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Edited Transcript of GLYHO.IS earnings conference call or presentation 14-May-15 1:30pm GMT

Q1 2015 Global Yatirim Holding AS Earnings Call

Istanbul Mar 25, 2020 (Thomson StreetEvents) -- Edited Transcript of Global Yatirim Holding AS earnings conference call or presentation Thursday, May 14, 2015 at 1:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Mehmet Kutman

Global Yatirim Holding Anonim Sirketi - Chairman & CEO

* Mehmet Kerem Eser

Global Yatirim Holding Anonim Sirketi - CFO, Head of Financial Affairs & Finance Group and Finance Director

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Conference Call Participants

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* Gloria Lam;Al Waha Capital;Vice President

* Rain Leesi

AS Avaron Asset Management - Investment Manager & Head of Research

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Presentation

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Operator [1]

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Ladies and gentlemen, welcome to Global Yatirim Holding First Quarter 2015 Financial Results Teleconference Call.

I now hand over to Mr. Mehmet Kutman. Sir, please go ahead.

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Mehmet Kutman, Global Yatirim Holding Anonim Sirketi - Chairman & CEO [2]

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Good morning or good afternoon, ladies and gentlemen, wherever you are. I have with me Mr. Kerem Eser, who is the Chief Financial Officer of the company, as well as the Investor Relations team. Should we -- I'm going to make a very quick introduction about the numbers as well as the recent developments, and then we'll open the panel for Q&A.

Let's start with the $64 million question about the IPO, which I'm sure all of you are quite questioning. The way it developed was, as you all know, the demand was approximately 1.38x oversubscribed on the international tranche and the local demand was barely subscribed. The banks in New York, what's happening around the world and the appetite for emerging markets, have told us that the aftermarket of the Söke might not be as good as the company deserves and they recommended to put the transaction and to recall at a later date. And we basically said, yes. We are considering -- we don't need the cash for sure, but we are considering other alternatives as we speak. There's nothing firm which we can mention or disclose at this stage. Having said that, I'm sure there's questions on this, but we will leave it at the end.

On our first quarter numbers, just a brief recap. On our revenue line, we are up by approximately 27% from TRY 66.5 million to TRY 84.5 million, the bulk of it coming from our energy section, up by 49% compared to the first quarter of 2014. On the ports side, we're up by 17%.

On the EBITDA line, the energy is doing relatively well, up by 35%, but still it's not a big number. The port is exactly in line with the budget, up by 25%. And our overall EBITDA is up by 108% from TRY 11 million to TRY 22.8 million. The bottom line, if you go down to the bottom line, you'll see that the difference is basically stemming from amortization expenses as well as currency depreciation, which are both noncash, TRY 11.8 million of it coming from the -- sorry, TRY 12.8 million coming from the depreciation expense and TRY 0.8 million coming from tax and others. Therefore, bringing the cumulative loss to TRY 28.2 million (sic) [TRY 28.6 million] versus TRY 26.2 million (sic) [TRY 26.6 million]. On a real cash basis, the way I look basically, the company has done extremely well in the first quarter.

On individual business units, on the ports side, our consolidated EBITDA is [8.4 million] for the first quarter versus a consolidated EBITDA of [8.250 million], although the volume is down from 53,000 to 50,000 TEU for the first quarter consolidated between Antalya and Bar. Because of the tariff increases that we achieved in the first quarter of 2015, the EBITDA line has been more or less the same, although the volume was approximately down by 8% in Antalya and little bit up in Bar, therefore bringing the overall TEU volume on a consolidated basis about 6%.

On the energy side, Naturelgaz, as usual, has been growing substantially with a 55% increase compared to the first quarter on their top line, bringing the EBITDA a little bit higher as well. But the main season for Naturelgaz, as some of you might know, starts with (foreign language), which starts in April, May. The real estate and the finance division are more or less the same.

That's basically a very quick snapshot. One more addition to the ports side. Our cruise revenue starts in second quarter and peaks on the third quarter. Our guidance is exactly the same for the ports side, $85 million EBITDA for year-end. We're keeping the same guidance.

That's basically a snapshot. I think we should move on to Q&A, which I'm pretty sure, in lieu of the number of participants, there should be quite a lot of them.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question is from Gloria Lam from Waha Capital.

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Gloria Lam;Al Waha Capital;Vice President, [2]

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So first of all, I missed your point just now regarding to the local demand of the IPO. So could you please repeat again?

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Mehmet Kutman, Global Yatirim Holding Anonim Sirketi - Chairman & CEO [3]

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Certainly. The total local demand, as of Friday night, was TRY 120 million versus TRY 200 million of offering. The remaining of the demand was made up on Sunday thanks to the -- some underwriting -- banks underwriting the issue for the remaining of TRY 80 million. Therefore, the local demand was undersubscribed by 40% at the time of the closing. And Sunday, trying to close the deal, we have convinced the banks to underwrite a large portion of it. So in reality, the local demand, if you exclude the underwriting of the 3 Turkish banks, was undersubscribed by 40%.

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Gloria Lam;Al Waha Capital;Vice President, [4]

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Got it. Got it. And the decision to pull out from the IPO or canceling the IPO is really because of the low local demand that you think might potentially impact trading going forward.

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Mehmet Kutman, Global Yatirim Holding Anonim Sirketi - Chairman & CEO [5]

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It's -- the local demand basically has been triggered for the international demand because the international demand, although being oversubscribed by 1.4x approximately, was not enough to compensate for the lack of local subscription. And the reason the local subscription is -- was small, Turkey is just not a capital markets country. I mean, the capital markets relative of Turkey, unfortunately, is not where it should be vis-à-vis it's economy being $1 trillion economy. It's a bank and finance community-denominated country.

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Gloria Lam;Al Waha Capital;Vice President, [6]

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Got it. And would you be able to provide us with some update on the potential equity injection from Goldman Sachs at Global Yatirim Holding level?

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Mehmet Kutman, Global Yatirim Holding Anonim Sirketi - Chairman & CEO [7]

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We were waiting for the result of the IPO process. Let me not disclose anything because eventually, people say, you keep saying something, it doesn't happen, although it tends to happen in the long term. Therefore, I prefer to make disclosure when it's really solid reference. So time being, everything is on track. We were waiting for this IPO. Nothing further to mention.

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Gloria Lam;Al Waha Capital;Vice President, [8]

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Got it. So Goldman due diligence process is irrelevant to whether the IPO is going to happen or not? Is that correct?

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Mehmet Kutman, Global Yatirim Holding Anonim Sirketi - Chairman & CEO [9]

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No, no, no. The Goldman transaction is completely irrelevant of the IPO. As a matter of fact, they absolutely didn't want the IPO from day 1. They were -- their recommendation was the London listing rather than Istanbul listing.

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Gloria Lam;Al Waha Capital;Vice President, [10]

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Got it. Got it. And if I remember correctly from the company disclosure before, the Goldman due diligence process should -- the original target is to conclude around this time of the year. Do you think that -- is that still the target time frame?

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Mehmet Kutman, Global Yatirim Holding Anonim Sirketi - Chairman & CEO [11]

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That is correct.

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Gloria Lam;Al Waha Capital;Vice President, [12]

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Got it. And at Global Ports level, I understand that there is CapEx related to Dubrovnik. Would you be able to give us a guidance on 2015 acquisition CapEx on all the acquisition targets that you are potentially looking at?

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Mehmet Kutman, Global Yatirim Holding Anonim Sirketi - Chairman & CEO [13]

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Yes. I can tell you from heart, having run a 3-week road show, having seen 127 different portfolio managers. One by one, Dubrovnik, the total CapEx is EUR 40 million between the terminal building and the shopping center, and that will generate approximately EUR 8 million to EUR 8.5 million starting 2017, of which minimum 50% is bank financing. The next one is Malta. Malta's total acquisition costs, depending on the share percentages, will be up to EUR 35 million, again, bank financing, minimum 20%. The third one is the 4 Italian ports, namely Cagliari, Catania, Ravenna and Brindisi, with a total passenger capacity of 250,000 for total acquisition of around EUR 1 million to EUR 5 million full equity. By the way, Dubrovnik is 1 million passenger, and Malta is 650,000 passenger. And the final one is Venice -- not the final one. Venice is the next one, tender due probably on or around July, but assuming it's Italy, it probably will be September. They have August as holiday, as you know, and there's the Venice local election on 14th of June. So between June to the August, I don't believe they will be able to get anything done. It's going to be mostly a September tender. The total acquisition ticket -- for 54% will be in the region of EUR 25 million to EUR 35 million. And the next one is Livorno with approximately 750,000 passenger with total acquisition ticket probably in the mid-20s for a total consideration of approximately EUR 150 million, of which the bulk of it will be financed, 50% equity, 50% debt.

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Gloria Lam;Al Waha Capital;Vice President, [14]

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So do you expect all this to happen over the next 12 months or over a certain time frame? And how do the company fund the equity side of this acquisition?

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Mehmet Kutman, Global Yatirim Holding Anonim Sirketi - Chairman & CEO [15]

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The cash generation of the Global Ports is approximately $85 million EBITDA, of which approximately 80% is cash conversion rate. The existing cash at banks of Global Ports is approximately $50 million, a little bit more than or even close to $60 million. So internally with their own cash, they can easily finance most of the acquisition, assuming they get 50% of debt.

The time frame for all these acquisitions, including Dubrovnik CapEx, will be for the next 24 months -- 18 months, I would say. Dubrovnik is construction, so that's why 24 months. But the acquisitions should end by -- in the next 12 to 16 months. And those acquisitions will bring a combined EBITDA of EUR 30 million over and above the $85 million, bringing the total consolidated EBITDA for year-end 2017 to approximately $115,000 to $120,000.

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Gloria Lam;Al Waha Capital;Vice President, [16]

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I see. Got it. May I also ask, generally for let's say, Dubrovnik, Malta, Venice, these ports, what's the net debt-to-EBITDA or gross debt-to-EBITDA loss rate at the port level?

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Mehmet Kutman, Global Yatirim Holding Anonim Sirketi - Chairman & CEO [17]

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The net debt-to-EBITDA, as we stand, is approximately -- (foreign language)

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Mehmet Kerem Eser, Global Yatirim Holding Anonim Sirketi - CFO, Head of Financial Affairs & Finance Group and Finance Director [18]

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(foreign language)

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Mehmet Kutman, Global Yatirim Holding Anonim Sirketi - Chairman & CEO [19]

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Approximately year-end net debt-to-EBITDA is around 3.3x. The target for the company is to maintain a net debt-to-EBITDA level of around 2.5. Moving forward...

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Gloria Lam;Al Waha Capital;Vice President, [20]

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This 2.5x loss rate, is it a target at the Global Ports level? Because right now leverage level is quite high.

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Mehmet Kutman, Global Yatirim Holding Anonim Sirketi - Chairman & CEO [21]

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No, the level is not high. The 3.3x is the existing level at Global Ports, $85 million EBITDA versus $277 million of net debt.

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Gloria Lam;Al Waha Capital;Vice President, [22]

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That's the target leverage, right?

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Mehmet Kutman, Global Yatirim Holding Anonim Sirketi - Chairman & CEO [23]

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That's the target leverage on a past performance -- (foreign language).

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Gloria Lam;Al Waha Capital;Vice President, [24]

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I see. So 3.3x is the average leverage of the port you're acquiring, and the 3.3x net debt leverage is the target leverage at the Global Port level.

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Mehmet Kutman, Global Yatirim Holding Anonim Sirketi - Chairman & CEO [25]

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Let me be very clear. I think there's a misunderstanding. Our existing net debt to leverage -- net debt-to-EBITDA level on the base of 2014 EBITDA is 3.9x. On the basis of existing assets as is, our net debt-to-EBITDA year-end 2015 is 3.3x. Okay? And our net debt-to-EBITDA post acquisition, assuming we get 50% debt -- (foreign language)

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Mehmet Kerem Eser, Global Yatirim Holding Anonim Sirketi - CFO, Head of Financial Affairs & Finance Group and Finance Director [26]

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3.2.

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Mehmet Kutman, Global Yatirim Holding Anonim Sirketi - Chairman & CEO [27]

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Our net debt-to-EBITDA, assuming for -- on a pro forma basis, assuming we do all the acquisitions with 50% debt will be approximately...

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Mehmet Kerem Eser, Global Yatirim Holding Anonim Sirketi - CFO, Head of Financial Affairs & Finance Group and Finance Director [28]

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3.1.

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Mehmet Kutman, Global Yatirim Holding Anonim Sirketi - Chairman & CEO [29]

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3.1.

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Operator [30]

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(Operator Instructions) Our next question is from [Bahatpen Goluntas] from Anadolu Agency.

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Unidentified Participant, [31]

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Sorry, (inaudible) you already say that Global Yatirim Holding's share price in [$3]. Do you still agree this price? And what's likely the situation with the partnership with (inaudible) with Goldman assessment?

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Mehmet Kutman, Global Yatirim Holding Anonim Sirketi - Chairman & CEO [32]

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Sorry, first, I didn't understand who is speaking. And I really -- the line is cutting off. I didn't understand the question. I understood...

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Unidentified Participant, [33]

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My name is [Bahatpen]. I'm from Anadolu Agency. My question is, you already told the Global Yatirim Holding share price is [$3]. And...

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Mehmet Kutman, Global Yatirim Holding Anonim Sirketi - Chairman & CEO [34]

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Hold on 1 second. I don't think this was open to press. You are from the press. This is not a press-open conference call. I do apologize for that. Sorry. I do sorry. And I hope these are all off the record. This is for investor conference. I presume our Investor Relations made a mistake by sending to the press as well. So my apologies. But if you have any questions, please feel free to call me directly. I cannot answer any press questions. This is an investor conference. My apologies for that. Do call me after the conference, and I will appreciate if you hang up, please. Thank you.

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Operator [35]

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(Operator Instructions) We have no further questions. Back to you for the conclusion.

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Mehmet Kutman, Global Yatirim Holding Anonim Sirketi - Chairman & CEO [36]

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Well, thank you very much. The only thing we have to say, we did go through the IPO process. We worked relentlessly. I think there's a disguise -- blessing in disguise. Our asset is strong. It's really printing money. We're very happy about it. We will make a decision -- strategic decision in the next few weeks on how to proceed or whether to proceed at all or not, and we'll keep our investor community. Our numbers is in line with our budget. Kerem, I'm sure, has some -- few words to add as well.

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Mehmet Kerem Eser, Global Yatirim Holding Anonim Sirketi - CFO, Head of Financial Affairs & Finance Group and Finance Director [37]

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Well, our Chairman has pretty summed up the situation. So one reminder, perhaps being the ports or the energy, our first quarter results, because of the seasonality, doesn't usually give an indication for the rest of the year. So the second quarter conference call or the third quarter, better say, will give better view on our performance for 2015. So that's all I'm going to say for this time. And if you have any further questions, you can contact myself or the Investor Relations department. So I'm reminded that there is another question. So let's have the question, too.

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Operator [38]

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We have 2 further questions. First question is from [Erdogan Ozun] from Turkey.

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Unidentified Participant, [39]

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(foreign language)

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Mehmet Kutman, Global Yatirim Holding Anonim Sirketi - Chairman & CEO [40]

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I think this is not open to Turkish conference. I think we have a scheduled Turkish conference for tomorrow.

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Mehmet Kerem Eser, Global Yatirim Holding Anonim Sirketi - CFO, Head of Financial Affairs & Finance Group and Finance Director [41]

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So we don't have a -- we only have the English version for this one.

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Operator [42]

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We have -- our next question is from Rain Leesi from Avaron.

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Rain Leesi, AS Avaron Asset Management - Investment Manager & Head of Research [43]

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This is Rain from Avaron. I was just wondering whether, basically, how large were the IPO-related costs? And I assume that this will be booked in the second quarter.

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Mehmet Kutman, Global Yatirim Holding Anonim Sirketi - Chairman & CEO [44]

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The IPO-related cost is not that high. It's only legal fees and travel expenses. It's not material at all. It is very minimal, and they will be booked in the second -- it will be very minimal. It's not material. Vis-à-vis our balance sheet size or our earnings or EBITDA, it's not material at all.

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Rain Leesi, AS Avaron Asset Management - Investment Manager & Head of Research [45]

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Okay. And another thing, just to confirm, did I understand correctly that the Antalya container volumes were down 8% year-on-year in first quarter?

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Mehmet Kutman, Global Yatirim Holding Anonim Sirketi - Chairman & CEO [46]

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That is correct, indeed, but the EBITDA line was exactly in line with the expectations because of the tariff increase. Average revenue from container went from $171 to $184 for the first quarter of this year. And the last month, April, the average container per revenue -- revenue per TEU was $190.

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Rain Leesi, AS Avaron Asset Management - Investment Manager & Head of Research [47]

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Okay. But can you briefly comment on the composition of the trade volumes? So...

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Mehmet Kutman, Global Yatirim Holding Anonim Sirketi - Chairman & CEO [48]

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Certainly, I can comment. 2 years ago, approximately 95% of our container volume was export of marbles to China. As of the first quarter, only 65% of the revenue is export of marbles to China, which is declining business. That's the reason of our -- decline of our number of TEU or number -- the volume number. Therefore, the -- which is being made up basically with import. 35% of the cargo is import cargo in the total container volume. And import cargo, as you know, is much more valuable than the export cargo. Furniture has been increasing, being the only licensed furniture custom clearance port in Turkey, we're the only one.

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Operator [49]

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We have no further questions.

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Mehmet Kutman, Global Yatirim Holding Anonim Sirketi - Chairman & CEO [50]

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Thank you very much, operator. The transcript will be available.

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Operator [51]

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Ladies and gentlemen, this concludes our conference call. Thank you all for your participation, you may now disconnect.