GW: What are the key features of Sisecam Group’s latest financial performance?
As Sisecam Group, we pursue a flexible and proactive management approach, continuously improved competencies, effective cost management, as well as prudent risk management practices against existing fluctuations and tough competitive conditions in the markets where we operate. We are proud to see the positive effects of all these components that we closely manage in our financial results and in the shareholder value we have created.
In 2018, our group reported strong sales figures, more than $3.2 billion, with a notable amount of total investments exceeding $650 million. Last year, we produced 4.9 million tons of glass, 2.4 million tons of soda ash and 4.1 million tons of industrial raw materials.
The share of our international sales, representing both the total amount of exports from Turkey and sales from overseas production, reached 61% in our consolidated sales. Thanks to ongoing efforts to optimise the cost structure and the geographical distribution of production activities, our consolidated EBITDA exceeded $1 billion in the same period.
GW: What are the main elements of Sisecam Group’s ongoing growth strategy?
Today Sisecam Group is a global player in flat glass, glassware, glass packaging and glassfibre, as well as soda and chrome compounds. The group carries out its production activities in 13 countries, with a workforce of 22,000 people and sells its products to more than 150 countries.
Sisecam has manufacturing activities in Turkey, Germany, Italy, Bulgaria, Romania, Slovakia, Hungary, Bosnia-Herzegovina, the Russian Federation, Georgia, Ukraine, Egypt and India. We operate on an international scale in the fields of flat glass, glassware, glass packaging and chemicals with 43 production facilities.
Our operations are conducted with a sense of responsibility of being the only global player active in all core areas of the glass industry. In terms of production capacity, our group ranked among the top three in glassware, top five in flat glass and glass packaging, top 10 in soda production and first in chromium chemicals worldwide. Sisecam is also among the world’s most distinguished glass manufacturers, due to its degree of specialisation and the considerable competitive advantage of its operations.
We focus 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 on customer needs and technological developments has continued to add value to our sustainable growth strategy. As a global manufacturer, having different operations in various countries and with a wide range of products, we aim to strengthen our position in our markets.
Moreover, we are planning to invest in new business fields that have the potential to grow in global markets. We are 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 will be included in our growth strategies.
GW: How are your strategies progressing to transform Sisecam’s organisational structure into a more flexible and solutions-oriented business and what benefits have resulted?
Sisecam Group has been transforming its organisation into a more flexible and solutions-oriented structure that creates value for all stakeholders. In this regard, we have aligned our group’s organisation with business divisions and we have simplified operational processes to utilise production capacities more effectively, strengthen our position in existing markets and pursue opportunities in alternative markets.
Sisecam is operating in four main business lines (flat glass, glassware, glass packaging and chemicals) and in 13 different countries, which gives us more flexibility in terms of production capabilities. While the production and business processes may differ in each business line, we focus on creating synergy and the creation of value added operations.
Sisecam transformed its organisational structure to benefit from operational flexibility through centralised functions to operate in 13 different countries with the same quality approach for its customers. Centralised supportive operations such as R&D, IT and Purchasing Departments help the group to achieve increased agility and synergy. In the R&D Department, ‘design’ and ‘technological development’ teams are integrated together to enhance our innovative product development capability. The current vast value added product range and improved response time in designing new products has strengthen our customer centric capabilities.
We are also implementing transformation projects in our business units, which will support the digitalisation of the processes, enabling data-driven business decisions and improving efficiency. The transformation projects are handled in collaboration with the subject matter experts and solution partners. The projects have started with finance and supply chain departments and they will be carried on with other functions of the group.
Data management and data governance projects are being conducted by the leadership of the Sisecam IT team, where all segments will benefit from the outcome in their operations. The glassware segment is also implementing various transformation projects that will enhance capabilities in terms of operational processes, supply chain, material and warehouse management, production planning, quality management and maintenance.
Moreover, executing its production and sales activities on a global scale with 22,000 employees in sync with common targets, Sisecam Group conducts all its business processes with a focus on operational excellence. Thus, the related programme is carried on by each facility, resulting in increasing efficiency and reducing cost structure. The process management and ‘6 Sigma’ applications have elevated this programme into a corporate culture. Each business unit functions with this sustainable culture and improves their operation fields consistently.
GW: Which business sectors and markets are performing particularly well?
As an international company competing in various markets, we keep a close eye on developments in the global and regional economies and formulate our strategies and business models in line with a proactive approach. In this regard, Turkey with its dynamic population and growing economy is still our main base and we have the ability to serve domestic demand well from our existing facilities in the country. As a result of market potential, we have also declared and planned some investments to increase our production capacity in our glass packaging and flat glass businesses. On the other hand, the share of international sales has been growing rapidly and has reached 61%. Our international presence gives us the opportunity to access different important markets and grants us a wider geographical portfolio.
In 2018, the global glass market displayed strong performance with the ongoing growth rate in developed markets. In the Euro zone, construction and automotive sectors performed positively and led to increased demand for flat glass. The glass packaging sector has been integrating automation and digitalisation technologies to its holistic processes and is achieving continuous growth. The glassware sector has established a solid effort to incline from stable market conditions in recent years to a growth structure with rising global demand. In 2018, soda chemicals experienced a significant increase in demand, whereas the chromium chemicals market has followed a stable path.
Throughout the year, uncertainties in the markets and currency fluctuation made the glass industry grasp the importance of sustainability and efficiency even more. In the light of Industry 4.0 applications, the industry will optimise its business and operational processes to ensure sustainable growth with value creation.
The flat glass market grew in 2018 and is expected to preserve its growth in the upcoming years, as well as Sisecam’s flat glass business. Last year, our sales revenue increased by 36% compared to 2017 and the Flat Glass Division has driven the lead in the revenue increase in Sisecam’s portfolio. Thus, the share of flat glass business in our group’s consolidated sales revenue reached 36% in 2018. With recent inorganic investments in Italy and India, combined with capacity increases in the current regions, our flat glass business will pursue its successful performance in the following years.
The Glass Packaging Division also performed well in both Russia and Turkey and increased its total sales revenue by 34% compared to 2017. The share of glass packaging business in Sisecam’s consolidated sales revenue reached 20% in 2018. While expanding and strengthening our footprint in the region, as the leading glass packaging producer, we have continued our capacity increase and modernisation investments, especially in Turkey.
Last year, the Glassware Division improved performance, with growing demand in global markets. Sales revenue increased by 25% compared to 2017, while improving the EBITDA margin to 18% by a three points increase. In addition, the share of the glassware business in Sisecam’s consolidated sales revenue was
15% in 2018.
Our Chemicals Division also performed particularly well, due to an increase in commodity prices, capacity balances in the global market and rising demand for soda chemicals. As a result, the sales revenue increased by 40% compared to 2017. Last year, the share of chemicals business in our group’s consolidated sales revenue was 24% and the business line improved its EBITDA margin to 40% via an eight points increase.
GW: Which parts of the business are currently the subject of major investment?
Sisecam Group aims to manage its business portfolio in balance with the current and future investment structure and create maximum value from each operating field. Our priorities are to focus on investments that create value and increase capacity. Even though the major investments will be in production, digitalisation and R&D investments will also play a significant role in the progress.
In our flat glass business, 2018 was the focus of major investments in Italy and India. The company is focused on the integration and cold repairs in these locations. Sisecam is the leading flat glass producer in Europe and its integration of the Manfredonia facility in Italy will boost its position further. In addition, we are planning to increase production capacity with a new furnace in Ankara, Turkey.
In the glassware business, investments in Egypt are a major factor, as we plan to take a significant role in the Middle East and North American markets.
In the glass packaging business, new furnace investments are planned in Turkey, as major investments and cold repair plans are taken into account as part of a major investment programme. The current operations are focused on Turkey and Russia, in which Sisecam is currently the market leader for glass packaging. There are some investment plans to diversify revenue stream and enter into new markets.
Consequently, we keep looking for possible opportunities to grow in each business lines with both organic and inorganic investments. Moreover, we are also planning to make strategic investments in new business fields.
GW: What are the main features and benefits of Sisecam Group’s enlarged glass container facilities in Eskisehir and Mersin, Turkey?
Last year, we fired a new furnace at the glass packaging facility in Eskisehir, Turkey. With an investment of $66 million, the fourth furnace started production in August. Sisecam Group’s annual glass packaging production capacity in Turkey reached 1.2 million tons, thanks to the additional 150,000 tons/year capacity installed.
It is currently our largest glass packaging furnace in Turkey and its capacity can also be increased to 550 tons/day via electrical boosting. Our investment policies are based on sustainable growth and high performance. With this furnace, we expect to achieve positive energy efficiency, while lowering carbon and NOx emissions to reduce environmental impact. In comparison to similar furnaces, it is able to achieve 5% lower carbon emissions.
Because the new furnace is equipped with state-of-the-art technology according to Industry 4.0 and has the most technologically advanced production lines, machinery and equipment, we aim to achieve an increased level of efficiency and flexibility.
As the leading glass packaging producer in Turkey, we aim to meet increased demand for glass packaging and put a lot of emphasis on operational excellence and sustainable growth. With the latest investment, we have achieved an improved efficiency at our facility in Eskisehir, while increasing our total glass packaging production capacity to 2.5 million tons/year. On the other hand, we have three furnaces at the glass packaging facility in Mersin, Turkey, where we are planning to invest in a fourth furnace in 2019. The new furnace will have an annual production capacity of 80,000 tons.
GW: Are there any other glass container investments in the pipeline, either in Turkey or elsewhere within the organisation?
The Mersin facility is a crucial export base, thanks to our production capacity, as well as the logistical advantage provided by the port of Mersin. With an investment of more than $18 million, our annual glass packaging production capacity in Turkey will increase to 1.3 million tons once the furnace, to be equipped with the latest technology, is fully operational.
In glass packaging, we have ambitious growth plans and are looking for new expansion opportunities. Furthermore, we are closely following trends within the glass packaging industry. We actively consider investment opportunities within our target markets in line with the economic outlook, growth and changing customer/consumer trends in these geographies.
GW: How well is your Glass Packaging Division performing, in Turkey and in other international markets served?
Sisecam’s Glass Packaging Division completed 2018 with a successful financial and operational performance, conducting its activities as a solutions partner for customers with creative processes by offering designed products and services and adding value to people and the environment, according to its vision of being a global glass packaging company.
We are among the top five producers of glass packaging worldwide, having a market leadership position within the countries where we have a production footprint. Our Glass Packaging Division continues to be a reliable supplier in all sectors served, with a broad product range, production flexibility and effective capacity management in all of its production facilities. In 2018, we exceeded a record-breaking one million tons sales volume at our Turkish operations and reached the highest amount of production and sales revenue in terms of local currency in the Russian operations.
According to our strategy, we have continue to be the leading glass packaging supplier in the region and have strengthened our current position in the global glass packaging market thanks to our competitive advantages, including strong technological knowhow, financial strength, experience in developing markets, fast growth ability, wide portfolio of high quality products and experienced and qualified technical teams.
GW: What are the motivations for Sisecam’s latest float glass investment near Ankara, Turkey? How is the project progressing and when do you expect it to be completed?
At the beginning of 2018, we announced a new furnace investment at our flat glass facility in Ankara, Turkey. We will invest around $127 million in a new 220,000 tons/year furnace. The investment will increase annual production capacity of the facility to 520,000 tons and will increase our flat glass production capacity in Turkey to 1.9 million tons, while contributing to our product diversity in the flat glass segment.
The new furnace investment is planned to be launched in 2020. Construction started in February 2019. The facility already includes a float line and a laminated glass production line. With the launch of a second float line in Ankara, we expect to enhance our production efficiency.
Turkey is one of the biggest flat glass markets in the region, with its consumption valued at around two million tons/year. It has been among the core markets of our Flat Glass Division for more than 50 years. We aim to maintain our market presence in Turkey with sustainable value creation. Furthermore, Turkey has great export opportunities.
GW: Within the past 12 months, Sisecam has also invested in a second float glass facility in Italy. What are the main features of this investment and what are your performance expectations for your Italian operations generally?
In 2018, we purchased a second flat glass facility in Italy and doubled our production capacity in the country. With the acquisition of the Manfredonia facility, Sisecam has become one of the largest flat glass producers in Italy and has strengthened its leadership in Europe.
We will increase our capacity in Europe and strengthen our position in the region, thanks to the 190,000 tons of annual production capacity at Manfredonia. The second facility in Italy is an important opportunity to contribute sales, expansion and competitiveness by increasing the product range. This investment will also enable us to realise one of our strategies, which is developing a value added product portfolio demanded by the global market.
The new investment in Italy will have production capacity for varied products such as laminated glass, coated glass and extra clear glass. This diversified production capability will contribute to sales throughout Europe.
GW: Please outline your strategy for the Indian market, following your acquisition of a further 50% stake in HNG Float Glass in 2018?
Sisecam Group has been strengthening its position in the Indian market. We acquired a further 50% stake in our flat glass manufacturer affiliate, HNG Float Glass Ltd (HNGFL) and becoming the company’s main shareholder will enhance our value creation potential.
The world’s sixth largest economy, India is one of the most promising markets in terms of growth potential. According to IMF, India is one of the fastest growing countries in the world and will become the fourth largest economy within three years. Along with the Indian economy’s expansion, construction and automotive sectors are expected to continue their rapid growth. In 2018, float glass consumption in India reached 2.2 million tons and architectural glass constitutes around 80% of this volume.
Government-supported projects also contribute to the ongoing development of the local construction sector. In addition, the urbanisation rate is increasing along with economic growth, resulting in higher demand for architectural glass. According to projections, demand for float glass will increase by 10% on a yearly basis over the 2019-2025 period in the country.
Our recent transaction will significantly increase our flexibility to pursue strategic initiatives and to benefit from the strong opportunities offered by the Indian market. We continue to look into both organic and inorganic growth opportunities in the region, in line with the market’s significant growth potential.
GW: How is the new glass fibre manufacturing facility at Balıkesir performing since its completion last year?
Last year, our Chemicals Division established a new glass fibre manufacturing facility in Balıkesir, investing more than €100 million, with an annual production capacity of 70,000 tonnes. The installation of the new facility was completed at the end of last year and production started at the beginning of 2019. Many products in the composite industry need to undergo customers’ approval processes. We have started these processes rapidly with our first products and have received quality approvals as quickly as we have started domestic and foreign sales.
As Turkey’s sole manufacturer of glass fibre, we rely on the future of the composites industry. We also plan to increase exports to the European market with a wide product range. We are planning to meet the needs of European customers looking for a reliable supplier, offering high quality glass fibre products.
GW: How is Pasabahce, your glassware unit, performing and are there any major changes on the agenda?
Our Glassware Division is the third largest producer globally and the second largest in Europe. In addition to our facilities in Turkey, we have significant international operations located in Bulgaria, Russia and recently in Egypt, representing 50%
of our glassware production capacity.
In the glassware business, we have focused on maintaining our market leadership in Turkey and Russia and on strengthening our position in Europe, while increasing penetration in other markets by implementing powerful competitive strategies.
Planned investments for maintenance and new product development, as well as new generation ERP (Enterprise Resource Planning) initiatives will continue to be among our priorities. We also aim to provide profitability and sales effectiveness through successful customer relations management, effective supply chain management and production efficiency, in order to continue to be the market leader in our main markets and increase our global footprint.
GW: Has the integration of Pearl for Glass Manufacturing in Egypt been concluded successfully?
After finalising the acquisition process of the glassware producer Pearl for Glass Manufacturing in the last quarter of 2017, we started our production operations in Egypt last year. This acquisition has strengthened our Glassware Division’s growth strategy in the Middle East and Africa. Especially thanks to Egypt’s special trade agreement with the USA, it gives a great opportunity to penetrate the North American market due to customs and tax advantages.
As a part of the integration process, Egypt has become our third glassware production location outside Turkey, with more than 500 employees. In order to convey accumulated expertise and experience as quickly as possible, our technicians were assigned in the production facility in Egypt. Additionally, we trained Egyptian employees at our other facilities to make them distinguished technicians in glassware production and to achieve targeted production performance.
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 manufacture products of quality at Sisecam level, with high production efficiency.
GW: Last year, Sisecam Group combined research and technological development and design operations under one roof. What are the reasons for creating the Sisecam Science, Technology and Design Center and what are your expectations for this initiative?
In 2014, we launched our new R&D centre called the ‘Sisecam Science and Technology Centre’ in Kocaeli, Turkey. Last year, we made an important decision in order to strengthen the inter-relationship between the rings of the value chain toward the product and combined our research and technological development and design operations under one roof, called the ‘Sisecam Science, Technology and Design Center’.
The synergy obtained has helped us by increasing the number of innovative material and product designs, while shortening the period of commercialisation. Accordingly, we continue to launch innovative solutions by new value added products as a reflection of our vision of being a global company that delivers creative solutions and makes a difference with its technology and brands.
GW: What are Sisecam’s objectives and expectations for 2019 and beyond?
In a tough environment where the global competition is increasingly severe, those organisations that have the capability and flexibility to adapt to changing conjuncture rapidly will have the upper hand. In this context, we will concentrate on projects that will bring speed and productivity to our company in 2019, including strengthening our infrastructure to keep up with the pace of technology, improving and further expanding operational excellence projects globally and strengthening our portfolio balance.
We will also preserve our strategic focus of achieving sustainable growth and value creation, while investing in the future. We have plans to invest in new areas of business we believe to be promising and to increase our strength in core businesses. In line with our Industry 4.0 approach, we will also continue to increase productivity through our modernisation and automation efforts. Moreover, we rely on our digitalisation road map that will innovate our ways of doing business by using technology.
The digitalisation process includes not only processes but also the solutions and products we offer to the market. In line with our goal of growth with value added products, we work hard to improve our R&D competencies and to offer more products that primarily satisfy customer expectations at a much faster pace.
On the other hand, ensuring global integration and adaptation in our human resource processes stands before us as an essential element on the path to our goals. With this understanding, we will continue our efforts with resolve to expand our practices across the group, focusing on the development of our most invaluable asset, our employees, to make our success sustainable.
Consequently, Sisecam aims to become one of the top three global manufacturers in its core business lines. 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 with its products and services, adding value to its stakeholders.