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OPERATIONAL ROOTS
Tekfen, which started its journey in 1956 as a small engineering and consultancy company, continues its operations as one of Türkiye’s top holding companies and as part of the BIST 30 Index. The Group expands its high experience and knowledge in engineering, contracting, chemical, agriculture, investment, and services industries with values of reliability, honesty, and quality, and offers them to the economy, its stakeholders, and society.
Each of these companies, which have become brands in their own right in their respective fields, holds a leading and reputable position in their industries not only through their economic performance but also through its robust corporate structure and rigorous service standards. Economic performance, corporate governance, and customer loyalty, which form Tekfen’s operational roots, are among the top sustainability priorities of the Group and are indispensable building blocks for its future vision.
ACE Oil Drilling and Production Platform, Azerbaijan
Economic Performance
Tekfen Holding’s primary focus in 2022, a year replete with economic challenges and uncertainties, was to be agile in our response to the rapidly changing conditions and hard-to-estimate events in all our areas of operation, to manage the risks in the best possible manner, and to ensure our business continuity.
One of Tekfen Holding’s two main lines of business, the contracting industry, was severely affected by the Russo-Ukrainian War following the pandemic. On the other hand, the positive developments in Türkiye’s relations with the Gulf countries in 2022 and the general upward trend in oil prices despite the severe fluctuations throughout the year have created a favourable environment for infrastructure investments. Tekfen Construction was invited to bid for a large number of projects throughout the year. Despite some cyclical challenges, Tekfen Construction managed to keep its business volume above a certain level and added two large-scale manufacturing projects to its portfolio.
Tekfen Manufacturing, a subsidiary of the Engineering and Contracting Group, recorded new projects in 2022 in addition to its backlog. Continuously expanding its foreign orders, the company has taken its first step into Australia, which was the only continent it had not previously exported to.
Already highlighted by the pandemic, food security and agricultural sustainability became a constant in the global agenda following the Russo-Ukrainian crisis. With Russia being a major global fertiliser raw material supplier, the tension negatively impacted the fertiliser industry. Türkiye’s leading fertiliser manufacturer and market leader, Toros Agri, managed to sustain its capacity utilisation rate at around 75 percent despite the year-long disruptions in the supply chain and the deteriorating conjuncture. Toros Agri’s agile and flexible responses to the extraordinary and unpredictable events in the post-pandemic industry boosted the company’s competitive power and improved its financial statements in recent years. As the ranking chemical fertiliser export champion for five years in a row, the company once again reached striking sales volumes as the previous year’s ban on fertiliser exports was partially removed in 2022.
Tekfen Group continuously monitors investment opportunities that will bolster its position in the market, enhance its competitive edge, and support its profit-oriented focus.
The factors that affected the performance of the Group Companies can be summarised as follows:
- High inflation and high interest rates making the economies of developing countries more vulnerable.
- The uncertainty surrounding the macroeconomic indicators causing a slowdown in the supply of large-scale projects.
- The Russo-Ukrainian War accentuated the East–West polarisation, subsequently changing geopolitical balances, exacerbating security concerns, and triggering a shrinkage in the international contracting industry.
- Orders in the contracting industry started to weaken, which reduced revenue predictability.
Factors that placed Tekfen Holding in a stronger position and reduced its financial risks:
- High credit quality supported cash-generating abilities.
- Foreign currency cash flows supported finances.
- Portfolio distribution was diversified enough to compensate for potential fluctuations in economic conditions.
- Strong position in the relevant sub-industries.
- High level of compliance with corporate governance principles.
Tekfen supports the employment and development of the countries where it does business with its economic contributions, boasting a local employment rate of 76 percent. Additionally, the Group Companies have a total of 5,152 suppliers, and 72 percent of all supplier payments are made to local suppliers.
Basic Financial Indicators
Sales Revenue (Consolidated million TRY)
Breakdown of Sales Revenue (%)
EBITDA (Consolidated million TRY)
Net Profit / Loss for the Year (Consolidated million TRY)
Investment (Consolidated million TRY)
Total Assets (Consolidated million TRY)
Corporate Governance
27%
Tekfen Holding’s female representation on the Board of Directors for 2022 is 27 percent.
Since day one, Tekfen Group has fostered its relations with management, partners, employees, and third parties on the principles of equality, transparency, accountability, and responsibility. The Group’s deep-rooted values, strong corporate tradition, and adherence to fundamental governance principles are indispensable parts of its identity. The Tekfen Group regards corporate governance as its fundamental basis for ensuring business success in its business activities and for protecting the rights of all its stakeholders, with a particular focus on its investors.
Tekfen Holding’s Board of Directors consists of 11 members, four of whom are independent. The Board of Directors has three female members, one of whom is independent. There are committees operating under the Board of Directors on issues such as establishing strategies and policies, monitoring compliance with action plans, and evaluating performance to ensure that the Board of Directors fulfills its duties and responsibilities in a healthy manner. The Sustainability Committee, Audit Committee, Corporate Governance Committee, Early Detection of Risk Committee, and Remuneration Committee are responsible for meeting periodically and presenting their evaluations and reports to the Board of Directors. The duties of the Chairman of the Board of Directors and CEO are carried out by different individuals in line with the Corporate Governance Principles.
Board Diversity
Increased diversity in the Board of Directors improves financial performance and shareholder returns and is welcomed positively by investors. According to the new EU law on gender balance on corporate boards adopted by the European Parliament, women are expected to make up 40 percent of non-executive directors or 33 percent of all directors on the boards of large companies by 2026.
Tekfen Holding attaches great importance to diversity in its Board of Directors and continues to take steps to improve its performance in this regard. Tekfen Holding’s female representation on the Board of Directors for 2022 is 27 percent.
More information about Corporate Governance is available on pages 180 to 199 in Tekfen Holding’s 2022 Annual Report.
Corporate Memberships and Supported Initiatives
Tekfen Holding*
Group Companies*
* TRY 4.28 million in membership fees was paid to the partnered professional organisations and nongovernmental organisations by Tekfen Holding and Group Companies in 2022.
Due to the global nature of its core business areas, Tekfen Holding closely monitors cyclical developments in the world and implements effective risk management with a prudent management approach to identify risks accurately and in advance, measure their potential effects, and to take the necessary measures.
Risk Management
The increasingly globalised uncertainty environment in recent years has further emphasized the importance of effective risk management. Being able to operate risk management processes accurately and effectively is the key to survival and success for companies in today’s world of uncertainty and crises.
According to the Global Risks Report 2023 published by the World Economic Forum, more than 80 percent of respondents to the global risk perception survey predict that uncertainty will remain over the next two years. The cost-of-living crisis, natural disasters and extreme weather events, geoeconomic conflicts, failure to tackle climate change, and social polarisation rank in the biggest five global risks in the two-year period.
Due to the global nature of its core business areas, Tekfen Holding closely monitors cyclical developments in the world and implements effective risk management with a prudent management approach to identify risks accurately and in advance, measure their potential effects, and to take the necessary measures. Group Companies act in coordination with Tekfen Holding and implement a uniform reporting method to manage potential risks in their own fields.
Risks are managed with a common risk management structure within the Group in accordance with the Committee of Sponsoring Organisations of the Treadway Commission (COSO) framework. Accordingly, the risks are identified, assessed (measured), answered (acted on), reported, and monitored in line with the department risk inventories of all Group Companies and as part of a bottom-up approach. All risk inventories are thoroughly reviewed once a year through the activities carried out with the departments to ensure a comprehensive assessment of external risk factors. This maintains the dynamism of the risk management process and the principle of continuous improvement.
Tekfen Holding and Group Companies have written procedures on how to manage their own risks, and organisational structures have been established to carry out risk management and reporting activities. The risk reports created for each Group Company are submitted to the Holding after the approval of the relevant Board of Directors and to the Early Detection of Risk Committee, which convenes every two months, after being analysed by the Risk Management Directorate.
The Early Detection of Risk Committee, which is chaired by an independent member of the Board of Directors, is responsible for bringing significant risks to the agenda of the Tekfen Holding Board of Directors, along with its own views and assessments concluded after examining the risk documents. Risks are evaluated at the highest level, and the appropriate measures are determined accordingly. Risk reports are also shared with the Independent Auditor.
Tekfen Holding addresses its risks under five main headings: financial, operational, strategic, reputational, and compliance. In addition to these headings, subjects such as climate change, the water crisis, occupational health and safety, human rights, code of conduct, compliance, business continuity, cybersecurity, the Law on the Protection of Personal Data, and executive succession management are also monitored as part of risk management activities. You can learn more about climate and water risks in the “Climate Crisis” section of the Strategic Drivers page.
You can download the report.
Risk Type
Financial risks
Definition
Collection risk (credit risk):
These are risks that may arise for the full and timely collection of accounts receivable.
Management
Sales of goods and services against cash payment where possible, requesting collateral from customers and asking for bank guarantees/liabilities, rating the customers according to their risk.
Liquidity risk:
These are risks where liquid assets may not be enough to meet the liabilities that are due.
Working with strong consolidated cash availability, regularly monitoring critical indicators for the maturity match of assets and liabilities in balance sheet management, emphasising stock management policies and the balance between trade receivables and trade payables, minimizing financing needs with a strong equity structure.
Market risks:
These are financial losses that may be incurred due to fluctuations in market parameters.
The use of derivatives for hedging against currency risk, attempting to fix the purchase prices for raw materials and materials required for the production of goods and services.
Operational risks
These are risks that may arise in the operational processes of all functions of each Tekfen company in the relevant industries. These are risks related to issues such as business continuity, information security, disasters, environmental and occupational safety, human resources, supply chain and production, and project management.
In principle, the measures to be taken regarding the management of these risks are considered to be an integral part of the efforts of the departments that carry out the first stage of the relevant activity. The central “Uniform Methods” published by Tekfen Holding regulate the basic rules that companies must follow while conducting their activities. Additionally, operations are constantly audited by the internal audit departments within the Holding and Group Companies, both according to the companies’ own regulations and the Uniform Methods, to determine whether the operational risks are managed properly.
Strategic risks
These are risks that may affect the fulfillment of the company’s long-term goals and services. They are related to issues arising from macroeconomic, political, demographic, social, environmental, and other factors in the regions where Tekfen operates, sustainability risks such as the climate and water crises, industry and competitive trends, internal resource allocation, entering new areas of activity, mergers and acquisitions, product development processes, and business opportunities.
These issues are evaluated and monitored by the Board of Directors, senior management, and expertise committees and then acted on as necessary. If necessary, services are obtained from consultancy firms with proven international competence and expertise.
Reputational risks
These cover the issues that may damage the company’s reputation. These are risks that may have an adverse effect on the company and potentially, its employees, customers, or other stakeholders due to errors or malicious acts that may arise from both internal and external factors.
Reputation is regarded as a major intangible asset for Tekfen Group Companies, and the focus of reputational risk management is on stakeholder relations and communication, as well as on corporate image management. To that end, reputational risks facing shareholders, customers, suppliers, employees, and society are managed through corporate communication and corporate governance activities.
Compliance risks
These are risks arising from intentional or unintentional non-compliance with legislation, contracts, or the company’s internal guidelines.
The Legal and Compliance units in the Holding and Group Companies work in coordination with the relevant operational units on each case to manage the risks that may arise from behaviours that do not comply with national and international legislation, internal procedures, and codes of conduct. Additionally, the Group took a major step in the management of compliance risks with the “Ethics Hotline,” which became operational in 2018.
Internal Audit
The Group’s individual internal audit teams carry out internal audit activities for Tekfen Contracting and Agri-Industry under Tekfen Holding. On the other hand, the Tekfen Holding Group Internal Audit Department audits all companies within the Group and all units of these companies. The Tekfen Holding Group Internal Audit Department is also responsible for the execution of all internal audit activities required per international standards and uniform intra-group practices. Internal audit units report to their company’s Board of Directors through that company’s Audit Committee to ensure that internal audit activities are conducted independently and impartially. Efforts to improve internal control systems are performed under the coordination of the Holding Group Internal Audit Department. Each internal audit team evaluates the effectiveness and efficiency of internal controls for their respective systems.
Tekfen Group’s internal audit units are responsible for examining the functioning of internal controls, risk management, and corporate governance processes as a whole and for sharing the results of their activities with the relevant audit committee members. Internal audit activities follow International Internal Audit Standards, applicable laws, and regulations.
Tekfen Construction was deemed worthy of the Ethics and Compliance Award by BP for its adherence to ethical principles and the support of its senior management.
Code of Conduct and Compliance
Tekfen’s Ethics Policy forms the basis of its business conduct and corporate culture. Relations with employees, suppliers, customers, shareholders and all other stakeholders are carried out with honesty, responsibility and respect for rights under the guidance of ethical rules. The Group ensures a responsible approach towards customers, employees, shareholders, suppliers, business partners, competitors, the environment, and society in accordance with the code of conduct adopted by all employees, which is based on integrity, the confidentiality of private information and trade secrets, conflict of interest, and compliance with laws and regulations. In this context, the company’s standards are documented through policies and shared with all stakeholders. Company policies can be found under the heading “Policies” section on Tekfen Holding’s website. This year, Tekfen Construction published its Ethics Policy in English, Russian, and French to make its ethical principles accessible to all its stakeholders and employees.
Tekfen Holding does not favour any political opinions or institutions. As detailed in Tekfen Construction’s Code of Conduct and Anti-Bribery and Anti-Corruption Policy supporting politicians or political parties and making payments to political parties, organisations, and their representatives are strictly prohibited.
Compliance with the Principles
All notifications regarding ethical violations can be made anonymously in Turkish or English via the “Ethics Hotline” commissioned in 2018, by calling +90 212 257 0 110, sending an email to etikhat@tekfen.com.tr and visiting www.remedetikhat.com.tr/en. All channels are available 24/7. Notifications are collected by an independent company. Tekfen Holding has an Ethics Committee, which is chaired by a Member of the Board of Directors and includes the Internal Audit Director. Notifications for Tekfen Construction can be made by sending an email to ethics@tekfen.com.tr or on the website.
All Group Companies have a Compliance Officer and a Compliance Committee appointed by the company’s Board of Directors. These individuals and committees work in cooperation with the Ethics Committee and report to both the company’s Board of Directors and the Tekfen Holding Ethics Committee every month. All notifications made to the Ethics Hotline are evaluated by the Ethics Committee according to ethical and disciplinary rules. In 2022, a total of 116 notifications were received through all ethical reporting channels, and 106 of them were resolved within the year. There are still no notifications or penalties related to corruption or bribery.
Training
Code of conduct training is important for ensuring compliance with the principles and establishing an in-house ethical culture. A total of 2,965 Group employees were given 6,380 person-hours of business ethics training in 2022. The training includes discussions of anti-corruption and anti-bribery. To raise the code of conduct awareness, Tekfen Construction informs its employees every month on various issues, such as behaviour in the workplace, equality of opportunity, conflicts of interest, and competition laws.
Engineering and Contracting Group employees receive training on the Code of Conduct and Anti-Bribery and Anti-Corruption Principles upon being hired and sign a letter of commitment stating that they have read and understood these principles. Additionally, refresher training on ethical values is conducted every year at the centre and on a project basis under the supervision of the Compliance Officer or the Project Compliance Representative.
Tekfen requires its contractors, subcontractors and suppliers to adopt its values and way of doing business and conducts merit assessments in order to encourage its contractors, subcontractors and suppliers to train their employees on these subjects.
