Strauss Group Reports Q4 and Full Year 2011 Results
TEL AVIV, Israel, March 27, 2012 /PRNewswire/ --
Strauss Reports Annual Growth in Sales of 12.3%, 3.0% Decrease in Gross Margin Percentageand 23.6% Decrease in Net Profit.
Q4 2011 Sales Grewby 14.5%, With 2.9% Decrease in Gross Margin Percentageand 0.6% Increase in Net Profit (*).
FOURTH QUARTER Financial Highlights:
- Net sales increased 14.5% to NIS 2.1 billion compared to NIS 1.8 billion LY;
organic sales, net of exchange rate impacts, grew 13.7%. - Gross profit increased 5.4% reaching NIS 686 million (33.2% of sales)
compared to NIS 651 million (36.0% of sales) LY. - Operating profit increased 33.7%, totaling NIS 154 million (7.5% of sales)
compared to NIS 115 million (6.4% of sales) LY. - Net income reached NIS 33 million.
ANNUAL Financial Highlights:
- 2011 sales totaled NIS 7.7 billion compared to NIS 6.9 billion LY, a growth of 12.3%;
significant growth in all Company activities: in Israel, Coffee, Sabra and Water;
organic growth, excluding exchange rate impacts, totaled 11.1%, - Gross profit increased by 3.3% to NIS 2.7 billion compared to LY,
the gross margin percentage fell from 37.8% to 34.8%. - Operating profit decreased by 10.7% and totaled NIS 523 million (6.8% of sales),
compared to NIS 586 million (8.5% of sales) LY. - Net income totaled NIS 161 million vs. NIS 211 million LY, a decrease of 23.6%
(*) The percentages for data listed are based on accounting data in NIS thousands, unless otherwise stated
Strauss Group (STRS.TA) today reported its results for the fourth quarter and full year 2011.
Ofra Strauss, Chairperson of Strauss Group, said today: "The consumer protest in Israel obligates us to improve and become more efficient at making organizational adjustments in line with the new reality, and increase the added value we provide to consumers. At the same time we are continuing to invest in innovation and strengthening the foundations for our international growth"
Gadi Lesin, President and CEO of Strauss Group, said today: "In 2011 Strauss Group reported 12.3% growth in sales, which is evident in all the Group's activities. At the same time, due to dramatic increases in production inputs and energy costs, high raw material prices compared to last year, the economic challenges in some of the markets where the Group operates, the measures the Group took in response to the public protests in Israel to decrease prices and also to look after our employees, we ended the year with a 3.0% decrease in gross margin percentage, a 10.7% decrease in operating profit and a 23.6% erosion of net profit.
The Group continues to make the adjustments required to increase added value for our consumers while at the same time investing in the development of its international activities with emphasis on the investments in our Water and Dips & Spreads businesses and their strategic international partnerships.
Zion Balas, CEO of Strauss Israel, said today: "Strauss Israel had annual growth this year of 5.9% despite erosions in gross and operating profits resulting from a sharp rise in production costs, effective price reductions for more than 50 products in a variety of categories and improving the welfare of our employees with lower levels of income . This year, and in the years to come, the Company will continue to optimize its resources to provide greater added value to consumers and adjust its operations to suit the new social reality.
Main pro-forma data (in NIS million):
Full Year Fourth Quarter
2011 2010 % of Change 2011 2010 % of Change
Sales 7,699 6,855 12.3% 2,070 1,807 14.5%
Gross Profit 2,677 2,593 3.3% 686 651 5.4%
Operating
Profit (1) 523 586 -10.7% 154 115 33.7%
Profit for
the Period 233 302 22.8%- 46 52 -10.0%
Net Profit (2) 161 211 23.6%- 33 33 0.6%
(1) Before other income (expenses)
(2) Attributed to the shareholders of the Company
ANALYSIS OF THE BUSINESS RESULTS OF THE GROUP'S MAJOR BUSINESS UNITS (PRO-FORMA)
The Group's Activity in Israel
Strauss Group is the second-largest company in the Israeli food industry and in 2011 held 11.2% of the total 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 Strauss Group in Israel include the Health & Wellness and Fun & Indulgence Divisions, the Israel coffee business , Max Brenner in Israel and Strauss Water in Israel (Tami4). In 2011, Strauss Group's sales in Israel totaled NIS 3,939 million compared to NIS 3,701 million in 2010, an increase of 6.4%. In the fourth quarter, Israel sales totaled NIS 943 million compared to NIS 931 million in the corresponding quarter last year, an increase of 1.3%.
Further to the acquisition of Tami4 the Group has increased its touch points with the Israeli consumer and expanded beyond retail and away-from-home (AFH) sales into a direct interface with the consumer.
The Coffee Business
Sales by Strauss's coffee business in 2011 totaled NIS 3,926 million compared to NIS 3,386 million in 2010, an increase of 16.0%. After neutralizing the impact of currency exchange rates, growth amounted to 16.5%. Organic growth in 2011 (after neutralizing the acquisition of businesses and the impact of exchange rate differentials) amounted to 14.2%.
Coffee sales in 2011 were positively influenced by the growth in activity in Brazil and in Russia, but were negatively influenced by the weakening of most of the markets in Eastern Europe due to the slow recovery from the crisis in these markets and by changes in the exchange rates of the various operating currencies.
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 in the country, and in expansion in the former USSR countries.
Sales by the coffee business totaled NIS 1,150 million in the fourth quarter of 2011 compared to NIS 920 million in the corresponding period last year, an increase of 24.9%. After neutralizing the impact of currency exchange rates, growth in the quarter amounted to 27.0%, whereas after neutralizing the acquisition of businesses and the impact of exchange rate differentials, sales in the quarter grew by 23.6%.
Local currency growth in the fourth quarter is evident mainly in the Company's activity in the former USSR countries, in Brazil, in Israel and in Poland.
Gross profit in the coffee business totaled NIS 1,127 million in 2011 (28.7% of sales) compared to NIS 1,081 million (31.9% of sales) last year, an increase of 4.2%. The gross profit in the coffee business was influenced by the sharp rise in raw material prices 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 304 million (26.4% of sales) compared to NIS 268 million (29.1% of sales) last year, an increase of 13.2%. The decrease in the gross profit rate is the result of the sharp increase in raw material prices.
The operating profit of the coffee business totaled NIS 260 million (6.6% of sales) in 2011 compared to NIS 257 million (7.6% of sales) last year, an increase of 1.1%.
In the fourth quarter, the operating profit totaled NIS 82 million (7.1% of sales) compared to NIS 52 million (5.6% of sales) in the corresponding quarter last year, an increase of 58.3%. The increase in the operating profit was influenced mainly by the growth in the gross profit per each ton sold in the period.
The Israel Sector
Sales
Strauss Israel is the second-largest company in the Israeli food industry and in 2011 held an 11.2% share 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 Strauss Group in Israel include the Health & Wellness and Fun & Indulgence Divisions, the Israel coffee business , Max Brenner in Israel and Strauss Water in Israel (Tami4).
In 2011, Strauss Group's sales in Israel totaled NIS 3,939 million compared to NIS 3,701 million in 2010, an increase of 6.4%. In the fourth quarter, Israel sales totaled NIS 943 million compared to NIS 931 million in the corresponding quarter last year, an increase of 1.3%.
Further to the acquisition of Tami4 the Group has increased its touch points with the Israeli consumer and expanded beyond retail and away-from-home (AFH) sales into a direct interface with the consumer.
Even with the many challenges of the past year, the Company concluded 2011 with sales growth, although profitability decreased and there was a reduction in operating profit mainly due to price reductions made in the second half of the year and a significant increase in input costs (raw material and energy prices, minimum wage rate). The Company succeeded in maintaining its competitive position in Israel, mainly due to continued investment in brands, innovation and marketing moves.
Throughout the year the Company continued to invest in innovation in various categories, including chewing gum, sweet snack bars, chocolate, desserts, cheeses and salty snacks. For the third time in succession, Strauss was awarded the title of the most innovative food company in Israel.
During 2011 the Company in Israel executed a process of adapting the organization to meet future challenges, as well as formulating its new strategy for the next few years.
The gross profit in the business in Israel totaled NIS 1,125 million in 2011, compared to NIS 1,111 million last year. The gross profit rate dropped from 41.4% to 39.6% this year.
In the fourth quarter the gross profit in Israel decreased by 4.0% and totaled NIS 262 million (38.6% of sales), compared to NIS 273 million in the corresponding period last year (40.7% of sales).
The percentage of decline in profitability is mainly due to permanent price reductions and special offers for a wide range of products designed to keep prices low. The Company is examining a variety of options in order to ease matters for its consumers.
The pro-forma operating profit in Israel decreased in 2011 by NIS 3 million compared to last year. The operating profit rate was 10.6% in 2011 compared to 11.4% in the corresponding period last year. The decrease in the rate of operating profit is mainly the result of price reductions in the second half of the year and the significant increase in input prices.
In the fourth quarter the operating profit in Israel increased by 2.4%, with operating profit in the quarter rising from 9.2% last year to 9.3% this year, mainly because of a decrease in operating expenses compared to last year.
The International Dips and Spreads Activity (Presently Executed by Sabra)
In 2011 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 2011 was 52.0%.
In the first quarter of 2011 the Company reported that Strauss Group and PepsiCo had announced an agreement in principle for the establishment of a global joint-venture that will manufacture and market fresh salads, dips and spreads in major international markets, with each partner holding 50% of the new company. During the reporting period the JV agreement was signed and PepsiCo Strauss Fresh Dips & Spreads International GmbH. Was established.
Sabra sales (100%) in 2011 totaled NIS 776 million compared to NIS 593 million LY, an increase of about 30.8%. After neutralizing the impact of currency exchange rates, growth amounted to 36.5%, organic growth, after neutralizing the impact of currency exchange rates, amounted to 20.4%.
Sabra's sales in the fourth quarter totaled NIS 200 million compared to NIS 165 million last year, an increase of 21.5%. Growth, after neutralizing the impact of currency exchange rates, amounted to 18.0%.
Operating profit (100%) in 2011 totaled NIS 72 million (9.3% of sales) compared to - 62 million last year (10.4% of sales), an increase of 16.6%.
Operating profit in the fourth quarter totaled NIS- 24 million (11.9% of sales) compared to NIS 15 million (9.3% of sales) last year, an increase of 55.3%.
Strauss Water
Strauss Water engages in the development, manufacture, marketing and sale of systems for the purification, filtration, heating and cooling of drinking water for the home market and for away-from-home consumption, on the basis of a long-term commitment to its customers. Strauss Water developed Maze technology, a breakthrough in the purification and treatment of water. Strauss Water is active in Israel (through the Tami4 brand), in the UK (through the T6 brand) and in China, through the brand Haier Strauss Water, a joint venture for point-of-use water solutions in that country between Strauss Water and Haier Group, the Chinese home electronic appliances giant. As at the date of the report, the company is in the initial phase of the process of selling Strauss Water products in China. In this first stage the products were launched in four cities - Beijing, Shanghai, Qingdao and Shenzhen.
In the fourth quarter 2011 Strauss Water signed a series of agreements with companies of the Virgin Group for the establishment of a joint venture, Virgin Strauss Water, through Strauss Water UK Ltd., which will engage in the marketing, sale and servicing of Strauss Water products in Great Britain and Ireland, with an option to expand the joint activity to France, Australia and South Africa. The products will be sold under the joint branding of Virgin and Strauss Water.
Strauss Water's pro-forma sales totaled NIS 405 million in 2011 compared to NIS 382 million LY, an increase of 5.9%.
In the fourth quarter Strauss Water's sales totaled NIS 99 million compared to NIS 103 million in the corresponding period last year, a decrease of 3.8%.
Strauss Water is planning expansion into other geographies in the future while continuing to develop innovative technologies in water purification and treatment and with long-term commitment to its customers, caring for people, water and the environment.
Max Brenner
The unique concept of our chain of Chocolate Bars continues to grow with the opening this year of a new branch in downtown Boston. The location of this new branch is intended to strengthen the chain's presence in the U.S. and support the Group's expansion strategy across North America.
In 2011 Max Brenner's sales totaled NIS 140 million compared to NIS 109 million last year, an increase of 28.9%. After neutralizing the impact of the erosion of the Dollar in relation to the Shekel, growth in 2011 totaled 31.0%.
In the fourth quarter Max Brenner's sales totaled NIS 41 million compared to NIS 31 million last year, an increase of 32.7%. After neutralizing the impact of the erosion of the Dollar in relation to the Shekel, sales in the fourth quarter grew by 30.3%.
As at the date of the report, 39 Max Brenner Chocolate Bars are in operation around the world: 6 in Israel, 4 in the USA, 2 in the Philippines, 1 in Singapore and 26 in Australia. Nine branches are owned by the Company (in Israel and the U.S.), with all other branches operated under franchise.
The Company continues to invest in the development of core infrastructure for Max Brenner in Israel and abroad.
Financial Results:
Sales
In 2011 Strauss Group's sales amounted to NIS 7,699 million compared to NIS 6,855 million last year, an increase of 12.3%. After neutralizing the currency impact, growth amounted to 12.8%. Organic growth after neutralizing the impact of changes in exchange rates in 2011 amounted to 11.1%. 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 2,070 million compared to NIS 1,807 million in the corresponding period last year, an increase of 14.5%. After neutralizing the currency impact, growth amounted to 15.3%. Organic growth after neutralizing the impact of changes in exchange rates in the fourth quarter amounted to 13.7%. Growth was evident mainly in the Company's activity in Israel, excluding coffee, which grew by some 1.3% in the quarter, in Sabra in North America, where growth amounted to 21.5%, and conversely, was negatively influenced by the water business, which decreased by 3.8% in the quarter.
Gross Profit
The financial accounting gross profit in 2011 totaled NIS 2,677 million (34.8% of sales) compared to NIS 2,593 million last year (37.8% of sales), an increase of 3.3%. The pro-forma gross profit in 2011 increased by 4.6% compared to the corresponding period last year, and its percentage dropped from 37.8% to 35.1%.
The gross profit was positively impacted by the improvement in sales in all of the Group's operations, and was adversely affected mainly by the increase in raw material prices.
The financial accounting gross profit in the fourth quarter increased by 5.4% and its percentage dropped from 36.0% last year to 33.2% this year. The pro-forma gross profit increased in the quarter by 6.4%, its rate decreasing from 35.8% to 33.3%.
The gross profit was positively impacted by the improvement in sales in all of the Group's operations, and was adversely affected mainly by the increase in raw material prices.
Operating Profit before Other Income (Expenses)
In 2011 the financial accounting operating profit (before other income and expenses) totaled NIS 523 million (6.8% of sales) in 2011 compared to NIS 586 million (8.5% of sales) last year, a decrease of 10.7%.
The 2011 pro-forma operating profit totaled NIS 572 million (7.4% of sales) in 2011 compared to NIS 601 million (8.8%) last year, a decrease of 4.8%.
The decrease in operating profit was mainly influenced by the increase in expenses relating to building Strauss Water's operations in China and in England, by the simultaneous operation of two production facilities in the USA (until the close of the old factory), by the establishment costs of the international dips and spreads operation, and by the decrease in operating profit in the Company's activity in Israel.
The financial accounting operating profit (before other income and expenses) totaled NIS 154 million (7.5% of sales) in the fourth quarter compared to NIS 115 million (6.4%) in the corresponding period last year, an increase of 33.7%.
The pro-forma operating profit totaled NIS 154 million (7.5% of sales) in the fourth quarter compared to NIS 123 million (6.8% of sales) last year, an increase of 26.3%.
The quarterly operating profit was mainly influenced by the growth in the operating profit of the international coffee operation, primarily as a result of the growth in the gross profit per each ton sold in the period.
Other Income (Expenses), Net
Other expenses, net totaled NIS 60 million in 2011 compared to NIS 45 million last year. Most of the expenses in 2011 are attributed, among other things, to the goodwill impairment in the subsidiaries in Serbia (NIS 46 million) and Israel Coffee (NIS 12 million), as well as to restructuring costs in Israel. Also included are costs relating to the establishment of the Company's activity in China. These expenses were partially offset by a capital gain, totaling approximately NIS 16 million, resulting from the change from complete control to proportionate consolidation in the subsidiary in the UK; completion of the transaction is subject to execution of the first investment within six months from the signing of the agreements (17 November 2011).
Most of the expenses in 2010 are attributed, among other things, to the discontinued operation of the subsidiary in Bulgaria further to the decision by Strauss Coffee to exit this market. Following this decision the subsidiary recognized expenses amounting to NIS 15 million. This item also includes the costs of building the new Sabra factory and the establishment of Strauss Water activities in China.
In the fourth quarter of 2011 other expenses, net totaled NIS 53 million (most resulting from the reasons described above), compared to NIS 12 million in other expenses, net in the corresponding quarter last year (mainly the costs of the establishment of Strauss Water and restructuring costs).
Income for the Period
The financial accounting income for 2011 totaled to NIS 233 million compared to NIS 302 million last year. The pro-forma income for the period amounted to NIS 334 million compared to NIS 358 million last year, a decrease of 6.6%.
Income for the period in the fourth quarter totaled NIS 46 million compared to NIS 52 million last year. The pro-forma income for the period in the fourth quarter amounted to NIS 97 million compared to NIS 73 million last year, a growth of 34.7%.
Income for the Period for the Shareholders of the Company
The financial accounting income for the period for the shareholders of the Company in 2011 totaled NIS 161 million compared to NIS 211 million last year, a decrease of 23.6%. The net income was adversely impacted following the decrease in the operating profit, the increase in other expenses, and the increase in financing expenses.
The pro-forma income for the shareholders of the Company in 2011 totaled NIS 237 million compared to NIS 258 million last year, a decrease of 8.7%. The pro-forma net income was adversely impacted by the decrease in the operating profit and the increase in financing expenses, and conversely, was positively influenced by the decrease 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 33 million last year, an increase of 0.6%.
The pro-forma income for the shareholders of the Company in the fourth quarter totaled NIS 67 million compared to NIS 50 million last year, an increase of 32.9%.
Income for the Period for Non-Controlling Interest Holders
In 2011 the share of non-controlling interest holders in the income of subsidiaries totaled NIS 72 million compared to NIS 91 million in the corresponding period last year, a decrease of 20.8%. In the fourth quarter the share of non-controlling interest holders in the income of subsidiaries totaled NIS 13 million compared to NIS 19 million in the corresponding period last year, a decrease of 33.3%.
Table 1
Following are the condensed financial accounting statements of income for the years and quarters ended December 31, 2011 and 2010 (in NIS millions):
For the Years For the Fourth Quarter
2011 2010 % change 2011 2010 % change
Sales 7,699 6,855 12.3% 2,070 1,807 14.5%
Cost of sales
not including
impact of
hedging
transactions 4,994 4,267 17.0% 1,382 1,160 19.0%
Revaluation of
the balance of
hedging
transactions on
commodities as
at the end of
the period 28 (5) 2 (4)
Cost of sales 5,022 4,262 17.8% 1,384 1,156 19.6%
Gross income 2,677 2,593 3.3% 686 651 5.4%
Selling and
marketing
expenses 1,727 1,597 8.2% 432 420 3.0%
General and
administrative
expenses 427 410 4.2% 100 116 14.2%-
Operating income
before other income
(expenses) 523 586 -10.7% 154 115 33.7%
Other income
(expenses), net (60) (45) 33.0% (53) (12) 308.2%
Operating income 463 541 -14.3% 101 103 0.7%-
Financing
expenses, net (103) (92) 12.5% (16) (22) -23.9%
Income before
taxes on income 360 449 -19.6% 85 81 5.6%
Taxes on income (127) (147) -13.7% (39) (29) 33.4%
Effective tax
rate 35.1% 32.7% 45.4% 36.0%
Income for the
period 233 302 -22.8% 46 52 -10.0%
Income
attributed to
shareholders of
the Company 161 211 -23.6% 33 33 0.6%
Income
attributed to
non-controlling
interest holders 72 91 -20.8% 13 19 -33.3%
* Financial data was rounded off to NIS millions. The percentage changes were calculated on the basis of the exact figures in NIS thousands
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, 2011 and 2010 (in NIS millions):
For the Years For the Fourth Quarter
2011 2010 % change 2011 2010 % change
Sales 7,699 6,855 12.3% 2,070 1,807 14.5%
Cost of sales 4,994 4,267 17.0% 1,382 1,160 19.0%
Gross income 2,705 2,588 4.6% 688 647 6.4%
Selling and
marketing
expenses 1,727 1,597 8.2% 432 420 2.9%
General and
administrative
expenses 406 390 4.2% 102 104 -3.1%
Operating
income -
pro-forma 572 601 -4.8% 154 123 26.3%
Financing
expenses, net (103) (92) 11.3% (16) (22) -23.9%
Income before
taxes on income 469 509 -7.7% 138 101 37.1%
Taxes on income (135) (151) 10.4%- (41) (28) 43.1%
Income for the
period -
pro-forma 334 358 6.6%- 97 73 34.7%
Income
attributed to
shareholders of
the Company 237 258 8.7%- 67 50 32.9%
Income
attributed to
non-controlling
interest
holders 97 100 -1.0% 30 23 38.9%
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, 2011 and 2010 (in NIS millions):
For the Years For the Fourth Quarter
2011 2010 % 2011 2010 %
Israel
Net sales 2,840 2,683 5.9% 679 671 1.3%
Operating
income 302 305 -1.0% 63 62 2.4%
Coffee
Net sales 3,926 3,386 16.0% 1,150 920 24.9%
Operating
income 260 257 1.1% 82 52 58.3%
International
Dips and
Spreads
Net sales 388 297 30.8% 100 82 21.5%
Operating
income 20 26 -23.2% 5 7 20.8%
Other
Net sales 545 489 11.4% 141 134 5.6%
Operating
income (loss) (10) 13 162.6%- 4 2 100.0%
Total
Net sales 7,699 6,855 12.3% 2,070 1,807 14.5%
Operating
income 572 601 -4.8% 154 123 26.3%
For additional information:
Investors Contact
Shahar Florence
CFO
Strauss Group Ltd.
Tel: +972-3-6752489
Email: shahar.florence@strauss-group.com
http://www.strauss-group.com
Media Contact
Mirit Cohen
Spokesperson
Strauss Group Ltd.
Tel: +972-3-6752150
Mirit.Cohen@strauss-group.com
http://www.strauss-group.com
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