Earnings Report /
Turkey

Ford Otosan: Romania’s contribution was dilutive for the margins

  • Ford Otosan posted TL3,816mn net income in 3Q22, 7% lower than our estimate and 13% lower than consensus estimate.

  • Ford Otosan realized TL4,853mn EBITDA in 3Q22, 14% above our estimate of TL4,262mn.

  • EBITDA margin of 9.7% was 222bps lower than our estimate of 11.9% (Ras Cons: 10.0%).

Zeynep Erman
Zeynep Erman

Equity Research Analyst

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Cemal Demirtas
Cemal Demirtas

Head of Research

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ATA Invest
4 November 2022
Published byATA Invest
  • Ford Otosan posted TL3,816mn net income in 3Q22, 7% lower than our estimate of TL4,123mn and 13% lower than consensus estimate of TL4,381mn. Despite higher than expected operating profit, higher than expected financial expense and lower than expected tax income led to lower than expected net income in 3Q22. 

  • Ford Otosan realized TL4,853mn EBITDA in 3Q22, 14% above our estimate of TL4,262mn. EBITDA margin of 9.7% was 222bps lower than our estimate of 11.9% (Ras Cons: 10.0%). Please note that we did not include the contribution of Romania acquisition to our 3Q22 estimates. The company started to consolidate Romania operations as of 3Q22 and the company did not share Romania’s financial impact in 3Q22. Thus, we do not know the exact contribution of Romania's acquisition and analysis without this detail is not very healthy. We need more details for analyzing the impact of Romania operations but Romanian consolidation seems margin dilutive at first look.

The company will hold a teleconference on today, at 18:00 Istanbul Time.

Total sales volume increased by 40% y/y to 140.0K in 3Q22. Domestic sales volume increased by 43% y/y to 19.9K units in 3Q22, whereas export volume was up by 40% y/y to 120.0K units during the same period thanks to contribution of Romania. After the consolidation of Romania, the company started to report Romanian sales unit under export and we roughly calculate that the Romania sales volume constituted 43% of the company’s total export units and 37% of its total sales volume in 3Q22. Ford’s domestic LV market share increased by 162bps y/y and 124bps q/q to 10.1% in 3Q22.

FROTO revised its guidance for 2022E. The company revised down its Turkish industry volume guidance to 775-825K from 800-850K, implying 0-7% increase in 2022E (ATA Est: 791K). The company maintained revised down its domestic sales volume guidance to 80-90K from 90-100K, implying 9-23% increase in 2022E (ATA Est: 81K).  FROTO revised down its Turkey export sales volume guidance to 305-310K from 330-340K, implying 6-7% y/y increase in 2022E (ATA Est: 317K). The company announced its Romania sales unit guidance at 105-110K and please note that we haven’t include the Romania sales unit to our model yet. FROTO revised down its Turkey production volume guidance to 380-390K from 410-420K for 2022E (ATA Est: 386K) and the company announced its Romania production guidance at 100-110K. FROTO revised up its CAPEX guidance to EUR720-770mn from EUR620-670mn for 2022E.

FROTO’s net debt increased to TL26,960mn in 3Q22 from TL18,733mn in 2Q22 due to acquisition. FROTO’s receivable days increased by 6- days q/q whereas the company’s inventory and payable days declined by 7-days and 1-days, respectively in 3Q22. Cash conversion cycle remained flat q/q at 18days in 3Q22. As of 3Q22-end, the company has TL577mn net FX long position compared to TL507mn net FX short position in 3Q22-end.