Esteemed Shareholders, Business Partners and Employees,

We left behind another gruelling economic year.  The household appliances market suffered a decline worldwide, notwithstanding some differences regionally.  In fact, shrinkage reached worrisome levels, especially in Eastern Europe.

Despite signs of improvement in the sector, especially with the incentives of 2009, talking about a complete recovery at this point would be rather premature.

We upheld our leadership in the household appliances segment and also in our LCD TVs and air conditioners with our brands.  We also achieved revenues of 6.6 billion Turkish lira in 2009, even under strenuous market conditions, and enlarged our market shares in our various areas of operation. Moreover, we were among the companies that raised their market shares the most in all of Europe.  We also upheld our leadership in Romania with a slight improvement in Eastern European markets. And our leadership primarily in household appliances, LCD TVs and air conditioners was unchallenged in Turkey.

We continued to penetrate new markets and new channels in our current markets during 2009 and focused on strengthening our brands. We grew more than 50% in terms of sales quantity with our Beko brand in the U.K., despite a shrinking market, while we increased our market share more than other companies in France. In addition, we have bolstered our brand positioning in many of our markets.

Despite some slowing down in the amount of sales due to a waning household appliances market, our revenues surpassed the previous year's, thanks to improved product diversity and favourable exchange rates.  Our profitability in household appliances swelled with improvements in product-price combinations as well as with simplification of product development and production processes, cost-cutting measures, and productivity projects.

A relative recovery in raw material prices had a positive effect on company performances in the industry. As such, we managed to turn declining raw material prices to our advantage.

We also restructured our consumer electronics segment. And our decision to focus on profits rather than sales growth in TVs bore fruit with growing profitability, in spite of declining revenues compared to the previous year's. The merger of Grundig Elektronik A.Ş. with Arçelik A.Ş. was completed in June. Consequently, we increased productivity substantially by joining two companies under one entity.

We focused on improving productivity and minimal cost management, primarily in the supply chain and also in all other processes. Improvements in operating costs along with product profitability resulted in an operating profit of 11.4 percent and an EBITDA margin of 14.1 percent.

Sound management of working capital was one of the targets in 2009. The ratio of working capital to net sales was cut to 36 percent from 47 percent, thanks to effective stock management efforts.

We accomplished 1.8 billion Turkish lira in cash flows from operating activities as a result of a hike in operating profits and the effective management of operating capital. Net financial liability in 2009 dropped to 1.2 billion Turkish lira from 3.1 billion Turkish lira at the end of 2008.  Thus, our balance sheet became even stronger in terms of our fast growth target.

Our R&D efforts were nonstop, with our capability helping us to continuously introduce our innovative products in the market.

We proved our ability to make and implement quick decisions along with our flexibility and strength in crisis management and emerged even stronger in a very tough market. As a result, we accomplished our financial and strategic targets for 2009.

We plan to grow and break into new markets by turning market conditions to our advantage in 2010. As we work towards this goal, we will focus on sustainable growth and continue to be one of the most profitable companies in our industry.

Bolstering our brands will remain one of priorities. We will persist in our efforts to create the most energy efficient products, adapting to the needs of consumers and enhancing their comfort.

We will pay the utmost attention to using our resources in the most productive way as we work towards realizing our challenging targets.  We will continue to develop green products that are innovative, aimed at increasing the quality of life for our customers.  In other words, we will continue producing the “mosts” and the “firsts.”

Our vision to carry us to the future is our vantage point: “RESPECTS THE GLOBE, RESPECTED GLOBALLY.”

I express my sincerest gratitude to our shareholders, employees, authorized dealers and services, customers and business partners for their support and contribution to the success of our company.

With my best regards,

LEVENT ÇAKIROĞLU
President of the Durable Goods Group of Koç Holding,
Arçelik A.Ş General Manager 
ARÇELİK A. Ş.