Tupras-Turkiye Petrol Rafineleri AS (IST:TUPRS) (Q2 2026) Earnings Call Highlights: Record ...

Negative Points

• The company faces ongoing uncertainty from geopolitical tensions, particularly in the Middle East and Russia, which could lead to renewed volatility in crude differentials and put upward pressure on costs, especially from September onwards.

• Tupras-Turkiye Petrol Rafinerileri AS ( IST:TUPRS ) expects a gradual normalization of product market conditions from August onward, which could lead to softer crack margins in the second half of the year.

• The company's working capital balance is at an unusually negative level, which management does not view as sustainable and expects to gradually normalize, potentially impacting cash flow in the coming periods.

• The electricity generation business saw a decline in EBITDA due to a softer pricing environment, despite higher production volumes, although an improvement is expected in the second half.

• The company's investment in four new tanker ships, totaling around $400 million, represents a significant capital commitment, with deliveries not expected until 2029, which could tie up capital and increase financial exposure to the shipping market.

Q & A Highlights

Q: Can you provide more color on the drivers behind the revised net refining margin guidance, the impact of jet fuel margin lags and crude differentials, and the expected effective tax rate and working capital normalization for the second half? A: Gokhan Dizemen (CFO) explained that the guidance raise to $13-$15 per barrel reflects expectations that disrupted refining capacity in the Middle East and Russia will return only gradually, likely into early 2027, keeping crack margins strong. The jet fuel margin lag from March's spike was fully realized in Q2, benefiting results. Crude differentials peaked in May/June but eased in July/August; however, renewed geopolitical tensions could pressure costs from September onward. The effective tax rate benefited from a one-time non-cash deferred tax income due to the corporate tax rate cut for manufacturers from 25% to 11.5%, which will not recur in H2. Working capital is expected to gradually normalize toward a neutral level, with an adjustment of a couple of days in net working capital days.

Q: Given the strong cash position and supportive outlook, is there a possibility of an additional dividend payment this year on top of the already announced dividend? A: Gokhan Dizemen (CFO) stated that Tupras does not have a practice of paying additional or special dividends within a financial year. Dividend decisions are made annually based on full-year performance, future CapEx plans, and liquidity requirements. The company remains committed to its policy of distributing around 80% of distributable profits, but it is too early to comment on a potential dividend based solely on half-year results.

Q: What is the target for the tanker fleet expansion, and how does owning these vessels impact freight costs and crude procurement strategy? A: Gokhan Dizemen (CFO) confirmed that Tupras placed orders for four new tankers with Korean shipbuilders, increasing total shipping capacity by around 75% to approximately 1.5 million deadweight tons. The $400 million investment will be paid in installments through 2029, with limited CapEx impact this year. Owning vessels allows Tupras to capture more value within the supply chain by procuring more crude on an FOB basis directly from sources, rather than letting ship owners capture arbitrage opportunities. For cargoes not using their own fleet, freight costs are included in the cost of crude purchase.

Q: If margins remain higher for longer, would Tupras consider postponing some maintenance to 2027, and can you comment on the crude procurement strategy during Q2? A: Gokhan Dizemen (CFO) confirmed that the maintenance schedule remains unchanged, with no postponements or delays planned. On crude strategy, Tupras leveraged its complex refinery configuration to source from around 14 countries with 24 different grades, including new types. The company procured two cargoes from the US Strategic Petroleum Reserves and tapped into new sources like Guyana, Colombia, and Norway, demonstrating the flexibility of its diversified supply base and trading office.

Q: What is your view on the refining macro outlook, and what percentage of Gulf refining capacity could return if geopolitical tensions normalize? A: Gokhan Dizemen (CFO) noted that the exceptional margins seen in March were driven by a temporary supply shock and market panic. While European refiners shifted yields toward middle distillates to compensate for lost Middle East imports, this tightened gasoline balances and supported gasoline cracks. Russian export restrictions and refinery outages (capacity down ~2 million barrels per day) continue to tighten balances. Recovery of damaged refining capacity will take time, supporting a high crack margin environment through 2026. Gulsen Ayaz (IR Director) added that July's exceptional crack levels are unsustainable, but strong margins are expected in Q3, potentially running into early 2027.

Q: Can you explain the TRY42 billion derivative outflow in the cash flow statement, and should we expect a reversal in Q3? A: Gokhan Dizemen (CFO) clarified that the derivative position primarily stems from inventory hedging activity, which aligns the pricing period of crude purchases with the pricing period of product sales. This strategy limits flat price exposure on inventories. Any cash inflow or outflow from hedging is offset by inventory gains or losses on the balance sheet, so the cash flow impact is a net effect between derivatives and changes in inventories.

Q: What was the impact of the jet fuel margin lag and crude differentials on Q2 net refining margins, and what should we expect for the effective tax rate in H2? A: Gokhan Dizemen (CFO) explained that the jet fuel margin lag from March's spike was fully realized in Q2, benefiting results. Crude differentials peaked in May/June but eased in July/August; however, renewed geopolitical tensions could pressure costs from September onward. The effective tax rate benefited from a one-time non-cash deferred tax income due to the corporate tax rate cut for manufacturers from 25% to 11.5%, which will not recur in H2.

Q: How should we think about the working capital unwind, and will it normalize within 2026 or extend into 2027? A: Gokhan Dizemen (CFO) stated that the negative working capital level is unusual and driven by spot cargo procurement with better payment terms in H1. The target is to maintain a neutral working capital balance with 20-25 days of receivable turnover, 40-45 days of inventory turnover, and 50-55 days of trade payable turnover. Normalization is expected gradually within this year, with an adjustment of a couple of days to net working capital days.

Q: Can you elaborate on the crude procurement strategy and how the company managed differentials during the volatile Q2? A: Gokhan Dizemen (CFO) highlighted that Tupras's complex refineries and coastal locations provide logistical advantages. The company procured from around 14 countries with 24 different grades, including new types, and tapped into new markets like Guyana, Colombia, and Norway. Two cargoes were sourced from the US Strategic Petroleum Reserves. This diversification and flexibility helped mitigate the impact of volatile crude differentials, which peaked in May/June before easing in July/August.

Q: What is the outlook for crack margins and product market conditions in the second half of 2026? A: Gokhan Dizemen (CFO) stated that disruptive refining capacity in the Middle East and Russia

For the complete transcript of the earnings call, please refer to the full earnings call transcript .