Sabancı's tripling plan

HALUK DİNÇER is head of the Sabancı Holding Retail and Insurance Group. He is responsible for retailing, which is one of the Holding's main branches of business. He manages a turnover of TL 3.1 billion, which accounts for 13.5 percent of the group's total turnover. This figure does not include insurance, for which he is also responsible. 2012 is going to be an extremely busy year for him. Because it will be the year which decides the fate of the 16 year-old partnership with Carrefour. When it comes to Carrefour, the holding is continuing the process of "evaluating strategic alternatives". "Everything is possible. Our road map will become clear by the end of the year," says Haluk Dinçer. We spoke with him about the group's plans in retailing and its future targets.

Capital: Could you summarize with the latest figures the Sabancı Group's strength in retailing?
- The retail and insurance group is one of Sabancı Holding's main business branches. Our companies are Carrefoursa, Diasa, Teknosa, Aksigorta and Avivasa. In 2011, we had a combined turnover of TL 5.1 billion and a consolidated turnover of TL 3.1 billion. The retail group accounts for 13.5 percent of the Holding's consolidated turnover.

Capital: How was 2011 for Carrefoursa? What are your targets for 2012?
- Carrefoursa's turnover in 2011 was TL 2.5 billion. The company's performance was below our expectations. We hope that 2012 wili be a better year. This year, instead of growth, we shall concentrate on improving our existing distribution network and the performances of our supermarkets.

Capital: Sabancı Holding CEO Zafer Kurtul said "Our status with regard to Carrefour will change" and Güler Sabancı said "We shall either sell or buy". What is the latest situation?
- There has been a decline in Carrefour's performance in Turkey in recent years. This has been mainly the result of frequent changes in the management. For this reason we have started a study to evaluate future strategic alternatives. But no decision has yet been taken on buying or selling. This is a decision that must be taken with the partners. We believe that the process will be completed by the end of this year.

Capital: The Holding released a statement that "We want to evaluate opportunities for organic and inorganic growth in retailing." What are these opportunities?
- In fact, we are looking at all opportunities. Our operations, both big and small, have in any case been continuing for quite a long time. It looks as if small local chains will at some point be bought out by the big chains. At the Sabancı Retail Group we shall continue with this strategy.~

Capital: You have a 12 year-old partnership at Diasa. Are you happy with its performance?
- Last year Diasa reached a turnover of TL 1 billion and 1,100 supermarkets. We are happy with its performance, its expansion in Turkey. We are planning to open more than 300 new supermarkets this year.

Capital: How much will you invest in retailing in 2012?
- Retailing will account for 5 percent of the Holding's total investments. I mean $100 million (TL 180 million). In 2012, we shall invest TL 100 million in Carrefoursa, TL 40 million in Teknosa and TL 40 million in Diasa.

Capital: How would you evaluate competition on the market?
- Retailing is a very easy market to enter. Over 1,000 new small format supermarkets are opened in Turkey ever year. There is very intense competition. But this favors the consumer. Because, as a result, the transition from traditional outlets to modern ones is occurring more quickly. When many more supermarkets are opened than are needed then the increase in costs is greater than the increase in turnover. As a result, there are problems with profitability. The sector is working with lower profits than three years ago.

Capital: But it is still an attractive market. New investments are continuing...
- Today organized retailing in Turkey has achieved a turnover of TL 40 billion. It could double or triple in size over the next ten years. When we look at the Sabancı Retail Group within this picture then retailing is one of the business areas to which Sabancı attaches importance. And it will continue like this.

Capital: Where will Sabancı be in retailing in five years' time?
- We don't want to say anything about Carrefour. But Diasa will very easily grow by 8-10 percentage points more than the market. It needs to double its turnover over the next three years. This plan also holds true for Teknosa. Teknosa will continue to grow by 35 percentage points more than the annual market average.

Sabancı's public offering strategy
SABANCI ACCOUNTS FOR 15 PERCENT OF THE
ISE Until a company goes public, then its value is only theoretical. Its real value becomes clear when it goes public and is open to investors. Today, the companies of the Sabancı Group account for nearly 15 percent of the total market value of the İstanbul Stock Exchange. Teknosa will become our 12th publicly owned company.

COMPANIES PROVE THEIR MATURITY
Every company in the Sabancı Holding portfolio which has reached a certain maturity can be expected to go public. This is a bit like proving its maturity,,, İt can be expected for two reasons. The first is to imbue the companies with some transparency and visibility. The second is corporate management.

THE COUNTDOWN AT TEKNOSA
If there is no hitch, we are planning to complete the public offering of Teknosa within a few months. Our work in this regard will be completed by the middle of this month. Then we shall give the green light and present it to the holding's board of directors. If they say OK then the public offering will be completed during the first half of the year.