation accounting impacts. For the first nine months, excluding IAS 29, which is the inflation accounting numbers, we generated TRY 13 billion EBITDA with a 14.5% EBITDA margin. These are first nine months results. While with IAS, when inflation accounting applied, the EBITDA margin decreases to 11.6% and TRY 11.1 billion. The same is valid for revenue as well.
Without IAS 29, our reported revenue is TRY 89 billion, and with IAS, it is TRY 95.7 billion. In terms of net income, we ended up with TRY 2.7 billion net income with IAS 29 applied, and without it is approximately TRY 4 billion. The impact is even more visible in Q3. It is from TRY 3.3 billion EBITDA decreases to TRY 2.3 billion, and EBITDA margin from 11.4% to 8.3%. The most visible part is on net income, from TRY 584 million positive net income to TRY 546 million negative net income. On the next page, I just wanted to talk about our margin pressures, margins key drivers. Margin pressure comes from a combination of inflation accounting, as I have shared, cocoa timing, and difficult market conditions we face both in Türkiye and in our international markets. There are several drivers behind the margin pressure.
IAS 29 impact of our nine-month EBITDA margin was 2.9% compared to two points last year. These are overall cumulative numbers. Two factors are particularly important that I would like to highlight. First, inflation expectations increased during the year, increasing the accounting impact. Second, the high cocoa cost carried in inventories continues to flow through our P&L with a time lag. At the same time, competitive and promotional intensity remains high, particularly in Türkiye. In Middle East and North Africa, we continue to face conflict-related demand and cost pressures, while Central Asia has been affected by currency volatility. These factors together explain the pressure we are seeing in profitability. An additional thing I would like to highlight that, you can see the volatility among quarters, and please expect a higher variance between IAS 29 and non-IAS 29 in Q4 2026 as well.
Again, one thing I would like to highlight is lower spot cocoa prices do not immediately translate into lower cost of goods sold because of the higher cost inventory continues to flow through the P&L with a lag, as I have shared. On the next page, going to Q3, the key point I would like to highlight is the volume resilience. Despite there has been some declines in our numbers, volume stayed resilient, and consolidated volume increased slightly by 0.3%, landing at 174.1, and despite all these challenges. Total revenue landed up at TRY 28.9 billion, approximately TRY 29 billion, and gross profit margin is 21.3%, landing at TRY 6.2 billion. EBITDA is 8.3% at TRY 2.4 billion, decreasing by 59%, and net income, we reported a loss in Q3 as TRY 546 million. On a nine-month consolidated basis, on the next page, nine-month volume resilience continues.
We were able to increase our volume by 0.6% as landing at 520 by the end of September on a nine-month cumulative number. Reported revenue was TRY 95.7 billion, down 8.8%, and while EBITDA was 11.11, ended 11.6% EBITDA margin. On a year-to-date basis, net income remained positive at TRY 2.7 billion. I think that the important distinction here is that volumes continue to hold up. Our challenge is therefore primarily around margin and value realization. In terms of on the next page, looking at the regional breakdown, we see profitability pressure both domestically and internationally. In Türkiye, Q3 was approximately TRY 2 billion in Q3, in terms of EBITDA, and with a 10% margin. International EBITDA was TRY 443 million, driving a 4.7% margin. As also Özgür Kölükfakı highlighted, we keep seeing challenges in our international markets as well.
In Central Asia, the uncorrelation between FX rate and inflation and the deterioration in profitability was driven to a significant extent by higher trade and promotional activities. In Middle East, demand conditions became more challenging as the year progressed. The weakness in Saudi Arabia that began in late 2025 continued through the period. The market also has become structurally more promotion-driven, and the conflicts that we have seen throughout the year has added incremental pressure across the supply chain and cost base, which also impacted our international numbers. On a nine-month basis, geographic diversification remains important despite short-term international pressures. On a nine-month basis, Türkiye generated TRY 66.9 billion of revenue and TRY 8.7 billion of EBITDA, corresponding to a 13% EBITDA margin. In international markets, we generated TRY 28.9 billion revenue and TRY 2.5 billion EBITDA with an 8.5% EBITDA margin.
Pretty much all the challenges I have shared on Q3 is also valid for the first nine months for our domestic and international regions as well. Here, on the next page, we wanted to show the Türkiye domestic page for three months and nine months without inflation as well, because we wanted to share with you that, in fact, operationally, our numbers are not significantly low, or in fact, from a competitive perspective, they are on a good place. Let's take a look at our three months 2026 without IAS 29 numbers. Total revenue increased by 15.2%, driving TRY 19.3 million, and gross profit landed 25.5% with 4.9. You can see that gross profit decreases only by 8%, and EBITDA reaches 13.5% EBITDA margin, driving TRY 2.6 billion.
You can see the same pattern for our nine months year-to-date numbers for Türkiye domestic operations without IAS 29. Total revenue increased by 18.1%, 61.4, gross profit 29.1%, 17.8, and EBITDA landed on a year-to-date basis at 16.4% without inflation accounting applied. You can see that, which is also quite a healthy number compared to on a nine-month basis, which was TRY 10.9 billion EBITDA. We ended up at TRY 10 billion EBITDA, a slight decrease versus prior year on a nine-month basis. On the next slide, this slide shows the snacking sales volume and snacking sales value by category. Snacking volume increased by 1.2% year-on-year, supported by export and international operations and new product launches. Sales value declined by 10.6%, reflecting softer demand in Türkiye snacking market and high base, and MENA disruption and the relationship between inflation and currencies, and especially in international operations.
Our category mix remains broadly stable, which is also encouraging, although our physical demand for our products continues to show the resilience. On balance sheet, finally turning to balance sheet, our financial position remains controlled. Covenant net debt EBITDA landed at 1.45, which is quite a healthy number in terms of preserving our strong balance sheet and cash flow position. Our debt profile remains 71% in terms of financial liabilities being long-term, which gives also great strength and flexibility to our balance sheet. We continue to actively manage our FX risk, which we ended up at 69%, close to 70% by the end of Q3, where our open position was hedged. Working capital movements largely reflect the timing of inventory supply. You can see that there has been also improvements on the other parts of our working capital.
Despite the short-term pressure on earnings, we remain disciplined in managing leverage, liquidity, and financial risk. In summary, we are navigating in a very challenging operating environment with resilient volumes while taking the necessary actions to protect profitability and maintain a disciplined balance sheet. With that, let me hand over to Özgür Kölükfakı again to take you through our outlook and our priorities.
Thank you, Fulya Hanım. Özgür Bey, can you hear us?
Hi, can you hear me now?
Yes, we can hear you, Özgür Bey. The ground is yours for the outlook.
Okay. Because there is some issue in the connection, I couldn't hear some parts of Fulya. Anyway, I hope you can hear me now. Let me continue. Okay, let me now turn to our updated full-year outlook. We now expect a single-digit decline in full-year net sales compared with our previous expectation of a low single-digit decline. We have also revised our EBITDA margin guidance to 9%-11% from 13.5% ± 1.5 percentage points, which was our previous guidance. These guidance figures include the effect of IAS 29. This revision reflects higher year-end inflation expectations and more intense competition in Türkiye and international markets. High promotional activity and continued consumer price sensitivity suggest that normalization will take longer than anticipated, limiting pricing flexibility and putting pressure on profitability.
Declining cocoa prices have also constrained our ability to increase selling prices in line with inflation, while the benefit of lower purchase prices reaches our cost base gradually. At the same time, inflation adjustments on cocoa inventories already secured continue to affect reported margins as those inventories move into cost of sales. In our MENA clusters, the ongoing conflict in the region has affected demand and increased costs, including the logistics. We have also held inventories for longer to maintain product availability and manage demand fluctuations amid these disruptions. Just to give you a feeling, this year, the war context in the region has an impact on our total consolidated EBITDA around 2 percentage points. In Central Asia, the Russia-Ukraine war and movements in the ruble, tenge, and USD have added to competitive and pricing pressures.
We expect inflation accounting effects to become more pronounced in Q4, and our updated guidance incorporates this fact. Our operational plan for the quarter focuses on effective commercial execution, improving promotional returns, and disciplined pricing and product mix management. Our immediate priorities remain improving profitability, managing inventories more closely, and strengthening cash conversion as the cocoa covers normalize by the end of the year. Let me now connect our outlook with the strategy that guides our growth decisions. Our strategy starts with our purpose, make happy, be happy. Our brands have a place in everyday moments, and our opportunity is to make that happiness relevant, accessible, and responsible. Our 5H Happiness Growth Compass defines how we grow. Consistent growth means reaching more consumers through our brands and innovation. Competitive growth strengthens our market position. Profitable growth gives us the freedom to reinvest into our business.
Sustainable growth reflects our responsibility to the planet and society. People-centered growth puts our colleagues and stakeholders at the heart of our business. Our 5P strategy and growth action plan turn that direction into execution. Let me briefly cover those 5Ps. First of all, purpose leads. We own and spread happiness through meaningful consumer connections. We commercialize sustainability by making responsible sourcing, better packaging, and waste reduction valuable to consumers and customers. Portfolio wins. We grow the core through stronger brands and product superiority, while portfolio transformation addresses changing needs. That includes affordability, premium experiences, and the growing health and wellness opportunity through our Go Ahead brand. Potential unlocks. We win with customers through closer partnerships and execution tailored to each channel. We unleash white spaces by extending our brands into additional consumption occasions and relevant market opportunities. Productivity fuels.
Lean and AI transformation, together with operational excellence, improve decisions and simplify how we work. Greater efficiency and less waste create capacity to invest behind our brands and future growth. Last but not the least, people make it happen. We are building a future-ready organization through talent, continuous learning, and stronger capabilities. A culture of trust, collaboration, ownership, and agility empowers our people to deliver the plan. Together, our compass, strategy, and action plan connect purpose to execution, supported by strong brands and people equipped to create lasting value. As a summary, this is how the market outlook looks like and our navigation plan to successfully drive our business. First, market headwinds. Inflation, currency volatility, and regional uncertainty continue to shape our environment. A K-shaped economy reflects diverging fortunes across consumer groups, reinforcing demand for both affordable choices and premium experiences.
At the same time, more snacking occasions and growing interest in health and wellness create opportunities. Cost of sales and supply chain pressures make effective commercial and operational choices especially important. Second, purposeful brands. Our response is anchored in three master brands: Ülker, our master umbrella brand, McVitie's, and GODIVA. Their established consumer connections give us a strong platform to serve different needs and occasions. Focusing on these brands gives our growth plan a clear commercial direction. Third, a strong plan. We have a strong plan to drive 5H growth. We will grow the core through stronger brands and superiority across product, pack, proposition, price, availability, and promotion. We will transform the portfolio around affordability and premiumization while developing health and wellness through Go Ahead brand and addressing each and every demand space touching to our consumers.
We will win with customers by tailoring the offer to each channel and creating more value from every ton, every ton we sell. We will unleash white spaces in additional consumption occasions and relevant geographic opportunities. Last but not the least, all these powered by one team. We will scale AI applications that demonstrate value, simplify processes, and optimize our value chain to improve effectiveness and productivity. Perfect execution depends on our people, supported by passion, trust, collaboration, resilience, and agility. These capabilities help us adapt to changing conditions and put the plan into practice. We have strong brands, clear priorities, and a team committed to execution. That gives us confidence in our ability to build a stronger business and create lasting value for our shareholders. Thank you, and we look forward to your questions.
Thank you, Özgür Bey.
Thank you. Thank you very much for the presentation. We will be now beginning the Q&A session. In the meantime, we are opening a quick survey for our web participants.
By the way, I really cannot hear anyone at this stage. Can anyone hear me?
Yes, Özgür Bey.
We can hear you, Özgür Bey.
We can hear you.
Okay.
Perhaps if you can
Okay. Now we are waiting for the questions, I understand.
Yes.
Yes. Our web participants can request to ask a voice question or send their question as a text. If you are joining via telephone, please press star two on your phone keypad and wait for your name to be prompted. We already have some participants in the queue. Our first voice question comes from Cemal Demirtaş from Ata Yatırım. Cemal, please go ahead. Your line is now open.
Thank you for the presentation. My first question is, as the management, do you have any plan to regain the investor confidence after three terrible quarters? Do you see that you had the second downward revision to your estimates? Maybe you could have warnings rather than just informing with these results, because it is having a negative impact on the visibility of the company. Investors are very much concerned about this lack of visibility. As you see, it is reflected to the share price. I sincerely want to ask how confident you are about the future of the company, because we see the declines in revenue earnings as well as increase in the debt level, net debt level. Although your covenant level is 1.45x, when you look at our net debt EBITDA, 2.9 x. Really, my perspective reflects the investors' perception, unfortunately, about Ülker.
Please just at least comfort us for the future, because previous quarters' guidances or indications we received from you during the analyst meetings were not very helpful when we see the pictures. At least give me more, better direction about the second 2027. Sorry for that, my criticism, but I had to say that. There is really, over the last several quarters, we are having very hard times understanding the company, and it is as if it is not in the confectionary business, it is something else in some other business. Sorry for my maybe just energy, but I just really, we need that answer from you to secure, at least for the future, be more informative about warnings. At least if something good or bad, you may have things bad or good. It is not a problem.
Just that kind of communication, every quarter we are expecting a recovery, then we do not see a recovery. It looks like even that is a lack of visibility from your side. That make us more nervous as the company's share value is very much at the very, very depressed levels compared to historical levels. Thank you very much.
Let me start, then Özgür Kölükfakı can continue.
Sorry.
Sorry, Özgür Kölükfakı can-
Sorry, Fulya. I can-
Yes, please.
There was a little bit connection issue. Now I can-
Sure. Please go ahead.
reply the question.
Sure.
First, I would like to just elaborate a little bit more on the guidance revision. The guidance revision is based on some critical points that I would like to highlight once more. First of all, the inflation is also revised, especially in Turkey. We started the year with 23% inflation estimation, and in the last quarter, the inflation was 28%, and the latest year-end estimation is 30%, as you know. Now we are working towards a higher inflation than the previous guidance. The second point is, in the current context, there is a market slowdown in most of the markets across the world, also in our region, and also in the flagship country, Turkey, which is trying to be juiced up by the competition with high levels of promotional sales and increasing price sensitivity.
The third one is, in this challenging inflationary context, especially because of the declining cocoa prices, we had the inability to raise the prices in line with inflation. Another point is that timing impact of the inflation adjustment on the cocoa inventories. Being a cocoa producer, we work with some covers, and in the past, sometimes you can have the benefits of it. But this year, the cocoa prices went down significantly, as you all know, as you all follow. This also put the inventory cycle into an unbeneficial point towards us. Demand pressure and rising costs, these are the things about, especially in general in the context. In addition to that one, the MENA tension has further increased, as you also followed.
The war, the Iran-U.S. war, the tensions has continued, and now the geography is moving into another tension between Saudi and Yemen. Also, as I mentioned, only the MENA tensions, the war impact has an impact of about 2% point on our EBITDA consolidated. When I shared the guidance last time, I also emphasized the fact that we are cautiously optimistic, and we were basing our assumptions that the promotion intensity will normalize, the tension in the region is getting normalized, which didn't happen. In addition to that one, Russia and Ukraine war also continued, and the Central Asia also faced with significant forex challenges. As I mentioned during the presentation, this ruble devaluation versus the tenge appreciation was not a kind of normal explanation. All this forced us to really revise our guidance.
Having said that, I must say that operationally, we have a strong plan. We feel confident about our Q4 plans, and for the future of our business, because the demand is there for our brands, for our products. As I shared with you, we continue to increase our market shares, and the consumers continue to use more and more our products. We believe, and as we see that, we expect more normalization in the cocoa side by the end of the year, which will have more positive impact to our business in the upcoming period. This is what I would like to share.
Okay. Thank you. Thank you very much. We will now move to our next question that comes from Eren Erciş from Yapı Kredi Yatırım. Eren, your line is now open.
Hello. Thank you for the presentation, Özgür Kölükfakı and Fulya Hanım. You have already touched on some of these points, but I would like to go into a bit more detail on a few of them. My first question is on the new guidance, the 9% to 11% range implies around 5% margin in the fourth quarter. How did October and early November look, and should we see fourth quarter as the bottom and the starting point for 2027? How do you see the margins next year? On Türkiye, volumes were up, but real revenue was down around 12%. How much of that was pure pricing, and how much was promotions, and how much was mix, especially the lower chocolate share?
You also said lower cocoa price made it hard to raise prices, but how much of the cocoa benefit have you already given back to consumers, and how much can you keep in 2027? Lastly, on cocoa, prices went back up in the third quarter, and at what level are you covered for the next few quarters, and for how many months is the IAS 29 inventory effect now mostly behind us, or will it still weigh on the first half of next year? I mean, 2027. Thank you.
Sorry. Sorry for the. Can you, maybe the moderators, can you please just briefly summarize the question? Because for some reason, there is a disconnection on the voice. It was breaking in and out. I couldn't understand the questions.
Sorry, Özgür Bey. Perhaps you can try to reconnect again to the call if you're having problems, or you can also alternatively dial in via the phone to the call.
Let me briefly connect on the phone because I really cannot hear. Let me just try to connect on phone, okay?
Okay. Ladies and gentlemen, please stand by. We'll shortly get back.
Okay. In the meantime, I can start with your cocoa-related question. Thank you for all your questions. As I have also shared during my presentation, lower cocoa does not translate immediately to lower COGS because there is a lag between cocoa prices and how it is translated and transferred into our COGS in our P&L statement. It is mainly cyclical, and there is a lag effect in terms of higher cost inventory. Margin recovery may not be immediate, but as of today, we know that we are pretty much in the same position in terms of competition, and we expect the cocoa price impact to normalize, hopefully, in 2027. But cocoa prices are not the only drivers to recover margins.
There are other factors such as pricing, promotional requirements, markets, macros, inventory turnover, and the inflation outlook, and other macros in turn, locally and globally. All that combined, they impact the margins. But as you know, as Ülker, we are taking all the actions needed to make sure that we mitigate all these risks one by one.
Yes. By the way, I also connected on phone. Can you hear me now?
Yes, Özgür Kölükfakı, we can hear you.
Okay, perfect. I also followed Fulya's answer, I think, which is covering the points very well. I think this is where we are in terms of the current context, as I explained in the guidance revision, and the future, how the future looks like.
Özgür Kölükfakı, as a follow-up, on Türkiye, volumes were up, but the real price are down 13% year-over-year. We talking about so much about how promotions mix and et cetera. Could you give some breakdown regarding to how much coming from these promotions or mix impact for 13% year-over-year real pricing decline?
Yes. As I said, this year, the promo intensity in the market has significant increase, which we can also follow up in the researches. The point is that we are trying to manage the promo intensity together with our profitability and also our market share. We are trying to have a balanced approach in how we manage the promo intensity. We are also focusing on our core brands, as well as we are focusing on the PPAs and also the new innovations to provide new offers, and in different channels address the needs of the consumers. As I can say that, we are not over-promoting, so we are trying to really manage our promo intensity in a balanced term in line with the market conditions, while also watching out our profitability and also the market share for the future of our business.
Sorry, Fulya, but last one. Do you see or do you feel any pressure is coming from the retailers about the payables length? Because when we look at the retailers' financials, we are seeing an increase in payable days. So are you feel that, or are you feel any pressure on the working capital side?
I think it will be better for this to be answered by our CFO, Fulya. Fulya, it is over to you.
On working capital side, you have seen that we have improved our payables over each quarter. It started in the first quarter, 47 increased to 54. Now, we are reporting 56 in terms of payables. In terms of receivables, it is also at a good level, and it is mainly driven by seasonality and business as usual activities, related to our increase in our sales and seasonality in our sales. In terms of inventory, yes, it remains slightly up at 121 days, even though it improved versus Q2 by two days from 123 days to 121. In inventory, softer domestic demand has slowed inventory turnover, adding to the impact of the higher inventory base carried into 2026. I mean, we have also mentioned that cocoa-related categories also impacted our stocks levels. This is our summary of our working capital numbers.
Please let me know if you have any more questions or need further details. In summary, there is no structural change in any of our KPIs, especially in our DPO.
Thank you so much.
Thank you.
Thank you. Thank you very much. Our next question comes from Evgeniya Bystrova from Barclays.
Hello, can you hear me?
Yes, yes. Please go ahead now.
Good. Good afternoon. Thank you for the presentation. I have just two quick questions, follow-ups, and apologies if they have already been answered. I was wondering what exactly will be the driver, as you said, of more pronounced impact of inflationary accounting in Q4? Just would like to understand that better. Also, what are the tools that you can utilize to maybe improve your profitability going into 2027 or better manage the headwinds that you are facing at the moment? Just in general, where do you think the market will be in 2027? Thank you.
Thank you very much. I think the first part is about Q4. The fourth quarter is expected to be our strongest sales period after Q1, bringing a larger portion of the inventories held during the year into cost of sales. Consequently, the inflation adjustments accumulated on those inventories will have a greater impact on reported profitability. Despite of the strong expectation for Q4, we will also face the inflationary accounting at a higher intensity. Stronger season sales will therefore coincide with a more significant inflation accounting for a headwind to margins. That is also impacting our guidance, as you can rightly estimate. Coming to your second question, our plans remain intact. We look at future very confidently. I shared with you our strategy, our purpose, our 5H Happiness Growth Compass, and our 5P strategy.
We will continue to drive towards our strategy to really drive 5H happiness growth for our consumers, for our customers, and for our stakeholders. We feel really confident about the future of our business, because our brands are really resonating with consumers. We have really strong products, core products that are having significant impact in the lives of our consumers. Also, we have significant innovations following the trends, as some of them we shared with you today. For the future also, we will leave no stone unturned in terms of addressing all the demand spaces touching the lives of the consumers, be it affordability, be it premiumization, be it all the demand spaces or the health and wellness platform. In short, we have all the right strategy and very clear action plan to drive 5H happiness growth for the future.
Thank you. Maybe just a quick follow-up on your free cash flow outlook. Where do you see it by the end of this year, and maybe what is your expectation for next year? Do you think there are any areas of free cash flow that you can maybe manage better going into next year? Thank you.
Let me leave this question to our CFO, Fulya.
Sure, Özgür Bey. In terms of cash flow, we do not disclose any cash flow estimate or forecast. As you know, having a very strong balance sheet and a cash position is our high priority. There might be some seasonal impacts, but I mean, the important thing is our priority is to have a very strong balance sheet and a strong cash flow position. We want to maintain this very healthy net debt EBITDA levels. In terms of loans and other financial liabilities, we are quite flexible and very strong. That is what I can share.
Thank you.
Thank you.
Thank you. Thank you very much. Our next question comes from Karim from Moon Capital. Karim, please go ahead. Your line is now open.
Hi. Just a quick question. I know that the results were underwhelming, and you are saying that fourth quarter will be difficult as well, but next year should start to get better. My question is more about just sort of the idea of share buybacks. I know I and others have talked about this with you, but just trying to understand what the thinking is of management and the board when it comes to share buybacks, given where the valuation of the company is today and the prospects for the business. Thank you.
Thank you, Karim. Thank you for your question. I think it is a good question, and this is also what we are evaluating. We regularly evaluate all alternatives with a focus on creating long-term shareholder value. That includes reinvestment in the business, maintaining a prudent balance sheet, dividend distribution, and very appropriate other tools such as share buybacks, as you mentioned. In the current context, this is something on the table. I will be very sincere with you. This is something on the table which we are considering, which we are evaluating for the future. Having said that, the current context is a bit more volatile than even the disruptive context of the world and the region that we are in. In the current environment, preserving financial flexibility can be particularly important given input cost volatility, interest rate conditions, and macro uncertainty.
For that reason, for the time being, it is on the table, and we will keep considering that, and we will evaluate that for the future, definitely.
Okay. I think it makes a lot of sense, just given Ülker is a very strong business. It is in a challenging environment right now. It does look like the region is starting to get a little bit better, hopefully. Oil prices have come down quite nicely in the last couple of weeks. I would encourage the board and yourselves, because I think the business should have better prospects ahead. Thank you.
Thank you very much, Karim. Thank you. I appreciate it.
Thank you. Thank you very much. Our next question comes from Anjali Doshi, Nuveen. Anjali, please go ahead. Your line is now open.
Hi. Thank you very much for the call today. I just had a question following up to the prior questions with respect to the drivers of the margin performance. If we take the IAS 29 impacts out and just look at it before that, for the nine months of 2026, you still have about a 520 basis point decline in margin. I think it was mentioned that it was estimated about 2 percentage points of this relates to the war impacts in the MENA region. I guess, of the other 320, how would that split between the pressures on margins from the cocoa prices, the inventory drawdown from that, and in COGS?
I am just curious at what point do you see that cycling through, so that some of the lower-cost inventories that were built at the start of the year start flowing through into the COGS. What quarters can we expect to be the bottom there, and what the impact would be from that perspective? What share of that is related to the discounts and the pricing pressure and inflation-related pressures that you mentioned as well? If you can give some color into how you see that particular piece proceeding into 2027, to give us some sense of how the margins can evolve from what you are expecting for 2026 into 2027.
Thank you very much. Let me answer your question. The reduction in our EBITDA margin guidance reflects both the commercial pressure and the greater-than-expected impact from inflation accounting, as I also mentioned during some part of the presentation, as well as some of the questions from our analysts. Higher promotion intensity is directly affecting profitability, while softer underlying demand has extended, of course, our inventory cycle. In the cocoa business, all the producers are working with some level of cover, as you can also understand. As inventories remain on the balance sheet for longer, the cumulative inflation adjustment to their cost increases and is subsequently reflected into the P&L. This is what we estimate for Q4, which is estimated to be operationally successful, strong quarter. This is where we will also see the impact in a more intense way, the inflationary accounting in Q4.
How do we see the future? Of course, the volatility is high in the world we are living in. The uncertainty, the VUCA conditions, of course, are all across the globe and also in our region. Having said that, based on our estimations, we believe the cocoa prices are now more stabilized compared to past, and our inventory cycle is getting normalized by the end of the year. This will also give us more confidence, make us more cautiously optimistic about the future. We believe this will also reflect into the market context. Therefore, this will also showcase itself in the new year, starting from 2027. This is how we see the outlook of the market context and how it will impact our business.
Thank you.
Thank you. Thank you very much. Our next voice question comes from Hanzade , J.P. Morgan. Hanzade please go ahead. Your line is now open.
Hello. Hi. Thank you very much for the presentation, Özgür Bey, Fulya Hanım. Actually, Anjali asked my question, but can you please clarify about this cocoa contract duration? Is it like a 12-month contract, 18-month contract, or you are now on a short-term contract in cocoa?
Thank you. Thank you very much, Hanzade Hanım. Let me leave it to Fulya, our CFO, Fulya Hanım, to reply this question.
Sure, Özgür Bey. Hanzade Hanım, thank you, but we do not disclose the total coverage levels or inventory days or hedge ratios. But you know that we are following up, and we have a very good platform to monitor these cocoa prices and how they impact our business. But we do not disclose this information.
Fulya Hanım, actually, I'm trying to understand the impact of this cocoa price moment. I can understand that cocoa is putting some pressure, and because of the low demand in Turkey, you still end up with some inventory at high price, I think, into Q4. Eventually, when we get into 2027, cocoa prices were quite low in the beginning of the year. Were you able to make any inventory at those low prices, or people again end up with cost inflation in cocoa into 2027?
I think, as we have mentioned, Hanzade Hanım, we expect the cocoa prices to normalize. It is kind of stabilized right now, and we expect to be within the same range all of our competitors. As you also know, there is always a lag between cocoa prices and the COGS. As we have shared, it is going to be expected to be normalized. This is one part related to cocoa prices. Regarding margins, there are other key drivers: pricing, promotional requirements, market conditions, global and local macros that all impact the margin. Cocoa is not the only indicator there.
Mm-hmm. Is it possible to share a pre-IAS 29 target? I am trying to understand the inventory, inflation accounting impact on the inventory. In the fourth quarter, on a pre-IAS 29, are you expanding your, normalizing your margin or not?
Our margins in Q4 pre-IAS will be quite good.
Yeah.
But as the pre-IAS will be good and better, but we do not disclose an exact number. However, regarding the inflation accounting-
No, I understand the impact-
You understand it. Okay, that is good.
All right. Thank you very much.
Then we're good.
Okay. Thank you. Thank you very much. We will now move to the text questions. Orkun Gödek from DenizYatırım wrote, "Could you please consider scheduling future investor calls on the same day right after the earnings release, especially on days involving guidance revisions? Running financial model updates simultaneously with the disclosures poses a real challenge for analysts and investors. We believe synchronizing the call right after their release would greatly streamline the process. Thank you.
Thank you very much. Normally, how we have been doing throughout the years is we make our announcement, and the next business day, we do the webcast analysis. But we take your point. We will consider that for the future.
Thank you. Ahmet Argun Kasap from DenizYatırım says, "Thank you for your presentation. What is your plan for 2027 in terms of possible ongoing pressure on sales growth, EBITDA margin?
Thank you. The 2027 budget process is ongoing, and we will be sharing our guidance when the time comes. I think you will be under Thank you for your understanding and patience to wait for the 2027 guidance. I think we captured some of the levers that are impacting 2026, and how it will move forward for 2027. Especially we discussed a lot about the cocoa impact and the ongoing estimations and our impact to our business. I think that will be giving you some teaser for 2027.
Perfect. Thank you. Thank you very much. I believe with this, we can move to the closing remarks from the company.
Thank you so much for your time and all your questions. Özgür Kölükfakı?
Thank you, Fulya. Thank you, team. Thanks to all the participants, our moderator, for joining us today. I would like to close with the statement that, we, as Ülker, we have been in the business for a long time, and our biggest strength is our brands, our touchpoints with the consumers. We have strong brands, clear priorities, and a team committed to execution with a very meaningful purpose to make happy and be happy. Our 5H Happiness Growth Compass and our 5P strategy and the clear action plan and the strong plan that we have for Q4 and for the future gives us really confidence in our ability to build a stronger business and create lasting value for our shareholders. Thank you very much for joining, and look forward to seeing you next time.
Thank you. This concludes our call for today. We are now closing all the lines. Goodbye.