Sisecam reported TL5,037mn net income in 4Q21 which was 36% above our estimate of TL3,694mn and 37% above consensus estimate of TL3,673mn. Despite TL149mn higher than expected tax expenses, TL246mn higher than expected EBIT, TL632mn higher than expected investment income, TL515mn higher than expected one-off revaluation and FX income due to Pacific Soda acquisition, TL126mn higher than expected financial income led to TL1,342mn higher than expected net income.
The company’s EBITDA surged by 54% y/y to TL2,387mn in 4Q21, which was 21% higher than our estimate of TL1,965mn and 9% higher than consensus estimate of TL2,181mn. The company generated 21.6% EBITDA margin in 4Q21, 325bps higher than our estimate of 18.4% (Rasyonet Consensus: 20.0%).
Based on 22E estimates, the company currently trades at 3.4x EV/EBITDA and 6.3x P/E multiple. 5Y median EV/EBITDA and P/E ratio are 5.5x and 7.3x.
Top line increased by 65% y/y to TL10.9bn in 4Q21
Flat glass segment was the highest contributor to the top line with its 65% y/y revenue growth. Flat glass segment’s share in consolidated revenue improved by 6bps y/y to 38.1%. Glass packaging segment revenue increased by 65% y/y and its share in total revenue increased by 1bps y/y to 21.9% in 4Q21. Chemicals segment revenue increased by 62% y/y while its share in total revenue decreased by 26bps y/y to 17.9% in 4Q21. Glassware segment revenue increased by 58% y/y, while its share in consolidated revenue was down by 69bps y/y to 15.5%.
As of 1Q21, SISE had started to re-categorise architectural and auto glass revenues which had been previously sub-segment of flat glass
In 4Q21, architectural glass revenue increased by 88% y/y due to +5% volume growth, +64% pricing and product mix effect and +19% currency impact. In 4Q21, auto glass revenue increased by 18% y/y despite -19% volume decline, +37% y/y increase in currency impact, pricing and product mix. In 4Q21, glassware revenue increased by 58% y/y due to +17% volume growth and +41% y/y growth in currency impact, pricing and product mix. In 4Q21, glass packaging revenue increased by 65% y/y due to +10% volume growth, +29% pricing and product mix effect and +26% currency impact. In 4Q21, chemicals revenue increased by 62% y/y due to +6% volume growth, +24% pricing and product mix effect and +32% currency impact.
EBITDA was 21% higher than our estimate
Consolidated gross margin was 33.9% in 4Q21, which was 264bps higher than our estimate of 31.3%. Main drivers of strong gross margin, despite higher raw material, packaging and energy costs, were a) larger scale of operations and higher capacity utilization rates especially at flat glass, chemicals and glassware segment levels, b) cost pass through across all business lines and sub-segments excluding soda ash. Consolidated OPEX/Net sales ratio was 9bps higher than our estimate of 17.6%. Consolidated OPEX/Sales increased by 122bps y/y mainly due to uptrend in logistics expenses and the rise in G&A expenses stemming from employee compensation adjustment due to high inflation and local currency depreciation. EBITDA margin of 21.6% was 325bps higher than our estimate of 18.4%.
As of 4Q21, SISE owns a US$334mn Eurobond portfolio
In 4Q21, investing income due to Eurobond portfolio was TL1,206mn which was 27% higher than our estimate of TL946mn.
Net debt was up by 273% q/q to TL10.5bn in 4Q21
Main drivers of increase in net debt were 1) consolidation of CINR and Pacific Soda, 2) TL6.0bn cash outflow from investment activities, 3) depreciation of TL against FX. Net Debt/EBITDA increased to 1.39x in 4Q21 from 0.42x in 3Q21. Due to consolidations if we calculate NWC need from SISE’s balance sheet we see that NWC need increased by TL3.5bn q/q, however according to SISE’s cash flow statement we calculate that SISE’s NWC need actually decreased by TL877mn q/q in 4Q21. The company’s cash conversion cycle increased by 2- days q/q. Receivable, inventory and payable days increased by 10-, 4- and 12-days q/q respectively. The company has TL5.9bn net long FX position as of 4Q21-end (3Q21: TL9.0bn net long position)