Ahmet Zorlu

Esteemed Shareholders,

We have left behind another difficult year in the global economy. 

2019 was a year marked by concerns over global growth under a shadow of protectionist policies, Brexit and the ongoing geopolitical challenges in many parts of the world.

Amid concerns over trade wars and a slowdown in global growth, leading central banks such as the US Federal Reserve (Fed) and the European Central Bank (ECB) had to return to expansionist monetary policies to support the economy. The Fed reduced its policy rate to 1.50-1.75% range with three interest rate cuts realized during the year while the ECB prepared a support package and initiated a new asset purchase program of EUR 20 billion per month, while also cutting interest rates. With the interest rate cuts, a relative recovery was observed in the capital flows to emerging markets.

While the US economy basked in one of its longest runs of growth, the Eurozone experienced weaker growth than the previous year. In addition to the fallout of the Brexit process during the year, political uncertainties occurring in Italy and Spain negatively affected the growth trend in the region. Meanwhile, economic growth in Japan remained short of expectations and the loss of momentum in Asian economies continued, while the growth performance of the Chinese economy fell to its lowest level in 30 years.

According to estimates, economic growth in 2019 was the weakest since the 2008 financial crisis. In its January 2020 report, the IMF revised down its global growth projections once again, reducing its estimates for global growth from 3% to 2.9% for 2019 and from 3.4% to 3.3% for 2020. The report highlighted that negative developments affecting economic activity in several developing countries required the re-evaluation of growth expectations. The relative recovery anticipated for 2020 is expected to come from emerging economies other than China.

In the first two months of 2020, a consensus is expected to be reached on the first-phase trade agreement in the trade war between China and the USA, which has been ongoing for the last two years, while the approval of the Brexit bill will have a positive effect on easing uncertainty in the markets and increasing risk appetite.

Turkey’s economy achieves success in its stabilization process. 

The Turkish economy rounded off a year under the influence of turbulent political relations with the United States as well as cyclical developments, and the geopolitical risks stemming from the Middle East which have been ongoing for some time.

The Turkish economy entered a troubled period following the sharp movement in the exchange rate in August 2018. The contraction in the Turkish economy, which started in the last quarter of 2018, continued through the first half of 2019 with the economy experiencing a 2.3% contraction in the first quarter and 1.6% in the second quarter.

The authorities’ determination throughout the year along with the swift measures taken by the government, the process of balancing conducted with the harmonious cooperation of the private sector have borne significant results. The Turkish economy, which exceeded expectations to grow by 1% in the third quarter of the year, increased its momentum in the fourth quarter to grow by 6%. This brought the growth rate for the full-year 2019 to 0.9%, exceeding the target of 0.5% growth set out in the New Economy Programme (NEP).

The improvement in the real exchange rate and moderate course of domestic demand supported the overall improvement in inflation dynamics in 2019. The CPI inflation, which had stood at 20.35% in January 2019, ended the year at 11.84%.

In response to the recovery in the inflation outlook, the Central Bank of Turkey gradually lowered its policy rate from July, when it stood at 24%, to 12% by the end of the year. This provided some relief to companies’ cash flows by lowering the financing costs in the second half of the year.

In 2019, exports reached a record level while the current account deficit, which had already declined to its lowest level of the last 9 years, improved further to post a surplus. The government, which has taken a decisive stance towards maintaining the success achieved in the balance of payments, sometimes described as Turkey’s Achilles heel, targets a current account deficit/GDP ratio of 1.2% for 2020.

The fact that the economic indicators in 2019 were realized close to the targets set out in the New Economic Programme has increased the confidence in the framework drawn out for 2020 under the program.

A challenging but successful year for Vestel Beyaz Eşya

In 2019, when we felt the pain of global conditions and the balancing process together as a country throughout the year, we continued to strive with every ounce of our strength to make sure Vestel Beyaz Eşya would reach a brighter future with our export-oriented strategy, innovation capabilities and competence in value-added production.

Vestel Beyaz Eşya, which gave more weight to export markets from the third quarter of 2018, continued to implement this strategy in 2019 as well and has continued to be one of the biggest forces in Turkey’s exports. I believe that we will carry our strong performance in export markets even further.

The global brands, for which we manufacture products, have demonstrated their faith and trust in our quality and our competencies in R&D, design and innovation by further expanding the scope of their existing collaborations with us. The best example of this is the expansion in the scope of our brand licensing agreement with Sharp, which is valid until the end of 2024, to include smart products.

Vestel Beyaz Eşya, a domestic technology and manufacturing company, exporting more than 80% of its production to 156 countries around the world, particularly in Western Europe, has to be a company which not only follows technological developments closely but directs these developments in order to maintain its competitive clout and pioneering power in the world. In this vein, since 2015, we started to develop all of the infrastructure and systems necessary for both Industry 4.0 and digital transformation at Vestel Beyaz Eşya. We have already implemented many Industry 4.0 projects at our factories and our work in this area continues rapidly. We continue to maintain our claim that Vestel City will be the first facility in Turkey to complete the Industrial 4.0 transformation.

On the product side of digital transformation, we continue to rapidly increase the number of smart products in our product range. The televisions, white goods and smartphones we currently produce at Vestel within the framework of the smart home ecosystem can connect, communicate and transfer data with each other. Today, we have products in our product range which can learn user habits and evolve themselves. For example, we have washing machines which are able to order detergent when the detergent runs out, which we introduced to the market in Europe. We have become the center of attraction at international fairs with our products which use Artificial Intelligence and are self-learning, taking their cue from user habits. We have been awarded dozens of awards in design competitions. Vestel Beyaz Eşya, which won 32 awards at the Plus X Awards alone, was once again the winner of the Most Innovative Brand Award, the most prestigious award, this year after having won the award in 2018.

We approach sustainability with a broad perspective. 

In line with Zorlu Holding’s Vision of Smart Life 2030, we focus on producing sustainable solutions in all of our activities which take the future welfare of people, society and the world as a basis. We work under a 360 degree sustainability approach which extends from our products and services, production facilities and human resources to our way of doing business. Acting in line with this vision, our products, which are the world’s most efficient in electricity and water consumption, which wash without detergent, have the lowest noise levels and which prolong the life of food, have attracted wide acclaim from consumers.

On the other hand, we attach great importance to producing with an awareness of our responsibilities to our country and our people, and contributing to the development of Turkish industry as well as supporting employment goals. With our social awareness, we strive to carve out a bigger place for our disabled citizens and for women in business life. With our Accessibility Project, we undertake designs and arrangements to ensure that our products are easy to use for individuals with disabilities.

As an organization that has adopted sustainability at its heart, the Walking Frame Project, which we developed for our four legged friends has won wide acclaim in the international arena, winning the Best Social Responsibility Project Award at the ACE of M.I.C.E. Awards, and the Bronze Award at the International CSR Excellence Awards, which is the most prestigious social responsibility award event held in the UK. In addition, the Green Organisation awarded Vestel Beyaz Eşya the “World Leader (CSR World Leader) Order” in recognition of its Walking Frame Project.

After all, we believe in a better future.

The year 2020 will be one where conditions in the world and in our country will not have fully recovered, where we will have to manage many risks, with factors such as the US Presidential election, the fallout of Brexit and recession in EU economies continuing to cast uncertainty over the global economy. In Turkey, on the other hand, the economic recovery is expected to gain momentum with a revival in consumer demand.

I believe that in 2020, with the correct soundings and our entrepreneurial spirit, we will further strengthen the drivers of our power such as our innovation, technology, design, value-added production and exports. I sincerely believe that 2020 will be a year when we will take firm steps forward for sustainability in line with our vision of Smart Life 2030.

We will continue to generate increasing value for our country by working hard in all areas that are needed for Turkey’s strong future.

I would like to extend my sincerest thanks to all of the stakeholders with whom we have faced the challenges and succeeded together.

Kind regards,

Ahmet Nazif Zorlu