GW: What is the current status and timetable for the construction of the greenfield glass packaging facility in Kaposvár, Hungary?
We disclosed our investment plans at the beginning of June last year. We held the groundbreaking ceremony for our investment in March this year. We plan to commission our Hungarian glass packaging facility in 2023. It is scheduled to reach its full annual production capacity of 330,000 tons in 2025.
GW: What is the motivation for Şişecam to construct its first European glass packaging plant?
Known as a long-term investor in all its markets, Şişecam [has a] holistic and inclusive development vision that supports its stakeholders. The European market accounts for a quarter of the total global glass packaging market. This fact offers major opportunities for the rapid development of the industry and for the expansion of our company’s current production footprint.
GW: What are the key elements of this investment and what benefits will Şişecam achieve as a result?
With a €255 million investment, this major facility, which will be our first glass packaging production facility in Europe, will enable us to introduce our quality glass packaging products to the European market more easily.
GW: What products will be manufactured in Kaposvár and what sectors and regions will the plant serve?
With its high-quality and high value-added glass packaging products, Şişecam will provide inputs to many different sectors, including the food, alcoholic, and non-alcoholic beverage segments. The production site will respond to the glass packaging demands of both Hungary and other markets across a wide geography while also boosting Hungary’s exports.
GW: Why was Kaposvár chosen as the location?
Şişecam operates in the glass packaging industry with 10 production facilities located in four countries and holds market leadership in Turkey, Russia and Georgia. Our total annual production capacity in glass packaging is 2.6 million tons. A sizeable portion of our international sales in glass packaging is directed to the European glass packaging market. Increased awareness of health and hygiene during the pandemic accelerated the demand for glass packaging globally. As a result, Europe offers great potential for further growth of the industry as well as providing ground for the holistic expansion of our company’s current production footprint. When we set out to capitalise on these opportunities, we decided to invest in Hungary.
GW: How supportive has the local Hungarian community been?
Şişecam’s business activities in Hungary started with an acquisition in 2013. Şişecam’s positive experience in the country played a major role in prioritising Hungary when planning a glass packaging production facility investment in Europe. Knowing that Şişecam is a long-term investor committed to developing the region in every geography it operates, the Hungarian community and the government have always been very welcoming to Şişecam.
GW: How many people will the plant employ?
This new glass packaging production facility will create direct employment for over 330 employees. Once the facility is commissioned, Şişecam’s total employment in Hungary will be approximately 650 people, and a further employment of about 1,000 people via sub-producers is expected. The volume of trade that our production operations will create in the region will also spur the development of many industries along the glass packaging value chain.
GW: How will the new plant fit into Şişecam’s model of sustainable manufacturing?
Our facility will make a difference not only with the economic value it will create, but also with its environmentally friendly and state-of-the-art technology features. In line with our sustainability approach, we [positioned] furnace efficiency, carbon footprint, recycling and circular economy at the core of our operations while planning our glass packaging investment in Hungary. The facility will rely on the most advanced applications of glass melting technology. Electrical melting technology will be used to minimise the carbon footprint of the project. This special technology, developed by Şişecam with its superior innovation capability, will also serve our sustainability activities and carbon footprint reduction targets. The facility will be technologically advanced with industry 4.0 applications and the entire operation will be carried out with [a strong focus on] resource efficiency and the protection of natural resources.
GW: Will any other plants in the group be the subject of major investment in the near future?
With the goal of being one of the largest three players globally, Şişecam continues to evaluate risks and opportunities in its whole business areas and accelerates investments that create sustainable value for its stakeholders. With this perspective, Şişecam strengthens its position in global markets gradually. Accordingly, Şişecam continues its unabated growth with investments in two float lines and one glass packaging furnace in Turkey, its first European glass packaging plant in Hungary and the Pacific and Atlantic Soda investments – the largest Turkish investment ever carried out in the USA.
Şişecam continues to invest decisively in order to create sustainable value for all its stake holders and sectors into which it provides input. In this context, the number of cold repairs, technology harmonisation, acquisitions and new investments Şişecam made in the last five years reaches almost 11 billion TL [Turkish Lira]. We also have big strategic investment plans in the pipeline which we have already announced. Our US Soda investment (US $4 billion), Hungarian Glass Packaging facility investment (€255 million), Eskişehir Glass Packaging investment (1 billion TL), architectural and automotive glass investments in Turkey (4 billion TL) will lead the way to achieving our targets.
During the uncertainty and out-of-the-ordinary conditions [experienced] globally due to the pandemic, Şişecam announced an investment of over 4 billion TL in two float lines for architectural and automotive glass in order to meet national glass demand and create value in the Turkish economy. With this investment, the current annual flat glass production capacity in Turkey will increase by 30% and reach to 2.6 million tons. As well as meeting the Turkish glass demand, the float line investment will contribute to increasing the exports of Şişecam and glass processing companies.
Other than its investments in Turkey, Şişecam continues to invest continuously in various regions of the world. In this context, the first glass packaging production facility investment in Europe will be made in Hungary.
Keeping sustainability at the core of its activities and operations, Şişecam decided to invest in Basalia Technology. This is an important Turkish invention in the bio-economy field which converts all kinds of waste into harmless substances. With this investment, Şişecam will play a key role in the global spread of this technology.
Lastly, Şişecam acquired Italian company Refel – one of the world’s leading refractory materials manufacturers – in the first quarter of this year. Refractory materials are used in the construction of glass melting furnaces and are crucial for the timely commissioning of such investments in accordance with planned schedules. With this acquisition, Şişecam aims to eliminate risks related to supply chain disruptions and secure its refractory supply in order to [guarantee that] glass manufacturing investments [remain] on schedule. While caring deeply about the high quality AZS refractory requirements of existing and prospective customers, Şişecam intends to maintain Refel’s competitive position through continuous high-quality service at a global scale. We believe the Refel acquisition will further bolster Şişecam’s strategic position in the global glass industry.
GW: What were the main features of Şişecam’s latest reported annual performance in an era of global economic geopolitical uncertainties?
2021 was a year filled with major challenges. However, hopes were raised around the world that the global pandemic might finally subside. Demand recovered accordingly, and production struggled to keep pace with ever-growing demand. Meanwhile, Şişecam successfully concluded another year filled with positive developments and major investments. Şişecam differentiated through digitalisation, transformation and recorded positive results from its merger to carry its 86 years of know-how and experience into the future, making us all proud. The lean and agile structure of ‘One Şişecam’ enabled risks to be effectively managed with a proactive approach and strategic opportunities to be evaluated prudently. Despite the difficulties we faced last year in a challenging economic climate, we took great pride in our successful financial and operational performance. Şişecam achieved successful results well above its targets thanks to these competitive advantages.
Şişecam is a strong global player with its 45 facilities in four continents and 14 countries, and sales to more than 150 countries. Today, we are amongst the two largest glassware, five largest glass packaging and flat glass producers in the world. While we are amongst the top three players in the field of soda ash, we are the world leader in the field of chromium compounds. We are moving forward in line with our goal of being one of the top three global manufacturers in all the main areas in which we operate.
No matter how volatile the economic atmosphere was, we continued our growth journey throughout the year. Our functional structuring and multidimensional digital investments ranging from production to sales, from logistics to supply chain management, made it possible for us to grow without slowing down. Our cost optimisation practices, effective production planning, healthy supply chain management and successful crisis resolution helped us to achieve a consolidated net profit of 9.2 billion TL in this challenging year. In 2021, we produced 5.6 million tons of glass, 2.3 million tons of soda and 4.5 million tons of industrial raw materials. As of the end of the operating period, we increased our consolidated net sales to 32.1 billion TL and our international sales amounted to 19.2 billion TL. These achievements also reflected positively on our share value. At the end of 2021, the BIST-100 index gained 26%, the BIST -30 index gained 24%, the BIST industrial index gained 45% and the BIST holding index gained 23%. In the same period, Şişecam stocks outperformed the index with 87% gain in value.
Şişecam’s financial performance for the first quarter of 2022 was also above our targets. As of the end of the period, we increased our consolidated net sales to 17 billion TL.
GW: What can you tell us about the group’s 2022–2030 sustainability strategy?
Şişecam considers sustainability efforts not as an obligation to be fulfilled in order to comply but rather an important responsibility from the heart. For Şişecam, the dynamic between yesterday, today, and tomorrow is a cause-and-effect relationship. We see the concept of a ‘Sustainable Future’ as a top priority. We aim to expand this vision of building a better world, so that it covers all our stakeholders and processes in the value chain, from raw material supply to production, from sales to our customers.
Şişecam’s sustainability platform ‘CareforNext’ is integrated with the United Nations’ Sustainable Development Goals and undertakes responsibilities along its entire value chain in order to achieve strong global transformation goals boldly.
CareforNext’s mission is to add positive value globally with sustainable products and services that address the changing needs of the planet and societies. Within the scope of this mission, we have determined the targets to be reached in 2030 under three main pillars: ‘Protect the Planet’, ‘Empower Society’ and ‘Transform Life’.
Under ‘Protect the Planet’ pillar, Şişecam defines its goals in minimising the negative impact on nature caused by its activities. We aim to reduce the amount of waste and use our resources in the most efficient way. Within the scope of this pillar, Şişecam’s priority areas are ‘Climate Change’, ‘Water Usage’ and ‘Circular Production’. Our target is to switch to a low-carbon business model by 2030, to increase installed capacity of renewable energy by eightfold, to reduce consumption of clean water by 15%, to reduce the packaging waste by 50%, and to reach 35% of the outer glass cullet used in production.
Şişecam aims to create a positive impact on all its stakeholders. In particular, Şişecam cares [for] local people and communities in its fields of activity, Şişecam employees, users and suppliers of Şişecam products, within the scope of the ‘Empower Society’ sustainability pillar. The priority areas under this pillar were identified as: ‘Corporate Heritage’, ‘Equality, Diversity and Inclusion’, ‘Talent Acquisition, Development and Management’ and ‘Occupational Health and Safety’. The objectives include disseminating glass culture on a global scale, reaching 25% female employment by 2030, creating a multi-national workplace environment, establishing a mentorship programme to strengthen the position of women in employment, increasing functional and personal competencies through training, boosting employee engagement rate, and achieving zero work accidents by 2030.
The ‘Transform Life’ sustainability pillar reveals Şişecam’s vision for forward-looking improvement through research, development and digitalisation efforts. Priorities within the scope of the pillar were identified as: ‘Sustainability across the Value Chain’, ‘Digitalised Value Chain’, ‘Sustainable Products’ and ‘Value-Added Partnerships’. The objectives on this pillar include committing all suppliers to the Şişecam Supplier Code of Conduct by 2030, strengthening the digital infrastructure and making it traceable, digitising the workplace, boosting the number of sustainable product patents, ensuring a percentage increase in the ratio of value-added products in turnover, implementing the innovative Basalia process, boosting the number of collaborations and partnerships for sustainable innovation.
‘Protect,’ ‘Empower’ and ‘Transform’ are the main pillars identified within the scope of Şişecam’s 2022–2030 Sustainability Strategy, while ‘Continuous Development’ is recognised as a cross-cutting pillar attributed with sustainability targets which are planned to be internally monitored. Areas covered under the cross-cutting pillar are ‘Operational Excellence’, ‘Communication and Awareness’ and ‘Risk Management’.
GW: In general, how would you summarise prevailing and future market conditions in the flat glass, glassware, glass packaging and auto glass sectors served by Şişecam?
The glass industry recorded 5% growth during 2021 with the positive knock-on effects from the easing of pandemic restrictions and higher demand from the sectors to which it provides input. Let me evaluate each field individually in detail.
FLAT GLASS: Despite the fact that 2021 was a difficult year due to the Covid-19 closures and raw material, freight and [computer] chip crises for the white goods sector, exports increased throughout the year with the accumulated demand and loosening of restrictions. The global freight crisis increased the demand for the Turkish market.
Despite the negative impacts on domestic sales such as fluctuations in the exchange rate and increase in raw material prices, production did not decrease. The European white goods sector grew by approximately 7% in 2021 compared to the previous year, and the Turkish white goods sector grew by 22%.
The increase in demand continued exponentially in 2021, and when there was lack of supply in the European market, demands from the Italian and Bulgarian factories were managed within the capacity potential through customer segmentation.
Although many flat glass manufacturers postponed their shutdowns and cold repair decisions in order to meet increasing demand in international markets, these efforts were not enough to meet the demand fully. China’s flat glass supply reduction also caused this on a global scale. In 2022, this strong demand is expected to continue along with favourable market conditions. However, it is predicted that supply difficulties will continue until the end of 2022, while sales of high value-added products will maintain an upward trend to a varying extent in all markets.
GLASSWARE: The glassware sector was mainly affected by pandemic-related supply chain disruptions at global scale, and subsequently increased cost of raw materials and energy in manufacturing. Many players in the sector changed their supply strategies in the short term, shifting from a just-in-time approach to more ‘just-in-case’ by holding greater inventory. Abrupt cost increases in various manufacturing factors forced companies to use flexible pricing strategies that limiting contract validity to as little as quarter-based. As risks and costs at every level are increasing, profit margins are decreasing accordingly.
Glassware is expecting the demand to come back to pre-pandemic levels before the end 2023. The hotel and catering industry is expected to keep its trendsetting, growth-boosting roles. Asia-Pacific regions will continue to lead the demand intensity by increasing both in population and urbanisation. Westernisation of developing countries is expected to have a positive effect on glass consumption through the growing trend of visiting pubs and cafes. Şişecam Glassware considers HoReCa [hotel/restaurant/catering] a strategic market in which success depends on wide range, strong distribution network and corporate strength in technological innovations and design, all of which Şişecam demonstrates. Household consumption habits that rose during the pandemic (e.g. eating and drinking more at home) are expected to continue, which in turn will increase glassware retail business.
In order to reach its targets and lead the industry Şişecam Glassware is looking both to minimise its risks in portfolio management and to get feedback from a wide range of customers.
In the glassware sector rivalry among competitors is high, not only through competition in the market for more shelf space, but also by implementing strategies such as mergers, acquisitions, new product launches and collaborations. Şişecam took advantage of such an opportunity with its acquisition of the glassware manufacturer Pearl of Glass Manufacturing in Egypt in 2017
GLASS PACKAGING: The last two years in the shadow of the global pandemic have proved the importance of integrating sustainability into every aspect of our businesses, to be constantly prepared for potential risks, and most importantly to develop a culture of collaboration with all stakeholders. Without a doubt, glass packaging is the best choice for human health and the environment. The rise of health awareness during the pandemic made glass consumers’ first choice for packaged food and beverages. Şişecam continued to be a reliable glass packaging supplier in all sectors served, with a broad product range, production flexibility, and effective capacity management in all of its production facilities.
Elevated health awareness and current household consumption habits [for sustainable packaging] are expected to continue in the post-pandemic era, with a positive effect on glass packaging demand. Meanwhile, disruptions in the supply chain and rising energy and input prices are projected to pose further downside risk in the coming year. On the other hand, risks on the demand side will be relatively limited as the use of glass packaging provides input to diverse sectors, such as food, beverage and pharmaceuticals. A decline is expected [regarding] Chinese manufacturers in the USA market, while further growth is projected in Europe. As one of the preferred suppliers in Europe, Şişecam sees a bright outlook in this market.
AUTOMOTIVE GLASS: Despite the negative impact of the computer chip crisis on this sector, the automotive industry rebounded after the pandemic. Auto glasses posted a robust growth during 2021. With supply chain constraints, sub-part and energy price increases due to the pandemic and Russia-Ukraine war conditions, OEM and encapsulation demands fell to 70% level and spare capacity.
The post-pandemic era heralds new carline projects with more environmentally friendly vehicles. Şişecam Automotive is receiving more European-based RFQs [requests for quotes] and responds with various new product proposals. With acquisition news on Eastern Europe, Şişecam is keen to expand its business volume.
The main challenge with OEM customers is price adjustment. Automotive glass production costs are mostly based on energy costs. Sub-parts and raw material prices have been affected due to European zone inflation and excessive energy price levels, causing sales prices to be adjusted upward.
By its very nature the automotive industry reacts quickly and improves itself with new, trend-led R&D projects. Value-added concepts in automotive glass will be laminated side lites, AR-HUD [augmented reality; head-up display], HUD-coated windscreens, coated heated glass – and these will get more take-up in car manufacturers’ RFQs.
GW: Where is Şişecam at with its holistic Digital Transformation project?
Şişecam carries out its comprehensive transformation effort with SAP [systems applications and projects] to have a globally integrated digital infrastructure. Our wide-ranging initiative is ranked as the most complex SAP project worldwide. This effort bolstered Şişecam’s ‘Managing by Data and Numbers’ capability. In addition to big data processing skills, Şişecam’s digital transformation gave it the basic tools required to effectively use artificial intelligence analytics and advanced technologies.
In 2021, the development of the corporate data architecture continued, and the creation of Digital Twins started with the Balıkesir Elyaf and Yenişehir flat glass factories, while corporate data warehouse efforts continue. The company engaged in activities to improve data quality, clean and manage master data and create management cockpits. Work for the implementation of a single, integrated data warehouse for Şişecam also continued, and a very important step was taken in the transformation journey: the organisational structure was changed from activity-based to function-based.
After achieving most of its transformational goals in 2021, Şişecam aims to continue its digitisation and Industry 4.0 efforts with a lean management approach in 2022. Managed by a culture in which decisions are made only with supporting figures and data, Şişecam plans to invest in high automation and advanced production technologies with smart factory vision in the coming years as well. Standardisation of operations between facilities is another key objective in 2022.
GW: Across the sectors, do any other recent or impending product launches particularly excite you?
The transformation of the global economy to achieve net-zero emissions by 2050 would be a universal and significant target. The transition would prevent the build-up of physical climate risks and reduce the odds of initiating the most catastrophic impacts on climate change. By doing so, it would also bring growth opportunities, as decarbonisation creates efficiencies and opens markets for low-emission products and services. Together with us, the whole glass community is aware of the crucial role of glass in that journey and the need for a core competence in achieving energy efficient processes and products.
Şişecam is making a huge contribution to reducing [its] CO2 footprint with innovative products serving different market requirements. For example, utilising Low-E [low-emissivity] glazing is a sustainable solution for energy-efficient buildings as it decreases thermal radiation, resulting in reduced energy waste. Şişecam puts a great effort into its R&D activities for improving the optical properties and thermal transmittance performance of Low-E coated glasses. To respond to different environmental conditions, aesthetic expectations and performance requirements, we are expanding our wide and versatile Low-E product portfolio, which provides U values down to 1.0 with different colour and transparency options.
Şişecam also supports the renewable energy sector with its innovative products. New generation glass fibre products produced with advanced fibre production technology and reinforced with nanomaterials are offered to wind turbine blade manufacturers. The high-performance single-end roving product, developed as a result of [one of] our long-term R&D projects, will be introduced to the market in the near future.
I would [also] like to share the news that Şişecam’s extensive experience in E-glass fibre production will be used to produce fibres from other glass types with high mechanical properties. Şişecam will continue to implement long-term projects that will strengthen its essential position in the glass fibre business area globally. We have already started R&D studies to develop fibre products from different glass compositions. The fibres made from new generation glasses will be used in the aerospace, automotive and wind energy sectors.
Şişecam’s most recent achievement in the renewable energy sector is the Şişecam solar mirror: an ultra-clear high reflectivity glass mirror appropriate for solar tower collectors. This highly qualified and environmentally safe product has a custom design composition that provides a very high chemical and mechanical endurance. The new generation of Şişecam solar mirror products offer good reflection values, a high degree of safety and excellent chemical resistance.
Şişecam’s approach to low environmental impact products also extends to the mirror production unit. One of the most recent developments in terms of glass-silvering mirror is the new generation water-based mirror-protecting paint system capable of contributing to the production of high-quality, eco-friendly mirrors with outstanding reflective, safety and chemical resistance properties. Şişecam R&D labs have developed a lead-free, water-based glass-silvering mirror paint with extremely low VOC (volatile organic compounds) emissions and no chemical agents potentially detrimental to health and the environment. This, we believe, is a major innovation for processors and end users.
With our first biotechnology investment in the Basalia project, which we believe will contribute to our 2030 CareforNext strategy, a pilot application is being conducted at the Mersin Soda-Chromium Facility aiming to treat waste water, capture carbon from flue outlets, and achieve zero waste and zero emission gains.
GW: How is Şişecam prioritising R&D efforts and what are the latest developments at the group’s Science, Technology and Design Centre?
Şişecam’s corporate R&D strategies are prioritised by taking into account the global trends in the sector, the socio-economic changes experienced in the world due to the pandemic, and by following scientific and technological developments around the world.
Inevitably, energy-saving and circular economy topics come to fore and Şişecam scientists have included these topics in their main focus. Studies are being made in both production processes and value-added product development projects, particularly for architecture, automotive and renewable energy sectors, and important practices have been implemented for efficient energy use and a reduced carbon footprint in all processes up to the end consumer. Şişecam scientists are also working on developing novel designs for next-generation glass furnaces in order to minimise and eventually phase out the use of fossil fuels.
In line with our mission to be a company adding value to life, we work to strengthen our position in the field of life sciences. It is a very special situation that glass, as a material touching people in all areas of life, can also be used to heal the human body. Therefore, R&D studies on innovative approaches to the healing effects of glass, especially its use for the destruction of cancer cells in the human body by radiation, gained momentum at Şişecam Science Technology and Design Centre.
There is also no doubt that storing pharmaceutical and medical products in glass packaging has many advantages over other materials. Şişecam is the only manufacturer in Turkey to produce Type 2 and Type 3 pharmaceutical glass packaging according to world standards and is the supplier of many national and international companies. We have recently accelerated R&D activities for the production of Type 1 pharmaceutical glass packaging. Glass belonging to the Type 1 class is crucial to ensure safe and efficient preservation of vaccines, due to its high hydrolytic, chemical and thermal shock resistance properties. The pandemic showed us how urgently glass could be needed for this use.
Automotive is one of the most demanding markets for high-tech products. In recent years, as Şişecam R&D, we have been closely following the latest developments and collaborating with OEMs to create smart solutions such as head-up display and smart glass systems used in automobiles.
In the focus of our sustainability vision, another important area is lightweight designs. Thin glasses, strengthened by chemical strengthening method based on ion-exchange process, create opportunities for significant reduction in the required glass thickness depending on the application. For example, thinner and lighter glasses reduce the fuel consumption and CO2 emissions of fossil fuel vehicles and increase the range of electric vehicles in the automotive industry, even reducing the static weight in architectural applications as well. In security applications, chemically strengthened glasses reduce the glass thickness required for relevant security levels and can provide a higher security level with the same glass thickness. All these reductions in thickness and weight lower the amount of raw material needed and the costs. Thus, Şişecam contributes to sustainability holistically with its suppliers and customers.
On the other hand, communication is a fundamental exigency in today’s modern world. Technological developments in communication are breaking the boundaries and we all recognised the role of communication during the pandemic. In modern architecture, glass facades are getting more common and should be considered as part of the communication chain. In the 5G communication world, the considered radio frequency range extends far higher than before, including frequency bands from 0.6GHz to 95GHz. At the same time, building regulations demand better heat insulation, which leads to a widespread use of low-emissivity coatings in windows. Although Low-E coated glasses bring energy efficiency and thermal comfort, they cause signal losses in the radio frequency and microwave bands used in telecommunication. Since this undesirable feature causes a loss of approximately 30–40dB in the 5G frequency band in telecommunication, the signal quality decreases considerably at 0.8GHz and higher frequencies, causing difficulties in communication and data transfer. It is possible to provide permeability to Low-E coated glasses in 5G communication frequency bands with the creation of frequency selective surfaces, which is an effective way to solve the signal attenuation through the coated glass. Similar to conventional analogue filters, frequency selective surfaces can be designed to offer a wide range of filter responses such as being transmissive to 5G communication and visible region but non-transmissive to the Wi-Fi range. As Şişecam R&D, we are co-operating with start-ups to develop such sophisticated designs on coated glass.
In summary, aligned with Şişecam’s global strategy, R&D contributes to continuous expansion of new product portfolio, new, efficient and feasible technology developments and the identification of new business areas. Furthermore, in order to extend Şişecam’s R&D capabilities, establishing an Incubation Centre in Turkey and a global R&D Branch is our next plan. With the incubation centre it will be possible to produce and sell high-tech, niche, value-added glass products such as special optical glasses, laser glasses, chalcogenide glasses and glass ceramics which are widely used in military and civilian applications and will increase our new product development competencies. Furthermore, the global R&D branch will bring the opportunity to establish an R&D network and an increased reputation within the global Materials Science community. Also, global collaborations with research institutes will allow Şişecam to use more advanced analysis techniques.
