Social upheaval, geopolitics and the Turkish lira: Inside IR at Doğuş Otomotiv
Müge Yücel, head of investor relations at Turkish automotive importer Doğuş Otomotiv, talks to IR Magazine about the country’s many elections, the impact of currency fluctuations on a firm that imports in euros and sells in lira, and the legal requirement that Turkish IROs be licensed by the Capital Markets Board of Turkey on capital market activities and corporate governance.
How did you get into IR? How long have you been with Doğuş Otomotiv and what did you do before?
I left my entrepreneur background in 2008 to work for Corporate Turkey. Armed with certain successes and failures, I started from scratch at Doğuş Otomotiv as a finance specialist where I picked up the daily routine of cash flow management, credit management, regulatory knowledge, working capital management and reporting – and eventually strategic risk management. I also began supporting the IR department, which I took over in March 2013.
The dynamics of this department have pulled me into the day-to-day management of corporate strategy, performance, operation and IR activity, as well as corporate governance. While governance has always been an additional job for IR here in Turkey, regulation now requires that IROs be licensed by the Capital Markets Board on capital market activities as well as corporate governance. It further requires that they be a member of the board committee for corporate governance and sustainability.
My skills in crisis communication and crisis management were immediately put to use, as upheavals broke out in Turkey right around the time I took over the IR department and a previously balanced share price suddenly saw a dive.
Managing retail investors and communicating with institutional investors during this period was a key factor. This was also when I started creating processes, checklists and beta analyses on news flow and such like to build an early detection system for potential risks and crises.
What does your typical day in IR look like?
I am an early riser: I get up around 5.00 am and immediately hit the shoreline, come rain or shine. Depending on my mood, I walk, run or meditate.
I am lucky to be able to take the service shuttle to work, which gives me time to catch up on global and local news, social media and any gossip relevant to the industry or our business. Depending on the ‘season’ we have different routines, if you can call them that. Really, no two days are alike.
But one thing that never changes no matter where I am is the morning mail to the board and upper management on share, index, currency and commodity performance.
During earnings season, aside from preparing the annual report content, we also prepare our IR dossier, which includes all necessary historical information, financial metrics and ratios, sector and macroeconomic indicators. We prepare our analyst presentation, too, to have it online at the same time as the announcement, as well as updates for the IR presentation so our agency can get that ready.
On a monthly basis, we brief the board on share, index and (foreign) ownership performance. I also brief it on IR activities and the IR calendar, give feedback from investors and analysts, discuss our IR strategy for the upcoming year and deliver the annual report for our department.
In the wake of Mifid II we started targeting shareholders more proactively and also organizing our own roadshows. For first-contact shareholders, I developed a general interest inquiry, which worked quite well by email in certain regions and in others was better over the phone. Although time-consuming, I got the hang of organizing one-day roadshows to different European cities, which was quickly followed by several dates and routes through the US and Asia – that also takes up a certain amount of time.
How did fluctuations in the lira impact your IR program in 2018?
Currency fluctuations are a daily topic for everyone in Turkey but for a pure importer like Doğuş Otomotiv, it becomes the focus of strategic risk management: all imports are done in euros, whereas nearly all sales are in Turkish lira.
While the lira had been steadily weakening since 2013, the beginning of Q3 of 2018 saw a surge that nearly doubled the exchange rate, leaving everyone in shock. But we have a strategic risk-management system in place, which was implemented by our former CFO – and it is exactly in times like these that IR must be available and present, in front of investors and ready to address all questions and concerns.
As a result of the fluctuations, we reviewed our IR calendar and determined the must-travel locations and conferences where we could reach the highest number of investors. While we do arrange a couple of days for local analysts and investors in the first and second half of the year, we had never done so for our shareholders abroad. After the currency surge, however, we announced a couple of days of availability for back-to-back conference calls or video calls. We received very good feedback for this and we might continue it in the future.
To what extent does geopolitics impact your IR program and how do you communicate with investors around these issues?
Turkey has been dealing with upheaval and irregularities since 2013 – with an election pretty much every year – and geopolitics has increasingly become an issue, even more so in investor meetings and our communications. So while investor communication had typically been company-oriented with updates on macro and country risk issues before 2013, since then the political environment has gained the upper hand in these conversations.
Lately, the majority of the meetings we have involve discussions around the political landscape, how geopolitical actions affect the business and their effects on macroeconomics. Depending on the investor approach, a smaller portion of the meeting might still be dedicated to the automotive industry or the specifics of our business.
Where have your energies mostly been focused over the past year, and how do you expect that to change in 2019?
We expected 2018 would be a tough year: it turned out to be much tougher than initially forecast. We had already seen a shift from European investors to more US and Asian investors, so our IR strategy for the year had taken shape by focusing more on these regions, and with much longer travel periods. Recent analysis has shown interest from US investors is rising, so in the second half of 2019 we will be planning meetings in that region.
Also, we have found our company-organized roadshows are more personal and barrier-free, making the direct approach preferable, so we have tried to include a few days here and there that we directly schedule around our broker-organized meetings. We are also planning to boost our corporate governance efforts with improvements around ESG, which should further enable our move toward integrated thinking and thus integrated reporting.
Looking across 2019 as a whole, the March 31 municipal election in Turkey will bring changes and reforms. Consequently, our IR calendar this year will start at the earliest around May.
What are key topics your analysts and investors want to know about at the moment, and how do you expect those to change in the coming 12 months?
In 2018 we announced our move into digitalization – so the financial community is now eager to hear more about our efforts in improving our operations and IT infrastructure with digital projects and creating agile teams.
This past year, in terms of volume of sales units, has been quite a bad year for the Turkish automotive industry, so in future a lot lies in how margins will be affected by the big drop in the volume of sales, how and when the market will pick up again in sales terms and what the drivers will be for consumers to invest in large-ticket items.
And of course, the new presidential regime will start to take effect and I am sure we will receive questions with regards to the new system and its impacts.
What has been the biggest challenge in the role so far? And what has been your highlight?
This might be a common issue among IROs but one of the challenges I had initially was the lack of communication between our corporate communications department and the IR department.
For some reason there had been no exchange whatsoever between these teams before I took over the department back in 2013. We started off with a number of meetings to get to know and understand each other. As acquaintance turned into collaboration, these meetings turned into updates on agenda items. Today, we communicate frequently and keep each other in the loop. This productive atmosphere is also reflected in the C-level briefing packets.
A highlight was my appearance as a panelist at the IR Magazine Global Forum in Amsterdam last year and teaching a workshop for the Bulgarian IR association. While I had been quite active in the Turkish IR society, I believe it is important as an IRO to share your experiences with your peers.
Do you actively target investors? If so, what is your process and how has Mifid II had an impact?
Actively targeting investors has always been part of my routine by cross-checking within our industry, country and – of course – peer investors. It had already become customary to contact certain investors that do not work with certain brokers, and we would make availability either on a conference day, or before or after it, depending on our trip.
But since talks began around Mifid II back in 2017, I made it a priority to learn the ropes on initial investor contact and interest inquiries. That is also how we started organizing our own roadshows and setting up back-to-back conference calls.
When it came in, Mifid II hit conference attendance immediately, slashing meeting requests for us nearly in half. This was a learning process for me. Thankfully, I possess good event-planning skills, which helped me to establish a routine on organizing roadshows.
Finally, if you had a bigger budget, what would be top of your IR wish list?
I think I am already lucky with the number of tools I have at my disposal. But I think it would be nice to have someone on board with me to keep track of the financial model and possibly work on scenario and sensitivity analysis, because it can get quite time-consuming.
On a personal level, as it is already a regulatory necessity to be licensed by the Capital Markets Board, I would welcome an internationally accepted license in this area.