Strauss Group: Continued Growth and International Expansion
Tue Aug 26, 9:12 AMTEL AVIV, Israel, August 26 /PRNewswire-FirstCall/ -- Strauss Group's (Tel Aviv: STRS) Chairperson, Ofra Strauss, and Erez Vigodman, President & CEO, announced today, upon publication of the Financial Statements, that the Group presented further accelerated growth in its international activity and its operating profit in the second quarter and first half of 2008.
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Ofra Strauss, Chairperson of Strauss Group, said today: "We continue to expand the Group's international activity while making structural changes that facilitate this process. The business results manifest these processes."
Erez Vigodman, President and CEO of Strauss Group, said today: "We are handling well the challenges facing us with the competitive global environment in the food industry this year. We continue to grow and expand our international activity, while improving the operating results of the group and conducting important structural changes that will facilitate further accelerated and profitable growth in the coming years."
Financial Highlights Second Quarter 2008:
- Group sales in the second quarter totaled NIS 1.53 billion, a 8.0% growth, and the international activity grew by 10.0%. Sales in the first half totaled NIS 3.0 billion, a 8.0% growth, and the international activity grew by 13.0%.
- Operating profit (pro-forma) in the second quarter totaled NIS 128.4 million compared to NIS 118.3 million last year, an 8.5% growth. Operating profit (pro-forma) in the first half totaled NIS 265.0 million compared to NIS 254.7 million last year, a 4.0% growth.
- Net financing expenses in the second quarter totaled NIS 29.3 million compared to NIS 12.8 million last year, and were affected by accelerated inflation in the quarter. Net financing expenses in the second quarter totaled NIS 53.8 million compared to NIS 25.9 million last year.
- Due to the increase in financing expenses, the net profit (pro-forma) in the second quarter totaled NIS 65 million compared to NIS 70 million last year. Net profit (pro-forma) in the first half totaled NIS 131 million compared to NIS 149 million last year.
- Net accounting profit in the second quarter totaled NIS 56 million compared to NIS 76 million in the same quarter last year. Net accounting profit in the first half totaled NIS 140 million compared to NIS 143 million last year.
Main figures in the second quarter and the first half (in NIS
million):
First Half Second Quarter
2008 2007 % Chg 2008 2007 % Chg
Sales 3,036.0 2,813.1 7.9% 1,532.0 1,420.5 7.8%
Gross
profits
accounting 1,121.1 1,076.4 4.2% 575.4 552.3 4.2%
Operating
profits
accounting(1) 255.5 255.0 0.2% 131.0 131.5 (0.4%)
Operating
profits
Pro-forma
/managerial 265.0 254.7 4.0% 128.4 118.3 8.5%
Net profit
accounting(2) 139.9 143.1 (2.2%) 55.9 75.5 (26.0%)
Net profit
Pro-forma
/managerial(2) 131.1 149.0 (12.0%) 65.3 69.6 (6.2%)
(1) Before other income (expenses)
(2) Attributed to company shareholders
Summary of main business activity results, (based on the Group's pro- forma / managerial reports) by fields of business activities in the quarter and the first half ending on the 30th of June 2008 and 2007 (in NIS thousand):
First Half Second Quarter
2008 2007 % Chg 2008 2007 % Chg
Israel
Net sales (1) 1,320.1 1,302.1 1.4 640.3 633.7 1.0
Gross profit 532.8 541.2 (1.6) 260.6 266.7 (2.3)
Operating
profits 132.3 123.2 7.4 61.6 58.6 5.1
Coffee
Net sales (1) 1,547.9 1,334.3 16.0 818.2 701.0 16.7
Gross profit 504.3 444.7 13.4 271.4 228.1 19.0
Operating
profits 136.9 123.5 10.9 72.5 56.3 28.8
Other
Net sales (1) 168.0 176.7 (4.9) 73.5 85.8 (14.3)
Gross profit 80.4 86.2 (6.7) 34.3 43.9 (21.9)
Operating
profits (4.2) 8.0 (5.7) 3.4
Total
Net sales (1) 3,036.0 2,813.1 7.9 1,532.0 1,420.5 7.8
Gross profit 1,117.5 1,072.1 4.2 566.3 538.7 5.1
Operating
profits 265.0 254.7 4.0 128.4 118.3 8.5
(1) Sales to external parties only
Financial Review:
General
Group business results in the second quarter and first half of the year were affected by changes in the economic environment within which the company operates, both in- and outside of Israel. These changes included, the rise in raw material prices, and commodities in particular, the rise in energy prices, accelerated inflation rates in Israel and the abroad, and sharp fluctuations in exchange rates of foreign currencies used by the company.
The accelerated (double-digit) growth in the international activity continued, while growth in Israel was more moderate. Price rises of raw materials and energy resulted in increased selling prices in most spheres of activity and in decreased gross and operating margins.
Despite these phenomena, the company managed to improve its managerial operating profit, but a sharp rise in financial expenses due to a high inflation rate in the quarter (2.44%) resulted in a decreased net managerial profit in the second quarter and first half of the year.
Sales
In the first half of 2008, the company continued to grow and its sales totaled NIS 3,036.0 million, compared to NIS 2,813.1 million last year, a 7.9% growth. Organic growth, after neutralizing the affect of exchange rate fluctuations and acquisition and sale of businesses in the first half, totaled 9.6%.
Accelerated growth in company sales, which is evident in all spheres of activity in Israel, coffee, Sabra and Max Brenner, was affected by, among other things, quantitative growth, a change in product mix, and price rises due to an increase in raw material prices.
The coffee activity continued to grow at high rates, presenting 16.0% growth in the first half, and neutralizing the effect of exchange rate fluctuations, the coffee activity grew by12.9 %. Sabra's activity in North America is proportionately consolidated (50%) as of the second quarter, and its pro-forma sales (assuming fully-consolidated Sabra sales) grew by 14.0% in the first half. Neutralizing the affect of exchange rate fluctuations, pro-forma sales grew by 34.4%. Sales in the Max Brenner activity grew by 11.8% in the first half, and neutralizing the affect of exchange rate fluctuations the Max Brenner activity grew by 20.6% in the first half of the year.
Strauss Israel sales grew by 1.4% in the first half, and neutralizing the industrial activity sold in January 2008, sales in Israel grew by 3.5% in the first half.
Sales in Israel, including the coffee activity in Israel, grew by 3.5% in the first half, and neutralizing the industrial market, Strauss Israel sales, including coffee grew by 5.3%.
In the second quarter, company sales grew by 7.8% totaling NIS 1,532.0 million, compared to NIS 1,420.5 million in the corresponding period last year. Organic growth after neutralizing the affect of exchange rate fluctuations and acquisition and sale of businesses totaled 8.6%.
Operating profit
In the first half, the operating managerial profit totaled NIS 265.0 million (8.7%) compared to NIS 254.7 million (9.1%) last year, a 4.0% growth. Improvement in the operating profit resulted from growth in sales, streamlined cost structure, and decrease in sales, marketing and administrative expenses. The increase in operating profit, evident in all company units, occurred despite an erosion in the gross profit rate.
In the second quarter, the operating managerial profit totaled NIS 128.4 million compared to NIS 118.3 million last year, an 8.5% growth.
Net Profit
The managerial net profit for the period attributed to shareholders totaled NIS 131.1 million in the first half compared to NIS 149.0 million during the corresponding first half last year. The net managerial profit was affected materially by a sharp rise in inflation rates and by a significant rise in the net financing expenses of the company which totaled NIS 29.3 million in the second quarter compared to NIS 12.8 million last year. In the second quarter the managerial net profit for the period, attributed to shareholders, totaled NIS 65.3 million compared to NIS 69.6 million during the corresponding quarter last year
Activity in Israel
In the first half of 2008, Strauss Israel's activity grew by 1.4%, and sales totaled NIS 1,320.1 million, compared to NIS 1,302.1 last year. Neutralizing the industrial activity (sold in January 2008) company sales in Israel grew at a 3.5% rate in the first half.
Overall sales of the Strauss activity in Israel, including coffee activity, totaled NIS 1,625.8 million in the first half compared to NIS 1,570.5 million last year, a 3.5% growth, and neutralizing the industrial activity sold in January 2008, Strauss' sales in Israel, including the coffee activity, grew by 5.3%.
In the second quarter, Strauss' activity in Israel grew by 1.0% and sales totaled NIS 640.3 million compared to NIS 633.7 million last year and, neutralizing the industrial activity sold in January 2008, the company's sales in Israel grew by 3.0% in the quarter.
Overall sales of Strauss' activity in Israel, including coffee activity, totaled NIS 787.4 million in the second quarter compared to NIS 749.6 million last year, a 5.0% growth, and neutralizing the industrial activity, Strauss' sales in Israel, including the coffee activity, grew by 6.8%.
Growth in the first half of the year is evident in both the Health and Wellness, and Fun & Indulgence divisions. Some of the financial growth in the quarter is attributable to price increases that the company initiated in order to offset the steep rise in raw material and energy prices in recent quarters.
The strong growth evident in the Fun & Indulgence division in the second quarter stems from the quantitative increase in division products that resulted, among other things, from the timing of the Passover Holiday.
The operating profit of activities in Israel grew in the first half by 7.4%, totaling NIS 132.3 million. The increase in operating profits in Israel resulted from improved cost structure of the activity in Israel and a drop in the sales, marketing and administrative expenses.
The operating profit in Israel in the first half improved as well, totaling 10.0% compared to 9.5% in the corresponding period last year.
The operating profit in Israel in the second quarter grew by 5.1%, totaling NIS 61.6 million.
Coffee Activity
Strauss' coffee activity in the first half grew by 16.0%, totaling NIS 1,547.9 million. Organic growth, after neutralizing the impact of acquisition of businesses and exchange differentials, totaled 12.9%.
Growth in sales was affected positively by the quantitative growth, by organic growth in some countries, mergers and acquisitions, and increased selling prices, and it was affected negatively by changes in the exchange rates of various currencies (mainly the Romanian Lei, American dollar and Serbian Dinar). Growth in activity is evident in most clusters in the first half, however strong growth was specifically evident in company activity in the former Soviet Union countries (following the purchase of Cosant Enterprises Ltd.'s coffee brands in CIS countries), Israel, Poland and Brazil. The AFH activity recorded strong growth in all countries of operation, growing at a 12.6 % rate in the first half of the year.
The coffee activity grew by 16.7% in the second quarter, totaling NIS 818.2 million. Organic growth after neutralizing the impact of acquisition of businesses and exchange differentials totaled 9.7%.
The operating profit of coffee activities in the first half totaled NIS 136.9 million (an 8.8% rate) compared to NIS 123.5 million last year (a 9.3% rate), a 10.9% increase. The operating profit was affected by the strong growth and increase in gross profit.
The operating profit of coffee activities in the second quarter totaled NIS 72.5 million (an 8.9% rate) compared to NIS 56.3 million last year (an 8.0% rate), a 28.8% increase. The operating profit was affected by the strong growth, increase in gross profit and considerable sales growth in Israel, Poland and former Soviet Union countries.
Sabra's refrigerated spreads activities and sale of Kosher products in the U.S. - "Sabra"
As of the second quarter, the company consolidated the company's activity in a proportionate manner (50%) according to its holding stake, after finalizing the transaction with PepsiCo.
Sabra's sales in the first half totaled NIS 122.2 million, compared to NIS 135.8 million last year. Pro-forma sales (assuming a fully-consolidated Sabra activity) totaled NIS 154.8 million, a 14% growth. After neutralizing the effect of the decline of the dollar against the NIS, pro-forma growth in the first half totaled 34.4%(3).
Sabra's sales in the second quarter totaled NIS 49.6 million, compared to NIS 67.9 million last year. Pro-forma sales (assuming a fully-consolidated Sabra activity) totaled NIS 82.2 million, a 21.0% growth. After neutralizing the effect of the decline of the dollar against the NIS, pro-forma growth totaled 44.1%.
Sabra continues its expansion efforts in top retail chains together with continuous innovation (five hummus flavors were launched in the second quarter) and marketing activity. Sabra continues to retain its No.1 position in the refrigerated flavored spreads category. Its average market share in the first half of the year was 28.2% (according to IRI figures published on June 15, 2008).
Max Brenner's Operations
In the first half, Max Brenner sales totaled NIS 45.8 million, compared to NIS 41.0 million last year, a 11.8% growth. After neutralizing the affect of the erosion of the dollar against NIS, growth in the first half totaled 20.6%.
In the second quarter, Max Brenner sales totaled NIS 23.9 million, compared to NIS 17.9 million last year, a 33.5% growth. After neutralizing the affect of the erosion of the dollar against NIS, growth in the second quarter totaled 46.4%.
Analysis of the Company's Financial Accounting Results:
Sales
The company's consolidated sales turnover in the first half totaled NIS 3,036.0 million, compared to NIS 2,813.1 million last year, a 7.9% increase. In the second quarter, sales totaled NIS 1,532.0 million, compared to NIS 1,420.5 million in the corresponding quarter last year, a 7.8% increase.
_________________________
(3) In Group managerial reports (pro-forma), Sabra is presented under proportionate consolidation as of the second quarter. For comparison purposes, Sabra's pro-forma results are presented here under the assumption of full consolidation in the reporting period as well.
Gross Profit
The Company's consolidated gross profit in the first half totaled NIS 1,121.1 million (36.9% from sales), compared to NIS 1,076.4 million (38.3% from sales) in the corresponding period last year, a 4.2% increase. The Company's consolidated gross profit in the second quarter totaled NIS 575.4 million (37.6% from sales), compared to NIS 552.3 million (38.9% from sales) in the corresponding period last year, a 4.2% increase.
Operating Profit Before Other Income (Expenses)
The company's consolidated operating profit, before other income (expenses) in the first half, totaled NIS 255.5 million (8.4% from sales), compared to NIS 255.0 million (9.1% from sales) in the corresponding period last year, a 0.2% increase.
Following are details relating to changes that occurred in the operating profit before other income (expenses): Sales and marketing expenses in the first half totaled NIS 683.8 million (22.5% from sales) compared to NIS 649.9 million (23.1% from sales) in the corresponding period last year, a 5.2% increase. Management expenses in the first half totaled NIS 181.8 million (6.0% from sales) compared to NIS 171.5 million (6.1% from sales) last year, a 6% increase.
The company's consolidated operating profit before other income (expenses) in the second quarter totaled NIS 131.0 million (8.6% from sales), compared to NIS 131.5 million (9.3% from sales) in the corresponding period last year, a 0.4% decrease.
Other income, net
Other income, net in the first half totaled NIS 19.8 million compared to expenses of NIS 6.8 million in the corresponding half last year. Other income in the first half included capital gain in respect of the PepsiCo transaction in the U.S., which was partly offset by expenses of an unrealized transaction totaling NIS 9.5 million.
Financing expenses, net
Financing expenses, net in the first half totaled NIS 53.8 million compared to NIS 25.9 million last year. Financing expenses, net in the second quarter totaled NIS 29.3 million compared to NIS 12.8 million last year. The jump in financing expenses resulted mainly from a sharp rise in inflation rates in the report period: 2.85% in the first half this year compared to 0.27% in the first half last year.
Profit Attributed to the Company's Shareholders
The profit attributed to the company's shareholders totaled NIS 139.9 million, compared to NIS 143.1 million last year, a 2.2% decrease. The profit for the second quarter, attributed to the company's shareholders totaled NIS 55.9 million, compared to NIS 75.5 million last year, a 26.0% decrease.
About Strauss Group:
The Strauss Group, Israel's second largest food and beverage Group, has, over the past few years, become an international corporation with a steadily growing part of its business conducted outside of Israel. The Group employs 11,400 people and operates nineteen production sites in eleven countries. Over the last five years the Group has consistently achieved double-digit growth, doubling the volume of its business in that period and generating NIS 6 billion (around $1.7 billion) in turnover at the end of 2007, of which 45% originated in international activities.
The Group focuses on key consumption trends in the food industry via three business divisions in Israel: Health & Wellness, Fun & Indulgence, and Coffee. The Group continuously expands its business activities outside of Israel, at present primarily through the Coffee Company, which is positioned as one of the world's ten largest coffee companies, leading markets in Israel, Central and Eastern Europe, and Brazil.
The Group collaborates with a number of leading multinationals - Danone, PepsiCo and Lavazza - and is traded on the Tel Aviv 25 Index.
Table 1 - Summary of Profit & Loss Accounting Statements for the
quarter and first half ending on June 30th 2008 and 2007 (in million
NIS):
Six Months Three Months
2008 2007 % Chg 2008 2007 % Chg
Sales 3,036.0 2,813.1 7.9 1,532.0 1,420.5 7.8
Cost of sales not including
impact of hedging
transactions 1,920.8 1,741.0 965.7 881.8
Hedging Transactions (5.9) (4.3) (9.1) (13.6)
Cost of sales 1,914.9 1,736.7 10.3 956.6 868.2 10.2
Gross Income 1,121.1 1,076.4 4.2 575.4 552.3 4.2
36.9% 38.3% 37.6% 38.9%
Selling and marketing 683.8 649.9 5.2 351.8 332.7 5.7
expenses
General and administrative 181.8 171.5 6.0 92.6 88.1 5.1
expenses
Operating income before 255.5 255.0 0.2 131.0 131.5 (0.4)
other income (expenses)
8.4% 9.1% 8.6% 9.3%
Other income (expenses), 19.8 (6.8) (8.0) (5.6)
net
Operating income after 275.3 248.2 10.9 123.0 125.9 (2.3)
other income (expenses)
Financing expenses, net (53.8) (25.9) 107.7 (29.3) (12.8) 128.9
Income before taxes on 221.5 222.3 (0.4) 93.7 113.1 (17.2)
income
Taxes on income (62.2) (63.1) (1.4) (27.5) (26.2) 5.0
Effective tax rate 28.1% 28.4% 29.4% 23.2%
Income for the period 159.3 159.2 0.1 66.2 86.9 (23.8)
Income attributed to
shareholders of the Company 139.9 143.1 (2.2) 55.9 75.5 (26.0)
Income attributed to
minority interest 19.4 16.1 20.5 10.3 11.4 (9.6)
Income for the period 159.3 159.2 66.2 86.9
Table 2 - Summary of Business Activity Results (pro-forma) for
the quarters and first half ending on June 30th 2008 and 2007:
Six Months Second Quarter
2008 2007 % Chg 2008 2007 % Chg
Sales 3,036.0 2,813.1 7.9 1,532.0 1,420.5 7.8
Cost of sales not including
impact of hedging
transactions and inventory
write-off in Sabra 1,918.5 1,741.0 10.2 965.7 881.8 9.5
Gross Income 1,117.5 1,072.1 4.2 566.3 538.7 5.1
Selling and marketing
expenses 683.8 649.9 5.2 351.8 332.7 5.7
General and administrative
expenses 168.7 167.5 0.7 86.1 87.7 (1.8)
Operating income before
other income (expenses) -
management accounting 265.0 254.7 4.0 128.4 118.3 8.5
Financing expenses, net (53.8) (25.9) 107.7 (29.3) (12.8) 128.9
Income before taxes on
income 211.2 228.8 (7.7) 99.1 105.5 (6.1)
Taxes on income (60.7) (63.7) (4.7) (23.5) (24.5) 4.1
Income for the period -
management accounting 150.5 165.1 (8.8) 75.6 81.0 (6.7)
Income attributed to
shareholders of the Company 131.1 149.0 (12.0) 65.3 69.6 (6.2)
Income attributed to
minority interest 19.4 16.1 20.5 10.3 11.4 (9.6)
Income for the period -
management accounting 150.5 165.1 75.6 81.0
Table 3 -Consolidated Balance Sheet (in NIS million):
As at June 30
2008 2007
Millions NIS % Millions NIS %
Cash and Marketable Securities 418 7.9% 620 12.8%
Accounts Receivables 987 18.7% 869 17.9%
Other Accounts Receivables 349 6.6% 245 5.1%
Inventory 700 13.3% 647 13.3%
Investments & Long Term Loans 92 1.7% 101 2.1%
Fixed Assets 1,230 23.3% 1,099 22.7%
Other Assets 1,506 28.5% 1,266 26.1%
Total Assets 5,282 100.0% 4,847 100.0%
Current Bank Liabilities 720 13.6% 280 5.8%
Accounts Payables 702 13.3% 663 13.7%
Other Creditors 533 10.1% 570 11.8%
Long Term Liabilities 1,295 24.5% 1,426 29.4%
Minority interest 194 3.7% 217 4.5%
Total equity attributable to the
Company's shareholders 1,838 34.8% 1,691 34.8%
Total Liabilities & Equity 5,282 100.0% 4,847 100.0%
For additional information, please contact:
Investors Contact
Yaffa Cohen-Ifrah
Director of Investor Relations
Strauss Group Ltd.
Tel: +972-3-6752545
Mob: +972-54-5772195
E-mail: yaffa.cohen-ifrah@strauss-group.com
Web: http://www.strauss-group.com
Media Contact:
Osnat Golan
Corporate Communications Director
Strauss Group Ltd.
Tel: +972-3-6752281
Mob: +972-52-8288111
E-mail: osnat.golan@strauss-group.com
SOURCE Strauss Group Ltd
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