Ford Otomotiv Sanayi A.S. (FROTO) Earnings Call Transcript

Hello, everyone. Welcome all, and thank you for joining us today. I am Bahar Efeoglu Agar, Head of Investor Relations at Ford Otosan. We appreciate your participation in our conference call to discuss quarter 2026 1st half results. Before we start, please take a moment to review the disclaimer statements included in the presentation. Joining me on the call are our CFO, Saibe Gul Ertug and our Corporate Finance leader Unal Arslan. We look forward to reviewing our results and developments for the quarter, followed by a Q&A session. Now I would like to hand over the call to our CFO, Golan. Guana, please go ahead.

Thank you very much, Bahar. Good afternoon, everyone, and thank you for joining us for our first half 2026 results call. This quarter, our overall performance has been relatively weaker than what we had projected for ourselves for the period. We will start looking into the physical and key dynamics of the market. But before doing that, I'd like to share a mark review with you, which has been substantially impactful in our results. I believe it will be important for all of us to understand it, its effect to our business and finally, our reaction to it. On the screen now, my friends are reflecting the economy economic development for the period. In fact, sorry. In Turkey, market conditions remained quite challenging. While inflation moderated compared to the prior period, it still continues to run well above currency depreciation. During the first half, inflation result was at 18%, whereas Euro appreciation was only 5%. This divergence remains one of the most important factors affecting the sector's profitability and cost structure. If you take a minute to contrast this data of it that of last year, in fact, you will realize that in the same period last year, it was in favor for our sort of business -- but currently, in this period, it has been significantly adverse. Another headwind came from the financing conditions, although the vehicle availability in the market improved compared to previous years. Consumer affordability remains constrained by financing costs. You can check the auto loan rates while relatively stable year-over-year, still remained close to 46% as of June, continuing to weigh on retail demand. If you check the European side, in fact, the environment was relatively more supportive. Passenger vehicle registrations continue to grow, while the commercial vehicle market also showed growth during the first half. However, we have to say that part of this recovery, in fact, reflects a low comparison base from last year rather than a broad-based improvement in underlying demand fundamentals. Furthermore, geopolitical uncertainties continue to weigh on both business activity and market visibility across the region. At the same time, underlying macro indicators remained relatively weak. Consumer confidence continues to deteriorate. Inflation remains also for the European markets above target levels and interest rates stayed at restrictive levels. As a result, while vehicle market expanded, the macroeconomic backdrop didn't provide meaningful support to the demand and the recovery remains uneven across the key markets. Overall, the first half was characterized by software demand, elevated competition and the macroeconomic environment where inflation continues to exceed currency movements. This is creating pressure on revenue growth and profitability across the industry. Now putting this scene, I'd like to move to the next slide and mention about our highlights. So despite car changing macro environment and intensified competition for Ford Otosan maintained resilient export volumes and sustained leadership in commercial vehicles in Turkey markets with 24.6% CV market share. For overall ranking in the domestic midst, Ford Otosan came in the fifth position with 6.6% market share. This highlights the divergence between passenger car and CV dynamics in Turkey. Domestic wholesale volume declined by 18%, reflecting the weaker market conditions together with more competitive market pricing competition, pricing was significantly pressured in the quarter since FX not appreciating much -- this left limited room in competing with imports pricing. There is, like I explained on the earlier page, the costs associated with inflation on and off lingering Middle East conflict. These weighed significantly on profitability and mostly on our entrepreneurial business. I'd like to highlight this, not necessarily with the export business, but our entrepreneurial business. Demand across certain key markets remains -- sorry, the demand across the key European markets remain softer than we anticipated during the first half. As a result, export sales declined by 4% year-over-year to 293,000 units while production decreased by 3% year-over-year to 341,000 units. Capacity utilization reached 73% overall with utilization rates of 70% in Turkey and 79% in Romania. This reflects the production levels aligned with the market demand. Despite the softer demand environment, our integrated manufacturing footprint in Turkey and Romania continue to support 4 European operations. From a financial perspective, the macroeconomic dynamics discussed earlier continued to pressure both revenue growth and profitability, the gap between inflation and [indiscernible] movements limited revenue growth while the timing of export sales was also unfavorable. Let me give -- let me try to explain what I mean by this. A larger share of export volumes was recorded during April and May when Euro appreciation remains relatively limited, while stronger currency movements coincided with lower export volumes in June. As a result, both export revenues and other operating income were adversely affected during the period. Just to refresh our memory, April had the Easter break and May has the [indiscernible] of sacrifice these mean shorter working months for us from a production volume perspective. somewhat similar timing mismatch occurred in the domestic markets in our wholesale figures for a period of time, we have to keep some derivatives of our MCV stock on hold in the plant due to required quality checks of a potential quality issue, we validated the quality divestment and issue and resume the sales operations afterwards. However, in between that time period affected our sales and stock position. We got adversely affected. Our trucks operations were also more prone to the disadvantages of being locally vertically integrated a lot. What do I mean by this? I mean, vehicle engine, transmission, all local, hence, being substantially hit with inflation and unfavorable gap between European and CPI. Given that approximately 90% of our materials, the localization rate in for truck business, the divergence between inflation and currency movements had a more pronounced impact on the cost base. And for Ford trucks, I'd like to mention about one more point in this line, back to regulation. This is an important regulation, which brings stricter European carbon dioxide emission targets for heavy trucks. Ford trucks is pursuing a balanced vector compliance strategy, focusing on accelerating zero-emission technologies while continuously improving diesel vehicle efficiency, enabling a gradual transition towards lower carbon transport solutions and reducing regulatory compliance risk in Europe. Liabilities regarding penalties. These penalties mean if the fleet emission exceeds the regulatory thresholds the brand will be subject to penalties. These penalties, these liabilities are already baked into our financials. Once the registrations are in place, meeting the overall emission target levels, these liabilities will be offloaded. But their impact -- their good news, in fact, will not be into this quarter. The benefits will be recognized for the future periods when they materialize. I wanted to mention this, and usually, I don't go into the deep-down analysis of the different vehicle lines. But I wanted to deliberately mention about this because -- in earlier talk some correspondence with you through our Investor Relations team, I'm hearing from my team that some of you are questioning essentially the Ford business, the contract manufacturing business highlighting some worries about is this business really cost plus can fortune recover its costs. I would tell you just to inform you to rest assured. Yes, Ford Motor Company honors its contracts with us. The bigger challenge, especially we faced in this period is the challenges and headwinds are coming and affecting more on our entrepreneurial business which is for Turkiye, the LCV MCV TV business and for trucks, including Turkey and export markets. So all of these factors combined together, they raised on profitability resulting in an adjusted EBITDA margin of 6% and adjusted EBITDA per week of EUR 1,438. Despite these headwinds, we maintained our disciplined financial position and our net debt to adjusted EBITDA stood at 1.75x, reflecting prudent balance sheet management and healthy leverage level. Finally, I want to mention, in our view, 2 important steps in our business we took since our last earnings call. We completed the final acquisition of Koc Finansman, which is a strategically important step that expands our financing capabilities. And supports a more integrated, seamless end-to-end approach across our automotive value chain. The impact of Koc Finansman operations, of course, since the acquisition completion happened on the first of July, its first impact will be visible in our reports starting from third quarter financials. And the to share with you is our Board of Directors approved Ford Trucks new cap project with a net investment of EUR 364 million. Last night, when we made the cut announcement for the financials. Also, we have declared this news. This investment is important to us. It is intended to support the long-term growth of our Ford truck operations in Europe, while ensuring compliance with upcoming EU emissions and safety regulations with the next-generation cap plant to be introduced progressively from 2028 onwards. It is a show of trust of both Ford Motor Company, KocKoc Holding and [indiscernible] our engineering and development work -- the program is aligned with the Ford truck product strategy, supporting entry into the U.K. market through the first right-hand drive derivative with long investment and it is going to give us a boost on our business view. So having said this, let me check if there is anything else I'd like to mention at this point. Let me -- so I think this covers the entire highlights that I wanted to highlight. One more add to the point I made about this approved project. It is also going to support us in utilizing the project-based state aid that's incentive announced in April. We will be able to utilize it with this -- so overall, we see primarily macro-driven profitability compression in our business, when I speak on the guidance, I will also mention about our reaction to it. But for now, for further details, let me leave the word to Bahar. Bahar, please?

Thank you, Gul. Let me continue with the main highlights of the Turkish automotive market. After reaching a record 1.4 million units in '25. The Turkish automotive market started this year with relatively resilient figures. However, momentum weakened through the second quarter as tighter financing conditions deteriorated macroeconomic outlook and geopolitical uncertainties increasingly wide on demand. While vehicle availability to improve these factors together with longer holiday periods, more than offset the positive impact consequently market contraction deepened from 4% in the first quarter to 12% all in the second quarter, resulting in an 8% decline in the first half of the year. Looking at the segment better, performance was mixed. Passenger car demand remained under pressure, while the light commercial vehicle segment pulled relatively resilient and growing by 5% year-over-year. The increasing share of this segment reached to nearly 12% in [indiscernible] this performance was supported by new model introductions by peers as well as a partial shift in demand from passenger cars towards CV, like commercial vehicles. with passenger vehicle prices increasingly exceeding 2 million threshold of debility challenges and financing constraints have become more pronounced. On the other hand, replacement demand in the van and truck segments remained weak. Despite the aging vehicle park, businesses continue to postpone fleet renewal decisions due to heightened macroeconomic uncertainty. Also, according to [indiscernible] data, the slowdown became even more evident in July with 25% contraction. As a result, the overall year-to-date market, excluding truck declined reached to 11% level from 8%. We believe these figures underline the increasingly challenging demand environment and support our cautious view for the remainder of the year. If we turn to our domestic performance, against this backdrop, our domestic sales volumes declined by 24% in the first half, and it underperformed the overall market. This was mainly driven by the discontinuation of the focus model as well as in terms find competition across several segments. As a result, we ended the period as the fifth largest player in the market with a market share of 6.6%. Looking at Sigma performance, we maintained our first and second place in Cement. However, tougher pricing competition and increase available to from peers with new introductions, pressure our overall sales performance. in commercial vehicles, overall, we continue to hold our market leadership with a market share of almost 25%. On the other hand, the sticky inflation challenged the competitiveness of especially for trucks in the local market due to increasing manufacturing costs, given its high local content ratio for trucks, which is our entrepreneurial business arm, faced greater cost pressure than fully important competitors, and it makes more difficult to maintain pricing competitiveness. Well, a more positive note is also Golan mentioned in the beginning of our call. We announced a new investment plan for our trucks business, which 364 million of plant investment through 2030. The program is expected to support compliance with upcoming in emissions and safety regulations while also strengthening our product offering and a competitive position in Ford European markets. In addition, we believe the acquisition of Koc Finansman will become an important contributor to our domestic business, particularly in the truck segment from '27 onwards. The acquisition will enable us to offer customers a more integrated end-to-end value proposition, financing and up to sales services. Let me move to our export market performance. In the first half of '26, the European automotive market continued to recover with passenger car and commercial vehicle registrations increasing by 6% and 3%, approximately 3% year-over-year, respectively. However, the recovery remains annual across segments and countries. While the end market returned to growth demand in several in port markets, including Germany, France and Italy remains faster than expected which is coupled with ongoing macroeconomic uncertainty and slower fleet renewal activity. Meanwhile, for us, the truck market benefited from a stronger rebound supported by a low comparison base. Against this spectrum of port maintained its position as Europe's leading commercial vehicle brand for the 12th consecutive year. As we also highlighted in our previous meetings, following an exceptionally strong market share of 17.2% in '25, which was supported by Ford's renewal product lineup. Right now, their market share normalized to 15.5% level, and it was reflecting a high base and improving vehicle available across the market. In line with the normalized sales of sorts in this period as for Total, our export sales units decreased by 4% year-over-year. As a result, we continue to play a key role in for success while producing more than 15% of fourth global vehicle registrations. That concludes my slides. I will now hand it over to Unal to walk you through our financial highlights.

Thank you, Bahar. Good afternoon, everyone, and thank you again for joining us. I'll take you through our first half 2020 financial results released yesterday and provide context on the key macroeconomic and financial drivers shaping our performance -- in fact, you have seen in this slide about ideas included the same slide that Bahar [indiscernible] told over at the way the beginning of this meeting or most of the major reasons and macro backdrop behind the adverse impacts that I will try to explain are being summarized here. In Turkey, as you know, and as you can see here, the euro appreciated by 14% year-on-year against the Turkish in the first half of this year. This is a year-on-year appreciation while the CPI increased by 32%. Under the inflation accounting, as you know, our prior year financials are indexed by CPI. And given that approximately 84% of our revenue is export generated and largely eroding this 18 percentage point FX inflation gap created a significant translation and profitability headwinds. Along with that, even maybe more importantly, within the first half, the euro at recited by 5% only compared with cumulative inflation. The divergence remained evident in the second quarter as well by a 4% or depreciation versus inflation of 7%, and the contend more important this year with last year is also very less supportive as the euro appreciated by 7% in the first half of 2022. I'll not touch the demand side a lot, but Gul already mentioned. Looking at inflation -- sorry, interest rates, consumer confidence, we can further incremental auto loan rates rose to 46% from almost 4 32.6%. These conditions continue to constrain domestic burner and pricing -- and against this part, we remain focused on disciplined edition, cost control, working capital management and liquidity that you will see in the current slides. Moving to the financial highlights. We generated a revenue of TRY 427 billion in the first half, down 12% versus the inflation adjusted prior year base. Export revenue amounted to TRY 369 billion and represented 84% of our total revenue that I mentioned the impact in the previous slide compared with 82% last year. And the domestic revenue was TRY 68 billion, down by 21%. Our total volume declined by 4% with export volume down by 6% and domestic volume down 18%. The revenue decline was more pronounced than the volume movement, primarily reflecting the widening gap that I explained between euro TL appreciation and inflation, constrained pricing in the domestic and truck businesses and also an unfavorable sales mix. Our gross profit, again, as we can see here, was TRY 29.3 billion, down 28% year-on-year. The key pressures were the timing mismatch between euro and Turkish lira movements and export sales, along with the widening gap that I explained between euro TL depreciation and inflation, higher purchase services, service and raw material costs amid inflation and as we all know, geopolitical pressures and constrained pricing environment in the domestic market and truck business. Operating profit declined by 6% to TRY 11.6 billion, and our adjusted EBITDA was TRY 25.6 billion, down by 37%. The embedded lease impact totaled TRY 3.5 billion, broadly stable year-on-year, while net other operating income decreased to TRY 1.9 billion from TRY 6.1 billion. This decrease, which we see in income from investing activities line in the detailed financials is mainly driven by, again, exchange movement, unfortunately, as I explained. This line includes valuation of leased assets, which is euro-denominated. We carry around EUR 450 million of leased assets. And as I mentioned, euro appreciation in first half of last year was 27%, and we have written a good news through valuation of this EUR 450 million worth of leased assets, which was only 5% this year's first half. If we -- I move to profit before tax, that's TRY 10.2 billion, down by 52%, while net income was TRY 10.3 billion, down by 40% Net financial expense improved by 38% to TRY 16.4 billion primarily to lower -- due to lower net FX losses, while the monetary gain remained broadly stable at TRY 11.9 billion. This support was partly offset by investing income declining to TRY 3 billion from TRY 9 billion, reflecting the lower FX valuation impact on assets subject to embedded lease arrangements. Tax was supportive in the second quarter, by the way, when we move from PBT to PAT net income. The TRY 4.3 billion tax expense recorded in the first half of last year turned into a modest tax income in the first half of 2026, including TRY 2.8 billion of deferred tax income following the regulation, establishing a 12.5% corporate income tax rate for manufacturing income. This tax rate change led us to write good news over temporary differences for deferred tax calculations. If we move to the next slide, we see that consistent with these profitability trends that I mentioned, first half margins declined year-on-year. Gross margin was 6.9%, down by approximately 1.6 percentage points. Adjusted EBITDA margin was 6.0%, down by approximately 2.4 percentage points and operating margin declined to 2.7%. Profit before tax margin was 2.4%, while net margin was also in line with 2.4%. In the second quarter, our adjusted EBITDA margin was 5.9%, showing relative stability compared with the first quarter, although still below the prior year level. And if we look at per vehicle basis, our adjusted EBITDA declined to approximately EUR 1,438 in the first half from EUR 1,839 last year. And our profit before tax per vehicle decreased by approximately EUR 573, reflecting the same FX pricing and cost pressures. If we move to next slide, here, this is again a classic slide. This slide summarizes the year-on-year adjusted EBITDA bridge. In fact, all the pressures that I tried to explain are visible here, the orange colors that we see in the first column, which includes the embedded lease adjustment, but the correction to the gross profit. And the right-hand side, other operating income, basically coming from FX impact on short-term receivables. These are driven by the macroeconomic backdrop that I tried to explain. But we see an improvement and a good control on the operational expenses, and we partially offset the backdrop coming from macroeconomic and market-driven adverse impacts. Turning to the financial situation analysis. We maintained a resilient balance sheet again. Our invested capital was TRY 360.7 billion, down 8% from year-end on the inflation-adjusted basis. and our total financial debt declined by 13% to TRY 168 billion, while net financial debt decreased by 4% to TRY 112 billion. Net debt to trailing 12-month adjusted EBITDA increased to 1.76x as Gul already mentioned from 1.49x at year-end, primarily reflecting lower trailing profitability, but the ratio remains well below our 3.5x threshold. Working capital requirement increased to TRY 54.3 billion and working capital as a percentage of sales rose modestly to 5.8% from 5.5%. The liquidity ratio was 97.1%, while the current ratio improved to 1.28. Overall, our capital structure, I can say, remains prudent with lower financial debt and improved liability to equity ratios compared with year-end. In the next slide, on cash flow, we see that net cash generated from operating activities was TRY 19.2 billion compared with, of course, TRY 78.7 billion in the first half of last year. The decline primarily reflects lower profitability that I mentioned and the TRY 2.4 billion working capital outflow compared with a significant inflow in the prior year period. We are at a fairly balanced level in terms of working capital, as we discussed in our prior quarter 1 results webcast. So this means in the last year, we improved our working capital significantly, and we had seen the impact of that improvement. And this year, we keep that prudent working capital levels in our operations. Looking at the capital expenditure, that's TRY 8.3 billion, down by 35% year-on-year and represented 1.9% of sales. As a result, free cash flow was positive at TRY 10.9 billion, although below the unusually strong prior year level. Net cash used in financing activities was TRY 23 billion, including TRY 14 billion of dividend payment, almost TRY 14 billion and TRY 4.1 billion of net interest payments. Despite these outflows, we closed the period with TRY 56 billion of cash and cash equivalents and with a very manageable net debt position. Finally, in the next slide, the cash conversion cycle remained stable at 17 days. Inventory days were 29, receivable days improved to 36 and payable days were 48. This reflects, as I mentioned in the previous slide, continued discipline in working capital management despite the challenging operating environment. Our balance sheet net FX position improved to a short position of TRY 95.8 billion, including cash flow and natural hedges, the net FX position was positive at TRY 56.3 billion. Return on equity was 18.1% and return on invested capital was 8%, both lower than year-end due to the profitability dynamics discussed. Even so our balance sheet, liquidity and risk management framework remains sound. With that, I'll hand the call back to Mrs. Saibe Gul Ertug to walk you through our 2026 guidance. Thank you for your time.

Thanks very much for the detailed explanation. So I believe so far, we have been able to show a picture about what happens in the demand and the profitability. The macro has been working against us. Due to this, we have been touching our guidance on certain key areas as a measure to enhance the final financial performance -- improve the financial performance of our company. The first line item we touched is on the retail domestic volume. You see -- in fact, first, I should start with the industry. Based on this explanation and also looking into the now July data is available, that also suggests the same thing. There will be -- we are expecting a reduction in the overall industry size. Formerly, we were calling it in between 1.3 million to 1.4 million units. Now we downward ticked it to 1.2 million to 1.3 million units. That's a reflection of the softening of the demand. Within that, looking into our retail domestic volume, we have reduced our projection to 75,000 to 85,000. This comes from a combination of both demand and our conscious and cautious choice of managing our sales together with the sales mix, both on a product mix and the retail fleet mix because on this area, we want to improve our profitability. So some of that cut over there is deliberate. It's a deliberate choice that we are taking, not just necessarily demand is down, but we want to improve the overall profitability out of our units. We have certain measures we are taking that if necessary, we can look into the details of it. On the export volume, you will see that we are not making a change. The Turkey and Romania-related export volumes are intact. And the effect of the total wholesale volume is being updated due to the change we deploy in the Turkish domestic market. We protected our overall production volume. However, because of the changes we have highlighted since the contribution to the revenue coming from domestic market will be low and seeing the euro conversion into TI on the export units, we thought it will be plausible to update the revenue projection into mid- to high single-digit decline. Having deployed all of this, we expect our adjusted EBITDA margin to land at between 6% to 7% within the year. This implies there will be improvements in the second half. And as I mentioned, through mix management, through better volume management and with this volume management, better variable marketing, better pricing options and also continued and enhanced cost-cutting measures, including also some of the resourcing activities being in place. And for some mix-related capacity enhancements, what I mean by that, if some of our vendors had an issue on the, let's say, for example, plug-in hybrids, we provided a better mix capacity on them, not on the plant, but on our suppliers. So in the second half, we will be better supporting our volumes. So through the effect of these actions, we will -- we target to improve our profitability. The CapEx side remains the same. The general investments regarding the plant maintenance, operational needs and product-related investments. Currently, we do not foresee a change over there. But as a reminder, I'd like to once more emphasize that for the health of the plant operations and health of the quality, of course, there is an element that we certainly do some of the CapEx we certainly do. But some portion of that CapEx, since we have already completed the key transformation and the key vehicle deliveries, including the final bundle and final wave of our partner, we have optionality to postpone, retime, reevaluate some of our product-related investments. Currently, at this point in time, we didn't touch it. We still keep it at EUR 300 million to EUR 400 million. And I believe this completes my section. So I will give the word back to Bahar.

[Operator Instructions] First question comes from Hanzade,JPMorgan.

I just want to make a follow-up on the export performance. You had -- I mean, European demand has started to pick up in the second quarter from a low base, but Ford continue to lose market share in Europe. What are the main reasons behind this relatively weaker export performance in the second quarter? And do you expect this to be reversed in the second half of the year? And what will be the driver behind it? The second one is about the gross margin performance or overall profitability metrics. As more than 80% of your revenues are export, which are on cost-plus contract basis, I wouldn't really expect such a big swing on the gross margin. I can understand that the product mix may be putting some pressure. But could there be also some waiver on the export contracts to Ford Otosan to Ford Motor to manage the gross margin side? I mean, the gross margin on their side, which could be also reversed in the second half of the year.

Thank you, Hanzade for the question. So let's start with the demand in export markets and how Ford performs over there. Bahar mentioned about the change in the market share. However, as we see the market development and evolution also including the partner units into the market with full portfolio, we do not see this as a big anomaly. You might remember our [indiscernible] project, it started to hit the market in waves, in chunks in bundles. And the starting point for that was, first, the Ford branded units. And in our earlier talks, I was explaining that finally, we are approaching the end of that investment saga and the last waves, last bundles of the Volkswagen units will also be in the market. But in a way, we can think that some of their units came slightly later than ours. So now since both parties have the full portfolio ready, some of that -- and it's a successful vehicle. Some of that pickup from the partner side would be something to be expected. So over -- and thinking that 17% level, something more than 17% levels, you could argue it's not a sustainable level. In these demand and macro conditions, everybody is running after certain campaigns and trying to promote their business. So some part of this move in the Ford brand market share, we see it as normal. And from a Ford Otosan perspective, since we are the producer of also those units, we don't see that as a problem. We expect it to settle down on a normalized view over there, of course, in the market dynamics. And Europe is a mixed bag in some of the countries, we see demand up in some of the countries, not so much. But as a balance, in our like long-term projection, we don't see as an anomaly. Instead, we see that we have been able to successfully conclude our commitments. We have launched our products. And now they are in the markets just operating in the intended fashion. I hope this answers the first part of your question.

So basically, you want to say that -- I mean, am I right in this one? So Volkswagen is taking some higher share in your overall exports looks like because of this ramp-up process? And so the market demand shift to Volkswagen products, and you don't expect this to continue to be like this. You expect this to normalize, right? So it's not Volkswagen gaining market share against Ford Motor. And in return on a compound basis, there will be then no impact on your side. I mean, no positive impact? Sorry, I couldn't explain it [indiscernible] well.

No, no, no problem. I have to be mindful of how I treat the Ford brand because like as Volkswagen with certain derivatives, which they didn't exist earlier, as those derivatives come into the market, this was something expected. We were expecting to Volkswagen to pick up some area because formerly, they didn't have it, but now they have it. So that part, I'm treating it as normal. But reading it with a Ford Otosan angle, since at the end of the day, we are the producer of the Vantum, I wouldn't read that as a negative sign. That was what I wanted to say. Maybe if we just approach from a Ford angle and look into the Ford Pro market share, it looks as if declining, like I said, because now the derivatives are available. Some of it is normalization. You are right in the terminology you use. However, with the Ford Otosan lens, since that was something expected, we are not reading it as a negative line.

Okay. All right. So you were not expecting this Volkswagen production to have a compound impact on your overall production?

No. Like it is supporting our production. When we look into the [indiscernible] segment, we say when we make our production planning, we don't disclose it separately. We don't say this much for this much Volkswagen, but we make our plans for the combined view. And with respect to that, in fact, even if I'm not allowed to give a breakdown, but I can at least high level say this, what we were intending to have in terms of the partner volume, we were able to have it. So over there, we didn't have an issue. Some of the maybe reduction witnessed over there could have come from the Ford brand itself. But overall, the projection and what we are producing, what we are doing is in line with our projections. And it supported our business view for the year of 2026. And your second question was about the gross margin, how it affects us. Like over there, in fact, always what we say is we have contracts made with Ford Motor Company on vehicle line basis. Each vehicle line has a different supply contract. And within the supply contract, the variable costs are identified what they are. We tell them, they are very clearly defined. The investments in hard currency, it's very clearly defined. Investment recoveries over a certain period of time, equating with a time value of money concept in itself. They are also written, but you can imagine, they are written with like hardcoded euros. So that is always honored by Ford Motor Company. And the mechanism, how we make the transfer pricing to Ford when we make the vehicle invoicing is very clearly addressed in our contracts. Over there, we can clearly say that Ford just recognizes this, and we do not have any issue in maintaining -- like we don't have any issue in maintaining our contract health. If you are asking about certain cost of goods sold related impact originating from the inflation accounting, since noncash monetary gain item is also visible, just talking about it with the partner, with our key customer, Ford Motor Company under such setting, it wouldn't make sense in our opinion. And it would, in fact, if we come back with such a thing, it could even be interpreted in a negative way thinking that, okay, Ford Otosan is trying to change the structure of the business. Ford Otosan is not able to handle this headwind. We don't want to do that. Instead of doing this, we try to explain the situation to them also. And just like our Minister of Finance advises us in every meeting, we try to look into total factor productivity, which means, okay, we have these headwinds, we have the incurred costs. How can we combat the incurred costs better? Because at the end of the day, the better management of those costs will make our life easier with our customer Ford and it will also make our life easier in the markets we operate ourselves as entrepreneurs. That's why currently, we do not foresee any change in the treatment of our contracts. And I believe this is also welcome from like with the point of view of Ford Motor Company. Unal, would you like to add anything else? Any other comments that you would like to make?

I think not necessarily, Gul. Your explanation was very good, I think.

I hope this answers H.

Next question comes from Yan [indiscernible]

Actually, I have 2 questions. One is related to truck segment. And truck segment had performed well in the past and also it was a meaningful value driver for Ford Otosan. But at this time, we see that the volume is decreasing for a long time and also the capacity utilization ratio is something like 40 percentage. And do you think that this is cycal structural changes in the truck segment? And also what time do you think that there will be a recovery in the truck segment? And also if you give us a little bit number about the Truck segment, for example, like how much EBITDA Truck segment generate in the first half of the year, maybe in the 2025, for example, it will give us a much more clue. And my second question will be related to Koc Finansman. How did you calculate the leverage impact of the Koc Finansman acquisition? Net debt to EBITDA, I mean, currently sits at 2x. And after the post acquisition, what level do you expect to rise?

Thank you, [indiscernible] Let me start with your first question was regarding the trucks. I just want to make a disclaimer that in our reporting as a policy, as a methodology, we are not segment reporting vehicle line by vehicle line. But to give you a feeling about how to view truck business, I will try to give some highlights. In my speech, I tried to say that there are important regulations coming in the heavy commercial vehicle segment for Europe. And usually, you know Turkey usually follows Europe, whatever is applicable over there, Turkey follows that. And because of the way trucks are used, even if Turkey was not following that, tractor owner in Turkey, road truck construction, tractor, when the fleets have their vehicles, it's common practice that they just travel around to Europe. That's why we have to be mindful of those regulations, and we have to make our vehicle ready for those regulations. These regulations, you can think of like the Euro 7, the emission-related regulations, how we make the carbon dioxide emission go away in a much better wheel. So we are -- regardless of the volume of our units, we have to be engaged in these regulations. And given the size of the business, given the macro backdrop we have talked so far, the vertical integration, the high local content of the Ford trucks, you can imagine that it is giving -- like there's huge investment also going on in for trucks. And the final declaration we have made for this joint development program together with IVECO for the new CA, these are really important investments. Their per unit implications are huge. However, that is for the creation of the next-generation business. Like if you are going to exist in this business, you have to do it. And this deploys to several other OEMs operating in this market. [ IVECO ] was one of them and the joint development we are doing in this new CA program with them is we are sharing the engineering work together with them. And to the extent possible, we are looking for commonalities. We are looking for better sourcing options. So I'm not going to go into the details of the project over here, but all the macroeconomic backdrop we have countered so far, we are looking into it for each and every vehicle line. And we are creating the next generation and future vehicle of it. The reason why I wanted to highlight Ford Motor Company and IVECO, when I said that this is a show of trust, you know that Ford Motor Company is no longer involved in the heavy commercial business. They have been out. Their segments include the Model e electric versions, blue conventional ICE vehicles and Pro, where we operate is their commercial vehicle line. So they are not in HCV. But when they declared recently the [indiscernible] Ford initiative, they were talking about adventure, [indiscernible] and looking into the brand portfolio and brand DNA, Ford thinking is that truck segment, heavy truck segment, what we do over there is very well blends into the Ford Pro section. So overall, yes, you are right. The investments to be divided on the certain units will be large. That's a fact. But the company made its internal discussions, internal calculations and came to the conclusion that for the overall portfolio view in the overall CV segment, this is the correct route to take. And wherever possible, when I say important resourcing, important partnerships, you can also think just like in the case of IVECO, we are sharing engineering, we will be looking into platform studies to pick the best partner for the best cost option and the best profitability. That project is going on. And as a full cycle for Trucksview, this is going on in line with Ford Motor Company involvement. So as we roll these events, of course, it starts when you are in the investment period until the recoveries are in place, that will have an implication on the profitability. But afterwards, it will come back with the benefits. I think like due to our methodology, this is and policy, this is the most I can declare about this one. For the Koc Finansman, I think your second point was regarding the Koc Finansman acquisition. Since we have just concluded our acquisition actions, how we consolidate -- and the effects moving into our consolidated financials from Koc Finansman, they will be visible in the third quarter. At this point in time, like I think it will be too early to call out something regarding that for the Koc Finansman financials. But for how they will support the synergies, in fact, with the exclusivity we are doing on our action now that they are our captive finance company, we have started seeing their benefits. And I think Unal can make maybe one more comment on the covenant-related question.