JCR Eurasia Rating by evaluating “Uşak Seramik Sanayi A.Ş.” and its “Outstanding Bond Issue”, has affirmed the Company’s Long Term National Rating of “BBB(Trk)”, while upgrading its outlook from “Stable” to “Positive”. Long Term International Foreign and

JCR Eurasia Rating, by evaluating “Uşak Seramik Sanayi A.Ş.” and its “Outstanding Bond Issue”, has affirmed the Company’s Long Term National Local Rating of “BBB (Trk)”, while upgrading its outlook from “Stable” to “Positive”. On the other hand, JCR Eurasia Rating has affirmed the Company’s Long Term International Foreign Currency and Local Currency ratings as “BBB-“ along with “Stable” outlooks. Other notes and details of the ratings are presented below. Long Term International Foreign Currency : BBB- / (Stable Outlook) Long Term International Local Currency : BBB- / (Stable Outlook) Long Term National Local Rating : BBB (Trk) / (Positive Outlook) Short Term International Foreign Currency : A-3 / (Stable Outlook) Short Term International Local Currency : A-3 / (Stable Outlook) Short Term National Local Rating : A-3 (Trk) / (Stable Outlook) Sponsor Support : 3 Stand Alone : BC With an operational history of more than 40 years and modern facilities occupying nearly 220,000 m2 of space, Uşak Seramik produces wall tiles, floor tiles, borders, decors and porcelain. In 2004, Uşak Seramik has joined the Tanışlar Group, which mainly operates in building materials and construction sectors. Tanışlar Group, which includes companies and brands such as Uşak Seramik, SeramikPark, Albinno, Granitta Favoritta, User Fix, Emiliano, S Design, Tanışlar Petrol, Tanışlar Nakliyat, Tanışlar Madencilik, Tanışlar İnşaat, Hit Enerji, Urganlı Kaplıcaları and Uşak Seramik Pazarlama A.Ş., mainly focuses on the production and marketing of ceramic and granite and reached a significant position in its respective sector. With its wide local dealer network and expanding exports to various countries, the Company is swiftly increasing its brand recognition. Uşak Seramik, with the vision of being one of the global brands in ceramic sector, continuously develops and renovates its products. The Company is accepted to the “Turquality” programsupported by the Ministry of Economy, which aims to create global brands from selective Turkish companies as well as expand Turkish branded product exports by improving the companies’ production, marketing, sales and after sales procedures and injecting managerial know-how through expert advisory support. With the help of the Turquality program, the Company will be able to accomplish its vision of being one of global brands in its sector, due to the financial subsidies that will be provided during the following 4 years. During the review periods, although the Company managed to increase its sales revenue, it couldn’t generate enough internal funds due to the high production costs along with their upward trend and financial expenses that resulted from high financial debts. By successfully issuing a corporate bond within 2015 from capital markets, the Company managed to diversify its funding structure. In addition to this, by channeling more of its production to the granite manufacturing, where a higher profit margin could be captured, the Company aims to increase its profitability. The Company has already obtained “investment incentive certificate” for investments that will enable this purpose. Despite the increases in its non-performing receivables, for which the Company sets almost full provision, the asset quality of the Company can be considered as acceptable and manageable considering the level of its non-performing loans to the level of its equity and total assets. Although the general outlook of the ceramic and granite sectors are considered as positive, increasing geopolitical risks that arise from unrests in the nearby geographies with contagion potential, weak recovery in the global economy, downward pressures on commodity prices that adversely affects the developing economies that relies upon commodities for growth and hence spreading of the economic slowdown to developing economies, the negative effects of FED’s interest rate hikes and other various factors that increase the uncertainty in the global economy could lead to reductions in the capital flows to the developing economies as well as the high volatility in exchange rates and depreciation of TRY against the main currencies will lead to the reduction in the debt service capacity of the real sector firms. In addition to these, a potential rate hike in the following periods in interest rates coupled with an economic slowdown may further undermine the construction and building materials (such as ceramic, granite, etc.) sector which is currently one of the main driving sectors of the Turkish economic growth and subsequently the ceramic sector. Taking into consideration, the limited improvement in profitability of the Company, the shares of which are publicly traded since 1990 with below sector- average profitability, increase in its sales revenue, diversified external funding sources through issuing a corporate bond with 728 days of maturity, good market recognition and current share in the market and acceptance to the prestigious Turquality program which will provide financial and operational support to the Company during the following periods, Long Term National Local Rating of the Company is affirmed as “BBB (Trk)” with an outlook upgrade from “Stable” to “Positive”. Despite the fact that majority of the Company’s shares are publicly traded, considering that Tanışlar Group which currently controls the Company has the willingness to support the Company subject to their financial capability with short or long term funds should the need arise, Sponsor Support Grade of the Company is affirmed as (3) based on JCR Eurasia Rating’s notation criteria. On the other hand, regardless of any support that may be provided by the Company’s shareholders, taking into account the current equity level, growth rates, increasing sales volume, asset quality and capital structure, market diversity, market penetration and current risks prevailing in the market, it is believed that Uşak Seramik has reached a position to successfully fulfill its current obligations provided that the current customer base, market effectiveness and macroeconomic circumstances are maintained. In this regard, the Stand Alone Rating is affirmed as (BC), which denotes a sufficient level within the JCR Eurasia Rating scale. For more information, related to the rating results you may visit our web site http://www.jcrer.com.tr or contact our analysts Mr. Şevket GÜLEÇ and Mr. Ersin KILIÇKAP.
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