TIME TO GO GLOBAL

Turkey 2013 | ECONOMY | INTERVIEW

TBY talks to Executives of Yıldırım Group on the group's rapid growth, operations in Turkey, and visions for the future.

Yıldırım Group
BIOGRAPHY
From left to right, top to bottom: Özer Öz, Vice-President for Business Development; Alp Malazgirt, CEO; Robert Yüksel Yıldırım, President; Sean R. Pierce, CEO of Yılport; Evren Öztürk, CFO; Mustafa Kemal Erkanat, Vice-President for Operations.

How did Yıldırım Group grow from a small family company in Samsun to a global Turkish brand?

ALP MALAZGİRT The company started in the 1960s in the trading business in Samsun, buying and selling construction materials. It continued in trading for about 30 years. In the 1990s, it then moved into the coal trade. The year 1993 was very significant, because it was the first time that the coal trade kicked off regionally. Coincidentally, 1989 is when the Berlin Wall fell and Russia started privatizing all its state-owned enterprises. Back then, only about 5% of all businesses in Russia were private. By 1994, in five years, this huge country had privatized about 90% of all its enterprises. During this time, many minerals, such as coal, became more available for export.

How did the company's strategy change in 1993 with the inclusion of the coal business?

EVREN ÖZTÜRK The company's aim from that point was to become the largest coal trader in Turkey. We brought the coal from Russia, and we set up a joint venture with the Russians in Turkey to distribute it. At the same time, we had our own coal facilities locally. That business also grew through vertical integration. In around 2003, Turkey started privatizing, so we halted the joint venture because the Russians had started doing business in Turkey on their own. It was at that point that we bought Eti Krom and Gemlik Gübre, making this an industrial company. From there the acquisitions continued, and that's how we became such a fast-growing enterprise.

MUSTAFA KEMAL ERKANAT Robert Yüksel Yıldırım believed in the importance of two things for the business. The first one was foreign trade. The second one was an inorganic growth strategy, rather than greenfield investment, which takes much longer. Our strategy was, and is, that inorganic growth can provide a more rapid return on investment. Robert also believed that, in the long run, base metal companies would become much more profitable than oil companies. Now we know that this is the case, with companies like Rio Tinto and Vale doing much better than companies like BP.

ALP MALAZGİRT The theme at this time was flexibility. Initially, Robert started doing business in Russia, but as soon as other people started getting into the field and crowding in, he moved to China. He had the flexibility to fold up his tent and go somewhere else to set up shop all over again. He's very entrepreneurial and hard working, with a lot of perseverance. When he went to China, the focus again was coal. Then, after a few years, we changed focus again, and now we're getting the coal from South Africa, through Mozambique.

EVREN ÖZTURK The focus was also on related industries. We moved from coal to bulk carriers to shipping. Then, in 2004, when a lot of chemical tankers were being bought and sold, we got into building tankers. We bought the Marmara Shipyard and now we build and sell our own tankers, both externally and to our shipping company. Over the years, we diversified into port investments.

ROBERT YÜKSEL YILDIRIM When I came back to Turkey from the US in 1993, my family business was trading construction products and coal. My background up until that point was in high-tech industries in Silicon Valley, and I wondered how I could contribute my skills to our very low-tech family business. I decided to use my English skills and my international business experience to focus on our foreign trading operations. I focused on the coal business, which was changing at the time because Turkey was changing its coal-use habits. The first thing I did was travel to Siberia to meet with Russian coal producers and traders. I saw a lot of opportunities in Russia at that time. I used my experience with international business ethics from the Americans and Japanese and, as a result, the Russians liked my style of conducting business and socializing. This allowed me to present myself as an insider in the Russian coal sector and gave me an advantage over other Turkish companies that were entering it. I learned from this experience that I have a talent for foreign trade, and we took advantage of that to expand into other products.

How has the international perception of Turkish business changed over time?

ALP MALAZGİRT In Asia, the perception has changed a lot. Turkey is now becoming a country that a lot of people are looking up to, especially in East Asia. In some Muslim countries like Indonesia, they look up to Turkey. In Central Asia, there are a lot of Turkish companies operating, first in the construction sector and later in the consumer sector. So, clearly, the perception has changed in the East.

SEAN PIERCE From an American perspective, I don't think I had a perception of Turkey before I came here. Now, what I see is a real duality; the difference between the skyscrapers we see around us, and what is down at street level.

EVREN ÖZTÜRK In 2011, when we were seeking finance for the acquisition of Malta Freeport, we had a lot of issues because we are Turkish. There was a reluctance on the part of finance providers. Even though Fitch has raised Turkey's rating to investment grade, we are still two or three notches lower according to S&P.

MUSTAFA KEMAL ERKANAT With Turkish companies abroad, we are like the crusaders. Europe hasn't accepted us at first, but as companies like ours become more intertwined in the EU economy, we will change Europe's perception from the inside and they will accept us in the end. If Turkish companies like ours do such a good job internationally, we will attract investors to Turkey. Our policies go along with Turkish government policies. For example, we are expanding our business in Africa at the same time as Turkey is expanding its influence in Africa. That will bring further investment into Turkey.

ÖZER ÖZ Turkey's perception is all about duality. If you're looking at it from the East, Turkey is a Western country. If you're looking at it from the West, Turkey is still an Eastern country.

How would you rank Turkey as a base of operations for an international business?

ÖZER ÖZ In some business areas Turkey is very attractive, because it is a hub for transportation between East and West. It is an energy corridor. We have a young population, which makes it attractive to retail investors. Turkey also has its shortcomings, because energy is very expensive here, and we don't have much mining. On the other hand, Turkey offers a young and educated population, so we have something to export. For health care, Turkey is a great place and we are attracting healthcare investment. It is a duality and there are a lot of parameters.

ROBERT YÜKSEL YILDIRIM Turkey is between the East and West, but it is more Western. Turkey is in the top 20 economies globally. We are advanced and we are changing, and the new target—to be in the top 10—is extremely difficult, but it is maybe doable in the next 20 years. Turkey deserves more than what it gets right now. If we had some of the opportunities that are given to European countries, we would be in much better shape. Look at Greece and Portugal and countries in Central and Eastern Europe. But still, we are thankful that we don't have oil because oil can have negative effects. Because Turkey doesn't have oil it means we are hard working as we have had to build everything ourselves and we have all the top industries in Turkey. If you looked 20 years ago, the textile sector was very attractive in Turkey. Now the textile sector is behind other industries like automotive, which is now our largest export segment. Steel is improving. In cement, we are in the top five in the world. Mining is also developing. This is all about Turkish entrepreneurs. They used to take what they earned here and spend it outside of Turkey. Now they are re-investing it in Turkey more and more, and now investing it in Turkey and legally investing it in Europe, the US, Asia, and Africa. We now see more Turkish groups expanding abroad. As the Yıldırım Group, we are in France, Belgium, Sweden, and Malta—we are becoming a part of the EU economy. I think that business in Turkey today has more opportunities than in Europe. In Europe everything is planned and restricted—in Turkey we still have ups and downs. This diversity is what makes Turkey strong.

What is your vision for Yıldırım Group a decade from now?

ROBERT YÜKSEL YILDIRIM Our intention is to be a pure Turkish company in the global arena. We don't want our boundaries to be Turkey's boundaries. Our identity is Turkish, but our business is global. We need to create international Turkish brands in business. Of course, it is not easy to try to become Turkey's Vale, but we can be a multi-industry group. We can aim to be among the top-20 port operators in the world. And in mining we want to be healthy and making money globally. Our Turkish identity is going to Africa and Latin America and then making the company international, with a head office in Istanbul, but offices and operations everywhere. We want to be less family oriented and more corporate oriented—to be an international company with international partners in major businesses.