Strauss Group Reports its First Quarter 2011 Results
- Strauss Group Continues Investments in Global Expansion,
- Quarterly Sales Total NIS 1.77 b, up 4.5% Profits Eroding Following the Continued Increase in Raw Material Prices
TEL AVIV, Israel, May 18, 2011 /PRNewswire/ -- The Strauss Group (STRS.TA) today reported its results for the first quarter of 2011.
Ofra Strauss, Chairperson of Strauss Group, said today "Strauss is continuing its global expansion and the development of future growth engines for the company. At the same time, we remain focused on innovation in our existing businesses and strengthening our brands, while dealing with the challenges of competition"
Gadi Lesin, President & CEO of Strauss Group, said today: "Strauss Group opens 2011 with sales growth seen in all Group activities. Our Israeli home base continues to grow and the company continues to invest in its global expansion. Quarterly Group sales grew by 4.5% but increased energy and raw material prices eroded the gross profit, operating profits and net profits"
"This quarter we completed the integration of acquisitions done in North America via Sabra and in Russia, we concluded the principles of an agreement to establish a jointly-held global company with PepsiCo, which will manufacture and market fresh salads, dips and spreads in major international markets and we invested in infrastructure to enter the Chinese market, announcing today the beginning of sales in that market"
First Quarter Financial Highlights[1]:
- Sales totaled NIS 1.77 billion (NIS 1.69 billion last year), up. 4.5%; Organic sales growth net of exchange rates effect totaled 3.5%.
- Gross profit totaled NIS 680 million (8.4% of sales), compared to NIS 684 million last year (40.3% of sales), down 0.5%.
- Operating profit totaled NIS 154 million (8.7% of sales), compared to NIS 181 million last year (10.7% of sales), down 14.9%.
- Net profit to shareholders totaled NIS 70 million, compared to NIS 92 million last year, down 24.6%.
Main pro-forma data (in NIS million):
First Quarter
2011 2010 % Chg
Sales 1,773 1,696 4.5%
Gross Profit 680 684 -0.5%
Operating Profit (1) 154 181 -14.9%
Profit for the Period 93 117 -21.2%
Net Profit (2) 70 92 -24.6%
(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 the first quarter of 2011 held 11.7% of the domestic retail food and beverage market (on a quarterly average, in financial terms). The Israeli market is the Group's home market, in which it is active in various categories.
Sales for the entire Strauss Group business in Israel include the Health & Wellness and Fun & Indulgence Divisions, the coffee business in Israel, Max Brenner in Israel and Strauss Water Israel (Tami4).
In the first quarter, Israel sales totaled NIS 1,016 million compared to NIS 969 million in the corresponding quarter last year, an increase of 4.8%. Growth was evident in all business divisions, Health & Wellness, Fun & Indulgence, Strauss Water Israel and Israel Coffee.
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.
Sales by Strauss's coffee business in the first quarter of 2011 totaled NIS 831 million compared to NIS 827 million in the corresponding period last year, an increase of 0.4%. After neutralizing the impact of currency exchange rates, growth amounted to 0.7%. Organic growth (after neutralizing the acquisition of businesses and the impact of exchange rate differentials) in the first quarter of 2011 was negative and amounted to a decrease of 0.6%.
Coffee sales were positively influenced by the growth in activity in Russia and in Israel, but were negatively influenced by the weakness in most of the markets in Eastern Europe, 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, and by the growing competition.
The gross profit in the coffee business totaled NIS 278 million in the first quarter (33.5% of sales) compared to NIS 298 million (36.0%) last year, a decrease of 6.6%. The decrease in gross profit is the result of the sharp rise in raw material prices and the difficulty in transferring the entire increase in these prices to the consumer.
The operating profit of the coffee business totaled NIS 67 million in the first quarter (8.0% of sales) compared to NIS 78 million (9.4% of sales) last year, a decrease of 14.1%. The decrease in the operating profit was influenced mainly by the decrease in the gross profit.
The Israel Sector - Strauss Israel
Sales
The Company in Israel concluded a quarter of growth in sales coupled with an increase in the operating profit. Sales by the Israel area of activity in the first quarter totaled NIS 728 million compared to NIS 697 million in the corresponding quarter last year, an increase of 4.4%. Growth was expressed in the sales of both units, Health & Wellness and Fun & Indulgence, and is evident in most categories.
According to StoreNext figures, in the first quarter of 2011 the Israeli food market grew by 2.5% in financial terms. Strauss Group succeeded in strengthening its competitive position in Israel in the quarter, mainly thanks to the continuing investment in its brands, innovation and marketing moves.
The gross profit in the business in Israel totaled NIS 301 million in the first quarter (41.4% of sales) compared to NIS 291 million in the corresponding period last year (41.8%), an increase of 3.4%.
The gross profit was positively influenced by the growth in sales, and was negatively influenced by the increase in the prices of most raw materials and energy.
The pro-forma operating profit in Israel increased in the quarter by 1.2% and amounted to NIS 90 million compared to NIS 89 million in the corresponding period last year, with a slight erosion in the operating profit in the quarter, down from 12.8% last year to 12.4% in the first quarter of 2011.
The International Dips Activity (Presently Executed by Sabra Dipping Company)
In this activity the Group develops, manufactures, sells, markets and distributes hummus and refrigerated Mediterranean salads, presently through the Sabra company, throughout North America. Sabra is jointly controlled by the Group and PepsiCo (each party holds 50%). Sabra's activity has been proportionately consolidated (50%) since the completion of the transaction with PepsiCo, beginning in the second quarter of 2008.
This area of activity includes the expenses of Strauss North America's head office.
In the first quarter Sabra's sales continued to grow, as did its market shares, and it maintained a leading position in the refrigerated flavored spreads category. In the quarter, Sabra's market share reached 51%.
During the quarter the Company reported that the Strauss Group and PepsiCo had announced the conclusion of principles for an agreement to establish a jointly-held global company that will manufacture and market fresh salads, dips and spreads in major international markets. Each of the partners will hold 50% of the new company (the final agreement has not yet been signed).
Sales (100%) - In the first quarter Sabra's sales totaled NIS 172 million compared to NIS 127 million last year, an increase of 35.8%. After neutralizing the currency impact, growth amounted to 41.0%. Organic growth excluding the currency impact was 19.0%.
The operating profit (100%) in the first quarter totaled NIS 9 million (5.4% of sales) compared to NIS 20 million in the corresponding quarter last year (15.9%), a decrease of 54.2%. The decrease in the operating profit is the result of the simultaneous operation of two production sites.
Strauss Water
Strauss Water engages in the development, manufacture 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 the Maze technology, a breakthrough in the purification and treatment of water. Strauss Water is presently active in Israel (through the Tami4 brand) and in the UK (through the T6 brand).
Strauss Water's sales continue to grow, and in the first quarter totaled NIS 99 million compared to NIS 83 million in the corresponding quarter last year, an increase of 19.0%.
During the quarter preparations for the launch of the water business in China continued, further to the establishment of the joint venture in home water solutions in China between Strauss Water and Haier Group, the Chinese home appliances and electronics giant.
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 and a long-term commitment to its customers and care for people, water and the environment.
Max Brenner
In the first quarter Max Brenner's sales totaled NIS 30 million compared to NIS 26 million last year, an increase of 15.6%; after neutralizing the impact of the erosion of the Dollar in relation to the Shekel, sales in the quarter increased by 17.3%.
In the first quarter of 2011 a new Chocolate Bar was opened in Boston, and as at the date of the report, 36 Max Brenner Chocolate Bars are in operation around the world: 6 in Israel, 4 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.
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 core infrastructure for Max Brenner.
Financial Results:
Sales
The Group's sales in the first quarter totaled NIS 1,773 million compared to NIS 1,696 million in the corresponding period last year, an increase of 4.5%. After neutralizing the currency impact, growth amounted to 4.8%. Organic growth after neutralizing the impact of changes in exchange rates in the first quarter amounted to 3.5%. Growth was evident mainly in the Company's activity in Israel, which grew by some 4.4% in the quarter, in Sabra's activity in North America, where growth amounted to 35.8%, and in the water business, which grew by 19.0% in the quarter.
Gross Profit
The financial accounting gross profit in the first quarter decreased by 2.8% and amounted to NIS 664 million compared to NIS 683 million in the corresponding period last year; the gross profit rate dropped from 40.3% last year to 37.5% this year. The pro-forma gross profit decreased in the quarter by 0.5% and amounted to NIS 680 million compared to NIS 684 million last year, down from 40.3% to 38.4%.
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 due to the continuing 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 133 million (7.5% of sales) in the first quarter compared to NIS 177 million (10.4%) last year, a decrease of 25.0%.
The pro-forma operating profit totaled NIS 154 million (8.7% of sales) in the first quarter compared to NIS 181 million (10.7%) last year, a decrease of 14.9%.
The quarterly operating profit was also influenced by the growth in expenses relating to the establishment of Strauss Water's activity in China and in England, and by the simultaneous operation of two production sites in the USA (the total impact on the profit amounted to a decrease of approximately NIS 10 million), as well as by the decrease in profit in the coffee business, further to the decrease in gross profit in this activity.
Other Expenses, Net
Other expenses, net totaled NIS 2 million in the first quarter compared to other expenses, net amounting to NIS 7 million in the corresponding period last year.
Operating Profit after Other Expenses
The Company's consolidated operating profit in the first quarter totaled NIS 131 million, compared to NIS 170 million in the corresponding period last year.
Financing Expenses, Net
Net financing expenses in the first quarter totaled NIS 26 million compared to expenses of NIS 8 million in the corresponding quarter last year.
The factors that contributed to the increase in financing expenses compared to last year were the revaluation of Index-linked liabilities in respect of Debentures Series A and B on the basis of the known Index (an increase of 0.9% in the quarter versus a decrease of 1% last year); expenses in respect of the revaluation of foreign currency positions due to the strengthening of the Group's operating currencies in the quarter in relation to the US Dollar, versus income from the revaluation of foreign currency balances in the corresponding period last year; and an increase in net credit volumes compared to the corresponding period last year.
By contrast, the increase in financing expenses was offset against expenses in respect of the revaluation of Index contracts last year versus a profit in respect of Index contracts this year, and against a profit from hedging transactions on Shekel interest.
The net credit volume as at March 31, 2011 totaled NIS 1,481 million compared to NIS 973 million on March 31, 2010 and NIS 1,156 million on December 31, 2010.
Taxes on Income
In the first quarter taxes on income amounted to NIS 31 million, reflecting an effective tax rate of 29.9%, compared to NIS 53 million and an effective tax rate of 32.7% in the corresponding quarter last year. The decrease in the effective tax rate in the current quarter compared to the corresponding quarter last year is mainly the result of differences originating in the variance of tax rates in foreign countries.
Income for the Period
Income for the period in the first quarter totaled NIS 74 million compared to NIS 109 million last year. The pro-forma income for the period in the first quarter amounted to NIS 93 million compared to NIS 117 million last year, a decrease of 21.2%.
Income for the Period for the Shareholders of the Company
The financial accounting income for the period for the shareholders of the Company in the first quarter totaled NIS 55 million compared to NIS 84 million last year, a decrease of 34.4%. The decrease is mainly the result of the decrease in the operating profit and of the increase in financing expenses compared to last year.
The pro-forma income for the shareholders of the Company in the first quarter totaled NIS 70 million (3.9% of sales) compared to NIS 92 million last year (5.4%), a decrease of 24.6%. The decrease in the first quarter this year is mainly the result of the decrease in the operating profit and the increase in financing expenses compared to last year.
Income for the Period for Minority Shareholders
In the first quarter the share of Minority shareholders in the income of subsidiaries totaled NIS 19 million compared to NIS 25 million in the corresponding quarter last year, a decrease of 25.9%.
Table 1
Following are the condensed financial accounting statements of income for the quarters ended March 31, 2011 and 2010 (in NIS millions):
For the First Quarter
2011 2010 % Chg
Sales 1,773 1,696 4.5
Cost of sales not including impact of hedging 1,093 1,012 7.9
transactions
Revaluation of the balance of hedging transactions
on commodities as at end of period 16 1
Cost of sales 1,109 1,013 9.4
Gross Income 664 683 (2.8)
Selling and marketing expenses 425 401 6.0
General and administrative expenses 106 105 0.8
Operating income before other income (expenses) 133 177 (25.0)
Other income (expenses), net (2) (7) (79.0)
Operating Income 131 170 (22.6)
Financing expenses, net (26) (8) 221.0
Income before taxes on income 105 162 (35.2)
Taxes on income (31) (53) (40.8)
Effective tax rate 29.9% 32.7%
Income for the period 74 109 (32.4)
Income attributed to the shareholders of the
Company 55 84 (34.4)
Income attributed to the holders of rights that do
not confer control 19 25 (25.9)
Table 2
Following are the condensed results of business operations (based on the Company's pro-forma statements) for the quarters ended March 31, 2011 and 2010 (in NIS millions):
For the First Quarter
2011 2010 % Chg
Sales 1,773 1,696 4.5
Cost of sales 1,093 1,012 7.9
Gross Income 680 684 (0.5)
Selling and marketing expenses 425 401 6.0
General and administrative expenses 101 102 -0.9
Operating income - pro-forma 154 181 (14.9)
Financing expenses, net (26) (8) 221.0
Income before taxes on income 128 173 (26.2)
Taxes on income (35) (56) (36.8)
Income for the period - pro-forma 93 117 (21.2)
Income attributed to the shareholders of the
Company 70 92 (24.6)
Income attributed to the holders of rights that do
not confer control 23 25 (8.4)
Table 3
Following are the condensed results of business operations (based on the Company's pro-forma statements) of the major business sectors for the quarters ended March 31, 2011 and 2010 (in NIS millions):
For the First Quarter
2011 2010 % Chg
Israel
Net sales 728 697 4.4
Operating income 90 89 1.2
Coffee
Net sales 831 827 0.4
Operating income 67 78 (14.1)
International Dips and Spreads
Net sales 86 63 35.8
Operating income 2 8 (70.2)
Other
Net sales 128 109 18.5
Operating income (loss) (5) 6 (170.8)
Total
Net sales 1,773 1,696 4.5
Operating income 154 181 (14.3)
Table 4
Consolidated Balance Sheet (in NIS million):
March 31 March 31
2011 2010
NIS millions
Current assets
Cash and cash equivalents 649 790
Marketable securities and deposits 179 74
Trade receivables 1,099 1,068
Income tax receivables 78 56
Other receivables and debit balances 212 160
Inventory 776 621
Assets classified as held for sale - 16
Total current assets 2,993 2,785
Investments and non-current assets
Other investments and long-term debit balances 167 145
Assets designated for the payment of employee 5 7
benefits, net
Fixed assets 1,567 1,418
Intangible assets 1,728 *1,566
Deferred expenses 26 29
Investment property 24 5
Deferred tax assets 6 4
Total investments and non-current assets 3,523 3,174
Total assets 6,516 5,959
Current liabilities
Current maturities of debentures 262 93
Short-term credit and current maturities of 265 196
long term credit loans
Trade payables 784 665
Income tax payables 36 47
Other payables and credit balances 514 492
Provisions 35 39
Total current liabilities 1,896 1,532
Non-current liabilities
Debenture 1,184 1,403
Long-term loans and credit 598 145
Long-term payables and credit balances 25 32
Employee benefits, net 31 30
Deferred tax liabilities 132 *136
Total non-current liabilities 1,970 1,746
Total equity 2,650 2,681
Total liabilities and equity 6,516 5,959
- Reclassified, see Note 1.4.3 to the Consolidated Interim Financial Statements as at March 31, 2011.
---------------------------------
[1] First quarter figures are pro-forma neutralizing the employees options, hedging transactions, non- recurring other income and expenses
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
Share this article