Beer Group President and Anadolu Efes CEO Can Çaka’s Comments

I am very pleased and encouraged by the strong performance of our operations in such an unprecedented and challenging period where both business lines reported results better than our initial expectations from top to bottom. This performance is attributable to both our organizational agility and our ability to adapt to changing environment and new ways of doing business. I am also happy that there has been no interruption to our business and no serious health issues were reported across our organization during this difficult period. There are still uncertainties and challenges ahead, however I am confident that we will overcome these difficulties by leveraging our key learnings from the crisis

The first six months includes three different periods of performance. We made a very good start to the year in the first two months where the results were significantly ahead of our initial plans. On the other hand, March and April has been the most challenging months across all operations where measures taken by the governments were at peak and negatively impacting the social life as well as our business. We started to see some recovery in May as consumers were adapting to new normal and favorable weather conditions also supported consumer demand. There has been significant step up in June volumes as the measures were eased gradually. Therefore, the volume pressure at the beginning of the quarter was partly mitigated by volumes generated in the second half of the quarter.

In beer group, we delivered strong operating profits in the second quarter that is above last year and exceeding our initial expectations. We continued to focus on profitable revenue growth management that allowed a robust revenue performance despite volume shortfalls. Our Zero Based Spending program and additional cost and spend optimization initiatives that were immediately launched assisted in this profit performance. I am also happy to report that we have been able to grow beer group free cash flow substantially ahead of 2Q2019 in such a challenging period, as a result of significant improvements in core working capital as well as prudent capex spending, in addition to EBITDA performance.

In our Turkish beer business, we have been investing in our brands and building on our craftsmanship skills since last year. In this context, our brewmasters developed and applied for an international patent for a new technique in mashing that enabled our products to have more distinctive and easy-to-drink taste. As a result, we had our “+1” relaunch of Efes family with new taste, new look and new communication approach, by the end of the quarter, slightly later than our initial plans due to COVID, where we started to produce our Efes beers using this new technique. It is very early to judge, however we are happy about the initial reactions of the consumers and the market place. We look forward to see the positive impact on our volume results going forward. In addition, our craftsmanship and/or seasonal offerings including Efes Summer Blue, Varım Limon and Bomonti IPA are also expected to support the volumes in the third quarter.

In the second quarter, sales in Russia continued to grow, although slower than in Q1, while overall industry has also softened. Despite aggressive competition, we managed to sustain market share in a balanced way, keeping value share performance in line with volume share and sustain or improve our market share across all segments. There was margin expansion in each of our other international operations albeit softer volume performance in the second quarter.

For the remainder of the year, our learnings from the crisis will shape our post-COVID strategies and priorities with focus on our brands, our consumers and customers, digitalization and financial discipline. In our journey to the new normal, we will continue to be flexible and agile while ensuring safety and well-being of all our employees.