Akkök’s plan for 2010

Akkök Holding is one of the leading groups in Turkey… It grew mostly through textiles before entering the shopping centre and energy businesses. Mehmet Ali Berkman was appointed as the group’s CEO as a result of a restructuring. Berkman is now working on the holding’s future strategy. He says: “We forecast that we shall grow by 15 percent in 2006. I can say that over the next five years we shall at least double in size. This represents a turnover of approximately $2.5 billion.”

In recent months the closure by Akkök Holding of its two Ak-Al Tekstil factories has served as a vivid reminder of the problems facing the textile and clothing industries. The sector has begun to cite Ak-Al Tekstil as an example of how “the major groups are leaving the sector”. The group’s earlier sale of Dinarsu has reinforced the opinion that “the Akköks are leaving the textile sector”. Mehmet Ali Berkman, the group’s CEO, denies these suggestions and cites the investment that they have made in increasing capacity in Aksu. He adds that they will stay in the sector with Aksu and that they will monitor their remaining two operations at Ak-Al and make decisions according to progress. Berkman says: “There will be mergers, partnerships and collaborations in the sector. People will try everything to reduce costs. Those who overcome these difficulties will be fine. We shall be one of the companies which overcomes these difficulties.”

The Group is prepared to consider foreign partnerships in Aksu. In addition, it is pursuing a growth strategy in energy and trying to become a regional power. Berkman says that investments made in Ak Enerji today will become highly profitable in 2-3 years. There is still interest in Grup Nautilus. The group’s core businesses includes real estate where it has several projects.

Akkök Holding Board Holding Mehmet Ali Berkman gave his first interview to Capital and answered our questions as follows:

* Will you continue in the textiles sector?
It is absolutely not true that we have left the textile sector. On the contrary, we are making significant investments at Aksu in product diversity, investment productivity and quality. Aksu has a niche business. It mostly produces outer clothing and woolen garments. We our developing the company. We are working on new markets and new fabrics. Wool products are being developed which use nanotechnology. We have also begun working on this. For this reason we have not left the textile sector. Textiles is not just a matter of producing yarn. Ak-Al has a factory which produces various yarns from acrylic fibers. We have withdrawn from two. The others are continuing and shall continue.

* You have previously referred to the risk from the Far East. There are some problems regarding the sector which are specific to Turkey. If you won’t withdraw from the textile sector, what kind of strategy will you adopt?
We are not thinking of clothing. But people will be very interested in outer clothing. It will become fashionable and, as a result, even though you still have suits at home you will go out and buy more every year. This means that there is demand. But there are a lot of players. There is excess capacity in Turkey. That is the reason for the problems.

There has been no coordination on a regional, sectoral or product basis. It was very disorganized. As a result, there will be mergers, partnerships and collaborations in the sector. People will try everything they can to reduce costs. Those who overcome these problems will be fine. We shall be amongst those who overcome the problems. These investments will enable us to breathe. Intelligent products will give us new markets. Aksu will continue. We shall monitor Ak-Al’s remaining two operations and make a decision according to developments.

* What were the Akkök Group’s year-end results in 2005?
We had a combined turnover of around $1.4 billion. The group’s total exports stood at $130 million. In 2005 we made total investments of $130 million. We employ a total of 4,068 personnel. When we look at 2005 we see that our real estate and chemicals performed very well. But in textiles, we had problems in terms of profitability at Ak-Al and Aksu. Our turnover was a little better than 2004 and we achieved our targets. But what did not reach its targets was Ak-Al Tekstil.

* What target have you set for 2006?
We forecast that we shall grow by 15 percent in 2006. Taking into account the restructuring, I can say that in today’s fixed prices we shall easily double in size in the next five years. This means a turnover of around $2.5 billion. This growth will be organic. Of course, we shall also look at opportunities for inorganic growth. In that case the figures will be different.

* Will you enter new business areas?
As regards new business areas, our views are based on our experience. I have observed the results of the collaborations, acquisitions and partnerships made by international companies. When I look at the companies in the holding in the same way, I think they must now focus on developing countries. I think it is very risky and dangerous to make investments in business areas which you do not know. How can one go and put money into small businesses, businesses about which one knows absolutely nothing, at a time when things are still developing? At a time when we are trying to expand our existing businesses why should we engage in such an adventure? As a result, we shall continue to focus on our existing businesses and we shall try to become a regional power in these areas.

* Are you looking to become a regional power as a holding or are your ambitions in this regard restricted to specific sectors?
As a holding, we should not dream. These ambitions will be pursued at a sectoral and company level. Energy, chemicals and real estate: these are important businesses. Aksa and Ak Enerji are important companies. Our chemicals company is picking up business in countries such as Jordan. But we should be in businesses which are related to, and support, our core businesses. For example, if an opportunity arises to purchase a plant which provides raw materials which Aksa buys, then we shall take it.

WHAT IS THE AKKÖK GROUP PLANNING IN ITS CORE BUSINESSES?
AKSA: The demand for acrylic fibers will continue to grow. The investment that we initiated last year and are continuing this year will create additional capacity of approximately 20,000 tons. We have made preparations for this capacity increase. But we have another advantage. We have a very sound position amongst European producers. Our rivals in Europe are completely leaving the leadership in this field to us.

AKKİM: This is one of the companies we are thinking of expanding. It has output of over 500,000 tons. It is a company whose own engineering capacity, production technology and products can compete with high-turnover chemical giants. It does not have a very high turnover itself. But it has secured significant price stability even though the use of chemical goods in Turkey is small-scale. This pricing structure resulting from this production is the reason that all these giants are lining up to enter the Turkish market.

Ak-Al: Ak-Al has a factory which produces various yarns from acrylic fibers. We have withdrawn from two. We are continuing with the others and shall continue to do so.

AKSU: Unlike with Ak-Al, at Aksu we are making very significant investments in product diversity, investment productivity and quality. Aksu has a niche business. It works on outer clothing and woolen products. We are developing the company. We are working on new fabrics and new markets. Wool products are being developed which use nanotechnology. We have also begun working on this.

AK ENERJI: We are heading towards diversification in energy production. We have two hydroelectric power plants. We are also working on other types of energy, such as wind energy. We are looking at another hydroelectric and thermal plant. We have taken certain prudent measures production. New investments will be channeled towards hydroelectric and coal power plants. We are trying to save ourselves from gas. As a result, we are diversifying.

SHOPPING CENTERS: We can make an investment from scratch or we can acquire something. We have many projects in this field.

EBRU FIRAT
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