TEL AVIV, Israel, November 21, 2012 /PRNewswire/ --
THE GROUP REPORTS 3.1% SALES GROWTH
AND 26.1% NON GAAP OPERATING PROFIT GROWTH THANKS TO STRONG RESULTS
IN THE INTERNATIONAL COFFEE SEGMENT AND IN SABRA'S OPERATIONS IN
NORTH AMERICA
A one-time net
gain of approximately NIS 59 million
on the realization of assets contributed to a significant increase
in the GAAP profit for the third quarter.
Ofra Strauss, Chairperson
of Strauss Group, said today (November 21, 2012): "The third quarter
results reflect Strauss Group's capabilities in managing a diverse,
international business portfolio. The company continues to invest
in developing its international activities and strengthening growth
drivers while persevering in streamlining processes, innovation,
and providing significant added value to consumers in all markets
where it is active, particularly in our home market in Israel."
Gadi Lesin, President and
Chief Executive Officer of Strauss Group, said today: "Strauss
Group posted 26.1% growth in the non-GAAP operating profit in the
third quarter of 2012 thanks to strong performance in the
international coffee segment and in Sabra, where sales grew by
34.2% in the quarter. At the same time, the Group continues to
contend with challenges in its home market in Israel and is implementing dozens of internal
streamlining processes. Strauss Israel has refrained from raising
the prices of its products, other than a small number of dairy
product categories where a moderate increase was inevitable in line
with the increase in the price of raw milk."
Key data on the third
quarter[1] and as at September
30, 2012
- Sales totaled NIS 2.1 billion
(NIS 2.0 billion last year), an
increase of 3.1%; organic sales excluding the effect of changes in
exchange rates grew by 4.4%.
- Gross profit totaled NIS 737
million (35.5% of sales) compared to NIS 688 million last year (34.2% of sales), an
increase of 7.1%.
- Operating profit totaled NIS 175
million (8.4% of sales) compared to NIS 139 million last year (6.9% of sales), an
increase of 26.1%.
- The non-GAAP operating profit in the third quarter was
positively influenced by the increase in the non-GAAP operating
profit of Strauss Coffee (an increase of NIS
27million, of which NIS 24
million originated in the international coffee segment), by
the growth in Sabra's operating profit (an increase of NIS 14 million) and by a decrease in the
operating loss of Obela (a positive contribution of NIS 3 million). However, the increase was offset
by an increase in the operating loss of the "Other" segment (a
negative contribution of NIS 4
million), mainly as a result of the growth in operating
expenses related to building the activity of Strauss Water in
China and England, a decrease in the Fun &
Indulgence segment (a negative contribution of NIS 3 million), and a decrease in the results of
operations of the Health & Wellness segment (a decrease of
NIS 1 million).
- Net income attributed to the Company's shareholders in the
third quarter totaled NIS 69 million
(3.3% of sales) compared to NIS 61
million last year (3.0% of sales), an increase of
14.5%.
- Cash flows from operating activities totaled NIS 171 million compared to NIS 57 million in the corresponding quarter last
year.
- The net debt as at September 30,
2012 totaled NIS 1,613 million
(compared to NIS 1,463 million on
December 31, 2011 and NIS 1,671 million on June
30, 2012).
Key data on the first nine months of the
year[1]
- Sales totaled NIS 6.1 billion
(NIS 5.6 billion last year), an
increase of 8.0%; organic sales excluding the effect of changes in
exchange rates grew by 8.7%.
- Gross profit totaled NIS 2.1
billion (35.1% of sales) compared to NIS 2.0 billion last year (35.8% of sales), an
increase of 5.8%.
- Operating profit totaled NIS 468
million (7.7% of sales) compared to NIS 418 million last year (7.4% of sales), an
increase of 11.9%.
- The growth in the non-GAAP operating profit was mainly due to
an improvement in the operating profit of Strauss Coffee (an
increase of NIS 43 million), growth
in the non-GAAP operating profit in Sabra (an increase of
NIS 25 million) and a slight growth
in the non-GAAP operating profit of the Fun & Indulgence
segment (an increase of NIS 1
million). However, this growth was offset by a decrease in
the results of the Health & Wellness segment (a decrease of
NIS 8 million), an increase in the
operating loss of the "Other" segment (a negative contribution of
NIS 7 million), mainly as a result of
the growth in operating expenses related to building the activity
of Strauss Water in China and
England, and expenses related to
building the international dips and spreads business (Obela)
outside of North America (a
negative contribution of NIS 7
million).
- Net income attributed to the Company's shareholders totaled
NIS 170 million (2.8% of sales)
compared to NIS 170 million last year
(3.0% of sales).
- Cash flows from operating activities totaled NIS 412 million compared to a negative cash flow
of NIS 20 million in the
corresponding period last year.
Key data on the first nine months and third quarter
(non-GAAP,
in NIS millions)[1]:
The Group's Activity in Israel
The Strauss Group is the second-largest company in the Israeli
food market and in the first nine months of 2012, according to
StoreNext, held 11.9% of the total domestic retail food and
beverage market (on average, in financial value terms). The
Israeli market is the Group's home market, in which it is active in
various categories.
The sales of 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 Strauss Water in
Israel (Tami4).
In the first nine months of 2012 the Strauss Group's total sales
in Israel amounted to NIS 3,065 million compared to NIS 2,996 million last year, an increase of 2.3%.
In the third quarter of the year the Group's total sales in
Israel amounted to NIS 1,031 million compared to NIS 1,035 million last year, a decrease of
0.4%.
--------------------------------------------------
1. Based on non-GAAP data, which do not include share-based payment, valuation of the
balance of commodities hedging transactions as at end of period, and other income
and expenses.
The Coffee Business
Following is the
scope of sales of the coffee business in the major geographical
regions, and growth rates for the quarter and nine months ended
September 30, 2012 and 2011 (in NIS
millions):
Nine Months Third Quarter
% change % change
Geographical in local in local
region 2012 2011 % chg currency* 2012 2011 % chg currency*
Israel Coffee 538 501 7.6 7.6 172 167 3.8 3.8
International
Coffee
Brazil (1)(2) 1,295 1,152 12.4 20.7 438 454 (3.4) 6.9
Former Yugoslavia
countries 150 172 (12.7) (3.4) 56 56 (0.1) 14.6
Former USSR
countries 608 492 23.5 19.3 210 186 13.2 8.0
Balkan States 189 176 7.2 13.7 65 60 9.2 16.6
Poland and other 301 284 6.0 11.1 108 99 7.1 7.3
Total
International
Coffee 2,543 2,276 11.7 16.9 877 855 2.6 8.4
Total Coffee 3,081 2,777 11.0 15.2 1,049 1,022 2.7 7.6
* The growth rate in the local currency neutralizes the impact of changes in
exchange rates in the different countries in relation to the Shekel on the growth
in the countries' sales.
(1) Brazil sales in the first nine months of 2012 include sales amounting to
NIS 237 million of green coffee and NIS 52 million of corn. In the first nine
months of 2011 sales of green coffee amounting to NIS 220 million and corn
amounting to NIS 52 million were included.
(2) Brazil sales in the third quarter of 2012 include sales amounting to
NIS 66 million of green coffee and NIS 17 million of corn. In the third quarter
of 2011 sales of green coffee amounting to NIS 93 million and corn amounting to
NIS 18 million were included.
Following are the
condensed results of business operations (based on non-GAAP
management reports) of the Coffee Company by reported sectors for
the quarter and nine months ended September
30, 2012 and 2011 (in NIS millions):
Nine Months Third Quarter
2012 2011 % Chg 2012 2011 % Chg
Israel Coffee segment
Net sales 538 501 7.6 172 167 3.8
Operating profit 64 58 11.7 20 17 25.6
% profit 11.9% 11.6% 12.2% 10.2%
EBITDA 74 70 5.8 24 21 16.3
% EBITDA 13.8% 14.0% 14.1% 12.6%
International Coffee segment
Net sales 2,543 2,276 11.7 877 855 2.6
Operating profit 157 120 30.5 66 42 55.9
% profit 6.2% 5.3% 7.5% 4.9%
EBITDA 205 163 25.6 82 56 46.3
% EBITDA 8.0% 7.2% 9.3% 6.5%
Total Coffee
Net sales 3,081 2,777 11.0 1,049 1,022 2.7
Operating profit 221 178 24.3 86 59 46.3
% profit 7.2% 6.4% 8.3% 5.8%
EBITDA 279 233 19.6 106 77 37.3
% EBITDA 9.1% 8.4% 10.1% 7.6%
Sales
Sales by Strauss's coffee business in the first nine months of
2012 totaled NIS 3,081 million
compared to NIS 2,777 million in the
corresponding period last year, an increase of 11.0%.
Excluding the impact of exchange rates differentials, growth
in the nine months amounted to 15.2%. Organic growth
excluding the impact of exchange rate differentials amounted to
13.4% in the reported period.
Coffee sales in the first nine months of 2012 increased thanks
to growth in the coffee category in almost all geographical
regions: in Brazil (an increase of
NIS 143 million), in the former USSR
countries (an increase of NIS 116
million, originating mainly in Russia), in Israel (an increase of NIS 37 million), in Poland (an increase of NIS 17 million) and in the Balkans (an increase
of NIS 13 million, originating mainly
in Romania). By contrast,
the increase was set off by a decrease in coffee sales in the
former Yugoslavia countries (down
by NIS 22 million).
In the third quarter Strauss Coffee's sales totaled NIS 1,049 million compared to NIS 1.022 million last year, an increase of 2.7%.
Excluding the impact of currency exchange rates, growth
amounted to 7.6%. Organic growth excluding the impact of
exchange rate differentials amounted to 6.3% in the quarter.
Coffee sales in the third quarter of 2012 increased thanks to
sales growth in the former USSR countries (an increase of
NIS 24 million, originating mainly in
Russia), in Poland (an increase of NIS 9 million), in the Balkans (an increase of
NIS 5 million, originating mainly in
Romania) and in Israel (an increase of NIS 5 million). By contrast, the increase
was set off by a decrease in coffee sales in Brazil (down by NIS 16
million).
Gross profit
In the first nine months gross profit in the coffee business
totaled NIS 880 million (28.6% of
sales) compared to NIS 823 million
(29.6%) last year, an increase of 6.9%. The improvement in
gross profit was the result of the growth in sales, which was
partly offset by the increase in the prices of the Coffee Company's
raw materials and other production costs compared to the
corresponding period last year.
In the third quarter gross profit amounted to NIS 310 million (29.6% of sales) compared to
NIS 276 million (27.0%) last year, an
increase of 12.5%. The increase in gross profit and the gross
profit rate is due to the growth in sales, the drop in green coffee
prices compared to the corresponding quarter last year, the
positive impact of the mix as a result of accelerated growth in
instant coffee sales in Russia,
and the decrease in the production costs of freeze-dried instant
coffee thanks to the new coffee production facility in Germany.
Operating profit
In the first nine months the operating profit of the coffee
business totaled NIS 221 million
(7.2% of sales) compared to NIS 178
million (6.4% of sales) last year, an increase of 24.3%.
The increase in the operating profit compared to the
corresponding period is the result of the growth in gross profit
and because G&A and selling and marketing expenses rose at a
lower rate than the growth in sales. Additionally, there was
an improvement in the operating profit of Elite Coffee to Go
(ECTG).
In the third quarter the operating profit of the coffee business
totaled NIS 86 million (8.3% of
sales) compared to NIS 59 million
(5.8% of sales) last year, an increase of 46.3%. The increase
in operating profitability compared to the prior period was mainly
influenced by the growth in gross profitability and the improvement
in the operating profit of ECTG.
Brazil
In the first nine months of 2012 the Company's sales in
Brazil totaled NIS 1,295 million, an increase of 12.4% (20.7%
excluding the currency impact). The average market share in
roasted and ground (R&G) coffee in the first nine months
according to A.C. Nielsen figures
reached 20.7%, compared to 20.5% in the corresponding period last
year. Growth was expressed in all categories of activity in
Brazil, except for corn sales.
In the third quarter of 2012 sales in Brazil decreased by 3.4% (an increase of 6.9%
excluding the currency impact). The decrease in the Company's
sales in Brazil is due in part to
a drop in green coffee sales. The Company's sales in
Brazil in the third quarter
included NIS 66 million in sales of
green coffee compared to NIS 93
million in the corresponding quarter last year.
Excluding green coffee sales, the Company's sales in
Brazil grew by 3.4% (14.5%
excluding the currency impact). Additionally, the average
exchange rate of the Brazilian Real versus the Shekel in the third
quarter of 2012 weakened by 9.1% compared to the average exchange
rate in the corresponding quarter last year, and adversely affected
sales growth in Shekel terms.
The former USSR countries
The Coffee Company continues to strengthen its competitive
position in Russian coffee market, particularly in instant coffee.
The Company's sales in the region in the first nine months of
2012 totaled NIS 608 million, an
increase of 23.5% (19.3% excluding the currency impact) in relation
to the corresponding period last year. The Company's sales in
the third quarter amounted to NIS 210
million, an increase of 13.2% (8.0% excluding the currency
impact) compared to the corresponding quarter last year. The
growth in sales is mainly the result of the increase in instant
coffee volumes.
The former Yugoslavia countries
The Company continues to contend with the challenging market
conditions in Serbia. In the first nine months sales in the
region decreased by 12.7% (a decrease of 3.4% excluding the
currency impact) compared to the corresponding period last year and
totaled NIS 150 million. Sales
were affected by the slowdown in the coffee market following the
recession, by the growing competition, by the material erosion of
the Serbian currency in relation to the Shekel and by a shift to
the consumption of more basic coffee in the country. The
Company's sales in the region in the third quarter of 2012 totaled
NIS 56 million, a decrease of 0.1%,
but after neutralizing the currency impact sales grew by 14.6%.
The change in trend and sales growth in the quarter (in local
currency) were mainly the result of volume growth and a price
increase versus the corresponding period last year.
In the third quarter this year an expense of approximately
NIS 16 million was recorded in
respect of the impairment of the residual goodwill attributed to
Strauss Coffee's subsidiary in Serbia. The impairment was
mainly caused by the increase in the discount rate applied in the
valuation, which was based on the DCF model. The increase in
the discount rate (from 11.0% to 13.0%) was mainly the result of
the increase in the risk-free interest rate in Serbia.
The Balkan States
In the first nine months this year sales amounted to
NIS 189 million, an increase of 7.2%
compared to the corresponding period last year (13.7% excluding the
currency impact). In the third quarter sales totaled
NIS 65 million, an increase of 9.2%
compared to the corresponding quarter last year (16.6% excluding
the currency impact), mainly as a result of the growth in sales
volumes.
Poland
In the first nine months of 2012 sales totaled NIS 301 million, an increase of 6.0% compared to
the corresponding period last year (11.1% excluding the currency
impact). In the third quarter sales totaled NIS 108 million, an increase of 7.1% compared to
the prior period (7.3% excluding the currency impact).
The sales growth was mainly expressed in volumes and was the
result of the Company's entry to a significant retail chain in
Poland at the beginning of the
year. Conversely, sales were influenced by the challenging
environmental conditions, growing competition and currency erosion.
Israel
In the first nine months coffee sales in Israel grew by 7.6%. Growth in
Israel sales was expressed in all
coffee categories (instant coffee, Turkish coffee) and in all
channels (retail, AFH).
In the third quarter coffee sales in Israel grew by 3.8%, mainly as a result of a
growth in volumes.
Activity in Israel
Following are the
condensed results of business operations based on non-GAAP
management reports of Strauss Israel by activity segments, for the
quarter and nine months ended September 30,
2012 and 2011 (in NIS millions):
Nine Months Third Quarter
2012 2011 % Chg 2012 2011 % Chg
Health & Wellness segment
Net sales 1,453 1,421 2.3 511 506 1.0
Operating profit 150 158 (5.3) 59 60 (2.3)
% profit 10.3% 11.1% 11.5% 11.9%
EBITDA 192 195 (1.3) 77 73 4.7
% EBITDA 13.2% 13.7% 15.1% 14.5%
Fun & Indulgence segment
Net sales 745 740 0.6 232 244 (5.1)
Operating profit 81 80 1.9 17 20 (12.2)
% profit 10.9% 10.8% 7.6% 8.2%
EBITDA 101 100 1.4 24 27 (9.2)
% EBITDA 13.6% 13.5% 10.5% 11.0%
Total Israel
Net sales 2,198 2,161 1.7 743 750 (1.0)
Operating profit 231 238 (2.9) 76 80 (4.6)
% profit 10.5% 11.0% 10.3% 10.7%
EBITDA 293 295 (0.4) 101 100 1.0
% EBITDA 13.3% 13.6% 13.6% 13.4%
Sales
Strauss Israel's sales in the first nine months totaled
NIS 2,198 million compared to
NIS 2,161 million in the
corresponding period last year, an increase of 1.7%. Growth
was expressed in both activity segments, Health & Wellness
(2.3%) and Fun & Indulgence (0.6%). Strauss Israel's
sales grew by 2.1% in volume.
According to StoreNext figures, in the first nine months of 2012
the Israeli food and beverage market grew by 1.2% (in financial
value). In this period the dairy market decreased by 1.5% (in
financial value), mainly as a result of reductions in product
prices by the Company and other companies in the market.
Strauss's market share of the total food and beverage market
in Israel in the first nine months
of 2012 was 11.9%, similar to the corresponding period last
year.
Israel sales in the third quarter totaled NIS 743 million, compared to NIS 750 million last year, a decrease of 1.0%.
Health & Wellness sales grew in the third quarter by 1.0%.
Growth was influenced by an increase in volumes and an
improvement in the mix, and was partly offset as a result of a
negative price effect compared to the corresponding quarter last
year.
Fun & Indulgence sales dropped in the third quarter by 5.1%.
Some of the decrease in Fun & Indulgence sales is
explained by the timing of the Jewish holidays this year.
Gross profit
In the first nine months gross profit in the business in
Israel increased by 0.1% and
totaled NIS 864 million (39.3% of
sales), compared to NIS 863 million
in the corresponding period last year (39.9%).
The gross profit rate dropped mainly as a result of an increase
in Strauss Israel's cost platform compared to the first nine months
last year: energy and water prices rose; wage costs increased,
among other things due to the Company's decision on the early
implementation of the increase in the minimum wage, applied by the
Company as part of the steps taken to improve the welfare of the
Group's employees; the negative effect of currency exchange rates
(mainly the strengthening of the Dollar); and an increase in costs
due to regulation (e.g. the Packaging Law).
Gross profit in the third quarter amounted to NIS 290 million (39.0% of sales) compared to
NIS 295 million in the corresponding
quarter last year (39.4%), a decrease of 2.0%.
The gross profit and gross profit rate decreased as a result of
the decrease in sales, and also due to the growth in Strauss
Israel's cost platform versus the corresponding period last year
(similar to the first nine months of 2012).
Operating profit
In the first nine months the operating profit in Israel amounted to NIS
231 million (10.5% of sales) compared to NIS 238 million in the corresponding period last
year (11.0% of sales), a decrease of 2.9%. The decrease in
the operating profit is due to the increase in selling expenses
compared to the corresponding period last year. The increase
in selling expenses was primarily the result of an increase in
distribution costs following the growth in sales, and also of the
increase in fuel costs and in wage costs.
The operating profit in Israel
decreased in the third quarter by 4.6% and amounted to NIS 76 million (10.3% of sales), compared to
NIS 80 million last year (10.7% of
sales). The decrease in the operating profit was mainly the
result of the decrease in gross profit.
The International Dips and Spreads
Activity (Executed by Sabra and Obela)
Sabra
Sabra's sales continue to grow along with its market shares, and
it maintained its leading position in the refrigerated flavored
spreads category and in the hummus category.
According to IRI, Sabra's market share in the twelve weeks ended
on September 9, 2012 was 25.7% of the
total refrigerated flavored spreads category (Number 1 in the
market), 56.5% of the hummus category (Number 1 in the market), and
9.1% of the fresh salsa category (Number 3 in the market).
Additionally, according to IRI Sabra led approximately 63% of
the growth of the refrigerated flavored spreads category.
Following are selected financial data on Sabra's activity
(reflecting 100%):
Sales
In the first nine months, Sabra's sales totaled NIS 751 million compared to NIS 576 million last year, an increase of 30.5%.
Excluding the currency impact, growth amounted to 18.9%.
Most of the sales growth, excluding the currency impact, is
explained by a growth in volumes.
In the third quarter sales totaled NIS
273 million compared to NIS 203
million last year, an increase of 34.2%. Excluding the
currency impact, growth amounted to 19.6%.
Operating profit
In the first nine months the non-GAAP operating profit totaled
NIS 98 million (13.1% of sales)
compared to NIS 48 million last year
(8.4%), an increase of 102.3%.
In the third quarter the non-GAAP operating profit totaled
NIS 47 million (17.1% of sales)
compared to NIS 19 million last year
(9.3%), an increase of 145.7%.
The growth in operating profit in the nine months and in the
quarter is mainly the result of the strong sales growth, which
allowed for continued growth in the production capacity utilization
rate in Sabra's plants (mainly the plant in Virginia), and of the decrease in G&A
expenses as a percentage of sales as well as various operational
streamlining accomplishments.
Obela
Obela's activity was launched in Mexico in June
2012 with the opening of its new production facility and is
expected to expand into additional countries. Like Sabra's
activity, Obela's activity is conducted through a joint venture of
the Group and PepsiCo (each party holds 50%). Further to an
acquisition in the refrigerated spreads category in Australia from PepsiCo in the second quarter,
in the third quarter of 2012 Obela acquired the Australian company
Copperpot, which specializes in refrigerated spreads.
Following are selected financial data on Obela's activity
(reflecting 100%):
Obela's sales began in the second quarter of 2012 and amounted
to NIS 15 million by the end of the
third quarter. Sales in the third quarter amounted to
NIS 8 million. The non-GAAP
operating loss totaled NIS 28 million
and NIS 10 million in the first nine
months of 2012 and the third quarter, respectively.
Other Operations
In addition to the areas of activity described above, the Group
has other businesses, which are included in the financial
statements as the "Other Operations" segment. Following is a
brief description of developments in these activities in the first
nine months and third quarter of 2012:
Strauss Water
In the first nine months Strauss Water's sales amounted to
NIS 314 million compared to
NIS 305 million last year, an
increase of 2.8%.
In the third quarter sales amounted to NIS 112 million compared to NIS 106 million last year, an increase of
5.0%.
Further to the contents of Note 6.8 to the Annual Financial
Statements regarding a set of agreements signed by the subsidiary
Strauss Water (hereinafter: the Subsidiary) with companies of the
Virgin Group to establish a joint venture in England (hereinafter: "Virgin Strauss Water"),
in August 2012 the Subsidiary closed
the transaction with investment funds of the Virgin Group (the
"Funds"). The amounts determined in the investment agreement
signed in November 2011 were altered,
and during the month of August 2012
the Funds invested the sum of $5
million in Virgin Strauss Water according to a pre-money
value of $8 million. The
Subsidiary simultaneously invested $3.5
million in Virgin Strauss Water and the Company invested a
further $1.5 million on November 1, 2012. Following these
investments, the shareholdings in Virgin Strauss Water are 72% held
by the Subsidiary and 28% by the Funds. To the extent that
Virgin Strauss Water accomplishes certain business objectives by
the end of 2012 the Funds and the Subsidiary will each invest an
additional $5 million in Virgin
Strauss Water. Assuming that both parties indeed make the
additional investment, the shareholdings in Virgin Strauss Water
will be 64% by the Subsidiary and 36% by the Funds. Should
the Funds decide to make the additional investment even in the case
where Virgin Strauss Water does not accomplish the abovementioned
business objectives, Strauss Water will be obliged to make the
additional investment as well.
The board of directors of Virgin Strauss Water comprises three
directors appointed by the Subsidiary, and three directors on
behalf of the Virgin Group. Virgin Strauss Water will
continue to be managed under joint control as aforesaid; however,
should the Funds' shareholding remain below 30% as a result of the
second investment not being made, or should their shareholding fall
below 30% in the future, one of the directors appointed by the
Funds will resign.
Max Brenner
Max Brenner applies an operating model that combines branches
operated under franchise with branches owned by the Company.
During the third quarter the Company sold the five branches
in Israel which had been under its
ownership. These branches are now operated under franchise.
The entire Max Brenner operation in Israel and abroad, including growing the
chain, managing the brand, developing the unique products, the Max
Brenner factory and the sale of products in shopping malls, will
continue to be managed by the Strauss Group.
As a result of the sale of the five branches in Israel (which were owned by a subsidiary of
the Group) the Group recorded a capital loss of NIS 13 million.
In the first nine months of 2012 Max Brenner's sales totaled
NIS 103 million compared to
NIS 99 million last year, an increase
of 4.6%. Excluding the impact of the strengthening of the
Dollar in relation to the Shekel, sales in the first nine months
compared to the corresponding period last year decreased by 0.6%.
Organic growth excluding the currency impact and sales by the
branches in Israel (which are
included for a period of 8 months this year, compared to 9 months
in 2011) amounted to 6.6%.
In the third quarter of the year Max Brenner's sales totaled
NIS 35 million compared to
NIS 36 million last year, a decrease
of 3.8%. Excluding the impact of the strengthening of the
Dollar in relation to the Shekel, sales in the quarter decreased by
9.7%. Organic growth excluding the currency impact and sales
by the branches in Israel (which
are included for a period of 2 months compared to 3 months last
year) amounted to 1.7%.
At the date of publication of the report, forty-four Max Brenner
Chocolate Bars are in operation in Israel and around the world: forty under
franchise and four owned by the Company (in the USA: New
York, Philadelphia,
Las Vegas and Boston). The Max Brenner branches are
spread throughout Australia (30),
Israel (6), the USA (4),
Singapore (3) and the Philippines (1). In the first nine
months of 2012 four new branches were opened under franchise, all
of them in Australia. The
branches were opened in May, July, September and November 2012.
Analysis of the Business Results of the Group*
Following are the
condensed financial accounting statements of income (GAAP) for the
quarter and nine months ended September 30,
2012 and 2011 (in NIS millions):
First Nine Months Third Quarter
2012 2011 % Chg 2012 2011 % Chg
Sales 6,079 5,629 8.0 2,078 2,015 3.1
Cost of sales excluding impact of
commodities hedging transactions 3,946 3,612 9.2 1,341 1,327 1.1
Valuation of balance of commodities
hedging transactions as at end of
period (22) 26 (6) 12
Cost of sales 3,924 3,638 7.9 1,335 1,339 (0.3)
Gross profit 2,155 1,991 8.2 743 676 9.9
% of sales 35.5% 35.4% 35.8% 33.6%
Selling and marketing expenses 1,346 1,295 4.0 449 449 0.1
General and administrative expenses 332 327 1.6 117 106 10.3
Operating profit before other
expenses 477 369 29.0 177 121 46.2
% of sales 7.8% 6.6% 8.5% 6.0%
Other income (expenses), net 51 (7) 59 (1)
Operating profit 528 362 45.8 236 120 97.0
Financing expenses, net (102) (87) 17.0 (34) (19) 75.7
Income before taxes on income 426 275 54.9 202 101 101.1
Taxes on income (157) (88) 78.4 (73) (31) 137.8
Effective tax rate 36.8% 31.9% 35.8% 30.3%
Income for the period 269 187 43.8 129 70 85.2
Attributable to:
The Company's shareholders 203 128 59.4 105 47 124.8
Non-controlling interests 66 59 10.3 24 23 4.6
* Financial data
were rounded off to NIS millions. The percentages change were
calculated on the basis of the exact figures in NIS thousands
Following are the adjustments to the Company's non-GAAP
management reports (NIS millions):
First Nine Months Third Quarter
2012 2011 % Chg 2012 2011 % Chg
Operating profit - GAAP - after
other income (expenses) 528 362 45.8 236 120 97.0
Share-based payment 13 23 4 6
Valuation of balance of commodities
hedging transactions as at end of
period (22) 26 (6) 12
Other expenses (income) (51) 7 (59) 1
Operating profit - non-GAAP 468 418 11.9 175 139 25.1
Financing expenses, net (102) (87) (34) (19)
Taxes on income (157) (88) (73) (31)
Taxes in respect of adjustments to
the above non-GAAP operating profit 28 (6) 27 (3)
Income for the period - non-GAAP
management reports 237 237 - 95 86 11.2
Following are the
condensed results of business operations (based on non-GAAP
management reports) for the quarter and nine months ended
September 30, 2012 and 2011 (in NIS
millions):
First Nine Months Third Quarter
2012 2011 % Chg 2012 2011 % Chg
Sales 6,079 5,629 8.0 2,078 2,015 3.1
Cost of sales 3,946 3,612 9.2 1,341 1,327 1.1
Gross profit - non-GAAP 2,133 2,017 5.8 737 688 7.1
% of sales 35.1% 35.8% 35.5% 34.2%
Selling and marketing expenses 1,346 1,295 4.0 449 449 0.1
General and administrative expenses 319 304 4.8 113 100 12.2
Operating profit - non-GAAP
management reports 468 418 11.9 175 139 26.1
% of sales 7.7% 7.4% 8.4% 6.9%
Financing expenses, net (102) (87) 17.0 (34) (19) 75.7
Income before taxes on income 366 331 10.6 141 120 18.0
Taxes on income (129) (94) 37.1 (46) (34) 35.9
Income for the period - non-GAAP
management reports 237 237 - 95 86 11.2
Attributable to:
The Company's shareholders 170 170 - 69 61 14.5
Non-controlling interests 67 67 0.5 26 25 3.7
Following are the condensed results of business operations
(based on non-GAAP management reports) of the major business
sectors for the quarter and nine months ended September 30, 2012 and 2011 (in NIS
millions):
First Nine Months Third Quarter
2012 2011 % Chg 2012 2011 % Chg
Israel
Net sales 2,198 2,161 1.7 743 750 (1.0)
Operating profit 231 238 (2.9) 76 80 (4.6)
EBITDA[2] 293 295 (0.4) 101 100 1.0
Coffee
Net sales 3,081 2,777 11.0 1,049 1,022 2.7
Operating profit 221 178 24.3 86 59 46.3
EBITDA 279 233 19.6 106 77 37.3
International Dips and Spreads
Net sales 383 288 33.1 140 102 37.8
Operating profit 35 14 145.6 18 1 939.9
EBITDA 50 26 87.6 28 6 370.0
Other
Net sales 417 403 3.3 146 141 3.1
Operating profit (loss) (19) (12) 59.7 (5) (1) 243.4
EBITDA 15 29 (49.6) (3) 13 (126.1)
Total
Net sales 6,079 5,629 8.0 2,078 2,015 3.1
Operating profit 468 418 11.9 175 139 26.1
EBITDA 637 583 9.2 232 196 18.7
2. EBITDA = operating profit plus depreciation and amortization of intangible
assets and deferred expenses.
Sales
In the first nine months of 2012 the Group's sales amounted to
NIS 6,079 million compared to
NIS 5,629 million last year, an
increase of 8.0%. Organic growth in the first nine months
excluding the impact of changes in exchange rates amounted to 8.7%.
Growth was evident mainly in the International Dips and
Spreads sector (the activity of Sabra and Obela), which grew by
33.1%, in the activity of the Coffee Company, which grew by 11.0%
in the reported period, and in the activity of Strauss Israel,
which grew by 1.7%.
The growth in the Group's sales in the first nine months of 2012
is the result of the growth in the sales of Strauss Coffee (an
additional NIS 304 million), growth
in the sales of the International Dips and Spreads sector (an
additional NIS 95 million), growth in
the sales of Strauss Israel (an additional NIS 37 million), and growth in sales by the Other
segment (an additional NIS 14
million; excluding sales by the five Max Brenner branches in
Israel which moved to a franchise
model, the increase amounts to NIS 20
million).
In the third quarter the Group's sales amounted to NIS 2,078 million compared to NIS 2,015 million last year, an increase of 3.1%.
Organic growth in the third quarter excluding the impact of
changes in exchange rates amounted to 4.4%. Growth in the
quarter was evident mainly in the International Dips and Spreads
sector (the activity of Sabra and Obela), which grew by 37.8%.
The growth in the Group's sales in the third quarter of 2012 is
the result of the growth in sales by the International Dips and
Spreads sector (an additional NIS 38
million), growth in sales by Strauss Coffee (an additional
NIS 27 million), and growth in sales
by the Other segment (an additional NIS 5
million; excluding sales by the five Max Brenner branches in
Israel which moved to the
franchise model, the increase amounts to NIS
9 million). However, the growth was offset by the
decrease in sales by Strauss Israel (a reduction of NIS 7 million).
Further explanations regarding the Group's sales in the first
nine months and third quarter are included in the chapter "Analysis
of the Business Results of the Group's Major Business Units".
Gross Profit
Gross profit (GAAP) in the first nine months of the year grew by
8.2% and totaled NIS 2,155 million
compared to NIS 1,991 million in the
corresponding period last year, and its rate increased from 35.4%
last year to 35.5% this year.
Gross profit (non-GAAP) in the first nine months grew by 5.8%
and totaled NIS 2,133 million
compared to NIS 2,017 million in the
corresponding period last year, and its rate decreased from 35.8%
last year to 35.1% this year.
Gross profit (GAAP) in the third quarter grew by 9.9% and
totaled NIS 743 million compared to
NIS 676 million in the corresponding
quarter last year, and its rate increased from 33.6% last year to
35.8% this year.
Gross profit (non-GAAP) in the quarter amounted to NIS 737 million compared to NIS 688 million last year, an increase of 7.1%.
The gross profit rate increased from 34.2% to 35.5%.
Further explanations regarding the Group's gross profit in the
first nine months and third quarter are included in the chapter
"Analysis of the Business Results of the Group's Major Business
Units".
Operating Profit before Other Income
(Expenses)
Operating profit (before other income and expenses (GAAP))
totaled NIS 477 million (7.8% of
sales) in the first nine months of 2012 compared to NIS 369 million (6.6%) last year, an increase of
29.0%.
Operating profit (non-GAAP) totaled NIS
468 million (7.7% of sales) in the first nine months
compared to NIS 418 million (7.4%)
last year, an increase of 11.9%. The increase in the non-GAAP
operating profit is mainly due to an improvement in the operating
profit of Strauss Coffee (an increase of NIS
43 million), growth in the non-GAAP operating profit of
Sabra (an increase of NIS 25
million), and a slight growth in the non-GAAP operating
profit of the Fun & Indulgence segment (an increase of
NIS 1 million). By contrast,
this increase was offset by a decrease in the results of the Health
& Wellness segment (down by NIS 8
million), an increase in the operating loss of the Other
segment (a negative contribution of NIS 7
million), mainly due to the increase in operating expenses
related to building the activity of Strauss Water in China and England, and expenses related to building the
international dips and spreads activity (Obela) outside of
North America (a negative
contribution of NIS 7 million).
Operating profit (before other income and expenses (GAAP)) in
the third quarter totaled NIS 177
million (8.5% of sales) compared to NIS 121 million (6.0%) last year, an increase of
46.2%.
Operating profit (non-GAAP) in the third quarter totaled
NIS 175 million (8.4% of sales)
compared to NIS 139 million (6.9%)
last year, an increase of 26.1%. The non-GAAP operating
profit in the third quarter was positively affected by the growth
in the non-GAAP operating profit of Strauss Coffee (an increase of
NIS 27 million, of which NIS 24 million were achieved in the International
Coffee segment), by the growth in Sabra's operating profit (an
increase of NIS 14 million), and by a
decrease in the operating loss of Obela (a positive contribution of
NIS 3 million). By contrast,
the increase was offset by an increase in the operating loss of the
Other segment (a negative contribution of NIS 4 million), mainly due to the increase in
operating expenses related to building the activity of Strauss
Water in China and England, a decrease in the Fun &
Indulgence segment (a decrease of NIS 3
million), and a decrease in the results of the Health &
Wellness segment (a decrease of NIS 1
million).
Other Income (Expenses), Net
Other income, net totaled NIS 51
million in the first nine months compared to other expenses,
net of NIS 7 million in the
corresponding period last year.
In the third quarter other income, net totaled NIS 59 million compared to other expenses, net of
NIS 1 million in the corresponding
quarter last year.
The principal sums constituting the other income, net in the
first nine months and the third quarter of 2012 are a capital gain
from the sale of a real estate property in Givatayim in an amount
of NIS 118 million (NIS 91 million net of tax); and by contrast,
amortization in respect of the impairment of investment property in
an amount of NIS 23 million, an
expense of NIS 16 million in respect
of the impairment of residual goodwill attributed to a subsidiary
of Strauss Coffee in Serbia, and a capital loss of NIS 13 million from the realization of a holding
in the subsidiary Chocolate Bar (in the context of the sale of the
five Max Brenner branches in Israel). See also Notes 4.7, 4.8 and 4.9
to the consolidated interim financial statements as at September 30, 2012.
Operating Profit after Other
Expenses
The Company's consolidated operating profit (GAAP) in the first
nine months of 2012 totaled NIS 528
million compared to NIS 362
million last year, an increase of 45.8%.
In the third quarter the Company's operating profit totaled
NIS 236 million compared to
NIS 120 million last year, an
increase of 97.0%.
Financing Expenses, Net
Financing expenses in the first nine months of 2012 totaled
NIS 102 million compared to expenses
of NIS 87 million in the
corresponding period last year.
The reasons for the increase in financing expenses compared to
the corresponding period last year were an increase in interest
expenses due to the growth of the gross debt and average life of
the debt, and expenses from the revaluation of foreign currency
derivatives as a result of the strengthening of most of the Group's
operating currencies versus the Dollar, as opposed to a significant
weakening in the third quarter last year. By contrast, the
increase was offset by financing expenses as a result of income
from the revaluation of Index transactions this year and financing
expenses relating to interest transactions in the corresponding
period last year.
The Consumer Price Index (on the basis of the known Index) to
which the Debentures Series B and other loans are linked rose by
2.1% in the first nine months of the year, compared to an increase
of 2.7% in the corresponding period last year; however, the
increase in the linked debt volume had an offsetting effect.
In the third quarter of the year financing expenses totaled
NIS 34 million compared to
NIS 19 million in the corresponding
period last year.
The main factors that contributed to the increase in financing
expenses were expenses entered in the quarter in respect of the
revaluation of foreign currency positions due to the strengthening
of the Group's operating currencies versus the Dollar, as opposed
to high income from the revaluation of foreign currency
transactions due to the significant weakening of the currencies
versus the Dollar in the corresponding quarter last year, an 0.9%
increase in the Consumer Price Index (on the basis of the known
Index) to which the Debentures Series B and other loans are linked
compared to an increase of 0.6% in the corresponding quarter last
year, and an increase in interest expenses in the quarter as a
result of the growth of the average debt life.
By contrast, the increase was offset by income entered in
respect of interest transactions in the third quarter this year and
expenses entered in respect of interest transactions in the third
quarter last year.
Net credit as at September 30,
2012 totaled NIS 1,613 million
compared to NIS 1,690 million on
September 30, 2011 and NIS 1,463 million on December 31, 2011.
Income before Taxes on Income
In the first nine months the Group's consolidated income before
taxes on income (GAAP) amounted to NIS 426
million (7.0% of sales) compared to NIS 275 million (4.9% of sales) in the
corresponding period last year, an increase of 54.9%.
In the third quarter the Group's consolidated income before
taxes on income amounted to NIS 202
million (9.7% of sales) compared to NIS 101 million (5.0% of sales) in the
corresponding quarter last year, an increase of 101.1%.
Taxes on Income
In the first nine months taxes on income amounted to
NIS 157 million, reflecting an
effective tax rate of 36.8%, whereas last year taxes on income
amounted to NIS 88 million and the
effective tax rate was 31.9%.
In the third quarter taxes on income amounted to NIS 73 million, reflecting an effective tax rate
of 35.8%, compared to NIS 31 million
in taxes last year and an effective tax rate of 30.3%.
The increase in the effective tax rate in the nine months and
the quarter is mainly due to a different mix of the pre-tax profit
between the different countries, which is taxed at different rates
and affects the weighted tax expenses, and to losses in various
businesses, which cannot be set off against profits from other
businesses.
Income for the Period
Income for the period (GAAP) in the first nine months totaled
NIS 269 million compared to
NIS 187 million last year, an
increase of 43.8%.
Income for the period (non-GAAP) in the first nine months
amounted to approximately NIS 237
million, similar to last year.
In the third quarter income for the period (GAAP) totaled
NIS 129 million compared to
NIS 70 million last year, an increase
of 85.2%.
Income for the period (non-GAAP) in the third quarter totaled
NIS 95 million compared to
NIS 86 million last year, an increase
of 11.2%.
Income for the Period Attributed to
the Company's Shareholders
Income attributed to the Company's shareholders (GAAP) in the
first nine months totaled NIS 203
million compared to NIS 128
million last year, an increase of 59.4%.
Income attributed to the Company's shareholders (non-GAAP) in
the first nine months totaled approximately NIS 170 million, similar to the corresponding
period last year.
In the third quarter income attributed to the Company's
shareholders (GAAP) totaled NIS 105
million compared to NIS 47
million in the corresponding period last year, an increase
of 124.8%.
Income attributed to the Company's shareholders (non-GAAP) in
the third quarter totaled NIS 69
million (3.3% of sales) compared to NIS 61 million last year (3.0%), an increase of
14.5%.
Income for the Period Attributed to
Non-Controlling Interests
In the first nine months the share of non-controlling interests
in the income of subsidiaries (GAAP) totaled NIS 66 million compared to NIS 59 million in
the corresponding period last year, an increase of 10.3%.
In the third quarter the share of non-controlling interests in
the income of subsidiaries (GAAP) totaled NIS 24 million compared to NIS 23 million in
the corresponding quarter last year, an increase of 4.6%.
For further information:
Talia Sessler
Investor Relations Director
Strauss Group Ltd.
+1-972-3-6752545; +1-972-54-5772195
talia.sessler@strauss-group.com
http://www.strauss-group.com
Mirit Cohen
Spokesperson
Strauss Group Ltd.
+1-972-3-6752150
mirit.cohen@strauss-group.com
http://www.strauss-group.com
SOURCE Strauss Group Ltd