Beer Group President and Anadolu Efes CEO Can Çaka’s Comments
I’m deeply saddened by all happenings in Ukraine and hope that there will be a common ground of dialogue as soon as possible, and I wish for order and peace to be restored. Anadolu Efes has been a major source of jobs for thousands of Russians and Ukrainians, along with a source of income for thousands of customers and farmers for over 20 years. Since the beginning, we have been in close contact with our local colleagues while closely monitoring the situation. Our first priority has been ensuring the safety and well-being of our PEOPLE. Together with our partner, we have taken all possible precautions and supported our employees, their families and the humanitarian relief efforts in Ukraine in every possible way including counseling, housing and financial support. In terms of our operations, as previously announced, our breweries in Ukraine were shut down as of February 24th” commented Mr. Can Çaka, Beer Group President and Anadolu Efes CEO.
2022 started with lots of challenges, no different than last two years. Pandemic-related supply-side constraints have led commodity prices to rise since last year, where we have observed the record-high price levels. Also the surge in energy prices together with supply chain issues and rising input costs have been pressurizing on all our operations inevitably.
Despite all these headwinds, we made a very good start to the year where we were able to record 14% surge in volumes and 474 bps improvement in EBITDA (BNRI) margin. We have seen quite strong demand from consumers in 1Q also benefitting from on-trade recovery. We have also witnessed some pre-buying behavior across the board mostly related to customers’ and consumers’ expectations of subsequent price escalations. The improvement in EBITDA (BNRI) margin is attributable to our well-managed value growth strategy as well as operational efficiency and timely use of risk-mitigating tools.
However, we are cautious for the rest of the year given the resurgence of inflation, soaring commodity prices coupled with the latest Covid-19 outbreak in China elevates ongoing fears around supply chains; which consequently may weigh on cost inflation. Therefore, subsequent price increases may put pressure on consumption. However, we keep our guidance intact following our successful results in 1Q, with the exception of volumes; given the lost volumes from Ukraine.
As we have recently announced, we have started active discussions with our partner AB InBev, regarding the sale of AB InBev’s non-controlling interest in joint venture to Anadolu Efes. AB InBev’s request for suspension of the production and sale of Bud in Russia will also be a part of the transaction. The discussions are at very early stage and further announcements will be made as the process progresses. Our core focus remains ensuring the health and well-being of our PEOPLE in both countries.
We are encouraged by the strong results we delivered in the first quarter of the year. However, we are well aware of the risks ahead of us. I am confident in delivering our targets for the rest of the year since the last couple of years have proven our success in navigating unprecedented challenges and emerging even stronger.