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Strauss Group reports third quarter revenues of $739.4m, coffee sales up 12% to $306.4m

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PETAH TIKVA, Israel — International food and beverage company Strauss Group published its financial statements for the third quarter of 2021. The financial statements demonstrate that the Group has continued the growth momentum as in the past quarters, with revenues for the quarter amounting to NIS 2.3 billion ($739.4 million), an increase of 6.9% compared to the corresponding period last year. Sales growth is evident in most of the company’s operations: Strauss’s activity in Israel, Strauss Water’s business, and the worldwide operations of Strauss Coffee. Sales of the dips and spreads company Sabra in the US in the quarter were stable.

Strauss Group President & CEO, Giora Bardea: “Strauss is making strides in its growth journey while coping with the ongoing effects of the COVID-19 pandemic on world economy. Among other things, these effects are expressed in global increases in commodity prices, worldwide shipping and handling costs and industrial energy prices. Group management is working to preserve resilience and stability, while making investments to ensure that the company is well-aligned and will maintain its growth momentum in the future.

This is reflected in the growth delivered by the Group in its core businesses, along with initial returns on its strategic investment in innovation and in the FoodTech industry, which had a positive effect on the Group’s profit in the quarter. ESG remains a core focus in our business and the Group is constantly improving its ESG scores. Together, these components will secure the Group’s continuing resilience and growth in the future”.

Despite the rise in revenues, the company reported stability in gross profit, which amounted to NIS 828 million, and a slight drop in operating profit (before inclusion of the profits of the FoodTech incubator), which amounted to NIS 248 million. Erosion of the gross and operating margins is largely the result of the increase in raw material prices, notably green coffee and milk, as well as rising global manufacturing and shipping costs as part of the fallout as the world emerges from the pandemic.

Strauss reported a 20% increase in operating profit, which rose to NIS 300 million, and a 28.1% increase in net profit, which was NIS 204 million. This increase is due to a gain of NIS 52 million recorded by the company in its FoodTech business, which is largely the result of the impressive funding round closed by cultured meat developer, Aleph Farms. Furthermore, the incubator was recently joined by a new startup active in the manufacture of cultured fish products.

Strauss Israel continued to grow its business and market share and ended the quarter with a 2.4% sales growth, bringing sales to NIS 976 million. In the third quarter, the food industry in Israel recorded a drop of 3.6%, meaning that Strauss increased its market share by 0.4 percentage points to 12.3% according to StoreNext. During the quarter, the company launched the ready-to-heat frozen meals category (under the “Delicious” brand), the oat-based “Not Milk” drink, delivering innovation in the plant-based milk category, and the XXTRA Flamin’ Hot Doritos and Cheetos snack food series. The company improved its operating margin due to sales growth and operating cost savings. Sales growth largely originated in the dairy and dairy alternative product category as well as the salty snack category. The salads category remained stable, whereas confectionery sales dropped compared to the corresponding period last year, among other things due to the timing of the Jewish high holidays, which this year fell entirely in September.

In the third quarter, Strauss Coffee’s business was marked by rising world green coffee prices, which increased at higher rates compared to the corresponding period, among other things due to freak frost that damaged coffee plantations in various Brazilian states.

Following the increase in the cost of green coffee, retail coffee prices were revised in Brazil (Três Corações (JV)).

The company in Brazil also delivered growth in quantities sold, and in total, reported a 37.1% sales growth in local currency. However, the joint venture’s gross and operating margins eroded.

In Israel, the coffee business experienced a slight drop of 1.7% in sales due to the timing of the holidays in September. During the quarter, the coffee company launched its new aluminum capsules as well as the new Turkish Coffee “Tastes of the Market” limited edition offering – Galilee and Jerusalem – containing exotic blends of spices and herbs.

The coffee business in Eastern Europe was marked by stability, with a slight drop in sales in Russia and Ukraine. In the third quarter and in the months of October and November, prices were raised in Ukraine, Romania, Serbia and Poland.

Strauss Water continued to grow with sales rising by 4.9% to approximately NIS 192 million. The company, which in the past quarter launched its new tami4edge water bar, has reported growth in both the number of customers and in the number of new appliances sold. The water business in China (Haier Strauss Water (HSW)), where the fight against COVID-19 continues, grew 8.9% in the third quarter.

Sabra, which has experienced challenges posed by the effects of the pandemic, reported a slight recovery in sales and moderate growth of 1.3% in the third quarter in local currency, with sales increasing to USD 97 million along with market share growth compared to the corresponding period last year. However, the company reported that its operating profit declined by 26% as a result of rising raw material prices, manufacturing and shipping costs.

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