Under these conditions, our main priority in 2023 was to quickly and accurately adapt to the highly variable economic and market conditions both domestically and internationally, and to develop a sustainable business model that would make our structure more resilient to risks and unite all our areas of activity around a shared synergy. We initiated our five-year strategic plan in June, which outlined the roadmap to our eventual goals. We focused our strategy on ‘downsizing to grow’ and our strength on more rational fields. It is important for us to diversify our business areas and create space for new endeavors to explore new opportunities. Green energy is the first step on this path.
Given Tekfen Group’s capacity and competency in fertiliser production and renewable energy, we identified green hydrogen and green ammonia as our priority investment areas. With these investments, we aim to pioneer a model not yet seen in Türkiye, creating a value chain from renewable resources to green fertilisers. For this purpose, we initiated feasibility studies for a facility to produce green ammonia from green hydrogen at one of the Toros Agri plants. To upscale our business model on a global level, we sent a document detailing our investment plan to relevant international players at the beginning of November.
We are Türkiye’s largest corporate consumer of ammonia. Once we successfully implement our plan, transitioning to green ammonia will bring us one step closer to our “net zero” goal. From a holistic perspective, we also see green ammonia, which cultivates valuable synergy between our agricultural production and renewable energy businesses, as a new opportunity area for our Contracting Group. As an EPC contractor, we aim to further bolster our knowledge and experience through green transformation. From this standpoint, we believe that the new capacities to emerge from the green transformation of our Agricultural Production Group will also create a leverage effect for the transformation of our Engineering and Contracting Group. Thus, by aligning all the Group’s activities on common ground, we plan to create a collective and significant value.
We are going through a period where sustainability and subsequent green transformation efforts have become more important than ever, with business models accordingly undergoing radical changes. As our founders previously noted, “We see social responsibility and sustainability principles as an integral part of our business and ventures!” This underscores the long-running significance that sustainability has had in Tekfen’s ethos. Inspired by their commitment to operating in harmony with nature and the environment, and their priority to be an exemplary company in both profitability and social and environmental impact, we view the transition to a low-carbon economy and the development of sustainable business models that support the green economy as the most suitable focus for our new investment initiatives.
The “digital business models,” hugely popular in the 2010s, have given way to “sustainable business models” in the 2020s. Across industries, environmental and social impacts are now just as important as financial and operational matters for the longevity of companies. Consequently, the shift towards sustainability-oriented business models presents both significant challenges and substantial growth opportunities for all industries in the coming period.
Tekfen is no exception to this reality. For our Agricultural Production Group, matters such as the carbon border adjustment mechanism, the Green Deal, and green ammonia will be key milestones. On the other hand, the pivot towards decarbonisation in the oil and gas industries, where our Contracting Group primarily operates, makes it inevitable that our Group will develop sustainable new business models. We believe that our new business model for renewable energy, which will benefit all our business areas, is a crucial starting point for Tekfen’s ongoing success.
Pursuant to our new focus areas, we restructured our organisation in 2023 to align with the Group’s integral values, 67 years of experience, and the requirements of our new strategies. In addition to our three existing lines, the Agricultural Production Group, the Contracting Group, and the Investment Group, we have added a fourth: Tekfen Renewable Energy. We aim for this new company to be the flagship of transformation. The prime aspect of our plan involves polishing our existing competencies in line with new goals and adding new functions to support the existing structure. We are building a structure that allows for tighter collaboration and synergy towards a common goal for our companies, despite them each operating in different industries.
As a global Group active across various industries, we are directly susceptible to economic, political, and technological developments, including international relations, commodity prices, currency fluctuations, inflation, the war for talent, and technological advancements. Consequently, achieving sustainable and profitable growth across all business areas is a primary focus of our business strategy.
Accordingly, while we maintain an export-oriented growth strategy in our Agricultural Production Group, we prepare to pursue global investment projects, including those in renewable energy, green hydrogen, and green ammonia, at our Contracting Group. Tekfen Ventures, the main company of our Investment Group, takes part in this landscape through its global investments in technology companies. The synergy between Tekfen Ventures’ portfolio companies, which develop innovative technologies, and the companies within our Group provides us with significant know-how transfer, particularly in areas that align with Tekfen’s future plans. Pivot Bio, for example, is a company that offers new horizons with its technology to convert atmospheric nitrogen into an accessible state for plants, thereby reducing the loss of soil nitrogen through water and aiding in the conservation of surface water. Similarly, Phospholutions, another Tekfen Ventures collaboration, enhances the efficiency of phosphorus fertilizers while reducing their environmental impact.
An important aspect of our strategic plan is to expand our carbon-neutral goals across the entire Group. The green transformation process, initially launched in the Agricultural Production Group, contains a detailed roadmap for net-zero targets for Scope 1 and Scope 2 by 2030. We set off on this journey towards lean and digital transformations and supported our cause with sustainability initiatives. We later incorporated energy efficiency, reduced process emissions, and customer experience into this roadmap. In pursuit of our goal to transform Toros Agri from a fertiliser brand into a “regional solution partner,” we established the Sustainability Academy, a pioneering initiative within the industry. This Academy is designed to encourage Toros Agri employees to speak a common language, increase their awareness, and enhance their skills and competencies. The project will be further expanded in the second phase with the admittance of farmers and dealers. We will expand our green transformation journey, which was initiated in Toros Agri, to cover the entire Group in 2024 to ensure we achieve our 2030 goals.
As another crucial pillar of sustainable and profitable growth, we reviewed our existing business models in 2023. At the companies within our Group that failed to achieve the expected levels of profitability, we implemented radical changes and restructuring on the organisational and operational levels. A prime example is the Contracting Group, where we are merging the Derince and Ceyhan manufacturing facilities to further strengthen our industrial manufacturing capacity. Thus, our Tekfen Manufacturing company, which boasts strong references and competencies in its field, has become an organisation capable of providing single-point solutions to the modular sea and land product demands of the energy industry. Additionally, as part of the new restructuring, common functions such as procurement and financial management have been centralised, improving efficiency and cost savings.
For our agricultural production and terminal operations, we announced a significant investment plan intended to advance our position in both global and local competition. To finance our new ventures and investments, we consolidated significant real estate properties owned by our Group, which are not utilised in our primary operations, into real estate investment trusts through partial divisions, making them available for future growth financing. A smaller set of properties, on the other hand, was sold at values above their current market rates, and other such properties will continue to be sold. In this process, where we have activated our dormant assets to build a better future, we decided to be more open to external opportunities, as we have stated on all major platforms, and to try a more proactive approach. To this end, we signed a consulting agreement with Dome Group Financial Advisers to identify opportunities and tools for strategic partnerships and collaborations within the scope of our strategic plan. We expect to see the results of these efforts by the end of 2024 at the latest.
In light of these developments, 2023 was a crucial period for all Tekfen stakeholders. We set off on a growth and transformation-oriented journey in line with our roadmap. Our Group has pioneered in all its operating areas since its establishment and has successfully implemented numerous significant transformation projects to date. Now, true to our legacy, we aim to fulfill our role in transitioning to a low-carbon economy, subsequently investing substantially in the Turkish economy, creating new employment opportunities in the regions we operate, leading our industries with new technologies and business models, and generating value for all our stakeholders through a sustainable and profitable structure.
As we leave behind a year burdened with the impact of past challenges, including financial strains, our new strategic approach and exciting new goals, along with our high motivation and energy, have us looking forward to 2024 with hope.
Sincerely,
Hakan Göral
President