Polyurethane Sector Review

The pandemic was a challenging but equally transformative period for us, during which we adapted to change faster than ever before. We were among the first companies to respond to the pandemic. As of March, we transitioned to a work-from-home system and implemented flexible working hours. Together with our company doctor and psychologist, we provided training to our employees on pandemic awareness and pandemic psychology management. As part of internal protective measures, we moved all our meetings to online channels. In doing so, while raising awareness among our employees, we avoided risky situations, took all necessary precautions, and created a healthy work environment. At the same time, we accelerated our digitalization projects and began conducting all meetings through online platforms. We reorganized our shifts and continued production with minimal personnel. To prevent supply and production problems experienced in different sectors, we placed greater emphasis on our supply chain. To ensure uninterrupted supply chain operations, we made priority-based plans with our suppliers. Thus, we managed to handle the pandemic process, which has continued for over a year, without any problems in production or supply. We coordinated with our customers and suppliers and reached our year-end targets. As Flokser Kimya, we raised our targets in 2021. We believe the sector will do better as well. What matters here is adapting quickly to change. In 2021, we are targeting sustainable growth and profitability. At the same time, we are continuing our investments to meet the needs of our sector. In this direction, we will realize our new production investment in Tarsus Organized Industrial Zone. With our new investment, we will increase our capabilities by developing new products for different sectors, both domestically and internationally, where we have not previously operated. On the other hand, we plan for our new factory in Tarsus to feature the latest technology. We have targets such as creating dark warehouses and conducting warehouse counts using drones. We have already begun integrating software robots into our systems, and we have started digitizing our processes and reports. We intensified our efforts to incorporate new technologies into our company and adopt technologies that will contribute to quality and efficiency. Including our pilot and industrial-scale applications, we are particularly designing and implementing unmanned-operated units. We are conducting research to operate many bottleneck lines more efficiently and error-free with new and best practices. In this direction, we accelerated the transition of our ERP program to SAP HANA, the new version of SAP. Additionally, we are making a new R&D investment to produce high-technology and value-added projects in the R&D field. We will continue to invest in our industry and innovation.

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Although our sector came to a standstill in March, April, and May 2020, thanks to credit support provided by our government, the sector regained momentum on 1 June. Toward year-end, increasing pandemic-related mandatory restrictions brought about some slowdown, but the activity continued through the end of the year. Despite all its negativity, 2020 was a highly productive year for us. The pandemic enabled us to implement new projects in terms of both production, services, and products. The most important of these was the new service we developed in addition to Covid-19 measures. In our joint R&D centers, we developed "Safe Sleep Tunnel SST" technology, a world first in the bedding sector in Turkey. With this tunnel, developed by Turkish engineers, we pass all our mattresses through UVC rays, giving them a more hygienic structure, and we deliver them to our consumers without hand contact by packaging them. In addition, we incorporated Thermolite 95-degree quilts and pillowcases and pillowcase covers that are not affected by high-temperature washing and thus maintain their hygienic structure into our product collection. In addition to hygiene measures we took in our sleep centers, the disinfectant mats we developed at İşbir Sünger were also positioned at the entrances of our stores. These mats were also sent to various health facilities in Turkey as part of efforts to combat the pandemic. The mats were met with strong interest not only from end consumers but also from corporate customers. A new initiative during the pandemic was also launched. In light of İşbir Sentetik's weaving experience, we launched İşbir Mask, our hygienic surgical mask brand. Our masks, which we produce at a rate of 2 million units per month and which are registered with the Health Ministry's Product Registration System, have been documented to provide 99 percent protection thanks to their Melt Blown fabric filter. With our hygiene-focused efforts and investments, by the end of 2020, we achieved 20 percent real growth in our Sünger&Yatak operations, 30 percent growth in mattress production, and 50 percent growth in revenue. The widespread use of vaccines following their discovery and gaining herd immunity in this respect is very important for the future of all sectors. In this regard, our government is doing its part perfectly and bringing vaccines to our people. I hope the vaccination process is completed as soon as possible and that we begin discussing herd immunity together. As you know, in the fight against the pandemic, there have been weekend curfews for months. This certainly has had a negative economic impact on the retail sector. However, the earliest lifting of restrictions will bring about economic revival. At this point, we are very hopeful about the coming months and have great expectations. The continuation of the VAT reduction and the economic gains from social mobility will positively affect our performance. For now, we are experiencing stable growth. We want to sustain the growth we have achieved in line with the investments and efforts we made in 2020 into 2021.

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The Covid-19 virus that emerged in China in December 2019 spread rapidly, and with the first confirmed cases in Turkey, as in the rest of the world, the difficult period we are in began with the pandemic declaration on 11 March 2020. Until the end of the first quarter, there was no sudden drop in orders in the market, and planned order production continued without interruption during this period. Due to the rate of spread of the outbreak and the increasing number of cases, the measures taken led to order cancellations and production shutdowns, particularly in the second quarter, causing shutdowns normally announced only during summer months for maintenance to be implemented continuously for 3-4 weeks, which led us at Pürplast to announce, for the first time in our company's 40-year history, a complete 4-week shutdown, and we witnessed historic losses in production and related revenue in April and May. During the shutdown period, we took measures to protect the health of our employees, aiming to minimize potential transmission risk in transportation, recreation areas, canteens, and all other common areas, thereby taking the first steps in adapting our company to the new process. Despite all these measures, employees were directly affected by the virus at a rate close to the national average. Our only consolation is that our colleagues who were infected by the virus recovered to their former health after home quarantine without requiring intensive care. As a result of various restrictions during the pandemic, like all suppliers negatively affected by the outbreak in terms of workforce, we benefited from short-time working support and, operating at low capacity, particularly with a production plan focused on lower-segment passenger vehicles, trucks, tractors, and construction machinery, we changed our general production method to balance the decline in the bus market due to the dramatic drop in tourism, and aimed to produce only on an order basis, thus utilizing our sometimes negatively affected workforce as efficiently as possible. Being aware of the importance of cash flow, we revised the budget of our ongoing foreign production facility investment, thereby greatly reducing the negative financial impact the pandemic period would bring to us, and we directed our work so that our new facility would be operational by the end of summer 2021. Following the crises in different periods experienced so far, meeting new market demands that emerge after crises rapidly through this capacity increase will be our main objective as Pürplast. Particularly in the bus market where the greatest losses were incurred, the revival of the tourism sector and the return of education to normal will create additional demand in the market, which will necessitate taking advantage of our new foreign facility's production capacity in the short term. With the widespread application of the vaccine in the first half of 2021 in our country as in all countries, with all its phases, the normalization process will begin, and I believe that the sector, after losses exceeding approximately 1.5 years, will return to its former days with a certain momentum before the end of 2022, albeit not in the short term. During this process, we managers must keep the morale and motivation of all our employees high and produce solutions to quickly eliminate the negative effects the pandemic has created in individuals. Particularly with the spread of vaccines developed against the virus and the increase in the proportion of vaccinated people to the general population of countries, serious progress is being made in the fight against the virus, and with the achievement of general immunity, from the end of summer onward, our country, together with the rest of the world, will take more concrete steps toward normalization. Looking at the daily case and death rates in countries at the forefront of vaccination today, we observe that the end of this process affecting the entire world has been reached. With the wish that vaccination capacity continues to be rapidly increased in our country as in the entire world and that everyone is vaccinated in as short a time as possible, I wish all our friends healthy days.

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