Having been planning a refinery investment in Yumurtalık for a while, the Erdemoğlu Holding has come to an end in that target. İbrahim Erdemoğlu, CoBD of the Erdemoğlu Holding, states that they are in talks with the respective ministries concerning the investment caught in the land barrier, says, “20 billion-dollar investment will be made in 10 years.”

Access to the polyester sector by acquiring Sasa from the Sabancı Holding seven years ago marked an important turning point for the Erdemoğlu Holding. The holding that had, not much, a 30 million-dollar turnover in 2001, is expected to close 2021 with a three billion-dollar turnover also through the contribution of the said investment.

The target for the subsequent five years is to double it and reach a turnover of six billion dollars. The new steps and refinery investment in Sasa, the group's largest business field, will bring along the achievement of that target.

The process has accelerated in the refinery investment in Yumurtalık that has been on the agenda of the group, which operates in fields like carpets, furniture, and textiles, for a while. The group that accelerated the investment in the production of PTA, which is the raw material of polyester, put an additional investment for the production of wall-to-wall carpets on its agenda, with the aim of increasing its efficiency in the carpet sector.

Expressing that they did not put a break to production during the pandemic process and focused on investments, İbrahim Erdemoğlu, Chairman of the Erdemoğlu Holding, says that they have been in talks with the ministries concerning the refinery investment in Yumurtalık and that they have come to an end.

Erdemoğlu responded to our questions in his assessment about the current situation in this long-expected investment:

The group announced important investments during the pandemic process. What is the latest state in those investments?

Three new facilities that we established in Sasa Polyester already started operating and the PTA facility will commence production in the initial months of 2023. After the one billion-dollar investment made in Sasa, now the second-tranche investment started at the end of 2020. The amount of this investment, which will be completed in 2023, will be 1,5 billion dollars. With this investment, we will produce 1,6 million tons of PTA, which is the raw material of polyester. It will contribute to the current account deficit of one billion dollars from Turkey's imports.

Could you mention the growth strategy of the group?

We had a carpet loom in 1983 and its value was 10 thousand dollars. We did not consume the profit coming from it. We have come to these days by doubling what we earned from it. Hence, we do not distribute profits to our shareholders today. The profits we have stay at the company.

This is the reason underlying our fast growth. Our capacity is growing rapidly in this process, for sure. New carpet looms are coming in Merinos and the production capacity is rising in the yarn facility. The same applies to our Dinarsu brand as well.

Despite the pandemic process, production has never come to a halt in all our companies and growth is in question. If you take a look at the annual growth rates in the eight months of this year, the growth rates in exports and production attract attention.

What are the growth figures like?

For example, Merinos has grown by 69 percent, Dinarsu by 73 percent, Özerdem by 48 percent, Zeki Mensucat by 99 percent, and Sasa by 186 percent. Our one-year aggregate turnover growth ratio is 99 percent. When it comes to exports, dollar-based Merinos grew by 33 percent, Dinarsu by 45 percent, Özerdem by 87 percent, Zeki Mensucat by 147 percent, and Sasa by 128 percent. There is a dollar-based total increase of 70 percent in our exports.

So, what is the turnover growth target as a group this year? How much of it will come from exports?

The turnover of the group will reach a total of three billion dollars. About 900 million dollars of it will come from exports. It will exceed one billion dollars next year. In our companies, investments have never stopped.

What do you think is the reason for the increase in exports? Has the domestic market contracted or have you expanded across new markets?

Of course, a base effect is present due to last year's lockdown. We have always progressed by growing in the course of the years. For example, we are the only supplier of Walmart in Turkey and 75 percent of our exports are to developed markets like the US and Europe. Thus, we experienced organic growth in the markets we know of.

What is the latest state of the refinery investment in Yumurtalık, which the group has announced but has not started yet? Does the process keep on? What was it that the investment stuck in there?

Of course, we wait for the finalization of the process in Yumurtalık. We are not stuck in anything. We are awaiting the government’s response. In the first phase, it will be an investment of three to four billion dollars. We will produce the raw materials that Turkey imports.

The Wealth Fund had said that they would invest in the area we demanded. So, we waited. Nevertheless, in the present state, it stated that it gave up the investment in the region that we demanded. Presently, our discussions with the ministries continue.

What is the size of the land there?

As it will be remembered, the land in Yumurtalık was at the Çalık Group and the state took it automatically as nothing was done in 10 years. There are private lands in addition to the Treasury’s lands. It is not only a single-type land. Currently, there are 128 parcels of land owned by the Treasury and a similar amount of land belongs to individuals, with a total of 280.

The part that belongs to individuals on this land, which is an area of ​​8,5 million square meters, must be purchased for the public benefit. We expect this as the refinery has to be situated by the sea. But we can say that the Yumurtalık investment has come to the final stage. We have consulted with the respective ministries and there appears to be no negativity at the moment. When the land issue is resolved, a 20 billion-dollar investment will be made in 10 years.

What will be done in terms of financing?

When it comes to financing, there is no opportunity to find it domestically. We will procure it from European banks. Our debt/EBITDA ratio appears to be below three percent. In other words, the ratio of our annual profit to our total debt is below our three-year EBITDA.

Is there a public guarantee?

There is no Treasury guarantee and, frankly speaking, we do not want it. Being a burden to the state is not in our philosophy, but being useful is.

What is the growth target in the holding? Where do you see yourself in the next five years?

Our turnover this year will be at the level of three billion dollars. We think that we will reach six billion dollars in five years.

“INDUSTRIALISTS MUST TAKE RESPONSIBILITY”

“In view of the unemployment today, the industrialists must take responsibility. Everyone must make investments by taking responsibility. Turkish businessmen must be sensitive about this subject. Nobody wants to switch from hot to cold and take responsibility. They are expecting it from another mechanism.

It is important to make investments in adverse circumstances. We demonstrated an example of it. We invested 2,5 billion dollars in six years and the conditions were not suitable for it. You must push the conditions. We do not have any other country. Investments must be made with the material we have at hand. If no one moves a muscle, the country will move backward. If the country is good, we are all good.”

https://www.ekonomist.com.tr/soylesi/rafineriye-10-yilda-20-milyar-dolar-yatiracagiz.html

Bloomberg HT

19 September 2021