Ülker's Operating Squeeze Is Being Masked by the Treasury Lines
Volume holds up while EBITDA margin collapses on cocoa lag and a promotional war — and a 45% net-income jump is flattered by tax, FX and refinancing gains
ULKER.IS · Earnings Call · 2026-08-19
The volume paradox
Ülker's second-quarter numbers tell two opposite stories. On the operating side, the business looks resilient: consolidated volume grew 1.3% to 163,000 tons, international operations jumped 6%, and market share held at 34% in Turkey. On the P&L side, the picture is ugly: revenue fell 11.4% to TRY 27 billion, gross margin shrank from 27.2% to 24.6%, and EBITDA margin dropped from 14.6% to 10.4%. The company's own keyword trajectory makes the pivot explicit. The top of Ülker's list has shifted away from the old volume-led story to two new leaders — cocoa price and category mix — which were nowhere near the top in prior quarters. The CFO laid the numbers bare:Part of the top-line decline is mechanical — inflation accounting under IAS 29 — but management is explicit that a deliberate competitive choice is also at play: “We are deliberately prioritizing the long-term health of our franchises rather than pursuing short-term value growth at the expense of affordability or market position.” — Ozgur Kolukfaki, CEO · 2026-08-19 The elevated promotional activity across the Turkish market, plus a category mix shift toward lower-priced biscuits as chocolate normalizes, drove the margin compression.Gross margin at 24.6% versus 27.2% last year. EBITDA came in at TRY 2.8 billion, corresponding to a 10.4% margin compared with 14.6% a year ago.
Cocoa: a procurement hangover
The most company-specific insight here is time-lagged. Back in November 2025, CFO Fulya Surucu told analysts that “a significant portion of our cocoa needs for the remainder of 2025 is secured as also into -- 2026 has also been secured at prices determined by our half 1 numbers” — Ali Akkoyunlu, Analyst · 2025-11-10. Those "half 1 numbers" were summer 2025 prices — before the market broke. An analyst on today's call noted cocoa is down roughly 60% year-on-year, yet Ülker is still chewing through expensive inventory. The CEO described the benefit as gradual: “while cocoa prices have moderated, we see certain pricing and margin management risk throughout 2026 as the category gradually transitions towards a more normalized cost environment” — Ozgur Kolukfaki, CEO · 2026-08-19, expecting the averaging to turn positive in Q3/Q4. JPMorgan's analyst pushed hard on the sensitivity if cocoa re-approaches $6,000, but management refused to disclose hedge coverage — a silence that will not fully reassure.The bottom-line rescue
So how did net income rise 45.5% to TRY 1.4 billion despite the operating bleed? Non-operating lines did the heavy lifting. The CFO explained the tax line: “the tax rate applicable to income from manufacturing activities is reduced to 12.4%, but effective date is 1st of January 2027. In the second quarter, there are some impacts from this legislation change due to deferred tax asset and liability calculation” — Fulya Surucu, CFO · 2026-08-19. FX losses fell ~47% on a calmer lira and a 64%-hedged open position, and interest expense dropped sharply — “we completed our financing and we completed it with much lower interest rate, which also creates a lower interest expense burden on the company” — Fulya Surucu, CFO · 2026-08-19, which the CFO confirmed is sustainable across the new 5-year tenors. Still, this is financial-line support, not operating recovery; the market may well discount a bottom line flattered by tax timing and refinancing.Guidance split and fresh risks
The outlook is now split: revenue guidance cut from flat to a low single-digit decline, while the 13.5% ±1.5pp EBITDA margin guidance is maintained — despite Q2 printing 10.4%. Management was already flagging this as conservative in May: “Our guidance reflects a conservative view, flat revenue and 13.5% EBITDA margin plus minus 1.5 points. The main headwinds are softer demand in Turkey, conflict-related pressure in MENA and higher energy and logistic costs” — Ozgur Kolukfaki, CEO · 2026-05-12. Now the CEO doubles down:— a bold claim given the first half delivered well below it, and with the official inflation estimate in Turkey raised by 2pp, limiting pricing power. Two genuinely new threads surfaced. First, an external risk: “there is no relations and there is no risk, which is impacting Ulker from any partners that we are dealing with” — Ozgur Kolukfaki, CEO · 2026-08-19 — the CEO addressing a Turkish sugar-industry investigation, a theme that registered as a key word-mover this quarter. Second, an AI transformation narrative: four priority domains (revenue growth management, supply chain, field sales, financial planning) under a newly-formed AI steering committee. Both are early, but they signal an intent to attack the margin problem structurally rather than simply wait for cocoa to normalize. The bottom line for investors: the 45% net-income pop is largely a treasury story — deferred tax, hedged FX, and cheap refinancing — while the operating engine grinds through a cocoa hangover and a promotional war. The credibility of the held 13.5% margin guide rests on cocoa inventories normalizing faster than competitors re-escalate promotions. That is a genuine, company-specific tension worth watching through H2.we are revising our 2026 net sales outlook from flat to a low single-digit decline. At the same time, and this is important, we are maintaining our EBITDA margin guidance at 13.5%, plus or minus 1.5 percentage points