Jan. 8, 2020

Kerim Kemahlı


Kerim Kemahlı

CFO, Nurol Holding

“We have set up a subsidiary to design software for the flight, fuel, and landing management systems that can go into Turkey’s fighter jets.”


After graduating from Heriot-Watt University in Edinburgh with a BA (Hons) in business organization, Kerim Kemahlı began his career with West LB in 1990, where he held several posts ranging from credit analyst to corporate marketing manager. He also established West LB Istanbul's treasury marketing unit. Between 1996 and 1998, he managed the corporate marketing activities of Finansbank's main branch, and in 1998 he moved to Finansbank's international division. Between 2007 and 2010, Kemahlı held CFO positions at Abalıoğlu Holding and Çelebi Group. He joined Nurol Group in late 2010 as its CFO as well as board member of Nurol Bank, and later as board member of Nurol Holding and FNSS.

How has Nurol Holding diversified its operations over the past decade?
Since its creation, Nurol Holding's diversification has followed Turkey's economic growth, though we have adopted a more strategic mode of planning further diversification, as evidenced in our defense sector investments. Nurol started its involvement in the defense sector in 1989 through a JV with a US defense company then known as FMC, which has since been acquired by BAE, which remains our partner. At the time, the Turkish armed forces wanted to develop a fleet of armored personnel carriers called the M113, which FMC agreed to produce in Turkey with Nurol. That partnership eventually became known as FNSS, of which Nurol is currently a 51% shareholder, with BAE holding the remaining 49%. That project was extremely profitable, and at that time Turkey was starting to push growing the indigenous defense industry to the top of the national agenda, so we began to further expand our presence in the sector. First, we set up another 100% Nurol subsidiary, Nurol Makina (Nurol Machinery) to create components for FNSS. In time, Nurol Machinery started its own R&D and began producing its own vehicles as well.

Outside of vehicles, how is Nurol further involved in the defense sector?
Turkey has been and remains a major purchaser of international defense products, but it has long been growing its indigenous industry to maximize local content, including armor. Before we decided to enter the armor sector, we invested around USD100 million into R&D to design and produce armor around 60% lighter than traditional steel armor. It is chiefly used in body armor, but it has also been a big success when used in armored and civilian vehicles. Only the US, China, and Germany have this technology, and we have been able to sell it so far to 27 countries. Those three companies make up the majority of our defense business, but we are also beginning to work in the aerospace industry. Turkey has begun a program to build its own indigenous fighter jet program. The government has mandated that the jet be as locally produced as possible, which will further develop the broader aerospace industry in Turkey. We have set up a subsidiary here to design software for the flight, fuel, and landing management systems that can go into that aircraft. The subsidiary, BNA, is a JV with BAE, which has been operational now for two years.

What is the status of your precious mineral mining operations?
Our gold mine in Lapseki is already operational and produces between 5,000 and 6,000 ounces of gold per month. This is the first mine in Turkey that entirely abides by international standards, and the project financing is from a consortium of banks including EBRD, which has strict environmental and social impact policies. Our second gold mine is in Ivrindi and is expected to produce around 10,000 ounces of gold per month once operational. For our mining operations, our production costs—including financing costs—are at about USD550 per ounce, so at today's gold prices that equates to a minimum 55% EBITDA margin, which is excellent. The 2018 turnover with only six months of operations of the smaller facility was TRY305 million, and it will rise to over TRY1 billion this year. The mining share of the total business turnover in 2018 was only 4% and will rise to 9% in 2019 and 14% in 2020. This is while defense business sales are exponentially growing, so we can see the impact of the mine business on total turnover.

Over the next 12 months, what are your top operational objectives?
For 2019, one of our key objectives is to open the second mine facility, which hopefully will be just as successful as the first. Our biggest challenge in 2020 will be to make sure that the second mine performs as well as the first.