Company Announcements

Strauss Group delivers NIS 4.1 billion in revenue in the first half of 2020, reflecting 4.9% organic growth excluding foreign currency effects[1]; Net profit in the half-year was NIS 306 million, up 4.0%

PETAH TIKVA, Israel, Aug. 17, 2020 /PRNewswire/ -- Strauss Group CEO, Giora Bardea: "Today we are wrapping up a second quarter that was affected by COVID-19 in its entirety, with solid results achieved in spite of the complex reality. Strauss Group has maintained business stability and financial strength, as reflected in market shares, organic revenue growth, higher gross profit, stronger cash flows and improved cost and structure of debt.

"In general, in the past quarter and half-year, an improvement was noted in our various activities in local currency, with businesses catering to in-home consumption benefiting from significant growth, whereas those focusing on away-from-home (AFH) consumption weakened. Following a challenging month in April, we saw a gradual trend of improvement in results in subsequent months, as social and economic restrictions are lifted in most countries.

"The strong shekel and ongoing weakening of currencies against the shekel, particularly the Brazilian real, significantly eroded the company's revenue and profits.

"Throughout the crisis, the Group has invested considerably in protecting the safety and health of its employees, in increasing investments in providing help and contributing to the community while maintaining its business operations. This includes new product developments, entry into new categories, acquisitions, ongoing investment in advanced technology and setting up new production sites in Israel and in other countries, as we look forward to emerging from the crisis."

Strauss Group (TASE: STRS) has wrapped up the second quarter of 2020 with solid results against a backdrop of challenges and positive and negative impacts, most of which are the result of the COVID-19 pandemic. The Group has maintained its high credit rating and has raised capital at attractive interest rates to ensure business continuity. In its retail business the company reported sales growth in most sectors, but the closure of restaurants, hotels and cafés has had a significant negative effect on the Group's sales in the AFH market, particularly in the coffee business. The depreciation of the Brazilian real against the shekel eroded the company's revenue. In total, the Group delivered NIS 1.94 billion in revenue in the second quarter, while in the half-year revenue was NIS 4.1 billion, reflecting an increase of around 1.5% and 4.9%, respectively (organic, excluding FX effects) compared to last year. As a result of the weakening currencies, the company reported a drop of around 6.5% in revenue in the quarter and of 1.7% in the half-year, compared to the corresponding periods last year.

As mentioned, the main impact on the Group's revenue in the second quarter was the result of the weakening of the various currencies against the shekel. The foreign currency effect on the company's sales in the quarter amounted to approximately NIS 164 million, of which NIS 138 million are the result of the depreciation of the Brazilian real against the shekel. In the first half, the foreign currency effect was around NIS 266 million, of which NIS 215 million are due to the weakening of the real against the shekel.

In the second quarter, the Group's gross profit was approximately NIS 743 million, down 9.6% compared to the corresponding period last year, mainly due to the drop in revenue as a result of foreign currency effects. The gross profit margin was 38.4%. Operating profit was NIS 223 million, down 1.6% compared to the corresponding period. The operating profit margin was 11.5%, up 0.5% compared to last year. Net profit (attributed to the shareholders of the company) was NIS 135 million in the quarter compared to NIS 121 million in the corresponding period last year, with the increase attributed to a decrease in tax expenses, which was partially offset by the drop in operating profit. Net profit in the half-year was NIS 306 million, reflecting an increase of 4.0% compared to the first half of 2019.

With the outbreak of COVID-19 the Group formulated a dedicated social program with the aim of helping some of its key stakeholders to cope with the pandemic and its implications. The Group applied a compensation mechanism to strengthen its people who have continued to come in to work despite the complexities involved, with emphasis on "front-line" employees. A loan fund was established to assist the company's small suppliers. The company also enlarged the scope of its contributions to the community to help populations harmed by the crisis, including donations of food and money to relevant nonprofits as well as through employee volunteering and the distribution of food products to medical teams in Israel, the US, Brazil and Eastern Europe.

Strauss Israel

The COVID-19 crisis impacted the activities of Strauss Israel in several ways, from both the operational and business aspects. From the operational aspect, the company invested millions of shekels in protecting and compensating its people, with emphasis on "front-line" employees. The company also increased its manpower quotas for the present time to maximize production capacity and expand its ability to deliver food to all retail customers.

Following the lockdown which began at the end of March and continued until mid-May 2020, demand for products for in-home consumption grew, especially products for cooking and baking at home such as dairy, salads, dips and spreads and chocolate tablets. In parallel, there was a drop in demand for single serve snack products and a shift to larger pack purchases by consumers. The Group's sales to retail chains grew, among other things in light of a significant increase in online grocery shopping, alongside a drop in sales to the institutional and AFH market (such as hotels, offices, cafés and restaurants). During and after the second quarter (through to the reporting date), demand for the Group's products has remained high, but has dropped in relation to the demand observed during the outbreak and lockdown phase. In the first half of 2020 the Group held a 12.2% share of the total domestic food and beverage market in Israel (in value terms), compared to 12.0% in the corresponding period in 2019. In parallel, this year the company increased the grant of discounts and campaigns for retailers, and will maintain this policy according to the state of the economy and the implications of the crisis.

In the second quarter Strauss Israel's sales were approximately NIS 851 million, reflecting 5.9% growth compared to sales in the corresponding period last year. Sales growth was mainly observed in the Health & Wellness segment, in products such as yogurt, dairy desserts, milk beverages, salads and dips and spreads, and washed and cut fresh vegetables. In the Fun & Indulgence segment sales dropped compared to last year, mainly as a result of decreased purchases of salty and sweet snacks, which are usually bought and consumed away from home ("on the go"), a drop in purchases of impulse products and fewer social events such as birthday celebrations and parties. Strauss Israel's gross profit in the second quarter was approximately NIS 342 million, reflecting an improvement of 8.4% compared to the corresponding period last year, and the operating profit was approximately NIS 98 million.

Strauss Coffee

The coffee business results were mixed druing the period and were channel dependant. Sales to the large retail chains rose moderately in the second quarter as consumers in most countries of operations stocked up on basic coffee brands, coffee beans and capsules for home consumption in preparation for lockdowns. Online sales were strong as well. However, sales to the traditional sales channel, which includes stores, groceries and open-air markets, were negatively impacted due to restrictions on opening hours and a drop in customer traffic. Sales to the institutional and AFH market dropped significantly following discontinuation of the business of hotels, cafés, restaurants, offices and the points of sale of the Elite Café chain in Israel. The coffee company's total revenue in the past quarter was approximately NIS 750 million, 0.8% less than revenue in the corresponding period last year (organic, excluding currency effects), but the erosion of the Brazilian real against the shekel had a material impact on income translated into shekels, which recorded a drop of 17.9%.

A breakdown by country demonstrates high variance: The business in Brazil grew by around 9.5% in local currency, and in the half-year, the market share of the coffee company in Brazil (Três Corações) was 28.0% compared to 28.3% in the corresponding period. In Poland, 16.9% sales growth in local currency was recorded in the quarter, but the weakening of the zloty negatively impacted sales by approximately NIS 6 million, such that growth in the quarter was 6.4%. In Israel and Romania, where AFH business is significant, revenue dropped, whereas in Russia and Ukraine, where AFH activities are on a small scale, revenue in local currency increased.

Sabra and Obela (100%)

Of all of the Group's businesses, in the second quarter Sabra's activity suffered significant harm to its supply chain as a result of COVID-19, which made it difficult to fully supply demand for the company's products. Another impact of the crisis was a reduction in sales to convenience stores, groceries and AFH sales. The company's total revenue in the second quarter was approximately NIS 319 million, constituting a drop of 9.0% compared to the corresponding period in local currency. It is worth noting that in the second quarter and first half the US hummus market grew, but due to the production shortages experienced by Sabra, the company could not benefit from this growth. Nevertheless, Sabra's market share in the half-year was 62.6%, higher than its market share in the corresponding half in 2019, which was 61.5%. The weakening of the dollar against the shekel constrained Sabra's sales by approximately NIS 8 million, meaning that on translation into shekels Sabra recorded a drop of 10.9% in revenue. The operating profit fell by around 31.2% to NIS 41 million as a result of the drop in sales, a change in the sales mix, and the company's expenses resulting from the adaptation of manufacturing and logistics sites to accommodate the effects of COVID-19. Obela's sales in the quarter were approximately NIS 36 million compared to NIS 38 million in the corresponding period in 2019, reflecting a drop of 4.0%. However, excluding foreign currency effects, the company delivered 5.1% sales growth.

Strauss Water

In the second quarter, Strauss Water's business in Israel experienced a gradual return to activity levels prior to the crisis and was influenced mainly by growth in the customer base, which was countered by a drop in the number of new appliances. The company's operation in China in the quarter was affected by the process of emerging from the lockdown, which led to a recovery in sales. The second quarter saw growth in online sales in China.

In total, Strauss Water wrapped up the second quarter with NIS 159 million in revenue, an increase of around 0.7% over last year, in spite of the restrictions on movement and the lockdowns in its countries of operations. Operating profit was approximately NIS 30 million compared to NIS 19 million in the corresponding period, due, among other things, to recognition of a development grant for the construction of the new manufacturing facility in China, which the company began building with an investment of 375 million yuan. The revenue of HSW in China amounted to approximately NIS 139 million in the quarter compared to NIS 141 million in the corresponding period last year, reflecting a slight drop of 1.3%. Excluding the currency impact, sales grew by 4.9%.

 


Non GAAP Figures (1)





Second Quarter


2020

2019

Change

Total Group Sales (NIS mm)

1,938

2,073

-6.5%

Organic Sales Growth excluding FX



1.5%

Gross Profit (NIS mm)

743

822

-9.6%

Gross Margins (%)

38.4%

39.6%

 -120 bps

EBITDA (NIS mm)

309

309

-0.2%

EBITDA Margins (%)

15.9%

14.9%

+100 bps

EBIT (NIS mm)

223

227

-1.6%

EBIT Margins (%)

11.5%

11.0%

+50 bps

Net Income Attributable to the Company's Shareholders (NIS mm)

135

121

10.1%

Net Income Margin Attributable to the Company's Shareholders (%)

6.9%

5.9%

+100 bps

EPS (NIS)

1.16

1.06

9.7%

Operating Cash Flow (NIS mm)

276

304

-9.2%

Capex (NIS mm) (2)

-70

-92

-23.9%

Net debt (NIS mm)

2,053

2,388

-14.0%

Net debt / annual EBITDA

1.6x

1.9x

(0.3x)

[1]  The data in this document are based on the company's non-GAAP figures, which include the proportionate consolidation of jointly controlled businesses and do not include share-based payment, mark-to-market 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.

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 (NIS mm)

Sales Growth vs. Last Year

Organic Sales Growth excluding FX 

EBIT (NIS mm)

NIS Change in EBIT

% Change in EBIT 

EBIT margins

Change in EBIT margins vs. 2019

Sales and EBIT by Operating Segments and Activities









Strauss Israel:









Health & Wellness

618

10.2%

10.2%

83

19

30.7%

13.4%

+210 bps

Fun & Indulgence (2)

233

-4.1%

-4.1%

15

-1

-11.8%

6.4%

 -60 bps

Total Strauss Israel

851

5.9%

5.9%

98

18

21.7%

11.5%

+150 bps










Strauss Coffee:









Israel Coffee 

133

-19.9%

-19.9%

25

-3

-10.0%

19.2%

+210 bps

International Coffee (2)

617

-17.4%

4.8%

48

-23

-33.3%

7.7%

 -180 bps

Total Strauss Coffee

750

-17.9%

-0.8%

73

-26

-26.6%

9.7%

 -120 bps










International Dips & Spreads:









Sabra (50%) (2)

160

-10.9%

-9.0%

21

-9

-31.2%

12.9%

 -380 bps

Obela (50%) (2)

18

-4.0%

5.1%

-2

1

38.1%

NM

NM

Total International Dips & Spreads

178

-10.3%

-7.7%

19

-8

-30.4%

10.5%

 -300 bps










Strauss Water (2)

159

0.7%

0.8%

30

11

61.3%

19.1%

+720 bps

Other 

0

NM

NM

3

1

87.1%

NM

NM

Total Group

1,938

-6.5%

1.5%

223

-4

-1.6%

11.5%

+50 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 and do not include share-based payment, mark-to-market 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 Haier Strauss Water (HSW) in China (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


2020

2019

Change

Total Group Sales (NIS mm)

4,106

4,179

-1.7%

Organic Sales Growth excluding FX



4.9%

Gross Profit (NIS mm)

1,621

1,667

-2.7%

Gross Margins (%)

39.5%

39.9%

 -40 bps

EBITDA (NIS mm)

663

658

0.7%

EBITDA Margins (%)

16.1%

15.8%

+30 bps

EBIT (NIS mm)

491

496

-1.0%

EBIT Margins (%)

12.0%

11.9%

+10 bps

Net Income Attributable to the Company's Shareholders (NIS mm)

306

293

4.0%

Net Income Margin Attributable to the Company's Shareholders (%)

7.4%

7.0%

+40 bps

EPS (NIS)

2.64

2.54

3.6%

Operating Cash Flow (NIS mm)

353

355

-0.6%

Capex (NIS mm) (2)

-133

-160

-16.9%

Net debt (NIS mm)

2,053

2,388

-14.0%

Net debt / annual EBITDA

1.6x

1.9x

(0.3x)

[1]  The data in this document are based on the company's non-GAAP figures, which include the proportionate consolidation of jointly controlled businesses and do not include share-based payment, mark-to-market 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.

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 Growth vs. Last Year

Organic Sales Growth excluding FX 

EBIT (NIS mm)

NIS Change in EBIT

% Change in EBIT 

EBIT margins

Change in EBIT margins vs. 2019

Sales and EBIT by Operating Segments and Activities









Strauss Israel:









Health & Wellness

1,235

12.3%

12.3%

149

30

25.6%

12.1%

+130 bps

Fun & Indulgence (2)

599

3.1%

3.1%

73

0

-0.5%

12.2%

 -40 bps

Total Strauss Israel

1,834

9.1%

9.1%

222

30

15.7%

12.1%

+70 bps










Strauss Coffee:









Israel Coffee 

368

-5.0%

-5.0%

86

0

0.3%

23.4%

+120 bps

International Coffee (2)

1,226

-13.6%

4.8%

94

-31

-25.0%

7.7%

 -110 bps

Total Strauss Coffee

1,594

-11.8%

2.3%

180

-31

-14.6%

11.3%

 -40 bps










International Dips & Spreads:









Sabra (50%) (2)

337

-3.5%

-0.4%

40

-17

-29.7%

11.9%

 -450 bps

Obela (50%) (2)

38

-7.1%

2.6%

-3

2

36.9%

NM

NM

Total International Dips & Spreads

375

-3.8%

-0.1%

37

-15

-29.1%

9.8%

 -340 bps










Strauss Water (2)

303

0.5%

0.6%

45

10

28.6%

15.0%

+330 bps

Other 

0

NM

NM

7

1

12.2%

NM

NM

Total Group

4,106

-1.7%

4.9%

491

-5

-1.0%

12.0%

+10 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 and do not include share-based payment, mark-to-market 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 Haier Strauss Water (HSW) in China (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)

First Half


2020

2019

Change

Sales

2,878

2,768

4.0%

Cost of sales excluding impact of commodity hedges 

1,691

1,623

4.2%

Adjustments for commodity hedges

18

-


Cost of sales

1,709

1,623

5.3%

Gross profit

1,169

1,145

2.1%

% of sales

40.6%

41.4%


Selling and marketing expenses

636

636

0.0%

General and administrative expenses

204

198

2.9%

Total expenses

840

834

0.7%

Share of profit of equity-accounted investees

118

153

-22.9%

Operating profit before other expenses

447

464

-3.6%

% of sales

15.5%

16.7%


Other income (expenses), net

-

-3


Operating profit after other expenses

447

461

-3.2%

Financing expenses, net

-57

-65

-11.4%

Income before taxes on income

390

396

-1.8%

Taxes on income

-73

-87

-16.3%

Effective tax rate

18.8%

22.0%


Income for the period

317

309

2.3%

Attributable to the Company's shareholders

282

283

-0.6%

Attributable to non-controlling interests

35

26

32.6%

 

Condensed financial accounting (GAAP)

Second Quarter


2020

2019

Change

Sales

1,333

1,338

-0.4%

Cost of sales excluding impact of commodity hedges 

795

793

0.3%

Adjustments for commodity hedges

4

-13


Cost of sales

799

780

2.4%

Gross profit

534

558

-4.3%

% of sales

40.0%

41.7%


Selling and marketing expenses

300

322

-7.0%

General and administrative expenses

96

99

-4.1%

Total expenses

396

421

-6.3%

Share of profit of equity-accounted investees

70

85

-18.2%

Operating profit before other expenses

208

222

-5.7%

% of sales

15.6%

16.5%


Other income (expenses), net

1

-2


Operating profit after other expenses

209

220

-5.2%

Financing expenses, net

-47

-38

23.4%

Income before taxes on income

162

182

-11.1%

Taxes on income

-16

-41

-61.2%

Effective tax rate

9.8%

22.5%


Income for the period

146

141

3.4%

Attributable to the Company's shareholders

126

127

-0.7%

Attributable to non-controlling interests

20

14

40.5%

Note: Financial data were rounded to NIS millions. Percentages changes were calculated on the basis of the exact figures in NIS thousands.

 

Conference Call

Strauss Group will host a conference call in Hebrew on Monday, August 17, 2020 at 14:00 (Israel time) with the participation of company management to review the financial statements of the company for the second quarter of 2020.

To participate in the conference call in Hebrew, dial 03-918-0685.

Strauss Group will also host a conference call in English on Monday, August 17, 2020 at 16:00 (Israel time) (14:00 UK, 09:00 EST) with the participation of company management to review the financial statements of the company for the second quarter of 2020.

To participate in the conference call in English, please call one of the following numbers as appropriate:

UK: 0-800-917-5108
US: 1-888-281-1167
Israel: 03-918-0687

A recording of the calls will subsequently be available on the company's website at:

https://ir.strauss-group.com/company-presentations/conference-call-recordings/

The financial statements for the second quarter of 2020 and the presentation that will accompany the calls will be available prior to the conference calls on the following websites:

https://ir.strauss-group.com/company-presentations/quarterly-presentations/

https://ir.strauss-group.com/earning-releases/

For further information please contact :

Osnat Golan

VP Communications, Digital & Sustainability

Strauss Group Ltd.

972-52-828-8111

972-3-675-2281

Osnat.Golan@Strauss-Group.com

Daniella Finn

Director of Investor Relations

Strauss Group Ltd.

972-54-577-2195

972-3-675-2545

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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SOURCE Strauss Group Ltd.