Strauss Group Announces Results For the Second Quarter of 2019, With Stable Sales as Earnings and Profit Margins Rise Significantly
PETAH TIKVA, Israel, Aug. 13, 2019 /PRNewswire/ -- Giora Bardea, President and CEO of Strauss Group (TASE: STRS): "As an international group with operations in diverse categories and numerous countries, we have delivered another quarter of growth and improvement in earnings and profit margins in most of the Group's businesses, in line with the trend of the past three years. We note that in the second quarter, similar to other international Israeli firms, Strauss was once again negatively impacted by the appreciation of the shekel against foreign currencies, with most of this effect applying to international revenues of the coffee company. The Group's other businesses - Strauss Israel, Sabra and Strauss Water - delivered growth and continued improvement in earnings and profit margins."
Strauss Group posted sales of NIS 2.07 billion in the quarter, reflecting a drop of 1.4% compared to the corresponding period; however, in organic terms and excluding foreign currency effects, sales increased by 1.7%. As mentioned, the difference is primarily due to the impact of softer currencies in the coffee company's countries of operations.
In terms of earnings and profit margins Strauss Group has delivered another strong quarter, with an increase in profit and improved profit margins for the Group and the subsidiaries, mainly thanks to continued innovation and long-term productivity implementations. The Group's gross profit in the quarter was approximately NIS 822 million, accounting for 39.6% of sales, compared to a gross profit margin of 38.7% in the corresponding quarter last year and reflecting an improvement of 1.1% in gross profit. The operating profit margin in the quarter was 11% of sales and amounted to NIS 227 million, compared to NIS 207 million in earnings and an EBIT margin of 9.9% in the second quarter of 2018, reflecting an improvement of 9.4% in operating profit. On the bottom line, the Group concluded the second quarter of 2019 with a net profit of NIS 121 million, an increase of 9.5% over the corresponding period last year. The improvement in net profit is the result of the increase in operating profit.
In the first half-year, the Group's revenue amounted to NIS 4.18 billion, reflecting 0.8% organic growth excluding foreign currency effects; gross profit was NIS 1.67 billion - 39.9% of sales compared to 38.5% of sales in the corresponding period. The EBIT in the half-year was NIS 496 million, 11.9% of sales, reflecting an improvement of 7.4% compared to the corresponding period last year. Strauss Group's net profit was NIS 293 million, an improvement of 13.6% compared to the net profit in the first half of 2018.
Strauss Israel continued the positive momentum, with sales rising by approximately 3.3% to NIS 803 million. The company's business in the second quarter was mainly influenced by continued growth in the yogurt and milk beverage category under the Pro brand, and by the start of distribution of Arla products (butter and cheeses), continued growth of the bakery category, Energy healthy snacks products and salty snacks led by Tapuchips. The Taam Teva and Yad Mordechai brands also delivered strong growth.
Strauss Israel's gross profit in the quarter was NIS 316 million - 39.3% of sales - compared to 38.6% in the corresponding period last year. Operating profit rose from approximately NIS 69 million in the second quarter of 2018 to NIS 80 million in the second quarter of 2019, reflecting margins of 8.9% and 10%, respectively. The improved margins were achieved mainly as a result of the sales mix, which was based on new launches in numerous categories while targeting different, and new, consumer publics, and the ramp-up of productivity processes initiated several months ago, particularly at the company's manufacturing sites, following investments in technology and various operational enhancements.
According to StoreNext's([1]) figures for the end of June 2019, Strauss's aggregate share of the Israeli food and beverage market was 11.9%, compared to 11.7% in the corresponding period last year.
Strauss Coffee delivered sales growth in Israel and Brazil (in local currency) during the second quarter, whereas the coffee company's business in Eastern Europe experienced a challenging quarter. Sales by the Três Corações joint venture in Brazil ([2]) grew by 1.7% in local currency and amounted to NIS 470 million (the Group's share 50%), while significantly increasing sales volumes and growing the company's market share from 27% in the corresponding period to 28.4% in the second quarter this year (according to A.C. Nielsen figures). Gross profit and profitability in local currency also rose; however, the 7.9% depreciation of the Brazilian currency eroded shekel income in the quarter by 6.1% compared to the corresponding quarter. The company's sales were also impacted by the drop in green coffee prices in Brazil.
The coffee business in Eastern Europe posted a drop in sales, mainly as a result of the softer currencies in the region as well as increased competition in those countries. In Israel, Strauss Coffee continued to grow, mainly as a result of an increase in sales volumes.
In total, the coffee business yielded revenue of approximately NIS 913 million in the quarter - a drop of 6.6% compared to the corresponding period last year. Excluding foreign currency effect, the drop in revenue amounted to 1.3%.
Strauss Water delivered another strong quarter of growth with NIS 159 million in sales, an increase of 6% compared to the corresponding period. Strauss Water's operating profit, which includes the Group's share of the net profit of the joint venture with Haier Group in China, HSW, amounted to NIS 19 million, 11.9% of sales compared to 11.3% in the corresponding period. The business in China delivered sales of approximately NIS 141 million (100%) in the second quarter, similar to sales in the corresponding period. Excluding foreign currency effects, sales increased by 5.7% compared to the corresponding period. HSW is presently active only in the POU (point of use) segment, which consists of filters and purifiers installed inside homes.
Given the joint venture's interest in expanding into additional categories in the water business, including the point of entry (POE) category (point of entry filtration and purification systems treat the water as it enters the home by connecting directly to the water line, improving water quality for general use and not only for consumption), in the second quarter the HSW joint venture entered into a distribution agreement for POE products manufactured by a company owned by Haier Electronics (which holds 51% of the HSW joint venture) and BWT.
These filtration and purification systems filter the water as it enters the home by connecting directly to the water line and provide an overall water purification solution for general home use, and are designed for private homes and higher income sectors of the population.
Sabra and Obela delivered 6.8% organic growth in local currency during the quarter. Sales by Sabra, which is active in the US and Canada, amounted to approximately NIS 357 million (100%) in the quarter, similar to the corresponding period last year. Sabra is the largest refrigerated dips and spreads manufacturer in the US. According to IRI, Sabra's value market share of the hummus market in the 24 weeks ended June 30, 2019 was 61.6%, compared to 59.9% in the corresponding period last year.
Sabra's operating profit rose 49.7% to NIS 60 million, constituting 16.7% of sales in the second quarter. Sales by Obela, which is active in Mexico, Australia, New Zealand and Western Europe, amounted to approximately NIS 38 million in the quarter, similar to the corresponding period; however, excluding foreign currency effects, growth was 7.7%
Non GAAP Figures (1)
Second Quarter
---
2019 2018
Change
---
Total Group
Sales (NIS mm) 2,073 2,103 -1.4%
Organic Sales Growth excluding FX 1.7%
Gross Profit
(NIS mm) 822 813 1.1%
Gross Margins
(%) 39.6% 38.7%
+90 bps
EBITDA (NIS mm) 309 264 16.9%
EBITDA Margins
(%) 14.9% 12.6%
+230 bps
EBIT (NIS mm) 227 207 9.4%
EBIT Margins (%) 11.0% 9.9%
+110 bps
Net Income
Attributable to
the Company's 121 112 9.5%
Shareholders (NIS mm)
Net Income
Margin
Attributable to
the 5.9% 5.3%
+60 bps
Company's Shareholders
(%)
EPS (NIS) 1.06 0.97 8.8%
Operating Cash
Flow (NIS mm) 304 179 69.8%
Capex (NIS mm)
(2) -92 -66 39.4%
Net debt (NIS
mm) 2,388 2,281 4.7%
Net debt /
annual EBITDA
1.9x
2.1x
(0.2x)
===
1) The data in this document are based on the company's non-GAAP figures, which include the proportionate consolidation of jointly controlled businesses (without implementation of IFRS 11) and do not include share-based payment, mark-to-market as at end-of-period of open positions in the Group in respect of financial derivatives used to hedge commodity prices and all adjustments necessary to delay recognition of gains and losses arising from commodity derivatives until the date when the inventory is sold to outside parties, other income and expenses, net, and the tax effect of excluding those items, unless stated otherwise.
2) Investments include the acquisition of fixed assets and investment in intangible assets.
* Reclassified. For further information, see Note 1.3 to the Condensed Consolidated Interim Financial Statements as at June 30, 2019.
** EBITDA for the 12 months ended June 30, 2019 was adjusted to reflect the effects of IFRS 16, Leases.
Note: Financial data were rounded to NIS millions. Percentages changes were calculated on the basis of the exact figures in NIS thousands.
Non GAAP Figures (1)
Second Quarter
---
Sales
Sales
Organic EBIT (NIS mm)
NIS EBIT margins
Change in
(NIS mm) Growth Sales Change in EBIT EBIT
vs. Last Year Growth excluding % Change margins vs.
FX in EBIT 2018
Sales and EBIT by Operating
Segments and Activities
Strauss Israel:
Health & Wellness 561 4.7% 4.7% 64 8 14.1% 11.3%
+90 bps
---
Fun & Indulgence (2) 242 0.1% 0.1% 16 3 20.1% 7.0%
+120 bps
---
Total Strauss Israel 803 3.3% 3.3% 80 11 15.4% 10.0% +110 bps
---
Strauss Coffee:
Israel Coffee 165 4.5% 4.5% 28 10 54.2% 17.1%
+550 bps
---
International Coffee (2) 748 -8.8% -2.5% 71 -18 -20.4% 9.5%
-140 bps
---
Total Strauss Coffee 913 -6.6% -1.4% 99 -8 -7.6% 10.9% -10 bps
---
International Dips &
Spreads:
Sabra (50%) (2) 179 0.2% 6.7% 30 10 49.7% 16.7%
+550 bps
---
Obela (50%) (2) 19 1.5% 7.7% -3 -1 -82.5%
NM
NM
---
Total International Dips &
Spreads 198 0.3% 6.8% 27 9 46.5% 13.5% +420 bps
---
Strauss Water(2) 159 6.0% 6.2% 19 2 12.2% 11.9% +60 bps
---
Other 0 NM
NM 2 6 143.5% NM
NM
---
Total Group 2,073 -1.4% 1.7% 227 20 9.4% 11.0% +110 bps
---
(1) The data in this document are based on the company's non-GAAP figures, which include the proportionate consolidation of jointly controlled businesses (without implementation of IFRS 11) and do not include share-based payment, mark-to-market as at end-of-period of open positions in the Group in respect of financial derivatives used to hedge commodity prices and all adjustments necessary to delay recognition of gains and losses arising from commodity derivatives until the date when the inventory is sold to outside parties, other income and expenses, net, and the tax effect of excluding those items, unless stated otherwise.
(2) Fun & Indulgence figures include Strauss's 50% share in the salty snacks business. International Coffee figures include Strauss's 50% share in the Três Corações joint venture (3C) - Brazil - a company jointly held by the Group (50%) and by the local São Miguel Group (50%). International Dips & Spreads figures reflect Strauss's 50% share in Sabra and Obela. Strauss Water EBIT figures include Strauss's share in the joint venture in China, Haier Strauss Water (HSW) (49%).
Note: Financial data were rounded to NIS millions. Percentages changes were calculated on the basis of the exact figures in NIS thousands. Total figures for International Dips & Spreads were calculated on the basis of the exact figures for Sabra and Obela in NIS thousands.
Non GAAP Figures (1)
First Half
---
2019 2018
Change
---
Total
Group
Sales
(NIS mm) 4,179 4,270 -2.1%
Organic Sales Growth excluding
FX 0.8%
Gross
Profit
(NIS mm) 1,667 1,646 1.2%
Gross
Margins
(%) 39.9% 38.5%
+140 bps
EBITDA
(NIS mm) 658 575 14.3%
EBITDA
Margins
(%) 15.8% 13.5%
+230 bps
EBIT (NIS
mm) 496 461 7.4%
EBIT
Margins
(%) 11.9% 10.8%
+110 bps
Net Income
Attributable
to the
Company's 293 258 13.6%
Shareholders (NIS
mm)
Net Income
Margin
Attributable
to the 7.0% 6.0%
+100 bps
Company's
Shareholders (%)
EPS (NIS) 2.54 2.25 13.1%
Operating
Cash Flow
(NIS mm) 355 267 33.0%
Capex (NIS
mm) (2) -160 -132 21.2%
Net debt
(NIS mm) 2,388 2,281 4.7%
Net debt /
annual
EBITDA
1.9x 2.1x
(0.2x)
===
1) The data in this document are based on the company's non-GAAP figures, which include the proportionate consolidation of jointly controlled businesses (without implementation of IFRS 11) and do not include share-based payment, mark-to-market as at end-of-period of open positions in the Group in respect of financial derivatives used to hedge commodity prices and all adjustments necessary to delay recognition of gains and losses arising from commodity derivatives until the date when the inventory is sold to outside parties, other income and expenses, net, and the tax effect of excluding those items, unless stated otherwise.
2) Investments include the acquisition of fixed assets and investment in intangible assets.
* Reclassified. For further information, see Note 1.3 to the Condensed Consolidated Interim Financial Statements as at June 30, 2019.
** EBITDA for the 12 months ended June 30, 2019 was adjusted to reflect the effects of IFRS 16, Leases.
Note: Financial data were rounded to NIS millions. Percentages changes were calculated on the basis of the exact figures in NIS thousands.
Non GAAP Figures (1)
First Half
---
Sales (NIS mm)
Sales
Organic EBIT (NIS mm)
NIS
% Change EBIT margins
Change in
Growth vs. Last Year Sales Change in EBIT in EBIT EBIT
Growth excluding margins vs. 2018
FX
Sales and EBIT by Operating
Segments and Activities
Strauss Israel:
Health & Wellness 1,099 3.0% 3.0% 119 9 8.0% 10.8%
+50 bps
---
Fun & Indulgence (2) 581 0.8% 0.8% 73 5 6.2% 12.6%
+60 bps
---
Total Strauss Israel 1,680 2.2% 2.2% 192 14 7.3% 11.4% +50 bps
---
Strauss Coffee:
Coffee Israel 387 3.3% 3.3% 86 27 44.2% 22.2%
+630 bps
---
International Coffee (2) 1,420 -10.7% -3.9% 125 -42 -24.8% 8.8%
-170 bps
---
Total Strauss Coffee 1,807 -8.0% -2.5% 211 -15 -6.6% 11.7% +20 bps
---
International Dips &
Spreads:
Sabra (50%) (2) 349 2.9% 6.6% 57 23 66.8% 16.4%
+630 bps
---
Obela (50%) (2) 41 6.8% 12.0% -5 -1 -19.5%
NM
NM
---
Total International Dips &
Spreads 390 3.3% 7.1% 52 23 74.1% 13.2% +530 bps
---
Strauss Water(2) 302 6.0% 6.1% 35 8 32.5% 11.7% +230 bps
---
Other 0 NM NM 6 5 589.2% NM NM
---
Total Group 4,179 -2.1% 0.8% 496 35 7.4% 11.9% +110 bps
---
1) The data in this document are based on the company's non-GAAP figures, which include the proportionate consolidation of jointly controlled businesses (without implementation of IFRS 11) and do not include share-based payment, mark-to-market as at end-of-period of open positions in the Group in respect of financial derivatives used to hedge commodity prices and all adjustments necessary to delay recognition of gains and losses arising from commodity derivatives until the date when the inventory is sold to outside parties, other income and expenses, net, and the tax effect of excluding those items, unless stated otherwise.
2) Fun & Indulgence figures include Strauss's 50% share in the salty snacks business. International Coffee figures include Strauss's 50% share in the Três Corações joint venture (3C) - Brazil - a company jointly held by the Group (50%) and by the local São Miguel Group (50%). International Dips & Spreads figures reflect Strauss's 50% share in Sabra and Obela. Strauss Water EBIT figures include Strauss's share in the joint venture in China, Haier Strauss Water (HSW) (49%).
Note: Financial data were rounded to NIS millions. Percentages changes were calculated on the basis of the exact figures in NIS thousands. Total figures for International Dips & Spreads were calculated on the basis of the exact figures for Sabra and Obela in NIS thousands.
Condensed financial accounting (GAAP)
Second Quarter
2019 2018
Change
---
Sales 1,338 1,348 -0.8%
---
Cost of sales
excluding impact of
commodity hedges 793 808 -1.9%
---
Adjustments for
commodity hedges -13 -2
---
Cost of sales 780 806 -3.1%
---
Gross profit 558 542 2.8%
---
% of sales 41.7% 40.2%
---
Selling and
marketing expenses 322 325 -0.7%
---
General and
administrative
expenses 99 103 -3.7%
---
Total expenses 421 428
---
Share of profit of
equity-accounted
investees 85 76 13.3%
---
Operating profit
before other
expenses 222 190 16.4%
---
% of sales 16.5% 14.1%
---
Other income
(expenses), net -2 0
---
Operating profit
after other
expenses 220 190 15.2%
---
Financing expenses,
net -38 -22 71.8%
---
Income before taxes
on income 182 168 7.8%
---
Taxes on income -41 -46 -12.8%
---
Effective tax rate 22.5% 27.8%
---
Income for the
period 141 122 15.8%
---
Attributable to the
Company's
shareholders 127 110 15.4%
---
Attributable to non-
controlling
interests 14 12 19.4%
--- ---
Condensed financial accounting (GAAP)
First Half
2019 2018
Change
---
Sales 2,768 2,794 -0.9%
---
Cost of sales
excluding impact of
commodity hedges 1,623 1,664 -2.4%
---
Adjustments for
commodity hedges 0 -13
---
Cost of sales 1,623 1,651 -1.6%
---
Gross profit 1,145 1,143 0.1%
---
% of sales 41.4% 40.9%
---
Selling and
marketing expenses 636 640 -0.7%
---
General and
administrative
expenses 198 198 -0.1%
---
Total expenses 834 838
---
Share of profit of
equity-accounted
investees 153 134 14.5%
---
Operating profit
before other
expenses 464 439 5.7%
---
% of sales 16.7% 15.7%
---
Other income
(expenses), net -3 2
---
Operating profit
after other
expenses 461 441 4.5%
---
Financing expenses,
net -65 -38 70.0%
---
Income before taxes
on income 396 403 -1.6%
---
Taxes on income -87 -113 -23.1%
---
Effective tax rate 22.0% 28.1%
---
Income for the
period 309 290 6.8%
---
Attributable to the
Company's
shareholders 283 263 7.6%
---
Attributable to non-
controlling
interests 26 27 -0.8%
---
Note:Financial data were rounded to NIS millions. Percentages changes were calculated on the basis of the exact figures in NIS thousands.
Investor Conference Calls
Strauss Group will host an investor conference in Hebrew on Tuesday, August 13, 2019 at 14:00 (Israel time) to review the Financial Statements of the Company for the second quarter of 2019.
Investors can listen to the conference in Hebrew by dialing 03-918-0609.
Strauss Group will also host an investor conference call in English on Tuesday, August 13, 2019 at 15:30 Israel time (13:30 UK, 08:30 EST) to review the Financial Statements of the Company for the second quarter of 2019.
To participate in the conference in English, please call one of the following numbers as appropriate:
From the UK: 0-800-917-5108
From the US: 1-888-668-9141
From Israel: 03-918-0610
The Financial Statements for the second quarter of 2019 and Investors Presentation are posted on the Group's Investor Relations website at:
http://ir.strauss-group.com/phoenix.zhtml?c=92539&p=irol-irhome
([1]) StoreNext is engaged in the measurement of the fast-moving consumer goods (FMCG) segment in the barcoded retail market (hereinafter: "StoreNext").
([2]) Três Corações (3C) - The Três Corações joint venture in Brazil - a company jointly held by the Group (50%) and by a local holding company, São Miguel Holding e Investimentos S.A. (50%). (Data reflect Strauss Coffee's share (50%) unless expressly stated otherwise).
For further information please contact:
Osnat Golan
Daniella Finn
VP Communications, Digital
& Sustainability
Director of Investor Relations
Strauss Group Ltd.
Strauss Group Ltd.
972-52-828-8111
972-54-577-2195
972-3-675-2281
972-3-675-2545
Osnat.Golan@Strauss-
Group.com
Daniella.Finn@Strauss-Group.com
Or
Shlomi Sheffer
External Communications Director
Strauss Group Ltd.
972-50-620-8000
972-3-675-6713
Shlomi.Sheffer@Strauss-Group.com
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