Arcelik A.S. (BIST:ARCLK) Q4 2025 Earnings Call

0:00 Ladies and gentlemen, thank you for standing by. I am Konstantinos, your course call operator. Welcome and thank you for joining the actual conference call and live webcast to present and discuss the full year 2025 financial results. At this time, I would like to turn the conference over to Mr. Baris Alparslan, Chief Financial Officer, Ms. Minensule Yazgan, Finance and ERM Executive Director, Ms. Stella Alvar, Capital Market Compliance Senior Lead, and Mr. Cesar Ercan, Investor Relations Senior Lead. Mr. Alparslan, you may now proceed. Thank you. Good morning and good afternoon, ladies and gentlemen. Welcome to our full year 2025 financial results website. This presentation contains the company's financial information prepared according to Theatres by application of IS29 inflation accounting provisions.

0:50 Here are the highlights of the year 2025. We generated 523.9 billion TL in revenues, reflecting a 6.6% year-on-year decline. Nevertheless, we delivered a significant improvement in profitability through disciplined execution, resulting in a 1.2 percentage point year-on-year improvement in gross margin and a 2.2 percentage point improvement in Q4 compared to the same quarter last year. EBITDA margin increased by 0.6 percentage points year on year, while the improvement exceeded 0.7 percentage points in the last quarter. 5.7 billion TL free cash flow was generated on the back of improving operational performance, combined with strict capex and working capital management.

1:36 This represents a remarkable recovery compared to last year's negative figure of approximately 11.4 billion TL. We also completed most of the post-merging integration across our European operations in 2025. We closed rye and cooking plants in Buch and a refrigerated factory in north-south Poland, as well as the Siena refrigeration factory in Italy at year-end, in line with the initial business plan as part of our restructuring initiatives. Even in such a transition year, we managed to sustain our leadership in the European MBA market. Despite market stress and cash outflows related to restructuring as its major progress was made in balance sheet optimization, it delivered significant leveraging on the back of strong free cash flow generation.

2:21 With a year-end MGL adjustment leverage ratio of 3.74 times, we remain in compliance with our covenant. In 2025, our consolidated revenues declined by 6.6% year-on-year in real terms, mainly due to an unfavorable price and product mix in Turkey, weak international demand, and intensified competition in Europe. Our gross profit margin was 28.8%, reflecting a 1.2 percentage point year-on-year improvement driven by lower raw material costs and favorable Eurodollar parity amid price and pressure across key markets. High growth profitability and savings from restructuring efforts helped to achieve a 0.6 percentage point improvement in adjusted EBITDA margin despite wage inflation pressure, which increased open as a percentage of sales due to lower revenue levels.

3:14 Here you may see our revenue bridge both for the final quarter and the full year on the left-hand side. In the last quarter, figures in Euro terms reflected a 10.5% year-on-year decline. This was driven by a slowdown in international sales, which declined by 14.3% year-on-year, mainly due to volume contraction. Revenues remained flat in Turkey over the same period. In real Turkish Euro terms, international sales declined by 13.5%, while sales in Turkey recorded 0.9% growth. However, the full-year comparison indicates better consolidated sales performance, with a 0.4% growth in Euro terms, supported by the inorganic contribution of Whirlpool legacy entities in the first quarter. International sales remained flat in Euro terms, while Turkey recorded 1.3% sales growth year-on-year.

4:04 Pricing remained a headwind across international markets and in Turkey, while volume decline was the main challenge throughout the year in international markets. On the right-hand side, our regional sales breakdown is presented. Turkey's share of total revenues stood at 32% in 2025, unchanged year-on-year. Europe's contribution remains slightly below half of consolidated revenues, in line with last year. Western Europe's share increased by 1 percentage point, to 34%, while the share of CIS and Eastern Europe declined to 15%. Representing 10% of consolidated revenues, the APAC region share decreased by 1 percentage point, while the African Middle East region continuously increased its contribution to 8% of consolidated revenues. Diversified revenue streams reduce dependence on any single macroeconomic cycle and provide access to high return profits such as Africa, MENA and South Asia, as well as after sales and consumer share operations. In addition, we are implementing a segment-driven brand strategy to address the broader market and strengthen our market position through differentiated products, with each brand playing a distinctive role in portfolio growth.

5:14 You may see the trend in sales volumes across the main product categories compared to market figures on the left-hand side. In Turkey, demand in the MDA6 market was under pressure, particularly in the first half of the year, while modest demand was supported by discount and sales promotions throughout the years. Despite a 3% decline in sales volume in the NBA 6 months in 2025, we managed to keep our sales volume slight year on year, thereby overperforming the market. Despite strong volume growth in the last quarter, real growth remained limited, reflecting approximately 1% real revenue growth due to an unfavorable price and product mix. As a result, full year figures marked a 6.6% real decline in 2025. Please note that scope of the market data for the AC and TV segments was revised starting in July to include sales from discount retailers and supermarket chains.

6:03 Following the scope change, our performance in the AC category reflects significant growth. Competition remains intense in the AC segment, with 45 grand being active, some of which affect price sensitive consumers. We closed the year with record market share in 2025 in each year. With a strong start to 2026, we expect to overperform the market this year as well, especially thanks to drier air conditioners and cooling products. In Europe, recovery in MDA demand slowed in 2025, with limited volume increases and no growth in Euro terms due to pricing pressures stemming from in-time competition. In Western Europe recovery continued in some key markets such as the UK, Italy, Spain, Netherlands and Belgium whereas there was contraction in demand in France, Germany and Austria. Overall market growth in Western Europe for MDA6 stood at 1.6% in the first 11 months of 2025.

6:58 DECO preserved its market leadership and stabilized the loss of market share in the final months of 3 years. Meanwhile, demand in Eastern European markets remained relatively strong over the same period. However, growth rates decelerated in some key markets such as Romania and Ukraine compared to growth of over 10% in 2024. Romania recorded modest growth while robust recovery continued in Ukraine. Similarly, growth in Europe's firms remained limited. Overall, 49% of consolidated revenues were generated in Europe, with sloppish revenues in Euro terms, including the inorganic contribution of the Euro transactions. Following the progressing ramp-up of new product launches, Beko Europe's second-half market share gains signal a renewed growth path. The increasing share of higher gross margin new product launches has been supportive of margin generation and market share gains, particularly in major countries and built-in categories. We will continue to focus on customized marketing and media investments to drive the success of new products and enhance brand appeal.

7:59 In particular, Whirlpool and Boutmesh brands will be elevated through new fifth-field finished fashion investments. Revenue generated in the Africa and Middle East region constituted 8% of consolidated revenues in 2025. Revenue in Europe grew by almost 10% year-on-year, driven by robust growth in the Africa region. DeFi's sales volume growth exceeded 10% in 2025 with nearly 15% growth in the last quarter. Growth in Euro turns remained below 7% year-on-year due to price decreases across major categories. Demand in South Africa was steady in the last quarter while growth in export markets outpaced local markets. DeFi succeeded in maintaining stable pricing and sustained clear market leadership.

8:46 In the Middle East, Anshir Hitachi JV delivered 7% growth in dollar terms and with persistent geopolitical instability, supported by channel expansion, effective sales promotion. Operating in one of the key markets in the region, Beko Egypt increased sales volumes by over 13% in 2025, resulting in a 9% year-on-year increase in sales revenue in dollar terms. We achieved multi-brand growth through Whirlpool Legacy Grants and Hitachi, supporting market growth in the MENA region. The increasing contribution of the Egypt battery further supported performance in this region. Representing 10% of consolidated revenues, the ATAG region continued to face a prolonged economic slowdown driven by rising costs of living and political instability. Forged revenues in the region declined by over 5% EUR in EUR terms.

9:34 Substantial growth in Taiwan, Pakistan, and Bangladesh limited to decline resulting from the sharp slowdown in China and deep demand in key markets such as Thailand, Japan, Indonesia, Malaysia, and Singapore. In Pakistan, Goldman's sales volume growth exceeded 10%, resulting in Euro-denominated revenue growth of over 8% year-on-year, marking another successful year. In Bangladesh, Singha's net sales increased by over 3% in Euro terms, supported by significant volume growth across major product categories, despite the economic slowdown and political challenges. Due to factors such as weak global demand, slowing growth, and ample capacity, average gold material prices declined significantly year-on-year. On the metal side, market prices were slightly higher in the last quarter.

10:19 Thanks to contracts with favorable pricing, no major impact is anticipated in the first half from rising metal prices. However, average metal raw material costs are projected to increase slightly year-on-year in 2026. On the plastic side, market prices were substantially lowered both year-on-year and quarter-on-quarter. We expect favorable plus conditions in the first half. However, a slight increase is anticipated in the second half, with prices remaining broadly flat on average in 2026. We are expanding our outsourcing activities to strengthen competitiveness by reducing the cost base to the maximum extent. With that, I pass on to Minan Hanım to cover the summary financials. Thank you for your stay. Here is the summary of our 2025 full year financial results as per inflation accounting both in yearly and quarterly comparison.

11:08 We have recorded 523.9 billion Turkish euros from sold-out Jordanians, reflecting an approximately 7% euro decline for the full year and a 1% euro-year decline in the last quarter. Growth profitability improved by 122 basis points year-on-year and by 216 basis points since 2004, compared to the same period last year. Operation COVID remains plagued in real terms since 2025 due to late inflation pressure. However, Q4 expressed a 32 basis point improvement compared to the same period last year driven by the lagging impact of exposition of the inflation. Further quoted impact is expected to become visible in the upcoming four years. Other income from operating activities made a positive contribution of over 1 billion Turkish Lira to the bottom line, mainly driven by an approximately 3 billion Turkish Lira provision reversal following changes to the initial redundancy plan. Next, financial expenses improved significantly in the final quarter, resulting in a 27% decline for the full year and a 56% year-on-year decrease in the same quarter. This improvement was driven by declining Turkish lira interest rates, higher interest income from increased Turkish lira deposits, change in our net ethics position that reduces hedging fees, and the expansion of our hedging

12:38 policies to include subsidiaries. Overall, we booked net financial expenses of approximately 27.6 billion Turkish lira in 2025. Not most monetary positions decreased by 28% year-on-year for 15 billion Turkish Lira. Consequently, we recorded 4.7 billion Turkish Lira loss before tax, and 9.8 billion Turkish Lira net loss before minority interest for the full year, corresponding to minus 1.9% net margin in 2025. Finally, in a margin of 5.9%, we recorded a adjusted EBITDA of 30.7 million Turkish Lira for the year, reflecting a substantial year-on-year improvement.

13:25 Please note that one of consulting expenses related to restructuring initiatives are excluded. The EBITDA adjustment amounted to 439 million Turkish Lira in 2025 and 126 million Turkish Lira in 2004. Including the adjustment for inventory-related monetary gains and net monetary positions attributable to income and expense items compromising the EBITDA, our EBITDA margin stands at 7.1% in 2025. Also note that, following the completion of the PTA, Q4-24 figures have been restated under IFRS 3 with the buy and purchase gain allocated to Q2-24 and only restructuring costs remaining in Q4-24. As of December end, our adjusted leverage stood at 3.74 times, marking a substantial improvement compared to the peak level of 4.5 times recorded in the first half.

14:29 Dea Leverages accelerated on the back of additional recovery and robust free cash flow generation, while disciplined net debt management reduced net debt to €2.8 billion. As usual, the use-wise receivable factoring and early collection tools declined. The amount of factoring and early collection stood at €723 million and €87 million respectively in the last quarter. Implying 193 million euro increase in total as compared to Q3. As consistently communicated, you delivered steel leveraging and close to your customers below the current level of 3.8 times.

15:15 You may find the detailed source for our debt crisis breakdown and the affected interest rates of our loan and bond portfolio on the right-hand side. Total burdens amounted to 235.9 billion TL with an average measure of 1.2 years. Our average effective funding rate including loans and bonds were at 32.8% for Turkish Riyal, 4.5% for Euro and 8.5% for Dollar. On the bottom left-hand side, you may see our cash currency breakdown, totaling 97.9 billion Turkish Lira. With well-diversified cash holding secular currencies, 41% of our total cash is denominated in Euro, 7% in Dollars, and 31% in Turkish Lira.

16:09 Euro denominated borrowers constitute 65% of our total borrowers, while US dollar and short-strand denominated borrowers account for 15% and 20% respectively. In terms of the debt maturity profile, long-term borrowings account for 37% of total borrowings, reflecting the upcoming maturity of the €350 million green bond in May and the fiscal preference for short-term insurance amid expectations of further post-trade costs. We have €3 million long-term facilities coming on screen, following the redemption of the green bond and the utilization of additional facilities We expect the maturity profile to normalize to approximately 55-45% between short- and long-term jobs. Excluding the notional cash flow and company credit card balances, the share of long-term borrowers could increase to around 55%. We are actively working on additional long-term facilities to further expand the maturity profile by year-end.

17:16 At the upper left corner, you may find all adjusted at least a margin breach. Higher growth margin and increased depreciation impact of the transactions are the main drivers behind 0.6 percentage points recovering the margin, whereas higher operating expenses had a negative impact due to late recession factor. At the upper right corner, you may see our networking capital to sales ratio. As of year end, effort in capital to sales ratio was 21.8%, slightly below the level in 2024. At the lower left corner, you can see our success to sales ratio at 3.4%, including capitalized amortization expenses reflecting a significant decrease year-on-year, thanks to this high policy on capital expenditure.

18:06 Finally, at the lower right corner, you may see our three cash flow figures. Robust cash generation from operations within the second half and reversal of working capital seasonality are free cash flow at the year-end, while 5.7 billion Turkish Lira outperforms our high inertial cash flow anticipation for the year-end. Here, you may see our guidance and actual figures for 2025. Against that group of three C-men in the final quarter, we then exchanged low guidance, while the adjustment at the margins slightly missed the low end of the guidance range. We met our year-end guidance for the net working capital sales ratio closing at 21.8%. CAPEX came in at around €250, well below the guided level, reflecting should catalysts can be shared with different.

19:00 So I leave the floor to Baris Bey to walk us through our guidance for 2026. Thank you. Ongoing global economic uncertainty and a weak demand environment continue to weigh on growth expectations, with projections for 2026 remaining below 2025 levels. That said, macroeconomic expectations revised over the course of the year point to more moderate and gradual normalization. According to OECD estimates, global growth is expected to reach 3.2% in 2025, ease to 29% in 2026, and re-accelerate to 3.1% in 2027, indicating that global growth momentum, while softer, remains intact. In Europe, overall growth expectations remain broadly in line with 2025 levels. However, the outlook for Germany and France, both of which are expected to see only model GDP growth at best, has turned more constructive.

19:55 This improvement is expected to support consumption, particularly through the release of pent-up demand in these markets. This backdrop provides supportive conditions for our international revenue outlook. In addition, a potential Russia-Ukraine ceasefire scenario could represent a significant upside for the European outlook. In Turkey, macroeconomic conditions remain challenging, with consumer demand continuing to face pressure, while signs of an meaningful recovery remain gradual. As such, a broadly flat real performance unit appears to be a reasonable base case assumption. Nevertheless, should policy rate cuts continue throughout the year, a more supportive demand environment could emerge, particularly in the second half, presenting future upside potential. These factors will serve as catalysts for a potential upward revision to expectations over the course of three years. Against this backdrop, for the year ahead, we are guiding for a broadly flat real revenue growth performance in Turkey, deflecting the continued pressure on consumer demand. For our international operations, we expect low single-digit growth in revenues on Euro basis, supported by the gradual normalization in European markets. We are guiding for an adjusted ADC margin in the range of 6.25% to 6.5%, underpinned by subsequent cost management and operational efficiency initiatives.

21:07 We expect the net working capital to stay the way it should be maintained at around 22% reflecting continued focus on working capital discipline. Capital expenditures are guided at approximately 250 million euros in line with our prudent capital allocation framework. With that we can proceed to the Q&A session. The first question comes from the line of Demikas Cemal with Atta Invest. Please go ahead. Thank you for the presentation. My first question is about the revenue drivers. I see that in the fourth quarter you had volume growth, but you didn't have much real growth. Could you further elaborate the dynamics on that front? You just tried to increase the volume and at the expense of some profitability should be reached.

22:04 And for this year, when you expect a flattish, you mean in real size, do you expect a volume increase or price increase in 2026 and what are the indications in early January, at least in the first month of the year? And regarding the international size, again, you know, When do you think we will see some recovery concerning the seasonality in your international operations? Fourth quarter was weak, and that was possibly the reason behind the radiation. But what should be the catalyst ahead for you to become more optimistic? Or do you think 3-5% growth, as you mentioned, single digits growth, Is it ambitious or is it a reasonable growth for you to cut your leverage going forward? That's my question.

23:09 Thank you. Thank you. Starting with the first one. So, as you know, Q4, especially in Europe, is much more characterized in campaign periods such as Black Friday, etc. So there is a pressure. On the pricing, so it was mainly characterized by volume growth. This is mainly the characteristics of the quarter as well. So we didn't do anything special, but as you know, this is the period where you're cleaning up your inventories and you prepare for the next season. The strongest season is usually the transition between Q3 and Q4, which we enjoyed increase both in volume and pricing. Especially in Europe, the last quarter and the last couple of months of the year, we observed the flattening of the pressure that is coming from China.

24:08 and us gaining significant market share in some key markets. So, the market share loss that was experienced during the year, especially in the first half, was clinched to some extent over the last couple of months of 2025, which is encouraging. As you know, I'm usually alluding to this new product introduction, etc., which is actually the essence and the main source of our synergies in Europe. The new products have arrived to the market and we are benefiting one by one, so gradually from this initiative. For your second question, in 2026, in Turkey we provided real growth as the guidance, relatively flat, so the price growth in line with inflation.

25:03 Having said that, we are especially optimistic for the second half of the year. As you know, the interest rate decline trajectory is continuing in Turkey. And in 2025, there was one incident, political incident back in March, which derailed that process a little bit. Barring such an incident, in 2026, we expect at least a better In Europe, again, there is a carryover that is coming from new product introductions especially that would expect to boost the volume. But we also expect uplift in pricing as you know due to brand segmentation that we do especially on the Whirlpool side and all the marketing investments. We aim to enhance and increase the market and expand its potential sales in Europe for this year to boost the sales in the newly introduced quotas. So its key driver will be both volume and pricing in Europe. For the remaining market, As you know, there are some plants which are in ramp-up period such as Egypt and Bangladesh.

26:18 We are quite profitable in all these markets including Pakistan, Bangladesh, South Africa and Central. So their high growth and profitability emanating from our market-leading positions are expected to continue in these markets. January started, January is a relatively weak month, seasonally. Having said that, we started in line with our budget, especially in key categories, both in Turkey and in Europe. So it provides us with a clear table line for the rest of the year, but it's too early to make a call. Given the quasi-holiday period especially at the beginning of January in Europe as you well know.

27:06 And the last question. So the growth rate that we provided is more on the conservative side for Turkey whereas it's more of the same case in Europe. Yes, we expect single digit growth and we definitely expect a recovery in consumer sentiment because it has been like almost three years now since the consumer discretionary industries demand in Europe has stalled. So, we see early signs, especially in some key markets and in continental Europe as well. Some markets like Northern Europe and Algeria said that they will recover further more, but especially in Ukraine and France, Nordic and Eastern Europe we see encouraging signs, including us starting to gain market share.

28:06 Baris Bey, regarding your leverage, We see some decline in fourth quarters compared to third quarter from 5.70 to 4.50, based on your calculations before the MTL adjustment. Did you see any impact of this share sale to Coach Group, you know, the archaic sale? Was it recorded in this quarter? I don't remember for now, but Did it have any impact on the, you know, maybe you mentioned during the presentation, maybe could you further, you know, just give some, you know, color on that side, you know, what was the reason for this decline and did share sales have some effect in the fourth quarter and what should be the target for the following year based on these, you know, the assumptions you have?

29:04 Your guidance, BTA guidance, working capital guidance and revenue guidance, what should be going forward? Sure. So, starting with the reasoning or rationale behind what is going ahead, Each point in our webcast throughout the entire year, especially the last quarter of the year, is where our collections and manufacturing opportunities on the back of increased receivables over Q3 and Q4 increased. It has happened exactly as we predicted. and there is a massive inventory cleanup and inventory reduction especially on the scope based inventory side in line with our targets throughout the year. We started the year with a high demand anticipation and as you know the first half of the year is usually the preparation period for cooling and air conditioning etc. where historically and seasonally our leverage increases. In the second house, especially in Turkey and in Europe as well, we usually experience all the sales and collections towards the end of the year.

30:19 And as you know, we have increased our pass-through opportunities as well towards the year end, which is quite a credit for our financials. And on the table side, we have started with many serious initiatives such as expanding further to China and utilizing the financial instruments, the low cost financing instruments that was granted out of China to extend our cable base. That has significantly enhanced our trade cable base in that respect. On the inventory side, just to quote a few numbers, the levels at the outset of the year were around 2.2 billion euros, which declined to around 1.8 billion euros towards the year end. So, on net working capital, we have really succeeded in line with our target. and of course EBITDA as you well know is coming on a trailing basis so on the back of high profitability months such as September, November and September the trailing EBITDA, cross month EBITDA is also increased gradually and we finished the full year as we anticipated and as we said we managed to remain in line with our covenant As far as the relationship or discussions with the financial institutions are concerned,

31:50 we managed to be in line with our covenant and will get the relevant payments etc. So there is no issue on the level side whatsoever as we finish the year. Coming back to your question, yes, we concluded the transaction just before the year end, which is around 5,000,000 TL and 100,000,000 EUR, which also contributed to the decrease in leverage with that amount. Thank you, Barış Bey. Thank you. The next question comes from the land of the Istiyan, Hanzada with JP Morgan. Please go ahead. Thank you very much.

32:37 I just want to make a follow-up about the China procurement. So what is the current share of China in your total procurement and what is your target here? I mean, to increasing the procurement from China, do you expect to be more competitive against Chinese players in Europe, so looking for a bit more stable market share in Europe? and the second question is about our margin expectation for 2026 and I mean they have highlighted that you are looking for rising raw material costs in the second half of the year and currently they are observing some increase in the precious metal prices like silver, aluminium and so I mean what's going to drive your margin expansion in 2026?

33:26 Thank you. Thank you. On the China procurement, it has been more down, like in general, including everything, around 25-30%, whereas the air was 35% in the following year. Having said that, I mean, we always source from China, but the way we utilize the financing instruments, low-cost financing instruments, has extended significantly, and we re-routed some of the key outsourcing and or raw material procurement activities towards these financial instruments which provides around like let's say 10 to 12 days increase for a full year in trade payable days. Of course there are some other compensating impacts but we see visible improvement in trade payable days coming out of this China Procurement Initiative.

34:23 On the European side, yes, we have started to see stability in growth, especially in some key regions. But more importantly, as I also noted during our face-to-face discussions, we saw an increase in size in market share gains. As you know, the whole year was characterized by market share loss. for the main markets for us which we started to crunch back in key categories towards the year end. We see that this trend is continuing as we enter the year and the whole aim will be to keep the top line momentum as we progress throughout the year. The drivers on the margins and especially on the commodities side, so the first quarter and the second quarter, so almost the first half, We expect to benefit from the lock-in prices of the last year. As you know, we had around 6 months duration or 3-12 months duration for our metal and plastics procurement in particular.

35:26 However, as we see in the first quarter of the year, we see some increases in the commodity prices. in some key categories like copper or aluminium. On that respect the jury is out whether they will be persistent or not and honestly speaking there is also the push out of the coin where it also applies to competition in the sense that it will probably have an increasing impact on the pricing as well. So, if commodity prices continue to remain high, the first half is largely protected to the already lost in contracts. As the second half, we have to see how much pricing pressures we'll get or how much of this increase will be reflected to the pricing.

36:19 And as you know, pricing power is not the only source. We have our material improvement project where we are always working towards engineering and design studies to lower our production costs in that respect and as you know we always target somewhere around seven to twelve percent improvement in material costs Thank you very much. Just to add before I forget, of course, the synergies will continue in 2026, maybe not at the same level of 2025, but there is Carry over that will come out of 2025 as well as new initiatives that are coming out of the recent closure of Siena and optimization initiatives in additional Italian plants such as Comunanza and Cacinetta.

37:37 As you know, Siena was closed at the year end and the benefits will accrue and that includes the white collar workers that is related to the social planning unit that we did with the government. And given they were concluded at the very end of the year, the benefits will accrue to 2026, especially in the first quarter. So, these are mainly the drivers of the margins for 2026. Alright, thank you very much. Very clear. On the time of procurement, I think that's quite important. Because when you increase the share of China, your target is to save on the financing cost, I understand, because extended growth is available, so it is still on the working capital, there is no pre-cash flow posted in post.

38:28 But in the meantime, I think this also puts the bridge right into a growth margin, right? Absolutely. It will both lower the units for human costs as well as lower financing costs or increase the cash flow via extending the trade table base. Double risk. So there is double impact on the future. Is there a potential for you to go further up on China procurement or 35% is the level that you can go maximum? I think it all depends on of course there are some let's say constraints around your insurance limits or your banking lines etc but it's of course not the only course that we will do but we will try to extend it as much as possible to the extent we're able to extend the payable days and benefit from the low-cost funding alternatives so these are the main drivers of the China Procurement Initiative.

39:25 All right okay thank you very much. The next question comes from Lana Bisola Evgenia with Barclays. Please go ahead. Good evening. Thank you for the presentation. I have just a few questions. So my first one, I think during the presentation you mentioned 7.1% EBITDA margin. I didn't hear properly. Was it the margin excluding IS-29 impact altogether or is it like adjusted for inventories? and the metric that you use for leverage calculation. And my second question is about labor costs. Obviously, we have seen about potential strikes and negotiations on that front, so it would be great if you could provide more color on the labor cost side.

40:13 What are you expecting this year in that regard? Thank you. Thank you. This domestic is adjustment for inventories in line with inflation accounting. The leverage metric is adjusted as well, which is aligned with the financial institution in terms of calculation and calculation methodology. On the labor cost side, we do not expect something that is much higher than the 2025. As you know, we have a collective labor agreement, but in our Brent's and Zion's numbers, these are all bought into our expectations. including the pricing expectations that we provide.

41:00 So, we do not expect something on the outlier side from the labor costs, but they remain relatively elevated in Euro terms as compared to historical numbers of Turkey. But it's also, as you know, related to the depreciation of Turkish Lira. Any depreciation that is slightly above inflation will bring them down, enhancing the competitiveness of traditional inflection companies. Thank you. And maybe one last follow-up in terms of seasonality of your margins. I can see that in 2025 Q3 was the strongest in terms of margins, whereas there was a decline in Q4.

41:45 So should we expect a similar dynamic throughout 2026 in terms of quarterly volatility and margin? Yes, it will be similar given there is no change in the underlying seasonal dynamics of the industry and the premium mix and product mix that we have. Great, thank you. You're welcome. Ladies and gentlemen, there are no further questions at this time. I will now turn the conference over to Mr. Alparslan for any closing comments. Thank you. Thank you very much for attending our conference. We hope to see you in the following conferences. Have a great year.