Monday 20 May 2024
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Strauss Group 4Q revenue at $2.7b, coffee sales up 13.6% to $293.6b

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PETAH TIKVA, Israel — Strauss Group has wrapped up 2021 with solid results. The company’s financial statements reflect growth in most categories and a stable operating margin, despite the sharp increase in raw material prices and gross profit erosion, due to the revision of coffee sales prices in Brazil and CEE, ongoing efficiency enhancement and mitigation processes, and profits arising from capital gains in a number of startups in The Kitchen Hub FoodTech incubator.

The company’s revenue in 2021 amounted to NIS 8.75 billion ($2.712 billion), reflecting 7.4% organic growth excluding foreign currency effects.

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The improvement is largely due to growth in sales volumes and an increase in the coffee company’s sales prices in Brazil and CEE, business growth in the water company and sales growth and market share gains in Israel, mostly in the dairy and dairy alternatives category.

Gross profit was NIS 3.2 billion ($992 million), whereas the gross margin eroded to 36.9% compared to 38.7% last year following rising input and raw material prices – notably green coffee, milk, and shipping and packaging costs. Growth in sales volumes offset the gross profit erosion.

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All in all, Strauss Group generated NIS 980 million in operating profit in 2021 and has maintained an operating margin of 11.2%, similar to last year, thanks to gains on its investments in its FoodTech business. Income attributable to shareholders amounted to NIS 639 million, with net profit growth largely due to the increase in operating profit and a significant drop in financing expenses.

Strauss Group President & CEO, Giora Bardea: “We have successfully ended another challenging year and are already well into a new year, with challenges that are no less significant. In 2021, in many locations we experienced a return to normal due to the accelerated pace of vaccinations worldwide, but recent events, including the waning pandemic and the war in Ukraine, have been accompanied by global increases in the prices of commodities, energy and shipping. These increases are impacting the world economy in general, and the food industry in particular. This year once again, our category diversity, geographic dispersal and, no less important, the first fruits of the incubator’s FoodTech activities, have enabled us to deliver good results.

“Along with tightly managing the challenges posed by COVID-19, looking ahead, we continued to allocate resources to ensure that the company is able to realize future opportunities. In the past two years, we crafted a new purpose for the Group, and we have now completed the definition of our strategy for the next few years. This morning, in line with our practice, we also published the Group’s Annual Sustainability Report, which contains information the company’s environmental, social and economic impacts in the past year, as well as a description of the sustainability strategy and objectives we have defined looking ahead to the next decade, with the goal of creating a positive long-term impact on people and the planet.

“Regarding the situation in Ukraine, and the devastating war being waged there, our business in the country is paralyzed. However, we are working at reinstating business partially where possible. We are closely supporting our employees in Ukraine and providing them with financial and humanitarian aid. We are also working with Israeli and international humanitarian relief organizations and helping Ukrainian refugees who have fled the terror of war with food donations and others. Strauss condemns Russia’s brutal attack on its neighbor, and we hope that there will be a stop to the war as soon as possible.”

Strauss Israel has wrapped up 2021 with 4.2% sales growth and, according to StoreNext, holds a 12.4% share of the Israeli food market (the barcoded market). The increase in revenue is the result of sales growth in the dairy and dairy alternative category, as well as in the salty snack category, the food category and in Yad Mordechai products (honey, olive oil, jams and sauces).

The coffee business in Israel grew 2.3%, largely due to the recovery of the away-from-home (AFH) sales channels, including the Elite Café chain, which has resumed operations.

In Brazil, Strauss Coffee’s sales grew by 23.2% in local currency in 2021, mainly as a result of the acquisition of Mitsui Alimentos and higher sales prices. Apart from Poland, sales growth was delivered in all CEE countries due to price increases as well as growth in volume.

Total Strauss Coffee Sales for the fourth quarter reached NIS 947 million ($293.6 million), up 13.6%. Organic sales growth excluding FX was up 21.1% on year. Ebit amounted to NIS 80 million ($24.8 million), up 11.3% on year.

Sabra reported stability in sales in local currency with USD 184 million in revenue (representing 50%) and a 42% drop in operating profit to USD 11 million (50%), the result of an increase in manufacturing costs due to the partial shutdown of the plant in December as well as increased labor costs. Obela delivered revenue of NIS 85 million in 2021 (representing 50%), an increase of 4.9%, and recorded an operating loss of NIS 6 million (50%), similar to the corresponding period last year.

Strauss Water grew by 10.2% with sales of NIS 736 million thanks to growth in the customer base and in sales of new appliances. The water business in China (Haier Strauss Water (HSW)), delivered RMB 1.3 billion in revenue, reflecting 15.3% growth, largely due to the opening of stores and the recovery of the local economy following the pandemic.

FoodTech activities through The Kitchen Hub are, and in 2021 continued to be, a strategic activity for the Group. During the year, cultured meat producer Aleph Farms, established by Strauss, raised USD 105 million, and other startups in the incubator, including Bio-Fence and others, completed funding rounds. As a result of these rounds, last year Strauss recorded a profit of NIS 71 million.

Additionally, on the reporting date, the fair value of Strauss Group ‘s holdings in the portfolio companies was NIS 375 million, compared to NIS 111 million in the corresponding period. Furthermore, on February 22, 2022, The Kitchen was informed that it had won a tender by the Israeli Innovation Authority for the establishment and operation of a second FoodTech incubator. The five-year concession period will begin by no later than September 1, 2022, and there is an option for a further three-year extension. The company has committed to investing up to NIS 225 million in the startups within the incubator.

(NIS 1 = US$0.31)

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