Q4 2019 Earnings Presentation - Microsoft · Q4 2015 Q4 2016 Q4 2017 Q4 2018 Q4 2019 Q4 Margins Tüpraş Net Med Margin •Narrow differentials and weaker crack margin environment

Hizmete Özel / Confidential

Q4 2019 Earnings Presentation

12 February 2020


Disclaimer

www.tupras.com.tr13/02/2020Earnings Presentation 2

This presentation contains forward-looking statements that reflect the Company management’s current views with respect to certain future events. Although it is believed that the expectations reflected in these statements are reasonable, they may be affected by variables and changes in

underlying assumptions that could cause actual results to differ materially.

Neither Tüpraş nor any of its directors, managers or employees nor any other person shall have any liability whatsoever for any loss arising from use of this presentation.


40

70

100

01/10/2018 01/01/2019 01/04/2019 01/07/2019 01/10/2019

Q4 2019 Key Market Highlights


Diesel-2.3

Jet Fuel-2.7

HS Fuel Oil-21.8

Gasoline+3.8

Gradual incline in Brent in Q4 2019

Glo

bal

Oil

Mar

ket

Turk

ish

Mar

ket

Contraction in diesel demand is softening

Mid-distillate and HSFO cracks were under pressure

Diesel

-1.6% +1.5%

Fuel Oil

+7.3%

Jet Fuel*

+3.0%

Gasoline

*Including transit flight consumption

Crack margins compared to Q4 2018, $/bbl Q4 2018 Ave.67.8 $/bbl

Q4 2019 Ave.63.3 $/bbl

11M 2019 vs 11M 2018

5.66

5.74 5.74

5.94

30/9 10/10 20/10 30/10 9/11 19/11 29/11 9/12 19/12 29/12

$/TL

TL closed with deprecation after a fairly steady episode

+0.08 TL 0.00 TL +0.20 TL


Q4 2019 Tüpraş Highlights

www.tupras.com.tr 413/02/2020Earnings Presentation

In Q4 20196.9 7387.0

Million tons of

Total Production

Million TL

EBITDA

Million tons of

Total Sales

• With the majority of the maintenances completed, capacity utilization was 96% in Q4 and 97.8% for the full year, meeting our guidance range.

Freight cost increase creating opportunities

• Sharp rises in freight costs expanded CIF-FOB spread, supporting competitiveness against imports.

Widening Asphalt-HSFO spread provides a cushion

• Asphalt-HSFO spread widened to ~10$/bbl in Q4 2019.

• Bitumen cargo exports reached ~800 k tons in 2019 utilizing both our refinery and trading office capabilities.

Strong capacity utilization8

9 91 96

87

4 59

9

94 96105

96

Q1 19 Q2 19 Q3 19 Q4 19

0.0

1.0

2.0

3.0

4.0

Jan

-19

Feb

-19

Mar

-19

Ap

r-1

9

May

-19

Jun

-19

Jul-

19

Au

g-1

9

Sep

-19

Oct

-19

No

v-1

9

Dec

-19

CIF-FOB Price Difference ($/bbl)

-30

-20

-10

0

Jan

-19

Feb

-19

Mar

-19

Ap

r-1

9

May

-19

Jun

-19

Jul-

19

Au

g-1

9

Sep

-19

Oct

-19

No

v-1

9

Dec

-19

Asphalt Cracks HSFO Cracks


Market


12.3

13.9

14.5

16.715.4

12.2

15.6

14.5

Q1 Q2 Q3 Q4

Diesel

Quarterly Crack Margin Comparison ($/bbl) in 2015 - 2019


Compared to Q4 2018, Mid-distillate and HSFO cracks performed weaker, while Gasoline cracks were stronger.

13.3

13.8

13.4

15.9

13.8

10.8

16.1

13.1

Q1 Q2 Q3 Q4

Jet Fuel

Sluggish demand on the back of underperforming global economy / milderwinter

10.912.7 12.5

4.64.5

10.512.4 8.5

Q1 Q2 Q3 Q4

Gasoline

2019 2018 2019-2015 Min - Max

Usage of FCC feedstock in VLSFO production

Increased de-stocking activity closer to IMO 2020 implementation

-+

Increased exports from Asia and Middle East

-12.6 -12.4

-10.1-7.1-5.8

-9.9

-12.4

-28.9

Q1 Q2 Q3 Q4

High Sulphur Fuel Oil

-

-

-

-

Excess supply due to return of refineries from maintenance and new capacity additions

Increased consumption of NG substituting FO in power generation

-Mild winter conditions supporting passenger car transport demand

Weak heating demand due to mild winter conditions

+


Heavy Crude Price Differentials to Brent ($/bbl)

www.tupras.com.tr 7

-12

-10

-8

-6

-4

-2

0

2

Q1

20

16

Q2

20

16

Q3

20

16

Q4

20

16

Q1

20

17

Q2

20

17

Q3

20

17

Q4

20

17

Q1

20

18

Q2

20

18

Q3

20

18

Q4

20

18

Q1

20

19

Q2

20

19

Q3

20

19

Q4

20

19

Arab Heavy

Basrah Heavy

Kirkuk

Kuwait

Ural

Average*

0

OPEC+ Cut Decision

OPEC+ Cut Decision

Iran Sanctions

*Simple average of listed differentials

• IMO driven demand shift to lighter crude widened differentials in Q4 2019 compared to Q3 2019.• Substantial portion of global heavy crude supply remains out of the market.

13/02/2020Earnings Presentation

Drone Attack to

KSA

•Iran Sanctions

•Venezuela Sanctions

•OPEC+ Cut decision and over-compliance

•Drone attack to Saudi fields

Supply Shocks on Heavy Crude

A total of ~4 mbd is missing from heavy crude pool since December

2018, leading to price increases and narrowing differentials


Operations


Capacity Utilization and Quarterly Production Volume


5.2

6.2

7.7

6.66.76.9

7.5

6.9

Q1 Q2 Q3 Q4

Quarterly Production (Million Tons)

2015 2016 2017 2018 2019

98

10

1

10

1

87 91

89 91 96

87

4 4 7

9 7 4 59

9

103 105 108

96 9894 96

105

96

2015 2016 2017 2018 2019 Q1 19 Q2 19 Q3 19 Q4 19

Capacity Utilization (%)

Crude Oil Semi Product Feedstock Total

*Capacity utilization calculation is based on 30 mn tons for Q1 2019 and onwards.

• Total production volume in Q4 2019 realized as 6.9 mn tons.

• Full year capacity utilization for 2019 was 97.8%, in line with our guidance.


Sales in Q4 (Million Tons)

www.tupras.com.tr 10

6.2 6.4 6.4 6.15.3

1.7 1.3 0.9 1.5

1.7

7.97.6

7.37.6

7.0

Q4 2015 Q4 2016 Q4 2017 Q4 2018 Q4 2019

Total Sales

Domestic Sales Exports

2.6 2.9 2.9 2.92.5

1.11.0 1.0 1.1

0.9

0.5 0.5 0.5 0.5

0.6

0.9 0.9 1.0 0.6

0.5

Q4 2015 Q4 2016 Q4 2017 Q4 2018 Q4 2019

Domestic Sales of Selected Products

Diesel Jet Fuel Gasoline Bitumen


Tüpraş generated 7.0 million tons of total sales in Q4 2019.


Financials


Tüpraş Net Margin and Med Complex Margin Comparison ($/bbl)


5.2

10.1

6.7

5.0

3.63.5

5.04.1

4.7

-1.9

Q4 2015 Q4 2016 Q4 2017 Q4 2018 Q4 2019

Q4 Margins

Tüpraş Net Med Margin

• Narrow differentials and weaker crack margin environment were the main factors behind the decrease in net margin compared to Q4 2018.

• Tüpraş-Med gap widened mainly due to HSFO cracks that have plummeted and more advantageous crude slate of Tüpraşcompared to Ural.

Effect of hedging operations excluded from above calculations.


Income Statement (Million TL)


Tüpraş generated 738 MTL EBITDA in Q4 2019.

*On CMB reports. EBIT includes extra items such as FX impacts of trade receivables and payables. In our EBITDA calculation. FX related items are excluded from EBIT as customary in international practices.

Million TLQ4 Q4

%FY FY

%2019 2018 2019 2018

Net Sales 21,631 24,803 -13 89,601 88,552 1

COGS -20,566 -22,778 -10 -84,716 -79,328 7

Gross Profit 1,065 2,025 -47 4,884 9,224 -47

Operating Expenses -540 -438 23 -1,783 -1,307 36

Income/Loss from other operations -464 1,591 -871 -2,181

Operating Profit 61 3,178 -98 2,230 5,736 -61

Income/Loss from equity investment 25 72 -66 197 257 -23

Operating Profit Before Fin. Income/Loss 86 3,249 -97 2,427 5,993 -59

Financial Income /Expense -525 -1,600 -2,739 -2,268

Profit Before Tax -439 1,649 -311 3,724

Net Profit (excluding minority interest) 186 1,766 -89 526 3,713 -86

EBITDA *(mn.TL) 738 1,887 -61% 4,039 8,908 -55

Inventory Gain/Loss -89 -297 194 2,653

EBITDA* (mn. TL) CCS 827 2,185 3,845 6,255


Q4 Profit Before Tax Bridge (2018-2019)


Decline in Profit Before Tax was driven by weaker crack margins, narrower differentials and FX loss.

Million TL

Inventory

FX

+208

-921


Annual Profit Before Tax Bridge (2018-2019)


Decline in profit before tax in 2019 was driven by narrow differentials, weaker crack margins and natural gas price hikes

Million TL

FX

Inventory

+2,261

-2,459


Financial Highlights


Tüpraş recorded 4,039 MTL EBITDA in 2019.

367335

1,575 1,033 8511,080 688

1,542 2,2101,4951,144

867

1,528

3,778

9561,2081,505

1,237

1,887

738

3,799 3,396

5,882

8,908

4,039

2015 2016 2017 2018 2019

EBITDA (mn TL)

Q1 Q2 Q3 Q4

275 79869

378-375

710331

1,457

1,027870

750

581

992

542

-155

815

803

493

1,766

186

2,550

1,793

3,812 3,713

526

2015 2016 2017 2018 2019

Net Income¹ (mn TL)

Q1 Q2 Q3 Q4

1.8 1.8

1.11.3

2.1

1.0 1.1 1.21.3

1.0

2015 2016 2017 2018 2019

Current Ratio & Net Debt / R. EBITDA

Net Debt / R. EBITDA Current Ratio

35%

22%

41%37%

5%

2015 2016 2017 2018 2019

Return on Average Equity²

1) Excluding minority interest 2) Calculation based on rolling net income


Balance Sheet Analysis (Billion TL)


Strong balance sheet maintained despite weaker operational profitability

0.8

-0.2

2.1

4.7

1.6

-0.7

-2.3-3.6

Dec-15 Dec-16 Dec-17 Dec-18 Mar-19 Jun-19 Sep-19 Dec-19

Working Capital Requirement (Billion TL)

6.96.1 6.2

12.010.6 10.1

8.7 8.4

Dec-15 Dec-16 Dec-17 Dec-18 Mar-19 Jun-19 Sep-19 Dec-19

Net Debt (Billion TL)

Proactive Financial Management

• Deleveraging continues despite operational headwinds

• Dynamic liquidity management ensures optimal cash and receivables management

5.26.0

1.6 1.6

4.6

0.2

1 year 1-2 years 2-3 years 3-4 years 4-5 years Over 5 years

Redemption Schedule (Billion TL)

Loan Eurobond TL bond


FX Exposure Management (31 December 2019)


Cash

202

Forward & CFH2,740

Stock1,537

Receivables & Other Assets

84

Payables2,114

ST Financial Loans792

• RUP: 191• Other: 602

LT Financial Loans1,687

• RUP: 707• Eurobond: 700• Other Loans: 280

Consolidated Hard Currency Assets

Consolidated Hard Currency Liabilities

Million $

-30 mn $

Tüpraş continues to employ strict FX

policies to mitigate currency risks

stemming from volatility.

* Cash flow hedge accounting : 813 mn $


Outlook for 2020


12M 2019 Results


3.7

1.7

0 1 2 3 4 5 6

12

M

Refining Margins ($/bbl)

Med Margin Tüpraş Net Margin97.8% total capacity utilization in 2019

28.1 29.228 30

Production Sales

Operationals12M 2019 Target

29.2 mn tons of sales and 28.1 m tons of production in 2019

157 150

12M 2019 Target

Capex (mn $)

157 mn$ refining CAPEX in 2019

97.8

0 20 40 60 80 100

12M


3.7 $/bbl net refining margin in 2019

Med FY Exp

Tüpraş FY Target

2.8

-3.1-5.3

Oct-19 Nov-19 Dec-19

Med Margin ($/bbl)


2020 Refinery Maintenance Schedule


Refinery Unit Quarter Duration (weeks) Status

Batman Plt 100/1100 Crude Oil & Vacuum Q1-Q2 5

İzmir

U-100 Crude Q1 6*

U-4000 FCC Q4 6

U-9200 CCR Q1 & Q4 3 & 7

U-9600 Isomerization Q4 8

U-9900 MQD Q4 7

İzmit Plt-6 Desulphurizer Q4 4

Kırıkkale

* This activity had started in Q4-19. Duration figure indicates the portion carried out in 2020


2020 Expectations


• Ural-Brent differential widening compared to 2019

• Weak outlook for HSFO

Med Complex Refining Margin 1.5-2.5 $/bbl

• IMO driven growth in mid-distillate cracks

• Gasoline cracks remain flat, HSFO to remain weak

• Heavy Crude Differentials to widen

• ~28 mt production, ~29mt sales and 95 - 100% capacity utilization

Tüpraş Net Refining Margin 4.5-5.5 $/bbl

• Sulphur treatment units, improvement in storage units

Refining Capex 200 million $

Hizmete Özel / Confidential www.tupras.com.tr13/02/2020Earnings Presentation 23

Appendix


Turkish Market, Jan-Nov 2018/19 (Million tons)


0.34 0.35

0.0

0.5

1.0

1.5

2018 2019

²Fuel Oil

2.16 2.23

1

2

3

2018 2019

Gasoline

4.61 4.94

2.0

3.0

4.0

5.0

6.0

2018 2019

¹Jet Fuel

23.15 22.79

0.0

10.0

20.0

30.0

2018 2019

DieselMillionTons

¹Transit flight consumption included²Bunker excluded

-1.6%+7.3%

+1.5%+3.0%


OPET


Opet has 1,670 fuel stations as of December 2019.

885 915 938 966 1,009 1,073 1,126 1,152 1,175

394 410 418 427435

431434 463 4951,325 1,325 1,356 1,393

1,4441,504

1,5601,615

1,670

2011 2012 2013 2014 2015 2016 2017 2018 2019

Opet Sunpet

Market Shareas of November 2019

18.99 %

White Product

35.55 %

Black Product


Crack Margin Effect on Tüpraş in Q4 (FOB Italy Prices)


ProductProduct Price ($/ton) Tüpraş 2019 Crack Margin ($/bbl)

2019 Q4 2018 Q4 Production Yields 2019 Q4 2018 Q4

LPG 410 513 3.0% -26.8 -22.09Gasoline 582 588 19.5% 8.5 4.64Naphtha 488 521 0.7% -8.1 -8.95Jet Fuel 601 657 16.8% 13.1 15.85Diesel 578 629 36.1% 14.5 16.71Diesel 1000 565 616 1.1% 12.7 15.01Fuel Oil 1% 404 410 0.8% -1.0 -4.58Fuel Oil 3.5% 223 393 2.5% -28.9 -7.14Others 221 352 14.7% -26.4 -9.04

Dated Brent ($/bbl) 63,3 67,8 95.3%

Total Crack Margin ($/bbl) Total Processed 2019 Q4 (mn bbl)

Total Effect (mn $) Total Effect (mn TL)2019 Q4 2018 Q4 Difference

3.7 7.5 -3.8 50.8 -191 -1,104


LPG3%

Gasoline20%

Naphtha1%

Jet18%

Gasoil39%

Fuel Oil4%

Kok3%

Asphalt10%

Other2%

LPG Gasoline Naphtha Jet Gasoil

Fuel Oil Kok Asphalt Other

Light Distil.24%

Mid. Distil.57%

Black Prod.17%

Other white

2%

Q4 Product Yields


2019 Q4

White Product Yield (%) 81.7%

Production 6.9 mn tons

API 31.9

LPG3%

Gasoline19%

Naphtha3%

Jet17%

Gasoil35%

Fuel Oil9%

Kok3%

Asphalt9%

Other2%



Light Distil.25%

Mid. Distil.53%

Black Prod.21%

Other white

1%

2018 Q4



API 31.1


Annual Product Yields


LPG3%

Gasoline20%

Naphtha1%

Jet19%

Gasoil33%

Fuel Oil7%

Kok3%

Asphalt12%

Other2%



Light Distil.25%

Mid. Distil.52%

Black Prod.21%

Other white

2%

2018



API 31.0

LPG4%

Gasoline20%

Naphtha1%

Jet17%

Gasoil36%

Fuel Oil9%

Kok3%

Asphalt8%

Other2%



Light Distil.25%

Mid. Distil.53%

Black Prod.20%

Other White

2%

2019



API 32.0


Tüpraş Balance Sheet (Million TL)


31.12.2019 31.12.2018 Diff. Diff. (%)Current Assets 27,919 20,962 6,957 33

Cash & C. Equivalents 10,652 5,983 4,669 78

Trade Receivables 4,788 5,429 -641 -12

Derivatives 304 176 128 73

Inventories 9,469 6,765 2,704 40

Pre-paid expenses 237 109 128 118

Other Current Assets 2,470 2,502 -32 -1

Long Term Assets 27,627 19,074 8,554 45

Financial Assets & Subsidiaries 1,397 1,271 126 10

Fixed Assets 20,587 12,397 8,190 66

Derivatives 99 168 -70 -41

Pre-paid expenses 199 378 -179 -47

Deferred Tax 3,768 3,566 201 6

Other Long Term Assets 1,578 1,293 285 22

Total Assets 55,546 40,036 15,510 39Short Term Liabilities 28,120 15,950 12,171 76

Financial Loans 5,178 4,113 1,064 26

Trade Payables 17,816 7,496 10,320 138


Provisions 117 80 37 46

Other ST Liabilities 4,930 4,024 906 23

Long Term Liabilities 14,255 14,140 3,340 1

Financial Loans 13,898 13,836 62 0

Payables & Provisions 316 257 59 23


Other LT Liabilities 9 5 4 89

Total equity attributable to equity holders of the parent 12,998 9,825 3,173 32

Minority Interests 174 121 53 43

Total Liabilities & Equity 55,546 40,036 15,510 39


Tüpraş and Med Margins ($/bbl)

www.tupras.com.tr 30

($/bbl)Gross

MarginInventory

EffectClean Gross

MarginClean NET

MarginNet

MarginMed Margin

2019 Q4 9.7 0.7 9.0 2.9 3.6 -1.9

2019 12M 9.2 0.1 9.1 3.6 3.7 1.7

2018 Q4 10.8 -4.0 14.9 9.0 5.0 4.7

2018 12M 14.7 0.8 13.9 8.5 9.3 4.6

6.5 6.0

8.1

9.3

3.7

5.3

3.6

5.8

4.5

1.7

2015 2016 2017 2018 2019

12M Margins

Tüpraş Net Margin Med Margin





*Capacity utilization calculation is based on 30 mn tons for Q1 2019 and onwards. Nameplate capacity calculated by standard 330 days of operations.

98 101 101

87 91

44 7

97

103105

108

96 98

2015 2016 2017 2018 2019

12M Capacity Utilization* (%)


106 108

90 89 87

5 3

5 9 9

112 111

9599 96

Q4 2015 Q4 2016 Q4 2017 Q4 2018 Q4 2019

Q4 Capacity Utilization* (%)



Annual Sales


Distributors46%

THY Opet5%

Jet9%

LPG3%

Other6%

Export23%

Bitumen6%

Military2%

• Tüpraş generated 29.2 million tons of total sales 2019.

22.2 24.8 25.7 25.622.4

6.55.5 5.8 4.2

6.8

28.7 30.3 31.5 29.8 29.2

2015 2016 2017 2018 2019

Exports

Domestic Sales

9.2 10.8 11.3 11.9 10.4

4.84.5 4.5 4.9

4.32.0

2.2 2.2 2.22.3

2.93.4 3.5 2.9

1.8

2015 2016 2017 2018 2019

Bitumen

Gasoline

Jet Fuel

Diesel

Total Sales

Domestic Sales of Key Products

Customer Groups 2019mn tons

mn tons

Sales to Distributors

2019

13.3 mn tons

Total Sales, 2019

29.2 mn tons

POAŞ27%

OPET31%

SHELL19%

BP13%

OTHER10%


Finished Product and Semi Product Imports

13/02/2020Earnings Presentation 33

311 430

939

2,655

185

HS Diesel ULSD Jet Fuel

Product Imports (Thousand Tons)

12M 2019 12M 2018

573

887

506

0

126

607

1237

483

20

120

HVGO ASR F. Oil LSFO Naphtha MTBE

Intermediate Imports (Thousand Tons)

12M 2019 12M 2018

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Hizmete Özel / Confidential www.tupras.com.tr13/02/2020Earnings Presentation 34

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Documents

Q4 2019 Earnings Presentation - Microsoft · Q4 2015 Q4 2016 Q4 2017 Q4 2018 Q4 2019 Q4 Margins Tüpraş Net Med Margin •Narrow differentials and weaker crack margin environment