We continued to grow in both size and depth in 2019, a milestone of our “Polisan of the Future” vision of embracing the new generation.
Dear Shareholders, Customers, Business Partners and Employees of Polisan Holding;
In 2019, the global agenda consisted of increasing economic imbalances with trade wars and concerns over growth and measures taken against it, in the shadow of rising geopolitical risk across many diverse geographies ranging from Brexit and the Middle East to Hong Kong. The Federal Reserve also imposed a gradual rate cut, echoing the monetary policies applied by the Central Bank of Japan and the European Union due to fears over stagnation. While the zero or negative interest policy in developed countries did not achieve the desired level of success, the Central Banks of developing countries also took economic measures with a focus on growth, in step with their inflation policies. Ultimately, the IMF revised its 2019 growth expectation, which had been anticipated as 3.5% in the January 2019 edition of the Global Economic Outlook Report, to 2.9% in its January 2020 issue.
While the Turkish economy spent the first half of 2019 in particular under the influence of Turkish Lira depreciation and high inflation; like the central banks of developed and developing countries, the Central Bank of the Republic of Turkey started to apply loose monetary policies and lowered interest rates to overcome growth obstacles. Depending upon this process, we started to see an improvement in macroeconomic variables such as inflation and the current account deficit, as well as in negative growth trends. The IMF predicted that the Turkish economy could close 2019, previously estimated to contract, with a growth rate of 0.2% and grow by 3% in 2020.
In these days as we proceed into 2020, we are closely following the corona virus outbreak in China and the possible effects of China's failure to meet its commercial commitments, the US presidential elections, tension between the USA and Iran and its reflection on the energy markets, and the developments in the commercial and legal relations between the UK and the EU within the scope of Brexit, all of which have reached the agenda of the entire World.
2019 has been a year when our operations in Turkey due to the economic conjuncture, and in Greece due to the increased competition in the market, have focused more than ever on revenue generation as well as solutions that create value for the protection of profitability. We continued to grow by combining our experience with the advantage of our partnerships with one of the world's leading chemical companies Dow Chemical and paint manufacturers Kansai Paint. Our combined revenues, in which, the unconsolidated Polisan Kansai Boya, our 50% Joint Venture with Kansai Paint, is included; were realized at TRY2,011.2 million. Our combined EBITDA margin rose to 15.1% levels, thanks to the operational efficiency provided by our new facility, while our combined net profit almost tripled, reaching TRY86.9 million.
The World is changing at a dizzying pace.
Marked by the widespread use of computers and Information Technologies, the third industrial revolution is evolving into the industrial revolution known as Industry 4.0 with the transformation of digital, biological and physical innovations. In the new world named Society 5.0 - Creative Society and structured through digital transformation, people will need imagination and creativity to bring their ideas to life.
Artificial intelligence, the Internet of Things (IoT), robotics and block chains, as well as digital technologies such as biotechnologies trigger revolutionary changes that are structured in Germany as “Industrie 4.0” and in China as “Made in China 2025” strategies. China, India and ASEAN (Association of South East Asian Nations) member countries have begun to turn the World's economic and geopolitical axis from West to East. There has arisen a need to address increasing global environmental issues, social inequality and sustainability issues with a different approach for the welfare of society. While the United Nations has set Sustainable Development Goals for 2030, investors in the financial sector prefer to include in their portfolio those companies showing sensitivity to the fields of the environment, society and governance.
In 2019, we took steps to position “Polisan of the Future” as a global brand in order to catch up with the global change.
In 2019, we started a transformation process in order to entrust the Polisan brand, generally recalled for its paint operations - even though it undersigns firsts with innovative products in the field of chemistry in Turkey - to new generations as the “Polisan of the Future”. Primarily, we addressed our human resource, which is at the heart of our successes. We have designed a new structure in which Group Companies' executives are accountable to their board of directors and can create joint synergies with Polisan Holding senior management in the fields of strategy and business development. Together with our professional staff that we have restructured, we have determined our road map to apply our strategic perspective to our business practices. We strengthened our audit function to reflect the importance we give to effective risk management. We took actions to simplify and strengthen the capital structures of our subsidiaries and foreign business partnerships, and increased the capital of our Group Companies, which we deem necessary. We halted our agricultural activities in April 2019 in order to focus on our main business lines. We also reviewed our operations with our performance metrics specific to product, region, industry, competition and stakeholder dynamics.
We have designed a new structure that operates within the framework of the accountability principle, and that improves through feedback: by establishing digital systems to monitor the development of our business and ensure the flow of information; regular reporting of our business results; and ultimately, with a strong audit function.
On the path to globalization, we position innovation and digitalization as integral parts of all our modes of doing business.
In order to ensure the continuity of the structure that we design in a rapidly changing world, we do not perceive operational excellence and efficiency as merely temporary aspects of a transformation process. We attach importance to digitalization beyond its being a factor that will increase our efficiency through enhanced data analysis. We aim to position digitalization as an element capable of impacting end-user demand within the value chain of the chemical industry, and of changing the business models through which we create value for our customers. In 2019, by leveraging the power of today's Digital Production Business Technologies we continued investing in our fields of activity to maximize quality, efficiency and the benefit of all our stakeholders, in terms of production processes, process management and customer relations. While aiming to open up to the global markets, in our operations, we want to focus on niche areas and products the added value of which is supported by technology. We aim to proactively offer to overseas markets those products that our R&D units develop for special projects in Turkey, and apply our innovative stance in Turkey to markets abroad. In this context, in our paint operation, we started to develop products tailored to the needs of the markets we have entered. And meanwhile, on the path to globalization, we are working on innovations in the field of chemistry.
We carry out our activities in the spirit of social responsibility and sustainability.
Within the framework of social responsibility, we place all necessary actions on our agenda, considering the good practices of the national and international sustainability platforms we participate in, within the scope of the UN Global Compact, to which we became a signatory in 2018.
We participate in national and international platforms such as the Bourse İstanbul Sustainability Index, Carbon Disclosure Platform, and EPD environmental product declaration platform. We continue our operations cognizant of our impact on the economy, environment and society. We carry out projects in support of children, women, and education, and participate in collaborations to protect the environment and natural life.
We look to the future with confidence.
As 2020 began, we relocated to our new headquarters reflecting a next generation approach, where our employees feel even more our appreciation for them, and where they can work ever more efficiently with a renewed team spirit. We gain strength from the rising synergy among our employees thanks to this change. I have full confidence in our ability to see profitability growth with our long-term business plans by achieving our targeted efficiency, thanks to our visionary management team, qualified work force, and loyal customer portfolio, as well as our quality certified business processes, and our globally leading giant business partners.
On behalf of the Polisan Holding Board of Directors, I thank our shareholders, employees, business partners and customers, who provided their support during this transformation process.
Mehmet Emin Bitlis