Dear Stakeholders,

The era of low interest rates and cheap money that began worldwide in 2020 due to the pandemic triggered an intense inflationary environment in the following period. In 2023, central banks raised interest rates to historically high levels and maintained them there to counteract the volatility caused by high inflation. With the addition of strained international relations, global GDP growth fell to 3.2%, below last year’s level. There was a nearly 5% contraction in global trade volume. While the US economy surpassed recession expectations with 3.4% growth, Europe’s growth rate fell to 0.4%, fueling concerns of stagnation. Despite low inflation and a troubled real estate sector, China seems to have achieved its 5.2% growth target.

The bipolar world order led by America and China continued to affect many areas globally, from technology to energy. In this period, where we frequently hear concepts like “friend-shoring” or “on-shoring,” countries shifted their production and supply networks to their own territories or allies. According to the United Nations Conference on Trade and Development (UNCTAD), trade volume among allied countries has grown by approximately 6% since the beginning of 2022, while there was a similar reduction among non-allied countries. The US ban on semiconductor chip sales to China or attempts to shut down TikTok due to sensitive information transfer highlighted the tensions between countries. In regions close to our country, the Israel- Hamas War has been ongoing since October, in addition to the Ukraine-Russia War, which is entering its third year. Attacks by rebels in Yemen on ships in the Red Sea have increased freight costs and negatively impacted supply security. Therefore, from a macroeconomic perspective, we can say that we have had a difficult year.

2023 was also a year where climate change and sustainability became major global focal points and significant advancements were made in artificial intelligence. The participation of 85,000 people, including 150 presidents of state, in this year’s United Nations Climate Change Conference (COP-28) and the agreement on a phased transition in fossil fuel consumption were promising developments. However, the inability to present a clear roadmap stands out as a factor slowing sustainability transformation and investments. It is estimated that increasingly widespread generative artificial intelligence applications could contribute up to $20 trillion to global GDP by 2030, approximately equivalent to China’s GDP. On the other hand, the World Economic Forum predicts that 85 million jobs could be eliminated by 2025 due to generative artificial intelligence applications. In this context, it is crucial to thoroughly evaluate all megatrends’ positive and negative impacts and position ourselves timely and accurately.

We anticipate that all these variables will expand their effects in 2024. The cautious approach of major central banks regarding interest rate cuts as part of their efforts to combat inflation will make access to finance a top priority. This situation will allow new players to take roles in the global financing arena, such as Middle Eastern countries that want to expand their geopolitical influence and have abundant cash resources following rising energy prices. For example, the UAE alone is reported to have made $2.5 trillion in overseas investments. While we do not expect significant changes in global GDP, it is possible to say that regional divergences will become more pronounced. As a country, we will continue to be negatively affected by the growth rates in critical export markets such as Germany, France and the UK, which are expected to hover around 1%. While making the right political decisions in a two-bloc world order is more important than ever, we believe embracing the significant transformation brought by megatrends and integrating them into our strategies is necessary.

The Turkish economy achieved 4.5% growth in this challenging environment. When analyzed by sector, services recorded a 6.4% increase, while the industrial sector grew by only 0.8%. The Purchasing Managers’ Index (PMI) remaining below 50 points in the second half of 2023 indicates that despite the overall recovery trend in the economy, the slowdown in the real sector persists. High financing costs, stagnation in export markets and rising production costs contribute to this slowdown.

On the monetary policy front, the positive effects of returning to orthodox practices and the Central Bank’s interest rate hikes were observed in many macroeconomic indicators. For example, Türkiye’s risk premium (CDS) fell below 300 points for the first time since February 2021 and the foreign exchange rate on the stock exchange rose from 27% before the May elections to 38%. Fitch’s upgrade of Türkiye’s credit rating from “B” to “B+” and its outlook from “stable” to “positive,” along with S&P’s upgrade of Türkiye’s credit rating from “B” to “B+” while maintaining a positive outlook, confirmed the improving environment. On the other hand, it can be said that many structural issues and vulnerabilities persist. Core indicators such as inflation at 70% and net reserves excluding swaps at minus $25 billion indicate that it is still too early for a healthy balance. Making the implemented policies permanent, ensuring predictability and transparency and prioritizing structural reforms remain crucial for investor confidence.

As Akkök Holding, we continue to focus on our investment and growth objectives to strengthen our leading position in the chemical and advanced materials sectors. The third carbon fiber line of DowAksa, which was commissioned this year, Akkim’s Türkiye’s first epoxy plant, which we will inaugurate in 2024 and Aksa’s new technical textile product, Mithra, for which we made an investment decision this year, are just a few examples. Additionally, we established Akkök Next to invest in startups operating in the field of advanced material technologies. With all these investments, we aim to increase our sectoral synergies and reinforce our leadership in our field. We are also intensively working on new growth roadmaps for our companies in the energy and real estate sectors. In this context, as a Holding, we have budgeted nearly $340 million in total investments for 2024. In all our investments and activities, we consider the impacts of sustainability and disruptive technologies and expend maximum efforts to manage our portfolio most effectively.

As a result of our activities this year, we achieved a total revenue of 116 billion TL in 2023. Our EBITDA was 19 billion TL and our exports amounted to 20 billion TL.

Looking forward, we will continue our efforts to adapt to constantly changing economic conditions, produce innovative solutions and achieve our sustainable growth goals. On this journey, your support, our valued stakeholders, will always be precious to us.

In 2023, we proudly celebrated the 100th anniversary of our Republic. This important date, deserving of enthusiastic celebrations, allowed us to repeatedly appreciate the values our Republic has bestowed upon our nation and the achievements gained with great sacrifices in its establishment struggle.

However, in 2023, we also experienced the sorrow of the earthquake, which is the disaster of the century. The wounds healed by the great solidarity shown nationally and internationally after the earthquake have slightly alleviated our pain. As a Holding, we have been a part of this solidarity process through many channels since the earthquake’s first day. We know that the suffering is great and long-lasting and we continue to support the earthquake region with long-term and very carefully considered projects.

I wish you a year full of health, happiness and success.

Respectfully,
Raif Ali Dinçkök
Chairman of the Board of Directors