Sisecam Group Vice Chairman and CEO, Professor Dr Ahmet Kirman spoke exclusively to John Wallis about the group’s current financial performance, its latest investment initiatives across the diversified range of glass types produced and the organisation’s plans/expectations for the future. The full version of this article appears in the March/April issue*.
The Sisecam Group is a financially strong global player in flat glass, glass tableware, glass packaging and glassfibre, as well as soda ash and chrome compounds. With 43 specialist production sites in total, the group undertakes production activities in 14 countries with a workforce of 22,000 people and sells its products to more than 150 countries. Sixteen plants are located in Turkey and 27 abroad, including interests in Germany, Italy, Bulgaria, Romania, Slovakia, Hungary, Bosnia-Herzegovina, the Russian Federation, Georgia, Ukraine, Egypt and India.
A flexible and proactive management approach is pursued, typified by constantly improved competencies, effective cost management, as well as prudent risk management practices against existing fluctuations and tough competitive conditions in the markets in which the group operates. “We are proud to see the positive effects of this strategy in our financial results and in the shareholder value created” Dr Ahmet Kirman explains.
Last year, Sisecam continued its sustainable and value creating growth via another strong financial performance. In 2019, consolitated revenues exceeded TRY 18 billion ($3.2 billion), representing a 16% increase compared to the previous year. International sales, involving both the total amount of exports from Turkey and sales from overseas production, represented 63% of the total. Almost five million tons of glass and 2.4 million tons of soda ash were produced in the same period.
Moreover, in 2019, total investment expenditure increased by 11% to $510 million. Consolidated EBITDA volume reached $860 million, representing a 27% margin. “We conduct our operations with a sense of responsibility of being the only global player active in all core business areas of the glass industry” Dr Kirman confirms. “In terms of production capacity, our group ranked among the top three in (household) glassware, top five in flat glass and glass packaging, top six in synthetic soda production and first in chromium chemicals worldwide. Sisecam is among the world’s most distinguished glass manufacturers, due to its degree of specialisation and the considerable competitive advantage of its operations.”
Sustainable growth strategy
Sisecam is focused on a sustainable value creating growth strategy, with organic and inorganic growth supported by investments in new capacities, value creating acquisitions, maximum capacity utilisation and value added products. A strong focus maintained on customer needs and technological developments has continued to add value.
As a global manufacturer, with operations in various countries and a wide range of products, Sisecam is constantly mindful of the different market drivers for every business sector and the opportunities that can emerge. In the household glassware sector, for example, where the global market is effectively saturated, the addition of new capacities in existing markets is considered unrealistic, Instead, Dr Kirman contends that growth via acquisition in potential markets is a more realistic goal, as was the case for Sisecam in Egypt. “Alternatively, in the flat glass business, we will look for opportunities in areas with high demand growth to invest, such as the case of our investments in Italy” he adds.
Investment priorities are focused on projects that create value and increase capacity. And although these major investments are associated primarily with extra production, it is anticipated that digitalisation and R&D investments will also play a significant role. In its flat glass business, for example, Italy and India have been the focus of attention. Sisecam is now the leading flat glass producer in Europe and the recent integration of its Manfredonia facility in southern Italy is expected to boost this position further. In addition, it is planned to increase production capacity in Ankara, Turkey via a new furnace investment.
Modernisation of the group’s household glassware production facility in Egypt has been another important project, with this operation expected to play a significant role in Middle East and North American markets in the future.
In the glass packaging arena, furnace investments have been finalised in Turkey and cold repair plans are part of the current programme. The latest projects are focused on Turkey and Russia, where Sisecam is the market leader.
In addition, Dr Kirman confirms plans to diversify the revenue stream and enter new markets. “We continue to explore possible opportunities to grow in each business area via organic and inorganic investments. Moreover, strategic investments are planned in new businesses that offer growth potential in global markets, tracking start-ups that integrate innovation alongside agile entrepreneurship capabilities. Evaluating potential strategic partnerships with start-ups that have glass-related solutions or the capability to contribute value added services or technologies for our group could be part of our growth strategies.”
For the year 2019, the Flat Glass Division’s revenues increased by 13%, while its share of the group’s consolidated sales reached 36% compared to 2018. The group continues to perform strongly across its flat glass markets despite short-term challenges resulting from a slowdown across the globe, while strengthening its position in both architectural and automotive glass.
In 2010, the Flat Glass Division included seven float lines and two automotive glass production facilities in Turkey and Bulgaria. A decade later, however, production capacity has almost tripled, with 13 float lines and 10 automotive glass facilities operated across Europe, Russia and India. “In a global flat glass market, we expect to continue our rapid growth, with an increasing focus on value added products and product innovation” says Dr Ahmet Kirman.
In recent years, Sisecam Group has increased its flat glass production capacity in Europe by inorganic growth in Italy. At the end of 2016, the group acquired Italian float glass producer Sangalli’s facility in the north of Italy. Today, this facility has a nominal capacity of 220,000 tons/year and is an important supplier to major industries. Following this acquisition, Sisecam has emerged as Europe’s largest flat glass manufacturer in terms of production capacity.
“As an industrial group, Sisecam creates economic value in all geographies where it operates” Dr Kirman reports. “We also realise investments in capacity increases and the modernisation of existing production facilities with a continuous investment approach. Within this scope, we have initiated an investment of Industry 4.0 and digital transformation at the Porto Nogaro plant, which has an annual production capacity of 220,000 tons. We plan to invest €6 million in generating electricity from flue gas. In this way, we will take an important step for the facility in terms of energy efficiency.”
Following the acquisition of Sangalli’s Manfredonia plant in southern Italy in 2018, Sisecam Group has further reinforced its leadership position. “The second facility in Italy is an important opportunity to contribute to sales, expansion and competitiveness by increasing the product range” says Ahmet Kirman. “This investment will also enable us to realise the strategy of developing the value added product portfolio demanded by the global market.”
Together with additional investments, more than €55 million has been spent at Manfredonia, including the acquisition value and working capital. Not only has the furnace been rebuilt with an advanced design but coating and lamination lines have been added.
Elsewhere in Europe, Sisecam is one of the largest foreign investors in Bulgaria with its float, automotive and household appliance glass facilities. This regional presence is soon to be expanded via the completion of a new windscreen production line. In addition, the automotive glass facility in Romania is soon to expand its operations by supplying new car models including electric vehicles from some well known producers.
Secondary operations, consisting of glass encapsulation and parts assembly applied on automotive glasses, are performed at six dedicated facilities located in Slovakia, Hungary, Turkey and Germany. While the Slovakia and Hungary plants focus on the mass production of encapsulated glass for various brands, the facility in Germany carries out niche production for premium vehicle brands.
Moreover, Sisecam’s latest furnace investment in Ankara will ensure that growing demand from the Turkish market can be accommodated fully. Some $127 million will be invested in a new 220,000 tons/year furnace, increasing annual production capacity from the site to 520,000 tons. “The investment will increase our flat glass production capacity in Turkey to 1.9 million tons and contribute to our product diversity in the flat glass sector” Dr Kirman explains.
The Glass Packaging Division also performed well last year, especially in Russia and Turkey, increasing total sales by 31% in 2019. Today, this division accounts for 24% of Sisecam’s consolidated sales revenue. Its footprint as the leading regional producer has been strengthened via a series of capacity increase and modernisation projects, especially in Turkey.
Glass packaging is manufactured in diﬀerent colours and sizes for the food, beverage, spirits, pharmaceutical and cosmetics sectors. An annual production capacity of 2.6 million tons makes it the largest glass packaging manufacturer in Turkey and one of the world’s leading producers, with other operations in Russia, Georgia and Ukraine. The only producer in Turkey capable of supplying the pharmaceutical sector in accordance with ISO Class 8 speciﬁcations, the company relies on supply chain excellence, lean production and high levels of automation, as well as data-driven production.
Manufacturing capacity in Turkey has been increased substantially in 2019 following another $18.2 million investment. Last August, Sisecam commissioned its latest furnace in Mersin, featuring an annual production capacity of 80,000 tons. In the last three years, the company has increased its annual glass packaging capacity in Turkey by 30% to 1.3 million tons. Today, 12 furnaces are operated at three Turkish glass packaging facilities in Bursa, Eskisehir and Mersin.
Further important advances were made by the Glassware Division in 2019. Last year, revenues increased by 22% and its share of the group’s consolidated sales revenue reached 17% compared to 2018. Accounting for 9% of the global market, the Sisecam Glassware Division’s international sales constitute 65% of its total business.
Production is undertaken at facilities in Kırklareli, Eskisehir and Denizli in Turkey, as well as in Bulgaria, Russia and recently in Egypt.
Since finalising the acquisition process in the final quarter of 2017, production started in Egypt at the end of 2018. This acquisition has strengthened the Glassware Division’s growth strategy in the Middle East and Africa. And thanks to Egypt’s special trade agreement with the USA, it provides an important opportunity to access the North American market thanks to customs and tax benefits.
In order to convey accumulated expertise and experience as quickly as possible to the 500-strong workforce, skilled Sisecam technicians were assigned to work at the production facility in Egypt. “Additionally, Egyptian employees were trained at our other facilities to achieve the targeted production performance” Dr Kirman explains. “We also provided the production processes with continuous technological developments along with our in-house developed machines and equipment, imported from Turkey. In a short period, we have gained the ability to make Sisecam level quality products at high production efficiency.”
Automated and hand-made soda lime, heat-resistant and crystal glassware is made across the six Glassware Division production sites, with sales undertaken to 140 different countries. “Our global design brand Nude has been performing very successfully in the premium segment, since its launch in 2014” Ahmet Kirman confirms. “We have recently launched Nude’s ‘Stem Zero’ collection with ‘Ion Shielding’ technology thanks to our R&D success by building on its sustainable technologies. This innovative and elegant collection increases product impact resistance and flexibility. It is the world’s toughest, yet finest, lead-free crystal glass, designed to enhance the experience of different wines.”
The Chemicals Division has also performed well. In 2019, revenues increased by 17%. Today, Sisecam Group is among the world’s top six synthetic producers with a total annual soda ash production capacity of 2.4 million tons provided by production facilities in Turkey, Bulgaria and Bosnia and Herzegovina.
Plans are now underway to expand the group’s production operations to the USA. Last June, an equal production partnership contract was signed with Ciner Group (a global leader in natural soda production) for natural soda production in the USA. A similar production partnership structure has been in place in Bulgaria for many years with Solvay, the world’s largest synthetic soda manufacturer.
The Green River, Wyoming investment will offer the possibility for natural soda production by employing low cost solution mining. Moreover, the investment will boost Sisecam’s global market share by strengthening its position in Asia and Europe. “We expect to start operations in 2024, following acquisition of the necessary operating permits and licenses” Dr Kirman confirms. “We are planning to finance this investment, which has an annual natural soda ash production capacity of 2.5 million tons besides 200,000 tons of sodium bicarbonate production capacity, with a long-term project financing loan by 80% and the balance with an equity capital to be invested equally. The capital expenditure is estimated at $2 billion for this greenfield investment.”
When this investment is put into effect in 2024, Sisecam Group will be among the top five global players in soda ash. This will be an important step towards its goal to become one of the top three global glass manufacturers.
Corporate sustainability strategy
While striving to be among the leading global companies in each of its core business activities, the Sisecam Group also takes seriously the social, environmental and economic pillars of sustainability to bring an equitable, viable and bearable future for future generations. A supporter of the United Nations Sustainable Development Goals, the group has initiated an integrated corporate sustainability strategy called ‘Care for Next’.
“In line with our sustainability approach, we have been promoting and applying the conscious use of natural resources, energy efficiency and renewable sources in our operations” Ahmet Kirman explains. “Because we operate in energy-intensive industries, the efficient use of energy, ensuring continuous energy supply in the most effective manner, the constant review of energy-related risks and opportunities and the management of operations in this regard are of great significance to our group.”
Manufacturing operations are managed on the basis of international energy management standards, with energy efficiency projects and solutions implemented to ensure continuous energy consumption reduction. According to Dr Kirman, a total of 815,285 GJ of energy was saved by means of the energy efficiency projects carried out in 2018. “Moreover, thanks to the efforts undertaken in the same period, 15 MW of electricity generation capacity was established with the application of waste heat recovery systems and 1% of total annual energy consumption was saved.”
As part of its renewable energy approach, in 2017 a 6.2 MW solar power panel plant was installed on the roof at Sisecam’s flat glass production facility in Mersin. In addition, 330 solar panels with a total installed power of 87 kW have been installed on the roof of the Sisecam Science, Technology and Design Centre. Elsewhere, Sisecam-branded energy efficient flat glass products are helping to reduce energy costs in Turkey by 40-65% compared to conventional insulating glass units.
“We also believe that efficient waste management is the basis of cyclical economics” Dr Kirman explains. “Recycling, which is an important part of the waste management approach, reduces the amount of waste and raw materials efficiency is ensured by reusing the recovered products in production processes.”
The objective of Sisecam’s integrated waste management approach is to develop projects to realise the ‘zero waste’ goal. For this purpose, active studies are being carried out to promote the culture of recycling through global awareness studies. In 2018, all recyclable wastes were reintroduced to production again and non-recyclable wastes were sent to facilities with required certificates and permits for final disposal. In this period, Sisecam collected 54% of its packaging waste from the market and recovered it. Approximately 16,500 tons of paper, cardboard, plastic and wood was recycled.
On the glass recycling front, the group continues to promote the transition to a recycling society in Turkey by generating social behavioural change through its ‘Glass and Glass Again’ project. The key elements of this project are raising public awareness for separate collection of glass packaging waste at its source, improving the infrastructure for collecting glass packaging waste, modernising recycling facilities and increasing capacities.
Sisecam Group has been adopting digital transformation not only as the digitalisation of production facilities but also to increase the digital capabilities of business units in terms of supply chain, finance and human resources etc. “This holistic approach is key to integrate business processes with innovative technologies” Ahmet Kirman confirms.
The group’s ‘Root and Wings’ digital transformation project has been proceeding across both manufacturing companies and central functions. Its aim is to empower the infrastructure in order to hasten digital transformation and enhance business processes. Every business function is involved, where interpreting data in business processes by advanced analytics applications is predicted to enhance operational excellence.
Many other projects are also being implemented including a transition to ‘cloud’ systems in information technologies, robotic process automation to increase efficiency in business processes and developing data architecture and cyber security technologies to support digital transformation.
Separately, increasing overall equipment efficiency and integrating RFID technologies in the warehouses at Sisecam production facilities have been an important area of attention. The Research and Technological Development Department has been conducting data analytics applications by using sensor readings from furnaces and managing temperatures automatically with smart algorithms, to enhance energy efficiency.
“The digitalisation process includes not only processes but also the solutions and products offered to the market” Dr Kirman confirms. “Thus, we are working hard to improve our R&D competencies and to offer products that primarily satisfy customer expectations at a much faster pace.”
According to the road map defined by its digital transformation strategy, Sisecam Group plans to invest in ‘business intelligence’ to create a better understanding of market and group organisational structuring globally. “We are implementing transformation projects in our business units that will support the digitalisation of processes, enabling data-driven business decisions and improving efficiency.”
These transformation projects are handled in collaboration with the subject matter experts and solution partners. “Capitalising on robotic process automation, artificial intelligence and cloud technologies will support Sisecam to achieve its goals in globalisation, operational excellence and customer orientation” Dr Kirman explains. “Thus, technology suppliers offering high quality services and goods on time are crucial both for the glass industry and Sisecam Group itself.”
With ambitions to become one of the world’s top three manufacturers in its core business areas, Sisecam Group continues to expand its production capacity with investments that maintain a leading and competitive position in global markets. “In the last five years, these investments have continued diligently and the average ratio of capital expenditure and revenues has reached a level of 13.5%” Dr Ahmet Kirman confirms.
Annual glass production has increased by 25%, reaching the five million tons level in line with the group’s capital expenditures, thanks both to organic and inorganic growth. In this period, eight production facilities have been added - four flat glass production facilities (one in Turkey, one in the Russian Federation and two in Italy), two automotive glass production facilities (one each in the Russian Federation and Romania), a glassware production facility in Egypt and a glassfibre plant in Turkey. According to Dr Kirman, by combining its extensive experience with an ambitious vision, Sisecam is growing as a people-oriented and environment-friendly global company that creates wealth and shapes the future, its products and services, adding value to its stakeholders.