2
OPERATIONAL ROOTS
ECONOMIC PERFORMANCE
CORPORATE GOVERNANCE
CUSTOMER LOYALTY
Tekfen, which started its journey in 1956 as a small engineering and consultancy company, continues its operations as one of Turkey’s top reputable 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.
As reputable brands in their respective areas, the Group Companies lead their industries not only with their economic performance but also with their corporate structures and 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 of its vision for the future.
Tekfen Manufacture, Derince Plant
Economic Performance
In 2021, a year marked by reduced investments, Tekfen Holding aimed to respond to the rapidly changing global and local environment by focusing on its current field of activity.
For the international contracting industry, 2021 was mostly under the influence of the COVID-19 pandemic, just like 2020. Even though countries and the industry achieved partial economic recovery thanks to the widespread vaccination roll-outs, the disruptions caused by the pandemic, especially in the production and supply chains, continued to drag down the economy. Just like the entire industry, Tekfen Construction, which was adversely affected by the fall in oil prices towards the end of 2019 and the restrictive effects of the pandemic in 2020, focused primarily on completing the ongoing projects in the best way possible and expanding its portfolio with new projects in 2021.
The Chemical Industry Group, which specializes in the production of an essential input in agriculture, namely fertilisers, and the Agricultural Production Group, which operates directly in agricultural production, were both exposed to the negative effects of the pandemic. But they also benefited from a positive outcome associated with COVID—the increased significance of global agricultural activities. Fertiliser prices started to increase rapidly in 2021, especially in the second half. This weakened the farmers’ purchasing power for fertilisers and caused the market to shrink.
The factors that affected the 2021 performance of the Group Companies can be summarized as follows:
- The uncertainty surrounding the macroeconomic indicators caused a slowdown in the supply of large-scale projects.
- Orders in the contracting industry started to weaken, which reduced revenue predictability.
- The pandemic continued to be a systematic risk factor in global and local economies.
- The rise in raw material prices stood out as a risk factor that may put pressure on profitability margins.
Factors that placed Tekfen Holding in a stronger position and reduced its financial risks:
- High credit quality supported cash-generating abilities.
- The balance sheet was strong thanks to satisfactory capital and cash levels, despite the deterioration in 2020.
- 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 in which it operates with its economic contributions, boasting a local employment rate of 76%. Additionally, the Group Companies have a total of 7,888 suppliers, and 52% of all supplier payments are made to local suppliers.
Basic Financial Indicators
Revenues (Consolidated million TRY)
Breakdown of Revenues (%)
EBITDA (Consolidated million TRY)
Net Profit / Loss for the Year (Consolidated million TRY)
Investment (Consolidated million TRY)
Total Assets (Consolidated million TRY)
Corporate Governance
36%
The average rate of women on the boards of BIST companies is 17%, compared to 36% at Tekfen Holding.
Tekfen Group has built its relations with management, partners, employees, and third parties on the principles of equality, transparency, accountability, and responsibility since the very first day. The Group regards its deep-rooted values, strong corporate tradition, and adherence to basic governance principles as indispensable elements of its existence. The Group strictly adheres to its corporate governance approach in order to protect the rights of shareholders and stakeholders at every step along the way.
With the change in Holding management in the first quarter of the year, the Group initiated a renewal process to review its structure in today’s ever-changing environment and transform it into a more agile, durable, and sustainable organisation. To that end, the ongoing efforts to establish a lean and agile organisation have been accelerated, as the Group has embarked on an intensive planning process to establish the right business model that will give it the leading edge by utilizing its strengths.
Tekfen Holding’s Board of Directors consists of 11 members, 4 of whom are independent. The Board of Directors has 4 female members, 2 of whom are 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 in order to ensure that the Board of Directors fulfills its duties and responsibilities in a duly 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
According to the “Women on Board Turkey 2021 Report” prepared by the Sabancı University Corporate Governance Forum, the representation of female board members in the BIST 100, which lists Turkey’s largest companies, decreased year on year and dropped to 15.3%. The representation rate stood at 17% for all BIST companies. The board members of 26 companies in the BIST 100 Index are all men. The ratio of female executives in Sustainability Index companies, which includes Tekfen Holding, stood at 16.9%. This rate was lower than expected, as it also fell below all BIST companies. Tekfen Holding, on the other hand, ranked high in the index with a female board representation rate of 36% in 2021, whereas the minimum target in the index was 25%.
More information about Corporate Governance is available on pages 181 to 202 in Tekfen Holding’s 2021 Annual Report.
Corporate Memberships and Supported Initiatives*
Founding Memberships
Memberships
Affiliate Memberships
* In 2021, dues of 1.75 million Turkish lira were paid to the trade associations and tax exempt groups of which Tekfen Holding and Group Companies are members.
GRI 102-12, GRI 102-13
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 in order to identify risks accurately and in advance, measure their potential effects, and take the necessary measures.
Risk Management
In addition to various uncertainties and transformations, the COVID-19 pandemic has also created unpredictable challenges for society, employees, company operations, and stakeholders, elevating the significance of risk and crisis management all over the world. Being able to run risk management processes correctly and effectively is the key to success in this environment of instability.
According to the Global Risks Report 2022 published by the World Economic Forum, 42% of respondents to the global risk perception survey predict that uncertainty will remain over the next three years. Climate action failure, biodiversity loss, social cohesion erosion and infectious diseases are among the top 10 risks.
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 in order to identify risks accurately and in advance, measure their potential effects, and take the necessary measures. Group Companies act in coordination with Tekfen Holding and implement a uniform reporting method in order 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. Additionally, all risk inventories are thoroughly reviewed once a year through the activities carried out with the departments in order 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 analyzed 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, water crisis, occupational health and safety, human rights, business ethics, compliance, business continuity, cybersecurity, the law on the protection of personal data (LPPD), 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.
Click to download the report.
Risk Type
Financial risks
Definition
Collection risk (credit risk):
These are the risks for the full and timely collection of receivables.
Management Method
Sales of goods and services against cash payment where possible, obtaining collateral from customers and asking for bank guarantee/surety, grading customers according to their risk.
Liquidity risk:
It is the risks of not having enough liquid assets to meet the liabilities that are due.
Working with a strong cash availability on a consolidated basis regular follow up of critical indicators for the maturity-matching of assets and liabilities in balance sheet management, paying due attention to balancing trade receivables and trade payables and stock management policies, keeping the financing need at a low level by working with a strong equity structure.
Market risks:
Financial losses that may be incurred as a result of the fluctuations in market parameters.
Using derivatives for hedging against currency risk, making efforts to pre-fix the purchase prices for raw materials and materials that will be needed for the production of goods and services.
Operational risks
Cover the risks that may arise during the operational processes of all functions of each Tekfen company in the all sectors. Risks related to issues such as business continuity, information security, disasters, environment and occupational safety, human resources, supply chain and production, and project management are managed within this context.
In principle, the measures to be taken regarding the management of these risks are considered to be an integral part of the work of the departments that carry out the activity at the first stage. “Unified Regulations” (UFRs), published by Tekfen Holding, regulates the basic rules that companies must follow while conducting their business. In addition, operations are constantly audited by the internal audit departments within the Holding and Group Companies, both according to the companies’ own regulations and UFRs, and operational risks are reviewed to check whether they are properly managed or not.
Strategic risks
Risks that will affect the realisation of the company’s long-term goals and services are managed within this context. These are the issues arising from macroeconomic, political, demographic, social, environmental, and similar factors in Tekfen’s operating regions, sustainability risks such as the climate crisis and the water crisis, and risk related to industry and competitive trends, internal resource allocation, entry into new fields of business, mergers and acquisitions, product development processes, and business opportunities.
These issues are evaluated and followed by the Board of Directors, senior management, and the expertise committees and created under hem, and necessary actions are taken. If deemed necessary, services are obtained from consultancy firms with proven international competence and expertise.
Reputational risks
Issues that may harm the company’s reputation are managed within this context. These are risks that may have an adverse effect on the company and potentially have a negative impact on employees, customers or other stakeholders due to errors or malicious acts that may arise from both internal and external factors.
Reputation is regarded as an important intangible asset for Tekfen Group Companies, and the focus of reputation risk management is on stakeholder relations and communication, as well as on corporate image management. In this context, reputational risks are managed vis-à-vis shareholders, customers, suppliers, employees, and society through corporate communication and corporate governance activities.
Compliance risks
Risks arising from intentional or unintentional non-compliance with the legislation, contracts, or the company’s internal guidelines are managed within this context.
In order to manage the risks that may arise from behaviours that do not comply with national and international legislation, internal procedures, and ethical rules, the Legal and Compliance units in the Holding and Group Companies continue to work in coordination with the relevant operational units for each subject. In addition, an important step was taken regarding the management of compliance risks with the “Ethics Hotline”, which became operational in 2018.
Internal Audit
Internal Audit activities for Tekfen Contracting and Agri-Industry Groups are carried out by the Group’s relevant Internal Audit teams. Tekfen Holding Group Internal Audit Directorate audits all companies within the Group and all units of these companies. Tekfen Holding Group Internal Audit Directorate is also responsible for the execution of all Internal Audit activities required in accordance with international standards and uniform intra-Group practices. Internal Audit departments report to the Company’s Board of Directors through the Audit Committee in order to ensure that Internal Audit activities are carried out independently and impartially. Efforts to improve internal control systems are carried out under the coordination of the Holding Group Internal Audit Directorate. Evaluation of the effectiveness and efficiency of the internal control system is carried out by the relevant Internal Audit teams.
Tekfen Group Internal Audit departments are responsible for examining the functioning of internal control, 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 are carried out in accordance with International Internal Audit Standards, relevant 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.
Business Ethics and Compliance
The business ethics lies at the foundation for Tekfen’s way of doing business. The Group ensures a responsible approach towards customers, employees, shareholders, suppliers, business partners, competitors, the environment, and society in accordance with the business ethics adopted by all employees, based on integrity, the confidentiality of private information, conflict of interest, and compliance with laws and regulations. Accordingly, the company’s standards have been put into writing through policies and shared with all stakeholders. In 2020, seven new company policies were established under the leadership of the working groups, and all policies were shared with all stakeholders on the Tekfen Holding website under the “Policies” section.
Tekfen Holding does not favor any political opinions or institutions. As detailed in Tekfen Construction’s Business Ethics 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 Group wide in 2018, by calling +90-212 257 0 110, sending an email to etikhat@tekfen.com.tr, and visiting a website (www.remedetikhat.com.tr/en). All channels are available 24/7 and 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 also can be made by sending an email to ethics@tekfen.com.tr or by using the form on the company's 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 2021, a total of 98 notifications were received through all ethical reporting channels, and 69 of them were resolved within the year. There were no notifications or penalties related to corruption or bribery during the reporting year.
Training
Business ethics training is important for ensuring compliance with the principles and establishing an in-house ethical culture. A total of 5,654 Group employees were given 23,062 person-hours of business ethics training in 2021. The training includes discussions of anti-corruption and anti-bribery. In order to raise the business ethics 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 Business 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 center and on a project basis under the supervision of the Compliance Officer or the Project Compliance Representative.
Tekfen requires its subcontractors and suppliers to adopt its values and way of doing business and conducts merit assessments in order to encourage its subcontractors and suppliers to train their employees on these subjects.
Customer Loyalty
95.7%
In 2021, all customer complaints were answered and 95.7 percent of them were resolved.
Tekfen Holding continues to provide the highest level of service to maintain the strong bond it has established with its customers and clients. Tekfen Group Companies conduct annual customer satisfaction surveys to ensure close and regular monitoring of customer satisfaction.
A total of 141 customer complaints were received in 2021 with all answered and 135 resolved. There have been no breaches in customer data confidentiality.
Tekfen Construction
Tekfen Construction cares about what its clients think, taking the necessary steps to ensure sustainable customer satisfaction. Tekfen Construction receives customer feedback through non-compliance reports obtained from employer representatives in the field and regular customer satisfaction surveys.
Relevant project departments perform a root cause analysis on the non-compliance reports, and action plans are determined to correct the non-compliance. These action plans include both the resolution of the relevant non-compliance and the measures to prevent it from reoccurring. The number of non-compliance reports and the timely conclusion of said reports are among the quality performance indicators of the projects. To that end, monthly reports are made to the headquarters, and activities are carried out to ensure that all complaints are resolved before the end of the relevant project. Additionally, collected feedback is evaluated annually with the participation of the senior management, and suggestions are made for improvement. Tekfen Construction received 208 non-compliance reports in 2021 with all resolved.
The Tekfen Construction General Directorate Quality Department conducts client satisfaction surveys twice a year for employers to evaluate the project management system of existing projects, and all feedback is evaluated annually with the participation of senior management. In 2021, two customer satisfaction surveys were conducted in the first half (January-June 2021) and the second half (July-December 2021) of the year. Responses were received from 21 customers in 7 ongoing projects and Ceyhan Fabrication Facility in the first half and from 23 customers in 6 ongoing projects and Ceyhan Fabrication Facility in the second half. Completed projects were not included in the survey. The customer satisfaction rate in 2021 exceeded the 85% target, averaging 88.23% for the year (88.10% in the first half and 88.36% in the second half).
Ceyhan Steel Structure Fabrication Plant, Adana
Toros Agri
Toros Agri aims to expand its current portfolio, closely follow innovations, and assist the end user in obtaining higher quality products and efficiency, as well as maintain and improve its well-established and effective communication with all customers and farmers. Distributors and authorized dealers also play a key role in determining their needs and ensuring customer satisfaction. Accordingly, the company maintains close contact with its distributors through regular visits and meetings.
Toros Agri analyzes product samples taken every two hours at its production facilities in its laboratories and constantly monitors the compliance of its fertilisers with quality standards. Notifications received from distributors and farmers regarding product quality are examined on-site when necessary. If the complaint regarding quality is justified, the product is returned, and the necessary steps are taken to resolve the quality issue quickly by investigating its cause.
Toros Agri Mobile Training Vehicle
96 different location visits
The Toros Agri training bus visited 96 locations and trained farmers and distributors on the correct use of fertilisers.
One-on-one meetings with farmers and distributors
Across the country, 5,398 distributor visits, 7,975 farmer discussions, 184 agricultural institution visits, 1 drone activity, and 20 farmer meetings were conducted.
Cooperation between Tekfen Foundation and TİSVA
As part of the social investment project carried out in cooperation with the Tekfen Foundation and the Turkey Waste Prevention Foundation (TİSVA), 2,500 farmers were reached.
15 demonstration trials in 7 regions
During the production season, 15 demonstration trials were performed in 7 regions.
13,674 fields of 11,209 farmers were registered
Using the Toros Farmer Application, 13,674 fields of 11,209 farmers were registered.
You can learn more about the related projects and practices in the "Social Investments" section of the Strategic Drivers page.
44
In 2021, 44 employees were given customer relationship management training.
Tekfen Engineering
Tekfen Engineering improves its Quality Management System effectiveness with the participation of all employees and ensures effective customer management in its projects. Customer management is monitored from top to bottom through weekly and monthly project management meetings. In these meetings, senior management and project managers come together and decide on strategies for customer management.
In order to ensure and measure customer satisfaction, a client satisfaction survey form is shared with customers, and the results are evaluated accordingly. Customer meeting records, feedback on the quality of the delivered product and service, requests and complaints, and satisfaction/dissatisfaction are recorded, monitored, and evaluated at management review meetings, along with all communications regarding product changes.
Tekfen Engineering records its findings in the “Tekflow” findings system in case of non-compliance, including complaints from stakeholders and in-Group audits, and shares them with the customer when necessary. Root causes of non-compliance are identified, actions to eliminate root causes and prevent recurrence of non-compliance are determined, corrective actions are taken, and the effectiveness of the corrective actions implemented are reviewed. Instances of non-compliance, corrective actions determined according to the relevant causes, and the results of these corrective actions are documented and preserved.
1915 Çanakkale Bridge
Operational Excellence
Tekfen’s operational excellence approach consists of four elements:
- Systematising and perfecting all processes in line with international standards and industry good practices.
- Making operational excellence a part of Tekfen’s culture with the goal of lean production, management of quality processes, effective and efficient use of resources, and continuous improvement.
- Continuously improving the quality of services offered to customers with the goal of long-term sustainable growth.
- Improving efficiency while reducing costs, increasing employee and customer loyalty, and reducing the environmental impact of operations.
Tekfen Holding and its Group Companies conduct all their operations following international standards, and all Group Companies implement quality, occupational health and safety, environment, energy, and information security management systems. The effectiveness and adequacy of the practices are regularly monitored and evaluated through internal and third-party audits. According to the evaluation results obtained, areas for improvement are determined and corrective measures are taken.
The management certificates of Tekfen Holding and Group Companies are listed in the table below:
3.5
million TRY
Toros Agri achieved a potential revenue of 3.5 million TRY in 2021 with its 6-Sigma Green Belt and lean production projects.
Toros Agri
As Turkey’s largest fertiliser producer, Toros Agri focuses its operational excellence goal on subjects such as lean production, productivity and quality increase, savings, and Occupational Health and Safety.
6- Sigma Green Belt Projects
6-Sigma is a methodology for achieving process excellence. Toros Agri completed its first 6- Sigma Green Belt process in 2020 and its second, in 2021.
In 2021:
- 16 candidates were involved in the second process.
- Fourteen 6-Sigma Green Belt projects were initiated, and a potential income of 2.64 million TRY was achieved.
- During the training process consisting of four modules, 216 hours of coaching support was provided to the Green Belt candidates for 2,016 person-hours of training and projects. Those who completed their projects and presentations received their Green Belt certificates.
Lean Manufacturing Activities and Practices
In 2021, Toros Agri focused on energy savings for its projects conducted as part of the philosophy of lean manufacturing and continuous improvement (Kaizen) and carried out numerous studies on energy savings for all units.
86 Kaizen projects were started in 2021 for continuous improvement. Toros Agri achieved a potential revenue of 3.5 million TRY in 2021 with its 6-Sigma Green Belt and lean production projects.
“Protect & Sustain” Excellence Certification
As the first and only company in Turkey to receive the “Protect & Sustain” certificate by the International Fertilizer Association (IFA) in 2018 for its OHS, environment, product safety, and security practices, Toros Agri maintained its “excellence” status in 2021.
Toros Agri Samsun Production Plant
Toros Agri “Green Belt” certificate ceremony
97.3%
Tekfen Construction’s quality performance was 91.6% in 2019, 89.7% in 2020, and 97.3% in 2021.
Tekfen Construction
At the beginning of each year, Tekfen Construction determines quality performance criteria such as error rates, repetitive work volumes, field test results, non-compliance, and material loss on a project/workplace basis by considering the scope of activities of projects and workplaces and customer expectations. The criteria are monitored monthly, and cumulative values are calculated at the end of the year.
Activities for quality purposes are carried out based on continuous improvement. Tekfen Construction’s quality performance was 91.6% in 2019, 89.7% in 2020, and 97.3% in 2021.
One of Tekfen Construction’s key efficiency advantages is the digitisation of project processes. In 2021, approval processes in steel works and quality control processes were carried out via mobile devices, which improved efficiency and reduced costs. The entire physical archive was transferred to digital media in 2021, which marked a major step towards accessing the required documentation faster and at a lower cost.
Ceyhan Steel Structure Fabrication Plant, Adana