Anadolu Efes Biracilik ve Malt Sanayii Anonim Sirketi : 2. Quarter 2023 Earnings Release

ANADOLU EFES

1H2023 EARNINGS RELEASE

Istanbul, August 8, 2023

2Q2023 HIGHLIGHTS

• Consolidated sales volume declined by 5.3% to 35.5 mhl
• Consolidated net sales revenue up 54.9% to TL 38,002.0 million
• Consolidated EBITDA Before Non-Recurring Items (BNRI) up 70.4% to TL 8,448.7 million

1H2023 HIGHLIGHTS

• Consolidated sales volume declined by 2.0% to 62.7 mhl
• Consolidated net sales revenue up 63.4% to TL 62,568.1 million
• Consolidated EBITDA Before Non-Recurring Items (BNRI) up 75.6% to TL 12,659.2 million
• Consolidated Free Cash Flow was TL 4,027.4 million in 1H2023 vs. TL 4,718.7 million in 1H2022

MANAGEMENT COMMENTS

"I am very proud to report another quarter with very strong results amidst dynamic operating and macroeconomic environment. Our immense focus on financial discipline nourished by our revenue growth management capabilities and zero-based expense management mindset led us to deliver net sales revenue growth of 55% and EBITDA (BNRI) growth of 70% on a consolidated basis including Anadolu Etap's 1 operating results; implying over 200 bps margin expansion in the second quarter. This period also marks the 6th consecutive quarter where we were able to grow our margins in beer group. We managed to maintain our leverage ratios at low levels by generating outstanding level of free cash flow amounting to TL 6.3 billion with the support of our both business lines." commented Mr. Can Çaka, Beer Group President and Anadolu Efes

CEO.

Our winning portfolio together with our efficient and effective execution capabilities paved the way for very strong volume results in beer group; which registered 5% growth in the quarter. Türkiye beer operations were the main source of growth while we observed strong momentum in Kazakhstan and Georgia as well. In our soft drinks business, we witnessed softer volumes in Türkiye and Pakistan operations. Yet, it was partly offset by double-digit volume growth achieved in Central Asia.

Russian beer volumes were down by low-single digits; yet displayed a significant recovery compared to the last two quarters. The beer industry showed volatile trend with slight recovery in 2Q on the back of no- pricing behavior by the players and low base of last year. Our overall pricing was ahead of competition as a result of carry over effect of last year's price adjustments which will be normalizing in the rest of the year. Accelerated projects and re-implementation of several initiatives are expected to support 2H2023 volumes.

Türkiye beer operations had another exceptionally strong quarter. The growth momentum achieved at the beginning of the year further accelerated and volumes grew over 20% in 2Q. The overall beer market volumes were also up in the period assisted by favorable pricing and increased consumer base with higher number of international tourists.

1 Anadolu Etap İçecek financial results started to be consolidated in soft drink operations' 2Q2023 and 1H2023 consolidated P&L as of April 19, 2023, while consolidated balance sheet includes Anadolu Etap İçecek figures as of 30.06.2023. In addition, Anadolu Etap Tarım financial results started to be consolidated in 2Q2023 and 1H2023 Anadolu Efes consolidated P&L as of April 11, 2023, therefore includes May & June results, while Anadolu Efes consolidated balance sheet includes Anadolu Etap Tarım figures as of 30.06.2023. All operational performance metrics presented in this earnings release are on a reported basis, except indicated otherwise.

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This quarter is special for us also for another purpose. Anadolu Efes published its first Integrated Report for the year 2022. We have been publishing our Sustainability Report for over a decade now but this year we transformed our reporting into integrated thinking highlighting how we create value for all our stakeholders around the six capital elements. We have also included our medium and long-term goals and performance indicators for all value areas. We are very excited to be at the very start of a very long journey of integrating our Company's long-term strategy with our sustainability priorities.

The strong first half results gave us the encouragement to raise our volume, revenue and EBITDA margin guidance for beer group and Anadolu Efes. Despite operating environment continue to be challenging, as we performed better than expectations in first half and as we assess a balanced risk and opportunity profile with lower inflation in international markets and lower than expected COGS pressures, we are revising our year- end guidance upwards.

SUMMARY FINANCIALS

Consolidated (TL mn)	2Q2022	2Q2023	Change %	1H2022	1H2023	Change %
Volume (mhl)	37.5	35.5	-5.3%	64.0	62.7	-2.0%
Net Sales Revenue	24,530.5	38,002.0	54.9%	38,297.9	62,568.1	63.4%
Gross Profit	8,819.4	15,130.7	71.6%	13,604.4	24,208.5	77.9%
EBIT (BNRI)	4,629.2	6,909.2	49.3%	5,717.1	9,708.6	69.8%
EBITDA (BNRI)	4,958.5	8,448.7	70.4%	7,209.4	12,659.2	75.6%
Net Income/(Loss)*	1,425.9	2,872.1	101.4%	1,293.9	3,280.6	153.5%
FCF	5,421.0	6,331.8	16.8%	4,718.7	4,027.4	-14.7%
			Change (bps)			Change (bps)
Gross Profit Margin	36.0%	39.8%	386	35.5%	38.7%	317
EBIT (BNRI) Margin	18.9%	18.2%	-69	14.9%	15.5%	59
EBITDA (BNRI) Margin	20.2%	22.2%	202	18.8%	20.2%	141
Net Income Margin*	5.8%	7.6%	174	3.4%	5.2%	186
Beer Group (TL mn)	2Q2022	2Q2023	Change %	1H2022	1H2023	Change %
Volume (mhl)	9.5	10.1	5.3%	17.2	17.3	0.2%
Net Sales Revenue	9,837.3	14,626.1	48.7%	14,939.4	23,637.0	58.2%
Gross Profit	4,149.5	6,980.7	68.2%	6,092.9	10,900.0	78.9%
EBIT (BNRI)	2,182.5	2,310.0	5.8%	1,948.4	2,771.9	42.3%
EBITDA (BNRI)	1,989.7	3,422.2	72.0%	2,442.3	4,725.6	93.5%
Net Income/(Loss)*	1,116.8	1,715.3	53.6%	668.4	1,605.9	140.3%
FCF	5,114.3	5,083.4	-0.6%	5,017.8	4,830.2	-3.7%
			Change (bps)			Change (bps)
Gross Profit Margin	42.2%	47.7%	555	40.8%	46.1%	533
EBIT (BNRI) Margin	22.2%	15.8%	-639	13.0%	11.7%	-132
EBITDA (BNRI) Margin	20.2%	23.4%	317	16.3%	20.0%	364
Net Income Margin*	11.4%	11.7%	37	4.5%	6.8%	232
CCI (TL mn)	2Q2022	2Q2023	Change %	1H2022	1H2023	Change %
Volume (mn u/c)	492.0	448.0	-8.9%	823.8	800.6	-2.8%
Net Sales Revenue	14,693.5	23,272.5	58.4%	23,358.9	38,828.2	66.2%
Gross Profit	4,662.0	8,133.7	74.5%	7,505.8	13,293.8	77.1%
EBIT	2,445.9	4,660.1	90.5%	3,773.9	7,002.7	85.6%
EBITDA	2,968.8	5,064.2	70.6%	4,763.2	7,971.3	67.4%
Net Income/(Loss)*	1,233.1	2,388.2	93.7%	1,863.1	3,422.7	83.7%
FCF	897.0	1,469.8	63.9%	-212.1	-647.7	-205.3%
			Change (bps)			Change (bps)
Gross Profit Margin	31.7%	34.9%	322	32.1%	34.2%	210
EBIT Margin	16.6%	20.0%	338	16.2%	18.0%	188
EBITDA Margin	20.2%	21.8%	156	20.4%	20.5%	14
Net Income Margin*	8.4%	10.3%	187	8.0%	8.8%	84

* Net income attributable to shareholders

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OPERATIONAL PERFORMANCE - ANADOLU EFES CONSOLIDATED

AEFES Consolidated (TL mn)		2Q2022	2Q2023	% change		1H2022	1H2023	% change
Volume (mhl)		37.5	35.5	-5.3%		64.0	62.7	-2.0%
Net Sales Revenue		24,530.5	38,002.0	54.9%	38,297.9	62,568.1	63.4%
Gross Profit		8,819.4	15,130.7	71.6%	13,604.4	24,208.5	77.9%
EBIT (BNRI)		4,629.2	6,909.2	49.3%	5,717.1	9,708.6	69.8%
EBITDA (BNRI)		4,958.5	8,448.7	70.4%	7,209.4	12,659.2	75.6%
Net Income/(Loss)*		1,425.9	2,872.1	101.4%	1,293.9	3,280.6	153.5%
FCF		5,421.0	6,331.8	16.8%	4,718.7	4,027.4	-14.7%
				Change (bps)				Change (bps)
Gross Profit Margin		36.0%	39.8%	386	35.5%	38.7%	317
EBIT (BNRI) Margin		18.9%	18.2%	-69	14.9%	15.5%	59
EBITDA (BNRI) Margin		20.2%	22.2%	202	18.8%	20.2%	141
Net Income Margin*		5.8%	7.6%	174		3.4%	5.2%	186

* Net income attributable to shareholders

Anadolu Efes' consolidated sales volume declined by 5.3% to 35.5 mhl in 2Q2023; cycling a strong growth of 12.9% last year. In beer group, Türkiye operations had an outstanding performance in the quarter. Beer volumes were also supported by Kazakhstan and Georgia, more than compensating softer volumes in Russia and registering 5.3% growth year-on-year. Soft drinks operations, on the other hand, had a challenging quarter where volumes declined by 8.9% on the back of Türkiye and Pakistan despite Central Asia and Middle East operation's strong performance.

Consolidated net sales revenue increased by 54.9% to TL 38,002.0 million in 2Q2023. FX-Neutral growth was at 37.9%. Revenue/hl was backed by effective pricing; while some portion is attributable to positive carry over impact from last year. Channel and product mix also supported revenue per hl performance. In 1H2023, net sales revenue reached TL 62,568.1 million with a growth of 63.4%. On organic basis, excluding Anadolu Etap business, 1H2023 net sales revenue growth was at 62.3%.

Consolidated EBITDA (BNRI) was recorded at TL 8,448.7 million in 2Q2023 with an annual increase of 70.4%; growing ahead of revenues. Strong topline growth together with moderate increases in per liter COGS especially international operations supported gross profitability in beer group; partially reflecting into operational profitability. In soft drinks, EBITDA margin increase was driven by timely pricing actions and prudent opex management despite the pressure on gross profitability. Thus, in 1H2023, consolidated EBITDA (BNRI) expanded by 75.6% with margin increase of 141 bps year-on-year. On organic basis, excluding Anadolu Etap business, EBITDA (BNRI) growth was 74.8%.

Anadolu Efes' consolidated net profit was TL 2,872.1 million in 2Q2023 versus TL 1,425.9 million a year ago. The year-on-year improvement is due to higher EBIT as well as a non-cash revaluation gain of TL 680 million recorded on the equity investment of Anadolu Etap Tarım in accordance with fair value assessment in step-up acquisition. With strong net income generated in the second quarter consolidated net income in 1H2023 reached TL 3,280.6 million.

Anadolu Efes' Free Cash Flow was recorded at exceptional levels in the quarter increasing from its already high level of TL 5,421.0 million in 2Q2022 to TL 6,331.8 million 2Q2023; with positive contribution from both beer group and soft drinks. Although there was some deterioration in working capital as a result of strong topline growth, the increase in cash generation was mainly driven by higher operational profitability as well as cautious capex spending; while capex/sales is expected to increase in 2H. Consolidated Net Debt to EBITDA (BNRI) was at 0.8x as of June 30, 2023.

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OPERATIONAL PERFORMANCE - BEER GROUP

Beer Group (TL mn)		2Q2022	2Q2023	% change		1H2022	1H2023	% change
Volume (mhl)		9.5	10.1	5.3%		17.2	17.3	0.2%
Net Sales Revenue		9,837.3	14,626.1	48.7%	14,939.4	23,637.0	58.2%
Gross Profit		4,149.5	6,980.7	68.2%	6,092.9	10,900.0	78.9%
EBIT (BNRI)		2,182.5	2,310.0	5.8%	1,948.4	2,771.9	42.3%
EBITDA (BNRI)		1,989.7	3,422.2	72.0%	2,442.3	4,725.6	93.5%
Net Income/(Loss)*		1,116.8	1,715.3	53.6%	668.4	1,605.9	140.3%
FCF		5,114.3	5,083.4	-0.6%	5,017.8	4,830.2	-3.7%
				Change (bps)				Change (bps)
Gross Profit Margin		42.2%	47.7%	555	40.8%	46.1%	533
EBIT (BNRI) Margin		22.2%	15.8%	-639	13.0%	11.7%	-132
EBITDA (BNRI) Margin		20.2%	23.4%	317	16.3%	20.0%	364
Net Income Margin*		11.4%	11.7%	37		4.5%	6.8%	232

*Net income attributable to shareholders

Beer Group sales volume increased by 5.3% to 10.1 mhl in 2Q2023. As the volume performance accelerated in the quarter versus the previous one, beer group sales volume reached 17.3 mhl in 1H2023; being 0.2% above last year.

International beer operations' volumes grew by 2.4% to 8.2 mhl in 2Q2023 taking up 1H2023 volumes to 14.5 mhl with 2.3% y-o-y decline. Russian beer market showed a better trend driven by lower comparables as 2Q2022 has been impacted with supply chain constraints and also pricing environment supporting affordability in 2Q2023. Beer volumes in Russia declined by low-single digits; while showing substantial improvement compared to last two quarters. Carry over impact of high pricing of last year and de-prioritization of some projects had still some effect on volume momentum yet will be rebalanced by some sales and marketing projects going forward. In Ukraine, there has been an incremental increase in volumes as Chernigiv and Mykolaiv breweries are operational. In CIS countries; Kazakhstan and Georgia had superior performance in the quarter registering mid-single digit growth on total volumes. Volumes in Moldova were down with decline in consumer base; high inflationary environment also affected affordability. Türkiye beer volume grew by 20.6% in 2Q2023, cycling a growth of 10.8% in 2Q2022. The volume momentum was accelerated compared to the first quarter of the year. Effective pricing, alternative and affordable offerings supported the demand in the market especially in the off-trade channel. Yearly volume increase is also attributable to good tourism activity in the country.

Beer Group sales revenue increased by 48.7% to TL 14,626.1 million in 2Q2023 with FX-Neutral growth of 29.5%. International beer operation's revenue reached TL 10,925.6 million with an increase of 38.0% with FX-Neutral growth of 14.1%. Carry over effect of pricing from last year in Russia as well as price adjustments taken in 1H in CIS countries contributed to revenue/hl increase of 39.4% in 2Q2023. Türkiye beer sales revenue grew by 94.6% to TL 3,643.8 million in 2Q2023. Revenue/hl growth was more moderate compared to previous quarter; yet still very strong, due to product mix and was recorded at 61.4% in 2Q2023. As a result, beer group revenue was recorded at TL 23,637.0 million in 1H2023 with a y-o-y growth of 58.2%.

Beer group gross profit grew by 68.2% to 6,980.7 million in 2Q2023 with a gross margin expansion of 555 bps. The gross margin trend of beer group was similar to 1Q with expanding margins in international operations, driven by pricing, including carry over impact and stronger than expected topline growth. Türkiye beer's gross margin declined mainly due to high inflation and pricing ability in phases. Yet, we expect a normalization in the second half with mid-year price increase following the excise and VAT adjustments.

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Therefore, in 1H2023, beer group gross profit reached TL 10,900.0 million with a margin of 46.1%; 533 bps higher over last year.

Beer group EBITDA (BNRI) grew by 72.0% to TL 3,422.2 million in 2Q2023 while margin improved by 317 bps to 23.4%. The improvement in gross profitability was partially reflected into EBITDA, with increases in operational expenses in Russia since it was a low base due to low S&M expenses last year. Strong topline in Türkiye results in OPEX/sales ratio being lower on year-on-year basis; supporting operational profitability. In 1H2023, Beer Group EBITDA (BNRI) was reported as TL 4,725.6 million with a margin of 20.0%; up 364 bps versus 1H2022.

Beer Group net income was TL 1,715.3 million in 2Q2023 versus TL 1,116.8 million income a year ago. Bottomline was significantly above last year. Increased interest expenses were more than offset by higher operational profitability and foreign exchange gain recorded from the cash held in Russian operations. Therefore, beer group net income reached TL 1,605.9 million in 1H2023.

Beer Group Free Cash Flow level was almost parallel versus last year and recorded at TL 5,083.4 million in 2Q2023 despite increased capital expenditures and tax expenses year-on-year. The strong cash generation in the quarter was driven by improved operational profitability as well as increased payables especially in Russian operations bringing 1H2023 free cash flow level to TL 4,830.2 million. As a result of strong cash accumulation, Beer Group Net Debt to EBITDA (BNRI) significantly improved to 0.4x as of June 30, 2023.

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