I would like to start my words wishing that we enjoy a successful and productive Annual General Meeting. The world economy has exceeded expectations despite deepening geopolitical, political, economic and social fractures, as well as increasing polarization. We have also left behind a year in which our country’s economy performed better than expected.
The world economy is estimated to have grown by 3.6% during 2017, and we welcome the fact that the revival in the economy stemmed from both developed and developing countries.
The US economy grew by circa 2.3% in 2017, with consumer confidence reaching to a 17-year record level, despite the USD 150 billion damage caused by the hurricanes that battered the USA one after the other. A similar growth rate is expected in 2018. Despite the political risks and crises in Europe, our largest economic partner, the positive figures and estimates regarding the Euro Zone economy are welcomed by us. Growth in Europe is expected to be realized at 2.5%, being the highest level for the last seven years, and is predicted to be around 2.3% in 2018.
While this is the general snapshot in developed countries, we also observed that developing countries grew more strongly than anticipated in 2017. The acceleration of economic activity in major countries, notably Turkey, Brazil and Russia, can be considered as an important factor behind this result. Although economic growth in India lagged behind expectations, the IMF estimates that developing countries grew by 4.7% in 2017. Again, according to the IMF’s latest projections, global growth will reach to 3.7% in 2018, its highest rate since 2011.
Amid economic environment in the world, our country’s economy also steered a positive course in 2017, exceeding expectations. Turkey’s economy is estimated to have closed 2017 with a growth rate in the order of 6.5-7.0%.
The price of crude oil, one of the most important parameters to our industry, tried to find direction by following changes in demand as well as the extent of compliance with agreement to cut production and geopolitical developments throughout the year.
With the alignment of non-OPEC producers, especially Russia, to the production cut-offs, oil prices resulted at USD 55/bbl as of 2016 year end, before falling back below USD 45/bbl levels in June. Crude oil prices then began to follow a volatile but upward trend due to tighter compliance by OPEC and Russia to the cut-off agreement and with the support of the recovery in demand from China, India and the USA. Amid mounting geopolitical tensions in the Gulf region and the decision to extend the cut-off agreement until the end of 2018, oil prices closed the year at USD 66.54/bbl, rounding off an increase of 21.3%.
Tüpraş maintained the steady growth in its domestic sales during 2017, when consumption of petroleum products in Turkey increased by 6.5% YoY. By the year-end, our total product sales amounted to 31.5 million tons, with an increase of 4.1%, and our total turnover stood at TL 53.9 billion.
Tüpraş recorded a pre-tax profit of TL 4.5 billion in 2017, 130% above previous year, achieving results which went beyond its operational and profitability targets. Meanwhile, in a period of slowing portfolio inflows to Turkey, our Company successfully completed a USD 700 million Eurobond issuance at very favorable conditions.
Tüpraş also continued its investments for sustainability in 2017, with its total investment expenditures reaching USD 5.9 billion over the last 12 years. In line with its business diversification strategy, Tüpraş prioritizes sectoral integration and investments in new initiatives in addition to meeting the energy needs of its own refineries in the field of renewable energy. The Company aims to reduce its energy costs and minimize its carbon footprint.
Moreover, within the scope of the Digital Transformation Project, an area where concrete steps were taken within the Koç Group during 2017, Tüpraş started to open data analysis centers at universities in order to prepare itself for the new world.
The projects carried out by Tüpraş, which develops collaborations with universities in every field, include a wide range of technologies from digital transformation applications that will transform business life to the Industrial 4.0 approach, which will affect refinery processes. Some of these projects include the monitoring of activities at the refinery site through wireless technologies, the Digital Refinery Twin, Predictive Maintenance through Advanced Analytics and the creation of Production Parameters with Artificial Intelligence algorithms.
Beyond all this progress in our work, our top priority is occupational and technical safety, which will ensure our success. In light of the declaration by Vehbi Koç, the founder of the Koç Group, of which we are all members, “Our most important capital is our human resource.”, and it is with this ethos that our highest priority, and one on which we shall not compromise, is occupational safety. By reviewing all of our processes through this awareness, our highest responsibility is ensuring that our work processes are safer. While we continue to create value for our shareholders and our country, we are committed to provide flawless work safety with the highest efficiency and an objective of “zero fault-zero accident” through the partnerships and projects we carry out.
Our Valued Stakeholders,
Closing a successful year, our business results provided us with the opportunity to distribute the highest dividend in Tüpraş’s history.
We would like to thank all of our stakeholders, suppliers and business partners for their valuable contributions, trust and loyalty they have shown to Tüpraş, and our employees who have contributed to our successful results.
Ömer M. Koç