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Industrials - 2020 General Overview

 

Priorities in 2020

In 2020, the top priority of Industry Group companies was agility against fluctuations in demand due to the pandemic. The Companies continued investing for the future. The fluctuations in demand in the world and in Turkey were foreseen with the data analysis models developed in the prior years. Significant profit was also made with a specific focus on supply chains and working capital management.

While achieving successful results in 2020, the agile teams formed within the Industry Group ecosystem, analyzed growth opportunities in innovative adjacent business areas and investments continued.

2020 has been a devastating year for our lives due to the pandemic, however it also brought growth opportunities to Sabancı Holding Industry Group, which had alreadystarted its digital transformation and implements innovative processes and material innovations as part of its daily work.

As the number of digital online meetings rose 60 times, significant improvements have been made in terms of time and cost of internal and external communication. Productivity and reliability of business processes were improved with the Robotic Process Automation (RPA) and therefore employees are able to use their time more effectively for innovation and improvement of existing processes. RPA applications and artificial intelligence assistants of Brisa and Kordsa manage more than 200 processes efficiently.

The digital filiation applications put into practice helped more than 8,500 employees and their families protect their health.

In 2020, Industry 4.0 efforts in companies accelerated. Systems that communicate each other during the production processes, monitor and analyze environment and machine conditions with sensors and trigger actions created predictability and cost advantages.

In the field of digitalization and innovation, the successes of the Industry Group were recognized with many awards.

With its R&D competency, more than 3,000 employees in Aksaray and Izmit factories that are equipped with Brisa smart technologies and its value added products and services offered to domestic and international markets, Brisa improved the value it offers for its stakeholders. With investments in dealer networks and brands, Brisa once again proved its leadership. 3 new countries were included in the export points while the market share in 13 countries increased.

With these developments, Brisa demonstrated a solid performance in a challenging 2020. Total sales of Brisa reached TL 4,137 million. Despite contractions in international markets, Brisa managed to increase its export volume on TL basis. Generating a strong profit as of the end of the year, Brisa continued its success in cash management. The working capital turnover ratio, which increased from 1.8 to 7 in 2019, reached 14 in 2020. In addition to all these financial successes, Brisa became Turkey’s 42nd most valuable brand in Brand Finance’s “Most Valuable and Powerful Brands of Turkey” survey. According to the survey, Brisa was the most valuable brand of the tire industry.

Besides their financial success, Brisa’s efforts for conserving biodiversity at Izmit and Aksaray plants were rated in the Gold category by BSEMIA (Bridgestone Europe, Russia, Middle East, India, and Africa).

Producing 1 out of every 3 passenger car tires produced in the world, Kordsa demonstrated outstanding performance by maintaining its combined EBITDA levels in its global tire reinforcement and composites (to civil aviation) businesses, which experienced contractions of 17% and 44% respectively. Unlike its competitors concentrated in the Asian market, Kordsa is geographically close to its customers and has strong “customer intimacy.” Kordsa attracted a strong customer demand and increased its market share in the last quarter following the contraction.

Axiom Materials, one of the USA-based companies of Kordsa received a new license which will make it possible to supply products for power generation applications in the Oxide-Oxide ceramic composite intermediate materials market.

In the field of composites, the expansion and differentiation efforts were accelerated in the consumer sectors beyond aerospace. With the investments in Turkey, Kordsa started to produce and offer new composite products with very high energy absorption capacity in Europe and Turkey.

The building reinforcement technologies initiative of Kordsa grew 1.8 times in 2020. Kratos branded synthetic fiber reinforcement products provide a total cost advantage to the customer. These products are preferred in infrastructure and superstructure projects due to their energy efficiency, long-term durability and low carbon emission characteristics.

Becoming the market leader in the pick-up sector in 2020 with the Mitsubishi brand, Temsa Motorlu Araçlar improved its net sales and profit compared to the previous year. Regarding Mitsubishi brand’s plan to withdraw from European markets in the next 3 years without developing any new models, Temsa Motorlu Araçlar started to develop company transformation plans and after-sales service organization.

Performance in 2020

In 2020, Brisa recorded a turnover of TL 4.1 billion and generated a net profit of TL 541 million. On the other hand, Kordsa generated a turnover of TL 4.6 billion and a net income of TL 149 million in 2020.

Creating an operational cash flow of TL 819 million, Kordsa reduced its net debt from USD 387 million in 2019 to USD 331 million with the acquisition of composite companies. Brisa, on the other hand, created an operational cash flow of TL 1 billion, reducing its net debt from TL 1.2 billion in the previous year to TL 661 million.

Digitalization, Technology and Investments

Industrial companies, which are in a cultural transformation to be ready for the new digital age, have proven that
companies that can quickly adapt maintain their operational success in the pandemic period. In the Industry Group, 62 projects associated with digitalization are ongoing, and the outputs of 55 projects that have been actively used since 2015 have yielded twice the return on their investments.

By integrating Microsoft Teams before the pandemic, which is one of its #dijitalisyeri (digital workplace) applications, Brisa was named among Microsoft’s global success stories with its efforts. Brisa transformed its success stories into academic case studies within the scope of the BRİKİM project.

The case studies titled “Digital Transformation with Artificial Intelligence,” “Empowering Sales Organization with Digital Technologies,” “Gaining Competitive Edge with Working Capital” were presented to academicians and students at Markalarfisildiyor.com, a digital case study library.

The “Stay Safe” application, which enables employees to voluntarily record the people they have contacted with location data, was launched by Brisa to ensure that employees can track back whom they have contacted in the event a risk occurs.

Brisa introduced an improved version of Filofix roadside assistance service, which is one of the success stories in the Digital Fleet era it has initiated. With Filofix, Brisa offers around-the-clock roadside assistance with one click, regardless of where the customers are.

Every year, about 150 new entrepreneurs and the technology/services they offer are integrated with the business units in Brisa. 30 entrepreneurs were integrated into the system to solve the issues of business units such as Marketing, Mobility, R&D, IT, etc. Collaboration with about 10 of these startups continues in 2021.

Combining its R&D competency with Continental, Kordsa managed to change the formula used to bond textile reinforcement materials with rubberbased compounds for about a century. With innovation in mind, Kordsa continues to work on Cokoon, which is a greener adhesion technology that does not contain Resorcinol and Formaldehyde. More than 70 companies in the industry are interested in this “open source” technology. 24 of these companies signed NDAs to receive information on the study and benefit from the know-how. Two companies besides Kordsa and Continental are in the patent pool.

As part of digital transformation, 17 Kordsa employees including Data Scientists, Data Engineers and Data Translators who participated in Sabancı University’s Advanced Data Analytics Program have carried out advanced data analytics projects since 2019. In 2020, Kordsa conducted data analytics studies on energy optimization and waste management in cooperation with SabancıDx and other international consulting companies. As a result of these studies, Kordsa created significant value from data.

2021 Priorities and Strategy

Industry Group will have a stronger mobility positioning in 2021 while achieving geographical and industrial expansion.

In order to further consolidate its leadership in the Turkish market, Brisa will increase its market share in original equipment and premium tire categories while maintaining its share in the economy segment. With Otopratik and Propratik chains in Turkey, Brisa will continue its journey also as the total mobility solutions leader.

With its geographical proximity and agility advantages, Kordsa aims to increase its market share in nylon and polyester reinforcement materials. Aiming to transform into an advanced materials company, Kordsa will increase its sales in composite technologies to industries other than the aerospace industry.