Anadolu Efes Biracilik ve Malt Sanayii Anonim Sirketi : 1. Quarter 2021 Consolidated Financial Results

Anadolu Efes

CONFERENCE CALL TO DISCUSS ANADOLU EFES FINANCIAL AND OPERATIONAL RESULTS

FOR THE FIRST QUARTER OF 2021.

Company: Anadolu Efes

Date: 06.05.2021

Participants:

• Can Çaka, Chief Executive Officer
• Orhun Köstem, Chief Financial Officer
• Asli Demirel, Head of Investor Relations

Asli Demirel, Head of Investor Relations

Ladies and gentlemen, welcome to Anadolu Efes first quarter 2021 financial results conference call and webcast. My name is Asli Demirel and I'm the Head of Investor Relations of Anadolu Efes. Our presenters today are Mr. Can Çaka, the CEO; and Mr. Orhun Köstem, the CFO. All participants will be in listen-only mode. Following the first part of this call, there will be a Q&A session and you will be able to write down your questions on the question box on your web screen. Just to remind you, this conference call is being recorded and the link will be available online. Before we start, I would kindly request you to refer to our notes in our presentation regarding forward-looking statements.

Now I'm leaving the ground to Mr. Can Çaka, Anadolu Efes CEO. Sir?

Can Çaka, Chief Executive Officer

Thank you Asli. Hi everybody, good afternoon and good morning wherever you are. Thank you all for joining our first quarter earnings release call.

Apparently, things have not become easier since our year-end conference call. 2021 has started and continues to be tough especially in Turkey. However, I can happily say that we have made a pretty strong start to the year driven by the dedication and

hard work of the entire Anadolu Efes Team under such challenging circumstances. So, I just wanted to take the opportunity to thank to the whole team for this strong set of results.

We delivered 13% volume growth in 1Q, with the contribution of both business lines. Beer volumes were expanded by almost 5% with Russia, Kazakhstan and Moldova taking the lead in terms of growth percentages. CCI also had a remarkable performance both domestically and internationally. In addition, we had a strong revenue growth in the quarter, as a result of price increases, a favorable product mix, as well as favorable conversion impact. We also had a good profit performance in the quarter. In addition to the support of the topline, there has been some shifts between quarters in terms of opex which we expect partially to be normalized in rest of the year. Therefore, we were able to deliver a better than expected revenue and margin performance in the quarter.

As noted in our full-year results call, we accelerated our focus and investments related to our +1 Relaunch in Turkey in order to be ready for the peak season, that is why the opex in our Turkish operation was higher compared to a year ago. We had relaunched Efes family last year with full look and feel revitalization. And now we are renewing our look and feel in the market as we planned at the beginning of the year as we communicated in our prior calls as well.

We were also able to beat expectations in term of free cash flow with a significant improvement year-on-year basis. This is supported by a very disciplined working capital management thanks to Orhun and his team, despite the fact that we increased our market investments incrementally in this quarter to drive consumption and be ready for the season.

We are continuing to invest on our infrastructure to improve our digital capabilities in order to be more effective and efficient in the post-pandemic era whenever it comes. Therefore, our digital transformation projects which were awarded by industry experts in the first place, will continue to be at the core of our focus while achieving our long- term targets.

As a recent note, we made an announcement on Monday, regarding our intention to evaluate the opportunities to refinance our USD Eurobonds that are maturing in 2022. In this regard, we made our application to the Capital Markets Board for approval and started the process. So, this will be another busy period for our finance team.

In the first quarter, our consolidated volumes reached 23.2 mhl. 31% of our consolidated sales volume came from beer group. Our revenue growth significantly outperformed the volume increase, exceeding TL 6 billion. Contribution of Beer Group

in terms of the revenues was higher compared to the volume proportion almost 40% of revenues in 1Q.

EBITDA performance was very strong as well. This is especially attributable to the performance of soft drinks. International beer margin was also higher in this period. Therefore, consolidated EBITDA margin improved by almost 500 bps, reaching to 11.6% in 1Q.

Due to the seasonality of our business, free cash flow was negative. 1Q is the time where we spend disproportionate capex to be ready for the peak season whereas the revenue & profitability contribution is the lowest among all other quarters. However, there has been significant improvement year-on-year basis from negative TL 1 billion to negative TL 250 million this year. So, basically, we're talking about a positive TL 750 million improvement on the free cash flow generation versus last year.

Our beer operations' sales volume was up 4.3% reaching 7.3 mhl. International operations were the main contributor to the growth. It was another strong quarter for Russia where the beer industry grew by around 6% year-on-year according to Rosstat. And our volumes were even stronger than that. But more importantly, we gained value share compared to the year-end as we are focusing on the value share. We saw positive dynamics in different price segments. Specifically, BUD showed the highest volume growth increasing more than 25%, Spaten, Essa, Stella Artois registered double-digit growth rates. Our non-alcoholic offerings had a remarkable performance benefitting from their sales through e-commerce channels. However, there has been some deterioration in consumer purchasing power in the period due to the economic conditions following the COVID period; therefore, we are cautious for the rest of the year.

In Ukraine, the beer market was down by low-single digit and our performance was slightly below the market due to the implemented price increase ahead of the competition. We are expecting our performance to normalize starting from the second quarter onwards when prices are more settled. We continued our launches in the quarter offering consumers different tastes and varieties as well. So, our efforts are continuing despite all of it. In Ukraine, the number of cases is increasing unfortunately. There is the impact on the market and our performance specifically in Ukraine.

Kazakhstan and Moldova both had superior performance with close to 20% volume growth where Georgia was also up by low-single digits. We have observed some premiumization in CIS countries which also supported our profitability in the quarter. But obviously, our focus on where we are the most stronghold segment is the mainstream segment and we registered growth in this segment through the period as well.

Turkey is obviously the most impacted from COVID among all other operations due to its high share in on-trade. Our volumes were impacted the most as a result especially in the first two months of the year, due to cycling a pre-COVID period last year. However, we benefitted from a temporary re-opening in March where the shortfall in the first two months was partly mitigated. So, those are positive signs whenever we are out of this pandemic, I would say things will be expected to be normalized and be better. During the first quarter, we accelerated the marketing spend related to our +1 relaunch where we are seeing the early positive signs of stabilization in market share that is comforting us. Obviously. +1 relaunch at the Efes brand family is positively perceived by our consumers.

A couple of notes on our subsidiary, CCI's consolidated sales volume continued its growth momentum and increased by almost 18% in 1Q with positive contribution from all countries. International operations had a superior performance with Pakistan and Jordan taking the lead.

There were obviously lockdowns and restrictions that curb the number of COVID cases in Turkey. Despite these headwinds in Turkey we were able to deliver more than 10% to 12% volume growth. Sparkling beverages' growth was even higher where it registered around 20% increase where the stills category grew more than 15.7% with improvements in juice and energy segments. Water category declined by almost 15%.

International operations grew by 23%. Pakistan had a superior performance and posted more than 40% volume growth with consumer and shopper initiatives and regional acceleration plans, as well as optimal resource allocation.

In the CIS the volume growth was more than 8% in 1Q 2021. Excluding Kazakhstan, all countries recorded double-digit volume growth rates. Middle East posted 9% growth driven by Jordan, where the volumes were up 42%, remarkable performance.

We have already discussed the operational part in the previous slides, but I would like to go over the strong bottomline that we have delivered. Our net income was almost TL 300 million in 1Q, and it benefitted from higher operational profitability, as well as some one-off items like FX gains recorded as a result of repatriated cash from EBI to Anadolu Efes in order to finance the working capital needs here. Also, we sold our land in Lüleburgaz in the period, therefore the gains from this sale supported the bottomline as well as the free cash flow.

I am handing over to Orhun for his remarks on financials. And unfortunately, this would be last call on our side, actually Orhun is leading the call. Basically, I would like to thank him for his great contribution to this organization for long years. And

especially for the last two years working with him was a pleasure for me. Obviously, Orhun's departure is good for Orhun and is a loss for Anadolu Efes. But I'm happy for Orhun. And that's business that's life. I'm pretty happy that we have a strong bench at Anadolu Efes, and we were able to take the news from Orhun happily and while being happy for his career, we were able to also name his successor. Gok̈cȩ will be joining the team here in Istanbul spending long years in international operations, in finance and leading the team. You will remember Orhun paved the way for CFOs having operational experience. So, I believe Gok̈cȩ 's operational experience will also add to our team. So, I'm very confident with this replacement. And I would like to thank Orhun once again, and I don't want to have him crying before he makes his final remarks. That's why I'm going to cut short and leave the ground to you. Thank you Orhun.

Orhun Köstem, Chief Financial Officer

Thank you, Can. And many thanks for your kind words. Obviously, it was thrilling for me to be part of the journey for Efes starting from the improving business in Turkey, and now today, obviously a very sizable regional beverage business. Many thanks for your leadership and support, especially over the past two years, where we have been making serious changes to the business, which obviously, will impact the future years to come. And as Can was underlining, I'm quite confident as I pass the flag on to my successor Gokce, which I'm sure is going to continue raising the bar to better levels.

Ladies and gentlemen, welcome again to our first quarter results webcast for Anadolu Efes. And we're quite happy to report another quarter of strong results. First of all, it's important to note, that the first quarter of 2020 was our latest memories of our normal lives. So, basically, growing over that quarter in the first quarter of 2021, we feel it was quite important. Even though the rate of rebound is different, as I'm sure you know in alcoholic drinks and beer, obviously, some of the shopping patterns like e- commerce or home delivery are restricted. So, in essence, there are different paths and velocity of rebound for our two business units.

Coca-Cola İçecek, which I'm sure you must have followed, has announced a very, very strong set of results, and obviously contributed quite significantly to Anadolu Efes results in this first quarter. Beer Group, also in Beer Group we have enjoyed very strong growth in volume terms, obviously 4%, ahead of last year. And between the volume growth and the price increases in all of the operations, together with favourable product mix, we have been able to grow revenues ahead of volumes even on a constant currency basis, our growth was close to 19% revenue. And then EBITDA, we ended up with a slight negative EBITDA. As Can was pointing out, although we have seen a very, very strong performance across our businesses in Kazakhstan, Moldova and Georgia, and very favourable results in Russia and Ukraine