Anadolu Efes Biracilik ve Malt Sanayii Anonim Sirketi : 2. Quarter 2022 Earnings Release

ANADOLU EFES

1H2022 EARNINGS RELEASE

Istanbul, August 10, 2022

2Q2022 HIGHLIGHTS

• Consolidated sales volume increased by 12.9% to 37.5 mhl
• Consolidated net sales revenue up 136.2% to TL 24,535.7 million
• Consolidated EBITDA Before Non-Recurring Items (BNRI) up 139.6% to TL 4,958.5 million

1H2022 HIGHLIGHTS

• Consolidated sales volume increased by 13.4% to 64.0 mhl
• Consolidated net sales revenue up 131.5% to TL 38,304.7 million
• Consolidated EBITDA Before Non-Recurring Items (BNRI) up 158.9% to TL 7,209.4 million
• Consolidated Free Cash Flow was TL 4,718.7 million in 1H2022 vs. TL 1,953.4 million in 1H2021

MANAGEMENT COMMENTS

"We are so happy to announce very strong results following a solid 1Q performance in such an extraordinary year amid heightening global tensions and persistently rising inflation. These results are the testimony of our ability to leverage uncertainties into opportunities. Our relentless efforts to drive quality growth; ensuring balance between volume and value share, have paid off. We managed to deliver low-teens volume growth in the quarter despite the fact that Ukraine operations were halted since February 24th. Such growth enabled us to have volumes back at 2019 levels again with the recovery of trade after pandemic. Supported with the volume growth, pricing initiatives, premiumization and discount management efforts revenue growth reached 136%. The topline was also supported by FX conversion as a result of our diverse geographic footprint. We were able to expand our EBITDA (BNRI) margin in such a tough environment while managing costs and expenses are challenging than ever. On top of this, cash generation has reached historically high levels yet we expect some normalization going forward" commented Mr. Can Çaka, Beer

Group President and Anadolu Efes CEO.

In our Russian operations, we have been taking price adjustment in order to cover the impacts of higher inflationary environment. Although until April consumer demand was quite strong, we have observed some softening in May and June in line with our initial expectations. Therefore, we are cautious for the rest of the year in terms of our volume outlook. Our strategy is sustained at finding the right balance between profitability and volume performance, and supported by revenue growth management initiatives as evidenced by our strong results in this quarter. In Türkiye, we significantly benefitted from on-trade recovery while consistent improvement in tourism activity has been supporting volumes. Also, I am more than happy with the promising performance of the most recent introduction to our portfolio "Bremen 1827" just one month after its initiation. I am sure this is just a beginning and looking forward to see accelerating results of our high quality lager.

In our announcement dated February 24th, we announced that we have suspended our operations at our three breweries in Ukraine; Chernihiv, Kharkiv and Mykolaiv. In light of the risk analysis and general evaluations which are still being conducted, we decided that the operations of our Chernihiv brewery could potentially be resumed. At the initial stage, necessary studies will be carried out so that our employees can return to work safely and our brewery will be technically ready. While we aim to start production in Chernihiv

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in 4th quarter depending on our safety & security assessment, sales and distribution will be supported by imported products until production starts.

We are cautious for the rest of the year as inflationary pressures are not expected to ease in a very near future. On the other hand, year-on-year lower commodity price points give us the opportunity to lock up most of our exposure for the rest of the year and even for 2023. Although second half of the year may be a bit more challenging than first half in terms of consumer demand, we are committed to sustain our solid momentum. With the strong results delivered in first half, we revisited our expectations for FY2022. According to our improved outlook for beer, we now expect beer group revenue to grow by high-teens on FX-neutral basis where EBITDA (BNRI) margin is foreseen to be flat or to expand by 100 bps.

I would like to congratulate every member of my team for their insistent hard-work and endless passion for navigating challenges and pushing beyond limits.

SUMMARY FINANCIALS

Consolidated (TL mn)	2Q2021	2Q2022	Change %	6M2021	6M2022	Change %
Volume (mhl)	33.2	37.5	12.9%	56.4	64.0	13.4%
Volume (mhl) (organic)**	33.2	35.3	6.4%	56.4	60.6	7.4%
Net Sales	10,387.2	24,535.7	136.2%	16,546.6	38,304.7	131.5%
Net Sales (organic)**	10,387.2	23,106.8	122.5%	16,546.6	36,129.5	118.4%
Gross Profit	3,919.3	8,824.6	125.2%	5,871.3	13,611.2	131.8%
EBIT (BNRI)	1,491.3	4,629.2	210.4%	1,597.4	5,717.1	257.9%
EBITDA (BNRI)	2,069.4	4,958.5	139.6%	2,784.5	7,209.4	158.9%
Net Income/(Loss)*	415.1	1,425.9	243.5%	710.3	1,293.9	82.2%
Net income/(Loss)* excl. impairment and losses in Ukraine	415.1	1,419.0	241.8%	710.3	1,692.6	138.3%
FCF	2,204.3	5,421.0	145.9%	1,953.4	4,718.7	141.6%
			Change (bps)			Change (bps)
Gross Profit Margin	37.7%	36.0%	-177	35.5%	35.5%	5
EBIT (BNRI) Margin	14.4%	18.9%	451	9.7%	14.9%	527
EBITDA (BNRI) Margin	19.9%	20.2%	29	16.8%	18.8%	199
Net Income Margin* excl. impairment and losses in Ukraine	4.0%	5.8%	179	4.3%	4.4%	13
Beer Group (TL mn)	2Q2021	2Q2022	Change %	6M2021	6M2022	Change %
Volume (mhl)	10.9	9.5	-12.2%	18.2	17.2	-5.2%
Volume excl. Ukraine (mhl)	9.3	9.4	0.2%	15.6	16.6	6.1%
Net Sales	4,564.2	9,842.5	115.6%	6,976.3	14,946.2	114.2%
Gross Profit	1,823.2	4,154.7	127.9%	2,515.8	6,099.6	142.5%
EBIT (BNRI)	415.3	2,182.5	425.5%	43.1	1,948.4	4420.5%
EBITDA (BNRI)	712.6	1,989.7	179.2%	665.2	2,442.4	267.1%
Net Income/(Loss)*	302.7	1,116.8	269.0%	505.2	668.4	32.3%
Net income/(Loss)* excl. impairment and losses in Ukraine	302.7	1,109.9	266.7%	505.2	1,067.1	111.2%
FCF	1,673.6	5,104.8	205.0%	1,084.2	4,998.9	361.1%
			Change (bps)			Change (bps)
Gross Profit Margin	39.9%	42.2%	227	36.1%	40.8%	475
EBIT (BNRI) Margin	9.1%	22.2%	1,307	0.6%	13.0%	1,242
EBITDA (BNRI) Margin	15.6%	20.2%	460	9.5%	16.3%	681
Net Income Margin* excl. impairment and losses in Ukraine	6.6%	11.3%	465	7.2%	7.1%	-10
CCI (TL mn)	2Q2021	2Q2022	Change %	6M2021	6M2022	Change %
Volume (mn u/c)	393	492	25.1%	674	824	22.2%
Volume (mn u/c) (organic)**	393	454	15.4%	674	764	13.4%
Net Sales	5,824	14,694	152.3%	9,571	23,359	144.1%
Net Sales (organic)**	5,824	13,265	127.8%	9,571	21,184	121.3%
Gross Profit	2,089	4,662	123.1%	3,356	7,506	123.6%
EBIT	1,072	2,446	128.1%	1,560	3,774	141.9%
EBITDA	1,356	2,969	118.9%	2,119	4,763	124.8%
Net Income/(Loss)*	721	1,233	71.0%	1,124	1,863	65.7%
FCF	727	931	28.1%	839	-212	n.m.
			Change (bps)			Change (bps)
Gross Profit Margin	35.9%	31.7%	-414	35.1%	32.1%	-293
EBIT Margin	18.4%	16.6%	-176	16.3%	16.2%	-14
EBITDA Margin	23.3%	20.2%	-308	22.1%	20.4%	-175
Net Income Margin*	12.4%	8.4%	-399	11.7%	8.0%	-377

• Net income attributable to shareholders
• Organic refers to excluding the impact of Uzbekistan in 2022

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OPERATIONAL PERFORMANCE - ANADOLU EFES CONSOLIDATED

AEFES Consolidated (TL mn)	2Q2021	2Q2022	% change	1H2021	1H2022	% change
Volume (mhl)	33.2	37.5	12.9%	56.4	64.0	13.4%
Volume (mhl) (organic)**	33.2	35.3	6.4%	56.4	60.6	7.4%
Net Sales	10,387.2	24,535.7	136.2%	16,546.6	38,304.7	131.5%
Net Sales (organic)**	10,387.2	23,106.8	122.5%	16,546.6	36,129.5	118.4%
Gross Profit	3,919.3	8,824.6	125.2%	5,871.3	13,611.2	131.8%
EBIT (BNRI)	1,491.3	4,629.2	210.4%	1,597.4	5,717.1	257.9%
EBITDA (BNRI)	2,069.4	4,958.5	139.6%	2,784.5	7,209.4	158.9%
Net Income/(Loss)*	415.1	1,425.9	243.5%	710.3	1,293.9	82.2%
Net income/(Loss)* excl. impairment and losses in Ukraine	415.1	1,419.0	241.8%	710.3	1,692.6	138.3%
FCF	2,204.3	5,421.0	145.9%	1,953.4	4,718.7	141.6%
			Change (bps)			Change (bps)
Gross Profit Margin	37.7%	36.0%	-177	35.5%	35.5%	5
EBIT (BNRI) Margin	14.4%	18.9%	451	9.7%	14.9%	527
EBITDA (BNRI) Margin	19.9%	20.2%	29	16.8%	18.8%	199
Net Income Margin* excl. impairment and losses in Ukraine	4.0%	5.8%	179	4.3%	4.4%	13

• Net income attributable to shareholders
• Organic refers to excluding the impact of Uzbekistan in 2022

Anadolu Efes' consolidated sales volume in 2Q2022 exceeded its level in 2019 for the first time in two years and increased strongly by 12.9% displaying an organic growth of 6.4% despite operations in Ukraine were halted since February 24th. In beer operations, the sound performance delivered in 1Q in Türkiye and CIS operations was sustained in this quarter as well. Such performances offset lower volumes in Russia. In soft drinks, growth came from across the board; Türkiye and international operations, with high contributions from CIS region, Uzbekistan and Pakistan. Therefore, consolidated sales volume reached 64.0 mhl in 1H2022, up 13.4% year on year.

Consolidated net sales revenue increased by 136.2% to TL 24,535.7 million with FX-Neutral growth of 58.3% in 2Q2022. Solid volume growth and price adjustments were the main drivers of topline growth with positive contribution from favorable and channel product mix in certain countries. Consolidated net sales revenue in 1H2022 was recorded at TL 38,304.7 million with 131.5% expansion.

Consolidated EBITDA (BNRI) grew by 139.6% year-on-year to TL 4,958.5 million; with slight margin improvement to 20.2%. Beer group margin showed a robust expansion in the quarter driven by effective management of revenue/hl growth as well as successful cost and expense discipline. Soft drinks operations' margin was below last year cycling a high base. Although the significant pricing taken and hedges in place were important mitigants, raw material cost pressures and higher energy expenses led EBITDA margin to decline in soft drink operations.

Anadolu Efes' net income increased by 243.5% year-on-year and reached TL 1,425.9 million in 2Q2022 despite significant increase in net financial expenses in both business lines and higher effective tax rate in soft drink operations. Bottomline was nourished by solid expansion in operational profitability as well as the increase in net operating income on the back of higher FX-gains recorded from working capital. Accordingly, net profit in 1H2022 was up by 82.2% to TL 1,293.9 million. Excluding the impact of impairment and losses in Ukraine, net income would have been TL 1,692.6 million in 1H2022.

Anadolu Efes' Free Cash Flow was significantly ahead of last year and reached TL 5,421.0 million in 2Q2022. The year-on-year increase is attributable to beer group with better operational profitability and controlled capex spending where cash generation in beer group is expected to normalize in 2H. There was negative swing in soft drink operations on the back of raw material pre-buys to mitigate supply chain related risks. The improvement in free cash flow generation in the quarter brought 1H2022 level to TL 4,718.7 million and as a result consolidated Net Debt to EBITDA (BNRI) improved significantly compared to 1Q2022 and was realized at 1.1x as of June 30, 2022.

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OPERATIONAL PERFORMANCE - BEER GROUP

Beer Group (TL mn)	2Q2021	2Q2022	% change	1H2021	1H2022	% change
Volume (mhl)	10.9	9.5	-12.2%	18.2	17.2	-5.2%
Volume excl. Ukraine (mhl)	9.3	9.4	0.2%	15.6	16.6	6.1%
Net Sales	4,564.2	9,842.5	115.6%	6,976.3	14,946.2	114.2%
Gross Profit	1,823.2	4,154.7	127.9%	2,515.8	6,099.6	142.5%
EBIT (BNRI)	415.3	2,182.5	425.5%	43.1	1,948.4	4420.5%
EBITDA (BNRI)	712.6	1,989.7	179.2%	665.2	2,442.4	267.1%
Net Income/(Loss)*	302.7	1,116.8	269.0%	505.2	668.4	32.3%
Net income/(Loss)* excl. impairment and losses in Ukraine	302.7	1,109.9	266.7%	505.2	1,067.1	111.2%
FCF	1,673.6	5,104.8	205.0%	1,084.2	4,998.9	361.1%
			Change (bps)			Change (bps)
Gross Profit Margin	39.9%	42.2%	227	36.1%	40.8%	475
EBIT (BNRI) Margin	9.1%	22.2%	1307	0.6%	13.0%	1242
EBITDA (BNRI) Margin	15.6%	20.2%	460	9.5%	16.3%	681
Net Income Margin* excl. impairment and losses in Ukraine	6.6%	11.3%	465	7.2%	7.1%	-10
*Net income attributable to shareholders

Excluding Ukraine, beer group sales volume had flat performance over last year which was better than our expectations and was recorded as 9.4 mhl in 2Q2022. After a very strong start in 1Q, Russian volumes were down in the quarter however it was more than offset by robust momentum achieved in Türkiye and CIS operations. Therefore, in 1H2022 excluding Ukraine, beer group volumes showed year-on-year increase of 6.1% where reported volumes were 17.2 mhl, yielding 5.2% year-on-year decline.

International beer operations' volumes declined by 15.6% to 8.0 mhl in 2Q2022 bringing 1H2022 volumes to 14.8 mhl. Excluding Ukraine, the volumes were down by only 1.6% in 2Q2022. Russian beer volumes decreased by low-single digits in 2Q2022 compared to a year ago. Cycling mid-teens growth in the first quarter, volumes started to decline starting from the month of May as a result of price increase in line with the predicted inflation. The market was also down by low-single digits in the period with declines in low premium and super premium segments due to lower availability of import brands in the market. SMIB and Efes were among best performing brands in the quarter. In 1H2022, we gained market share in volumes with even a better performance in value basis. CIS countries had another quarter with solid performance. While cooler investments, new brand launches supported the volumes in Kazakhstan, the momentum achieved in non-alco and craft category in Moldova and premium segment development in Georgia led a volume growth of mid-single digits on average in CIS operations. Türkiye beer volumes increased by 10.8% to 1.5 mhl in 2Q2022, bringing 1H2022 volumes to 2.4 mhl implying a performance in line with pre-Covid period. Recovery in on-trade sales compared to last year, together with a good tourism season and superior performance achieved by our newly launched brand "Bremen 1827" were the triggers of the solid performance in the quarter. Also the export volumes were beyond expectations in the period.

Beer Group sales revenue has significantly outperformed the volume performance and reached TL

9,842.5 million in 2Q2022 with year-on-year increase of 115.6% where FX-neutral growth was also very strong at 31.5%. International beer operation's revenue showed a very robust expansion of 114.3% to TL 7,923.0 in 2Q2022. The increase in FX-neutral basis was 10.4%. Apart from the positive conversion effect, timely price adjustments, effective discount management together with favorable product mix especially in CIS countries were the drivers of solid growth in revenue per hl. Also, year-on-year higher share of CIS countries which have relatively higher USD revenue/hl supported international revenues. On top of a solid performance in volumes, Türkiye beer sales revenue benefitted mainly from price adjustments where the latest one was implemented a few weeks earlier than planned in order to reflect excise tax hike. The year-on year revenue/hl increase was ahead of the increase in 1Q and realized at 98% in this quarter despite higher share of on-trade compared to last year. Thus, sales revenue of Türkiye beer operations increased by 119.3% year-on-year to TL 1,872.7 million in 2Q2022. Therefore, in the first half of the year beer group sales revenue increased by 114.2% year-on-year to TL 14,946.2 million.

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Beer group gross profit was up by 127.9% to TL 4,154.7 with a margin expansion of 227 bps in 2Q2022. There has been significant inflationary pressures in the raw and packaging material prices since the beginning of the year together with a consistently upward trend in energy prices. Despite an extraordinarily fluctuating cost base, timely price adjustments implemented across all operations as well as effective use of commodity and currency hedging mechanisms yielded a solid margin expansion both in domestic and international operations. Strong volume performance in Türkiye also led to lower share of fixed costs in cost of goods sold, supporting gross profitability. On top of a very strong gross profitability performance in 1Q with the momentum achieved in 2Q, beer group gross profit reached TL 6,009.6 million in 1H2022 with a margin of 40.8%, 475 bps above last year.

Beer group EBITDA (BNRI) was up by %179.2 to TL 1,989.7 million in 2Q2022, yielding a margin of 20.2%, 460 bps higher than last year. The improvement in gross profitability was reflected into EBITDA margin performance with higher pace as a result of frugal opex spending across all beer operations. Despite there has been savings in selling and marketing expenses, volume performance was beyond expectations. There was controlled spending in G&A expenses as well. As a result, EBITDA (BNRI) increased by 267.1% to TL 2,442.4 million in 1H2022, while the margin was realized at 16.3%.

Net financial expenses were higher on year-on-year basis due to increased borrowing costs in Türkiye, higher TL equivalent of foreign currency interest expenses as a result of significant TL depreciation as well as the increased cost of derivative transactions in Russia. However, the increase in net financial expenses were more than compensated by year-on-year better operational profitability and higher FX gains recorded from payables in Russia due to favorable RUB rate against hard currencies which was accounted under other income. Therefore, Beer Group net income increased more than three times compared to a year ago and reached TL 1,116.8 million in 2Q2022. As a result, in 1H2022, net income was recorded as TL 668.4 million with an increase of 32.3% despite impairment and losses related to Ukraine. Excluding the impact of impairment and losses in Ukraine, net income would have been TL 1,067.1 million in 1H2022.

Beer Group Free Cash Flow increased by 205.0% to TL 5,104.8 million, a record high level, cycling a very strong quarter last year. Cash generation was attributable to higher operating profitability, improvements in working capital management primarily in payables and significant savings especially in Russia. Appreciation of Ruble against TL in the period also led to a currency translation gain incurred from exceptionally low level of working capital which is expected to normalize in the rest of the year depending on currency movements and payables performance. In 1H2022, free cash flow reached TL 4,998.9 million versus TL 1,084.2 million in 1H2021.

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