Turkey's Arcelik working on deals to expand abroad

LONDON (Reuters) - Arcelik ARCLK.IS, the home appliances arm of Turkey's biggest industrial conglomerate Koc Holding KCHOL.IS, is working on acquisitions to speed up its international expansion, particularly in Asia, its chief executive said on Monday.

People walk past an Arcelik dealer selling washing machines and refrigerators in Istanbul October 12, 2011. REUTERS/Serkan Senturk

The company, which sells washing machines, dryers and refrigerators under labels including Beko and Grundig, wants more such “white goods” brands, but could also look at small appliances such as coffee makers and food processors.

“(M&A) is important because we have global ambitions,” CEO Hakan Bulgurlu told Reuters in an interview in London.

He forecast “significant demand growth” in southeast Asia and the Indian subcontinent, including Indonesia, Vietnam and the Philippines, as well as Bangladesh, Pakistan and India.

“They’re all focus areas for us,” he said.

Geography is a much more important factor than price, Bulgurlu added. Arcelik could easily do another deal like last year’s roughly $250 million purchase of Pakistan’s Dawlance, but could also do something several times bigger, he said.

“We’re opportunistic. We’re not restricted on size in any way.”

Bulgurlu said international markets should account for 65 percent of Arcelik’s sales this year, up from 60 percent in 2016, reaching 80 percent in a few years.

Europe currently accounts for the large majority of international sales, though the company has a growing presence in Africa through its 2011 purchase of South Africa’s Defy Appliances.


Bulgurlu stood by Arcelik’s forecast for revenue to grow 20 percent this year from 16.10 billion Turkish lira ($4.43 billion) in 2016, even though its overall home market could grow faster than the 3 percent it had previously forecast.

The stronger market in Turkey is due to a recent government move to reduce a tax on white goods in order to spur demand. Still, the weak lira has made raw materials such as oil, steel and plastic more expensive, impacting profitability.

“There’s a lot of uncertainty in the world,” Bulgurlu said, also citing the weak pound that has caused inflationary pressure in Britain, which accounts for 10 percent of sales.

The company had to raise prices on some UK products and expects that to temper demand, especially after there was a surge due to expectations of future price rises.

“I think demand will taper off a little,” Bulgurlu said, noting however that Arcelik still aimed to double its business in Britain in the next five years, even as the country’s exit from the European Union raises questions about the economy and the future of foreign workers.

“It will continue to be our most important market outside Turkey,” he said.

Arcelik opened a research and development center in Cambridge, eastern England, last year, in an effort to take advantage of a British tradition for scientific innovation.

“We want to tap into that and take that pure research and make it applicable to appliances,” Bulgurlu said, citing potential for smart appliances such as refrigerators that know when food is going bad and ovens that can keep food cool until its time to cook.

Reporting by Martinne Geller; Editing by Mark Potter