Strauss Group Reports its 2010 Fourth Quarter and Full Year Results
TEL AVIV, Israel, March 16, 2011 /PRNewswire/ --
- A Record Year in Group Sales - Sales Totaled NIS 6.85 Billion, up 7.5%, With 9.1% Increase in Gross Profit and 3.9% Decrease in Net Profit
- Sales in Q4 up 5.4% With 0.2% Increase in Gross Profit and Decrease of 13.2% in Operating Profit.
- Effect of Expenses on Growth Drivers Reduced Net Profit by 28.4%
The Strauss Group (STRS.TA) today reported its results for the fourth quarter and full year of 2010.
Ofra Strauss, Chairperson of Strauss Group, said today, "In 2010 we continued to focus on long-term strategic processes, laying out foundations for Strauss Group's further global expansion.. We formed a new strategic partnership with Haier, inaugurated a world-class salad plant in the U.S., and expanded our activity in North America and CIS, while enhancing our position at our home base in Israel. In 2011 we will continue to conduct significant processes that result from the international growth strategy of the company."
Gadi Lesin, President & CEO of Strauss Group, said today: "Strauss Group continues to grow and expand globally with record annual sales of NIS 6.85 billion, up 7.5%, improved gross and operating profits, but decreased net profit for shareholders".
"Strauss Group will continue its global expansion journey, entering new markets and countries with high-growth potential, and expanding its portfolio of businesses. The Group will make further investments in future growth drivers- fresh foods, Strauss Water and Strauss Coffee - while enhancing its leadership position at the Israeli home base."
Fourth Quarter Financial Highlights[1]:
- Sales totaled NIS 1.81 billion (NIS 1.71 billion last year), up. 5.4%; Organic sales growth net of exchange rates effect totaled 9.2%.
- Gross profit was up 0.2%, totaling NIS 647 million (35.8% of sales), compared to NIS 645 million last year (37.6% of sales).
- Operating profit totaled NIS 123 million (6.8% of sales), compared to NIS 141 million last year (8.2% of sales), down 13.2%.
- Net profit to shareholders totaled NIS 50 million, compared to NIS 70 million last year, down 28.4%.
Full year Financial Highlights[2]:
- Sales totaled NIS 6.85 billion, compared to NIS 6.37 billion last year, up 7.5%. Organic growth net of exchange rates effect totaled 4.0%. Growth is evident in all activities, Israel, coffee, Sabra and Water.
- Gross profit was up 9.1% to NIS 2.58 billion compared to the same period last year, and its rate grew from 37.2% to 37.8%.
- Operating profit was up 5.4%, totaling NIS 601 million (8.8% of sales), compared to NIS 570 million last year (8.9% of sales).
- Net profit to shareholders totaled NIS 258 million, compared to NIS 268 million last year, down 3.9%.
- Strong cash generation, operating cash flow totaled NIS 501 million
[1] Full years and fourth quarter figures are pro-forma neutralizing the employees options and one time bonus (2009), hedging transactions, non recurring other income and expenses
[2] Full years and fourth quarter figures are pro-forma neutralizing the employees options and one time bonus (2009), hedging transactions, non recurring other income and expenses
Main pro-forma data (in NIS million):
Full Year Fourth Quarter
2010 2009 % Chg 2010 2009 % Chg
Sales 6,855 6,373 7.5% 1,807 1,715 5.4%
Gross Profit 2,588 2,371 9.1% 647 645 0.2%
Operating Profit (1) 601 570 5.4% 123 141 -13.2%
Profit for the Period 358 360 -0.8% 73 95 -24.3%
Net Profit (2) 258 268 -3.9% 50 70 -28.4%
(1) Before other income (expenses)
(2) Attributed to the shareholders of the Company
Home base
Strauss Group is the second-largest company in the Israeli food industry and in 2010 held 11.2% of the domestic food and beverage market (on a yearly average, in financial terms). The Israeli market is the Group's home market, in which it is active in various categories.
The sales for the entire business of the Strauss Group in Israel include the Health & Wellness and Fun & Indulgence Divisions, the coffee business in Israel, Max Brenner in Israel and the Strauss Water Israel (Tami4) activity. In 2010, Strauss Group's sales in Israel totaled NIS 3,701 million compared to NIS 3,355 million in 2009, an increase of 10.3%. In the fourth quarter, Israel sales totaled NIS 931 million compared to NIS 862 million in the corresponding quarter last year, an increase of 8.0%.
As a result of the acquisition of Tami4 the Group has increased its touch points with the Israeli consumer and has expanded beyond retail and away-from-home (AFH) sales into a direct interface with the consumer.
The Coffee Sector
In the global coffee business the Group develops, manufactures, markets and sells branded coffee products in Israel and in various emerging markets - Central and Eastern Europe and Brazil. This business area comprises two sectors of activity - Israel Coffee and International Coffee.
In 2010 Strauss Group was the sixth largest company in the world retail coffee market, with a market share of 2.1% in value terms (according to the market research firm Euromonitor).
Sales
Sales by Strauss's coffee business in 2010 totaled NIS 3,386 million compared to NIS 3,349 million in 2009, an increase of 1.1%. After neutralizing the impact of currency exchange rates, growth amounted to 1.6%. Organic growth in 2010 amounted to 1.6% after neutralizing the acquisition of businesses and the impact of exchange rate differentials.
Coffee sales in 2010 were positively influenced by the growth in activity in Brazil and in Russia, but were negatively influenced by the weakness in most of the markets in Eastern Europe due to the slow recovery from the crisis in these markets, by changes in the exchange rates of the various operating currencies, by the sharp rise in raw material prices coupled with the difficulty in raising prices in the prevailing macroeconomic conditions in some of the countries, as well as growing competition.
The growth in local currency is evident mainly in the Company's activity in Brazil, where the Company continues to grow at an accelerated pace, while increasing its market shares and expanding into additional geographical regions there, and in the former USSR countries and in Serbia.
Sales by the coffee business totaled NIS 920 million in the fourth quarter of 2010 compared to NIS 909 million in the corresponding period last year, an increase of 1.2%. After neutralizing the acquisition of businesses and the impact of exchange rate differentials, growth in the quarter amounted to 9.3%.
Gross profit in the coffee business totaled NIS 1,082 million in 2010 (32.0% of sales) compared to NIS 1,067 million (31.9%) last year, an increase of 1.4%. The gross profit in the coffee business was influenced by the sharp rise in raw material prices (particularly in the second half of the year), as well as by the significant growth in the volume of activity in Brazil, which is characterized by below-average profit rates.
The gross profit in the fourth quarter totaled NIS 268 million (29.2% of sales) compared to NIS 299 million (32.9% of sales) last year, a decrease of 10.2%. The decrease in the gross profit is the result of the sharp increase in raw material prices and the difficulty in transferring the full increase in raw material prices to the consumer.
The operating profit of the coffee business totaled NIS 257 million (7.6% of sales) in 2010 compared to
NIS 270 million (8.1% of sales) last year, a decrease of 5.0%. The operating profit was influenced by the growth in sales and in the gross profit.
In the fourth quarter, the operating profit totaled NIS 52 million (5.6% of sales) compared to NIS 78 million (8.6% of sales) in the corresponding quarter last year, a decrease of 33.8%. The decrease in the operating profit was influenced mainly by the decrease in the gross profit.
The Israel Sector - Strauss Israel
Sales
In 2010 Israel sales were NIS 2,683 million compared to NIS 2,624 million in 2009, an increase of 2.2%. In the fourth quarter sales by the business in Israel totaled NIS 671 million compared to NIS 634 million in the corresponding quarter last year, an increase of 5.8%.
During the year the Company continued to invest in innovation in various categories, including chewing gum, sweet snack bars, chocolate, desserts, cheeses and salty snacks and for the third year in a row was named Israel's most innovative food company.
In 2010 the Strauss Israel completed the process of adapting its structure to meet future challenges, as well as formulating the new strategy for the next few years.
Gross profit in the Israel Sector totaled NIS 1,111 million in 2010, compared to NIS 1,080 million last year. The gross profit rate rose from 41.2% to 41.4% this year. In the fourth quarter the gross profit for Israel increased by 9.3% and totaled NIS 273 million (40.7% of sales), compared to NIS 250 million in the corresponding period last year (39.4% of sales)
Most of the improvement is due to the continued implementation of streamlining processes in the cost of sales, and the currency impact (weakening of the Dollar and the Euro in relation to the Shekel).
The pro-forma operating profit in Israel increased in 2010 by 5.8%. The growth in the operating profit in Israel is due to the growth in gross profit and to the continued improvement in the cost structure. The operating profit rate in Israel improved in 2010 and amounted to 11.4%, compared to 11.0% in the corresponding period last year.
In the fourth quarter the operating profit in Israel increased by 16.8%, with operating profitability in the quarter rising from 8.4% last year to 9.2% this year.
The International Dips Activity (Presently Executed by Sabra Dipping Company)
Sabra's activity has been proportionately consolidated (50%) since the closing of the transaction with PepsiCo, beginning in the second quarter of 2008.
In 2010 Sabra's sales continued to grow, as did its market shares, and it maintained a leading position in the refrigerated flavored spreads category.
Sabra's average market share in 2010 was 47.0% compared to an average market share of 39.4% in 2009. In the fourth quarter Sabra's average market share was 48.6% (according to IRI data published on December 26, 2010).
Sales
In 2010 Sabra's sales totaled NIS 593 million compared to NIS 430 million last year, an increase of 38.0%. After neutralizing the currency impact, growth amounted to 44.7%. Organic growth excluding the currency impact was 37.8%.
Sabra's sales in the fourth quarter totaled NIS 165 million compared to NIS 121 million in the corresponding period last year, an increase of 36.7%. After neutralizing the currency impact, growth amounted to 42.3%. Organic growth excluding the currency impact was 21.4%
The operating profit in 2010 totaled NIS 62 million (10.4% of sales) compared to NIS 73 million last year (17.0%), a decrease of 15.3%
The operating profit in the fourth quarter totaled NIS 15 million (9.3% of sales) compared to NIS 21 million in the corresponding quarter last year (17.6% of sales), a decrease of 27.7%.
Strauss Water
Strauss Water engages in the development, manufacturing and marketing of systems for the purification, filtration, heating and cooling of drinking water for the home market and away-from-home consumption, on the basis of a long-term commitment to its customers. Strauss Water developed a breakthrough in the purification and treatment of water in the form of its patented Maze technology. Strauss Water is presently active in Israel (through the Tami4 brand) and in the UK (through the T6 brand).
Strauss Water's pro-forma sales amounted to NIS 382 million in 2010, compared to NIS 316 million last year (assuming the full consolidation of the Tami4 business from the beginning of the year), an increase of 20.8%.
In the fourth quarter Strauss Water's pro-forma sales totaled NIS 103 million compared to NIS 78 million in the corresponding period last year, an increase of 32.4%.
During the quarter the Group announced that a partnership agreement had been signed with Haier Group, the Chinese consumer electronic appliances giant, for the establishment of a joint venture in home water solutions in China. The venture is jointly owned by Strauss Water (50%) and Haier Consumer Goods (50%) and will be established with an initial investment of $20 million (each of the parties is to invest $10 million). The Strauss Group's entry into China is an additional step in the realization of the Group's global expansion strategy. This partnership will leverage the combined know-how and capabilities of Strauss Water in the areas of technology and expertise in the development of solutions for the purification of safe drinking water, and Haier's leadership and reliability in the spheres of marketing, distribution and service in China.
Strauss Water plans to expand into additional geographical regions in the future while continuing to develop innovative technologies for the purification and treatment of water, based on a long-term commitment to its customers and care for people, water and the environment.
Max Brenner
In 2010 the Group's biggest Chocolate Bar opened in Las Vegas, and as at the date of the report, 35 Max Brenner Chocolate Bars were in operation around the world: 6 in Israel, 3 in the US, 2 in the Philippines, 1 in Singapore and 23 in Australia. Eight branches are owned by the Company, and all other branches are operated under franchise.
In 2010 Max Brenner's sales totaled NIS 109 million compared to NIS 108 million last year, an increase of 0.2%. After neutralizing the impact of the erosion of the Dollar in relation to the Shekel, growth in 2010 totaled 2.4%.
In the fourth quarter Max Brenner's sales totaled NIS 31 million compared to NIS 35 million last year, a decrease of 11.1%. After neutralizing the impact of the erosion of the Dollar in relation to the Shekel, sales in the fourth quarter decreased by 8.9%.
The Company continues to invest in the development of core infrastructure for the Max Brenner business in Israel and abroad, and in 2011 the Company plans to open additional stores, while continuing to invest in major infrastructure and Max Brenner.
Financial Results:
Sales
In 2010 Strauss Group's sales amounted to NIS 6,855 million compared to NIS 6,373 million last year, an increase of 7.5%. After neutralizing the currency impact, growth amounted to 8.0%. Organic growth after neutralizing the impact of changes in exchange rates in 2010 amounted to 4.0%. Growth was evident in all of the Company's activities - Israel, coffee, Sabra and water.
The Group's sales in the fourth quarter totaled NIS 1,807 million compared to NIS 1,715 million in the corresponding period last year, an increase of 5.4%. After neutralizing the currency impact, growth amounted to 8.8%. Organic growth after neutralizing the impact of changes in exchange rates in the fourth quarter amounted to 9.2%. Growth was evident mainly in the Company's activity in Israel, which grew by some 5.8% in the quarter, in Sabra in North America, where growth amounted to 36.7%, and in the water business, which grew by 32.4% in the quarter.
Gross Profit
The financial accounting gross profit in 2010 totaled NIS 2,593 million (37.8% of sales) compared to NIS 2,375 million last year (37.3% of sales), an increase of 9.2%. The pro-forma gross profit in 2010 increased by 9.1% compared to the corresponding period last year, rising from 37.2% to 37.8%.
The gross profit was positively impacted by the improvement in most of the Group's businesses, notably Israel, Strauss Coffee and Sabra, by the consolidation of the Tami4 activity for the first time and by the continuing streamlining measures applied, and was adversely affected by the impact of currency exchange rates.
The financial accounting gross profit in the fourth quarter increased by 1.3% and dropped from 37.5% last year to 36.0% this year. The pro-forma gross profit increased in the quarter by 0.2%, down from 37.6% in 2009 to 35.8% this year.
The gross profit in the quarter was positively influenced by the improvement in Israel, and by contrast was negatively influenced by the decrease in gross profit in the coffee business further to the sharp rise in raw material prices and the impact of currency exchange rates.
Operating Profit before Other Income (Expenses)
The financial accounting operating profit (before other income and expenses) totaled NIS 586 million (8.5% of sales) in 2010 compared to NIS 559 million (8.8% of sales) last year, an increase of 4.9%. The growth in the Group's operating profit is mainly due to the increase in the operating profit in all of the Company's activities and to the consolidation of Tami4's activity for the first time (starting from the fourth quarter 2009).
The pro-forma (pro-forma) operating profit totaled NIS 601 million (8.8% of sales) in 2010 compared to NIS 570 million (8.9% of sales) last year, an increase of 5.4%.
The increase in the group operating profit is evident mainly in the activity in Israel and was positively influenced by the consolidation of Tami4 for the first time (in the first three quarters) and by contrast, the decrease in the coffee business operating profit due to the decrease in gross profit and from the increased expenses related to Strauss Water's increased activity in China and England and the concurrent operation of two factories in the U.S. (total impact on profit amounted to a reduction of about NIS 41 million and from expenditure of NIS 9 million in respect of option plan at Strauss Coffee (see Note 25.7 annual financial statements.)
The financial accounting operating profit (before other income and expenses) totaled NIS 115 million (6.4% of sales) in the fourth quarter compared to NIS 134 million (7.8% of sales) in the corresponding period last year, a decrease of 13.6%.
The pro-forma operating profit totaled NIS 123 million (6.8% of sales) in the fourth quarter compared to NIS 141 million (8.2% of sales) last year, a decrease of 13.2%.
The decrease in operating profit is mainly due to the decreased gross profit of the coffee business and was also affected by increased expenses related to Strauss Water activity in China and England and the concurrent operation of two factories in the U.S. (total impact on profit amounted to a reduction of about 14 million).
Other Income (Expenses), Net
Other expenses, net totaled NIS 45 million in 2010 compared to other expenses, net of NIS 35 million last year. Most of the expenses this year are attributed, among other things, to the discontinued operation in Bulgaria further to the decision by Strauss Coffee to exit this market, following which the subsidiary recognized expenses amounting to NIS 15 million; and to the costs of building the new production site for the subsidiary, Sabra; establishment of the Company's activity in China, and the costs of structural changes. Most of the other expenses in 2009 were attributed to the impairment of goodwill in Strauss Coffee's subsidiary in Serbia in an amount of NIS 22 million, and the costs of the establishment of Strauss Water.
In the fourth quarter of 2010, other expenses, net totaled NIS 12 million (most of the expenses are in respect of the costs of establishing the activity in China and the costs of structural changes), compared to NIS 8 million in expenses, net in the corresponding quarter last year (mainly the costs of the establishment of Strauss Water).
Income for the Period
The financial accounting income for the period in 2010 amounted to NIS 302 million compared to NIS 318 million last year. The pro-forma income for the period in 2010 amounted to NIS 358 million compared to NIS 360 million last year, a decrease of 0.8%.
Income for the period in the fourth quarter totaled NIS 52 million compared to NIS 81 million last year. The pro-forma income for the period in the fourth quarter amounted to NIS 73 million compared to NIS 95 million last year, a decrease of 24.3%.
Income for the Period for the Shareholders of the Company
The financial accounting income for the period for the shareholders of the Company in 2010 totaled NIS 211 million compared to NIS 233 million last year, a decrease of 9.8%. The net income was positively impacted by the growth in operating profit, which was fully offset by the increase in tax expenses compared to last year and the growth in other expenses further to the discontinued operation in Bulgaria.
The pro-forma income for the shareholders of the Company in 2010 totaled NIS 258 million compared to NIS 268 million last year, a decrease of 3.9%.
The net income was positively impacted by the growth in operating profit, which was fully offset by the increase in tax expenses compared to last year.
The financial accounting income for the period for the shareholders of the Company in the fourth quarter totaled NIS 33 million compared to NIS 59 million last year, a decrease of 44.6%. The income in the fourth quarter was impacted by the decrease in the operating profit and the increase in financing expenses compared to last year.
The pro-forma income for the shareholders of the Company in the fourth quarter totaled NIS 50 million (2.8% of sales) compared to NIS 70 million last year (4.1% of sales), a decrease of 28.4%. The income in the fourth quarter was impacted by the decrease in the operating profit and the increase in financing expenses compared to last year.
Income for the Period for Non-controlling interests
In 2010 the Non-controlling interests share in the income of subsidiaries totaled NIS 91 million compared to NIS 85 million last year, an increase of 6.9%. In the fourth quarter the Non-controlling interests share in the income of subsidiaries totaled NIS 19 million compared to NIS 22 million in the corresponding quarter last year, a decrease of 13.3%.
Table 1
Following are the condensed financial accounting statements of income for the years and quarters ended December 31, 2010 and 2009 (in NIS millions):
For the Years For the Fourth Quarter
% %
2010 2009 change 2010 2009 change
Sales 6,855 6,373 7.5 1,807 1,715 5.4
Cost of sales not including
impact of hedging transactions
4,267 4,002 6.6 1,160 1,070 8.5
Revaluation of the balance of
hedging transactions on
commodities as at the end of (5) (4) (4) 2
the period
Cost of sales 4,262 3,998 6.6 1,156 1,072 7.8
Gross income 2,593 2,375 9.2 651 643 1.3
Selling and marketing expenses 1,597 1,442 10.7 420 393 6.9
General and administrative 410 374 9.6 116 116 -
expenses
Operating income before other 586 559 4.9 115 134 -13.6
income (expenses)
Other income (expenses), net (45) (35) 26.7 (12) (8) 50.0
Operating income 541 524 3.4 103 126 -18.4
Financing expenses, net (92) (87) 7.3 (22) (17) 28.0
Income before taxes on income 449 437 2.6 81 109 -25.6
Taxes on income (147) (119) 24.0 (29) (28) 5.4
Effective tax rate 32.7% 27.1% 36.0% 25.4%
Income for the period 302 318 -5.3 52 81 -36.1
Income attributed to
shareholders of the Company
211 233 -9.8 33 59 -44.6
Income attributed to 91 85 6.9 19 22 -13.3
non-controlling interest
Table 2
Following are the condensed results of business operations (based on the Company's pro-forma statements) for the years and quarters ended December 31, 2010 and 2009 (in NIS millions):
For the Years For the Fourth Quarter
% %
2010 2009 change 2010 2009 change
Sales 6,855 6,373 7.5 1,807 1,715 5.4
Cost of sales 4,267 4,002 6.6 1,160 1,070 8.5
Gross income 2,588 2,371 9.1 647 645 0.2
Selling and marketing expenses 1,597 1,442 10.7 420 393 6.9
General and administrative 390 359 8.7 104 111 -6.4
expenses
Operating income - pro-forma 601 570 5.4 123 141 -13.2
Financing expenses, net (92) (87) 7.3 (22) (17) 28.0
Income before taxes on income 509 483 5.0 101 124 -18.8
Taxes on income (151) (123) 22.3 (28) (29) -0.4
Income for the period - 358 360 -0.8 73 95 -24.3
management
Income attributed to
shareholders of the Company
258 268 -3.9 50 70 -28.4
Income attributed to 100 92 8.0 23 25 -9.9
non-controlling interest
Table 3
Following are the condensed results of business operations (based on the Company's pro-forma statements) of the major areas of business activity for the years and quarters ended December 31, 2010 and 2009 (in NIS millions):
For the Years For the Fourth Quarter
2010 2009 % 2010 2009 %
Israel
Net sales 2,683 2,624 2.2 671 634 5.8
Operating income 305 288 5.8 62 53 16.8
Coffee
Net sales 3,386 3,349 1.1 920 909 1.2
Operating income 257 270 -5.0 52 78 -33.8
International Dips and spreads
Net sales 297 215 37.7 82 61 35.8
Operating income 26 30 -14.6 7 9 -22.2
Other
Net sales 489 185 163.9 134 111 20.2
Operating income (loss) 13 (18) - 2 1 186.2
Total
Total net sales 6,855 6,373 7.5 1,807 1,715 5.4
Total operating income 601 570 5.4 123 141 -13.2
Table 4
Consolidated Balance Sheet (in NIS million):
December 31 December 31
2010 2009
NIS millions
Current assets
Cash and cash equivalents 729 957
Securities and deposits 66 86
Trade receivables 1,017 998
Income tax receivables 79 55
Receivables and debit balances 226 176
Inventory 682 664
Total current assets 2,799 2,936
Investments and non-current assets
Other investments and long-term debit balances 167 158
Assets designated for the payment of employee 6 7
benefits, net
Fixed assets 1,532 1,381
Intangible assets 1,696 1,619
Deferred expenses 27 31
Investment property 24 21
Deferred tax assets 19 5
Total investments and non-current assets 3,471 3,222
Total assets 6,270 6,158
Current liabilities
Current maturities of debentures 260 94
Short-term credit and current maturities of 246 167
long term credit loans
Trade payables 793 757
Income tax payables 36 50
Other payables and credit balances 534 480
Provisions 36 36
Total current liabilities 1,905 1,584
Non-current liabilities
Debenture 1,177 1,410
Long-term loans and credit 268 79
Long-term payables and credit balances 27 38
Employee benefits, net 28 32
Deferred tax liabilities 143 129
Total non-current liabilities 1,643 1,688
Total equity 2,722 2,886
Total liabilities and equity 6,270 6,158
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For additional information:
Investors Contact
Yaffa Cohen-Ifrah
Director of Investor Relations
Strauss Group Ltd.
Tel: +972-3-6752545
Mob: +972-54-5772195
Email: yaffa.cohen-ifrah@strauss-group.com
http://www.strauss-group.com
Media Contact
Osnat Golan
VP Corporate Communications
Strauss Group Ltd.
Tel: +972-3-6752281
Mob: +972-52-8288111
Email: osnat.golan@strauss-group.com
http://www.strauss-group.com
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