Görkem Elverici* was recently appointed CEO of Sisecam. In part one of this interview, we hear from him about the global plans for the Turkish glassmaker and how the company was affected by the Covid-19 pandemic.
You have been the CEO of Sisecam at a unique moment in its history, namely that all the joint operations are now combined into a single entity. How significant is this consolidation to the future of the company?
As the only global player active in all core areas of the glass industry, Şişecam is a global actor in flat glass, glassware, glass packaging and fibreglass, as well as soda and chrome compounds. Our company carries out its production activities in four continents with a workforce of 22,000 people, and we sell our value-added products to more than 150 countries. Our sales to customers outside Turkey constitute nearly 65% of the total.
In terms of production capacity, our company ranks among the top two in glassware, top five in flat glass and glass packaging, top 8 in soda production and the leader in chromium chemicals worldwide. Sisecam is also among the world’s most distinguished glass manufacturers, due to its operations in all main fields of glass and competitive advantage of its operations in various countries.
Having production operations in Turkey, Germany, Italy, Bulgaria, Romania, Slovakia, Hungary, Bosnia-Herzegovina, the Russian Federation, Georgia, Ukraine, Egypt, India and the US, Şişecam continues on its journey to becoming one of the top three global producers in its all-main business lines.
As you mentioned, 2020, which was also the 85th anniversary of our Company, has been a unique year in our deep-rooted history. Despite the challenging environment brought by the global pandemic, we recorded a key milestone in our corporate history by consolidating all our operations into a single entity. We have completed the largest merger of the Turkish capital markets with exemplary success. With this strategic move, Şişecam has taken a major step forward to shape its future
With the completion of this effort, “One Şişecam” entered a new era, jumping into a rising stage with global excellence. Simplifying its legal entity and shareholding structure; consolidating all its activities under one entity will further enhance Şişecam’s global competitive position
We are now focusing on a multidimensional transformation process that is going to build the backbone of “Şişecam of the future”. With the transformation that is aimed to provide more agility and simplicity, we will have the necessary infrastructure to adapt to the changing conditions of the world that will emerge after the global pandemic and will have even stronger foundations and capabilities to benefit the changing trends that will carry Şişecam into the new era. The multidimensional transformation will also create synergies within the business units of “One Şişecam for the future” and unlock various potential synergies that have a direct impact on productivity and profitability.
Our operating model which was built on a business unit-based structure has also changed to a function-based structure as a part of our transformation. Şişecam's new operating model, based on functional principles will simplify to more effectively manage the company that spans four continents across our different lines of business. I consider this effort as an enormously important step toward adopting a more customer-centric, simpler, more flexible, lean, integrated, digitalised, optimised and agile structure across the company.
The structure we have established will accelerate our operational excellence processes and will significantly support Şişecam’s new initiatives for growth and innovation. In addition, our newly consolidated structure will help transform our respective business models according to our new operating model and ensure a holistic implementation of such transformations through digital infrastructures. Meanwhile, the more collaborative environment we will create will maximise future benefits.
We are also focused on simplifying our global shareholding structure as we have done in Turkey. We have already started this process by consolidating 12 companies into 4 companies that we had previously established in the Netherlands. This merger is also successfully completed, and we plan to take similar steps in other regions where we operate.
What do you see as the main goals of the company over the next years?
As a company that puts sustainability as one of its key pillars, we will also sustain our management strategy, which has proven itself over and over again as can be seen in the success of our operations. We also intend to improve our overall business model by more effectively deploying our capital investments, and also by transitioning to the function-based management approach as part of our strategy for the coming years.
Şişecam will continue value-creating portfolio management, expanding its global presence in existing businesses and entering into new business areas. In this aspect, we have initiated a new investment in Hungary in glass packaging and in the US in soda ash segments. We will also continue our investments in Turkey that will reinforce our leadership in Turkey. Şişecam continues to look into potential opportunities to broaden its horizon in global scale with new investments through M&As and greenfield activities. The fields we are interested in and considering are not only limited to the glass industry, but we are also looking into many potential sectors with sustainable growth and profitability. We are evaluating the potentials for different business areas in line with our existing business objectives.
There are several reasons why we place importance on this. We are committed to ensuring the return on capital for our shareholders. The key here is to be present in the right businesses that can optimize returns. In the past decade, Şişecam has made the decision to divest two business areas that were not part of its core focus and will further optimize its portfolio of businesses with sustainable growth and returns.
Among the new potential businesses, high technology areas such as the defense industry, agriculture and materials (composite) are examples of areas that we look for opportunities. Yet, I would like to particularly note that we will also focus on digitalization and advanced technologies even in our investments in conventional industries. On the other hand, we are also determined to make investments directly in state-of-the-art technologies together with start-ups or medium-size companies to create more value-added products and use more advanced technologies in our own areas. Şişecam is positioned to achieve a global operational excellence with a more integrated, digitalised and optimised structure.
Our 5-year target is:
- We aim to increase the share of our non-Turkey sales above 70 percent level, which is currently at c. 64 percent.
- We are planning to increase our production outside Turkey above 50 percent level, which is currently at c. 42 percent.
- As we continue to grow in our fields of activity, we will also evaluate organic and inorganic growth opportunities.
- Wherever there are opportunities for sustainable growth, we will be there too.
Our goal is to increase the EBITDA margin by an additional 200-300 basis points per year after 2-3 years following the merger.
With the above targets Şişecam will carry its continuous success to the future with its efficient and digitized operations and add more value with new growth and technological initiatives.
We are also proud to be taking a part in responding to COVID-19 while keeping our core values and targets of our Sustainability Strategy “CareforNext” during such a challenging time. We remained in trusting that the common goal that brings the whole of humanity together is very simple and basic: 'Healthy planet, healthy people in the pursuit of sustaining our only and One Planet and Common Future’.
In this direction, our sustainability goals which directly peers with the UN’s 11 Sustainable Development Goals provides enormous opportunities which are shaped around the pillars of “Preserve”, “Empower” and “Progress”. Our strategy aims to preserve natural resources and our corporate heritage for new generations, to approach all our stakeholders by respecting diversity and inclusion, to encourage digitalization, and to sustain operations that do not make a negative impact on climate change.
One of the biggest talking points in the industry is the use of digitisation. Do you anticipate the use of more digital technology within Sisecam’s facilities?
Şişecam views digitalisation as a new culture and way of doing business that encompasses the entire value chain. Numerous huge digitalisation programmes are underway across our global operations.
Şişecam has been adopting digital transformation not only as digitalisation of the production line and facilities but also increasing the digital capabilities of the business units such as supply chain, finance and human resources. The holistic approach in this journey is the key focus. We are transforming our digital infrastructure by taking tomorrow’s needs into account. Under the new post-merger organisational structure, Şişecam is speeding up its digital transformation journey to achieve greater operational excellence globally.
We have an infrastructure digitalization initiative underway that is one of the world's top three largest SAP programs that are carried out at the moment. We will unite our 43 facilities located in 14 countries and all our sales systems to a single digital infrastructure to make them part of a unified functional business model. We are also working together with PWC globally for this program besides SAP.
The key issue we are focusing on in our digital transformation is to speed up our decision-making process. Our plans are targeted towards boosting our competitiveness gradually in the coming period. We will create a Şişecam that can convey its market domination to more extensive geography from individual locations, with influence across a much larger global footprint.
I would like to particularly note that our focus will surely be upon digitalisation and advanced technology practices even in our investments in conventional industries. We started our Digital Transformation Program back in the early days of 2018.
As part of our digital transformation journey, we have gone live since last year in glassware, retail, finance, procurement and HR domains. ERP system transformation process is scheduled to continue with the remaining business lines of our portfolio of operations that is expected to be completed in the next 2-3 years.
When the process is completed, Şişecam, along with other programs, will have the tools and advanced technologies required to use artificial intelligence and data analytics in addition to cloud-based systems and big data processing skills. It will be an essential milestone for our digital transformation.
The Covid pandemic was a tough time for us all. How did Sisecam react and adjust its production as a result?
In 2020, despite the pandemic, Şişecam manufactured 4.9 million tonnes of glass at its production facilities. In addition, the company produced 2.2 million tonnes of soda and 4.1 Million tonnes of industrial raw materials in this same period.
We reported consolidated net sales of TRY 21.3 Billion in 2020 with an increase of %18 year on year. International sales – which including exports from Turkey and sales from non-Turkey production facilities – accounted for 60 percent of our consolidated sales during the year.
Şişecam reported consolidated EBITDA of about TRY 6 billion thanks to our optimisation efforts and related actions. Our sound financial structure also enabled us to continue investments necessary for our operations and further expand employment. In the same period, Şişecam recorded total capital expenditures (Capex) of TRY 1.9 Billion.
In the first half of 2021, Şişecam demonstrated an even better financial performance year on year, which refers to the pre-pandemic period. Şişecam’s consolidated sales reached TRY 13 billion in the first half of the year 2021 with its total investment of TRY 838 million in the same period. International sales accounted for 64 percent of our consolidated sales during the year.
Although the Covid-19 pandemic has resulted in unprecedented changes in our lives and the economies, navigating through uncertainties with a dynamic approach to crisis management and the ability to quickly adapt to changing conditions, Şişecam has continued to create value in the extraordinary atmosphere of the pandemic.
Şişecam adopts the philosophy of “people first” in all its operations. We quickly implemented and followed all applicable rules, restrictions and guidelines set by public health and governmental authorities in every country we operate. Ensuring the health and safety of our 22.000 employees located in 14 countries has always been a top priority of our business strategy.
Even prior to WHO’s official declaration of the pandemic, we had already started taking a wide range of measures related to hygiene, disinfecting, travel, protection of employee’s health, and business continuity. We implement the preventative measures announced by the World Health Organization and official institutions of countries where we operate at all our workplaces, alongside our Pandemic Action Plan.
As we operate in 14 countries with continuous production in manufacturing facilities, we adjusted our people planning in line with the local authority practices. Our staff at headquarters and sales offices in all countries shifted to hybrid working.
As a company that delivers global solutions with its value-added products and provides world-class main input to over 100 industries, we have also demonstrated great agility in taking a wide range of measures to ensure business continuity.
Since our current business lines require uninterrupted production, Şişecam has quickly adapted its production plans and business processes by considering emerging developments in its target markets and geographies.
We closely monitored global events and market dynamics related to our business lines with robust crisis management practices.
As a result, Şişecam successfully continued its production operations without any interruptions through efforts on optimisation and operational excellence.
As we are keenly aware that corporate success cannot be achieved without successful ecosystems, with this perspective, we have promptly and effectively taken all necessary measures to protect our stakeholders.
We supported our key suppliers and customers with ecosystem financing solutions in order to protect all the parties in value chain of business and as well as our stakeholders.
By keeping its stakeholders unharmed from the uncertainty and challenging market conditions, Şişecam restrained the value creation.
We also ensured operational sustainability by performing exceptional demand/production planning to support our supply system. We have achieved a remarkably balanced corporate structure thanks to market diversification across our business lines.
This competitive advantage, coupled with effective management of production and operating costs, helped to maintain Sisecam’s operations intact despite the pandemic. For the foreseeable future, we will maintain our cautious approach while planning carefully and prudently for the period ahead.
Since the Covid-19 is an ongoing pandemic, Şişecam continues to review evolving guidance from public health, governmental and scientific authorities of the countries it operates.
Based on findings and analysis, Şişecam modifies its measures for each stage of the struggle against the pandemic, such as periods of tighter restrictions and staggered normalisation. We actively promote these precautionary and protective measures in the regions we operate with a specified approach for each and every country.
Part 2 of the interview with Mr Elverici will be available online soon. An abridged version of this interview will appear in the September issue of Glass International.