TBY talks to Mehmet Koca, General Manager of Gübretaş, on the state of the local and international fertilizer market and his company’s plans for overseas growth.
TBY Following record high sales in 2010, what is your outlook for sales and profitability in 2011?
MEHMET KOCA Gübretaş has been providing fertilizer to the Turkish agriculture sector since 1953, and in 2009 we had record high sales, but this was not reflected in our profits mainly due to high inventory levels resulting from the global economic crisis. In 2010 we set a new sales record of 1.45 million tons and experienced profits of around TL150 million. In 2011 we are expecting 1.57 million tons in sales, and we are very hopeful.
What has been the impact of your acquisition of Iran’s Razi Petrochemical Company in 2008?
As you know, there are three major components of fertilizer, namely nitrogen, potassium, and phosphate. Turkey is lacking these raw materials, so our search for natural resources led us to Iran, which has the second largest natural gas reserves in the world. When Razi Petrochemical Co. was privatized a consortium led by Gübretaş purchased 95.62% of the company, giving us a strong value position for nitrogen, the first input in fertilizer. The facility is 877,000 square meters in size, with 13 plants, 2,500 employees, and a capacity of approximately 4 million tons.
Do you have plans for further acquisitions outside of Turkey?
We are in constant search of these types of opportunities. Now that we have acquired a facility for nitrogen, the next goal is phosphate, which is abundant in North Africa.
What was your motivation for the purchase of the shipping company Negmar?
As we have over a million tons of products and material to transport, there is a need for us to be in logistics. Apart from this need, we also see a high potential for profitability in this sector. We currently have four bulk carriers. In a couple of years we plan to see this number increase to 10. Our fleet operates for our needs and also for the needs of the free market.
What have been the biggest changes in Gübretaş since you came to the company seven years ago?
Our stock market value was about $30 million seven years ago, and now it is about $1 billion. Our market share was about 13-14%, now it is around 29%. We were a local player, now we are a global player. A study by the Turkish national edition of Fortune magazine concluded that Gübretaş had been the “Fastest Growing Company in Turkey” for the last three years. On top of this we are growing in line with the Turkish economy.
In that context, what are the strengths and challenges of Turkey’s economy?
In terms of challenges, Turkey lacks capital sources as well as natural resources. On the other hand, Turkey has a talented and hardworking population. Turkey is adaptable to the needs of a changing modern business world, while at the same time able to maintain its moral values.
In recent years we have enjoyed a stable political environment, which is good for the economy and allows us to create an important political and economic balance in the region. Turkey is currently the 16th biggest economy in the world and the eighth biggest in terms of agriculture. My personal view is that we will continue rising in both of these categories.
Gübretaş is known for its corporate social responsibility. Where are your social initiatives currently focused?
Our main audience for these activities are farmers, and we are focused on education and raising awareness within this group. Our motto is: “conscious farmers win”. In this respect we are working with universities to enlighten farmers and those involved in the agriculture sector. For example, we provide scholarships to the children of farmers who study agriculture at 25 different universities. We are also motivating farmers to do soil analysis in order to utilize the appropriate products.
What are the biggest issues facing Turkey’s agriculture sector?
The inability to achieve economies of scale based on the amount of arable land is the main challenge. The need to modernize farming is another one. At the macro level, the biggest problem is agricultural planning. In recent years, however, there has been strong progress in these areas. The fact that the value of agriculture exports is rising along with per capita income is proof of this. Of course, we are directing ourselves toward products that add value in these ways.
What is your vision for the future of Gübretaş?
We are going to continue strengthening our position as a global player, increasing and diversifying our production in geographic areas with the right natural resources and raising awareness among farmers.
We are also now working to develop region or plant-specific fertilizers to increase the soil and crop quality. Our aim is to continue maintaining the balance between creating profitability for our shareholders and maintaining our social responsibility to educate and improve the lives of farmers.
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