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Strauss Group Announces a Strong Third Quarter With 5.5% Sales Growth and Net Profits Up by 35%, Following Outstanding Results Achieved by Strauss Coffee and Strauss Water and Healthy Growth Exceeding the Food and Beverage Market in Israel(1)

PETACH TIKVA, Israel, Nov. 16, 2017 /PRNewswire/ -- Gadi Lesin, President and CEO of Strauss Group (TASE: STRS) (November 16, 2017): "The Group continues to post excellent financial results in all key metrics. The third quarter perpetuates the trend of prior quarters and demonstrates a strong performance by Strauss Israel and noteworthy results achieved by the Group's global growth drivers in the coffee and water companies, along with continued focus on efforts to improve Sabra's results. The results of our operations in key countries, including Brazil, Russia, China, Australia and Israel – combined with the initial deliverables of implementing our strategy of focusing on our core businesses – have generated robustness and stability the Group can continue to build on in the future."

Q3 2017 highlights(1)

  • Strong organic sales growth, excluding foreign exchange effects, was c8.3%. Shekel sales were NIS c2.2 billion compared to NIS 2.1 billion in the corresponding prior-year period; sales were impacted by negative foreign currency translation amounting to NIS c34 million, mainly as a result of the weakening of the BRL against the NIS compared to the corresponding period.
  • Gross profit was NIS c809 million (c36.6% of sales), up c0.7% compared to the corresponding prior-year period. Gross margins were down c1.7%.
  • Operating profit (EBIT) was NIS c221 million (c10% of sales), up c3.4% compared to last year. EBIT margins were down c0.2%.
  • EPS for shareholders of the Company was NIS c1.09, up c26.4% compared to the corresponding prior-year period.
  • Positive cash flows from operating activities totaled NIS c181 million, compared to NIS c132 million in 2016.

(1) 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, valuation of the balance of commodity hedging transactions as at end-of-period, including adjustments required for deferral of profit or loss from commodity derivatives until the inventory is sold to external parties, and other income and expenses, net, unless stated otherwise.

First nine months 2017 highlights(1)

  • Organic sales growth, excluding foreign exchange effects, was c7.3%. Shekel sales were NIS c6.3 billion compared to NIS 5.9 billion in the corresponding prior-year period; sales were impacted by positive foreign currency translation of NIS c4 million, mainly as a result of continued gains by the BRL against the NIS compared to the corresponding period.
  • Gross profit was NIS c2,342 million (c37.0% of sales), up c3.5% compared to the corresponding prior-year period. Gross margins were down c1.3%.
  • Operating profit (EBIT) was NIS c631 million (c10% of sales), up c3.6% compared to last year. EBIT margins were down c0.3%.
  • EPS for shareholders of the Company was NIS c3.04, up c17.6% compared to the corresponding prior-year period.
  • Positive cash flows from operating activities totaled NIS c294 million, compared to NIS c402 million in 2016.

(1) 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, valuation of the balance of commodity hedging transactions as at end-of-period, including adjustments required for deferral of profit or loss from commodity derivatives until the inventory is sold to external parties, and other income and expenses, net, unless stated otherwise.


Non GAAP Figures (1)





Third Quarter


2017

2016

Change

Total Group Sales (NIS mm)

2,210

2,096

5.5%

Organic Sales Growth excluding FX



8.3%

Gross Profit (NIS mm)

809

804

0.7%

Gross Margins (%)

36.6%

38.3%

-170 bps

EBITDA (NIS mm)

283

273

3.6%

EBITDA Margins (%)

12.8%

13.1%

-30 bps

EBIT (NIS mm)

221

213

3.4%

EBIT Margins (%)

10.0%

10.2%

-20 bps

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

125

92

34.9%

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

5.6%

4.4%

+120 bps

EPS (NIS)

1.09

0.86

26.4%

Operating Cash Flow (NIS mm)

181

132

36.1%

Capex (NIS mm) (2)

-57

-50

14.0%

Net debt (NIS mm)

2,285

1,640

39.4%

Net debt / annual EBITDA

2.3x

1.6x

0.7x





(1) 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, valuation of the balance of commodity hedging transactions as at end-of-period, including adjustments required for deferral of profit or loss from commodity derivatives until the inventory is sold to external parties, and other income and expenses, net, unless stated otherwise.

(2) Investments include the acquisition of fixed assets and investment in intangibles.

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)











Third 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. 2016

Sales and EBIT by Operating
Segments and Activities









Strauss Israel:









Health & Wellness

552

5.0%

5.0%

62

-1

-1.4%

11.3%

-70 bps

Fun & Indulgence (2)

256

-1.6%

-1.6%

26

2

6.9%

10.1%

+80 bps

Total Strauss Israel

808

2.8%

2.8%

88

1

0.9%

10.9%

-20 bps










Strauss Coffee:









Israel Coffee

176

-2.3%

-2.3%

27

0

2.0%

15.3%

+60 bps

International Coffee (2)

896

15.6%

18.9%

95

10

10.5%

10.5%

-40 bps

Total Strauss Coffee

1,072

12.2%

14.8%

122

10

8.5%

11.3%

-30 bps










International Dips & Spreads:









Sabra (50%) (2)

168

-9.2%

-3.1%

3

-11

-75.8%

2.1%

-550 bps

Obela (50%) (2)

18

26.3%

29.2%

-3

-0

NM

NM

NM

Total International Dips & Spreads

186

-6.7%

-0.8%

0

-11

-98.8%

0.1%

-550 bps










Other (2)

144

-7.4%

8.5%

11

8

225.2%

8.1%

+580 bps

Total Group

2,210

5.5%

8.3%

221

8

3.4%

10.0%

-20 bps










(1) 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, valuation of the balance of commodity hedging transactions as at end-of-period, including adjustments required for deferral of profit or loss from commodity derivatives until the inventory is sold to external parties, and other income and expenses, net, 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 D&S figures reflect Strauss's 50% share in Sabra and Obela. Other Operations figures include Strauss's share in the joint venture in China, Haier Strauss Water (HSW). Until August the Company held a 34% stake in the joint venture, and commencing in September, its percentage holding increased to 49% following the acquisition of an additional 15%.

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 nine months


2017

2016

Change

Total Group Sales (NIS mm)

6,335

5,909

7.2%

Organic Sales Growth excluding FX



7.3%

Gross Profit (NIS mm)

2,342

2,263

3.5%

Gross Margins (%)

37.0%

38.3%

-130 bps

EBITDA (NIS mm)

804

781

2.9%

EBITDA Margins (%)

12.7%

13.2%

-50 bps

EBIT (NIS mm)

631

609

3.6%

EBIT Margins (%)

10.0%

10.3%

-30 bps

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

338

277

21.8%

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

5.3%

4.7%

+60 bps

EPS (NIS)

3.04

2.58

17.6%

Operating Cash Flow (NIS mm)

294

402

-27.2%

Capex (NIS mm) (2)

-189

-163

16.0%

Net debt (NIS mm)

2,285

1,640

39.4%

Net debt / annual EBITDA

2.3x

1.6x

0.7x






(1) 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, valuation of the balance of commodity hedging transactions as at end-of-period, including adjustments required for deferral of profit or loss from commodity derivatives until the inventory is sold to external parties, and other income and expenses, net, unless stated otherwise.

(2) Investments include the acquisition of fixed assets and investment in intangibles.

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 nine months


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. 2016

Sales and EBIT by Operating
Segments and Activities









Strauss Israel:









Health & Wellness

1,554

4.2%

4.2%

170

8

4.9%

10.9%

--

Fun & Indulgence (2)

809

3.3%

3.3%

89

3

3.5%

11.0%

--

Total Strauss Israel

2,363

3.9%

3.9%

259

11

4.4%

11.0%

+10 bps










Strauss Coffee:









Coffee Israel

537

1.9%

1.9%

84

5

6.3%

15.6%

+70 bps

International Coffee (2)

2,478

18.8%

16.7%

230

34

17.3%

9.3%

-10 bps

Total Strauss Coffee

3,015

15.4%

12.8%

314

39

14.1%

10.4%

-10 bps










International Dips & Spreads:









Sabra (50%) (2)

475

-13.2%

-7.9%

31

-40

-56.3%

6.6%

-650 bps

Obela (50%) (2)

49

44.0%

25.9%

-9

1

NM

NM

NM

Total International Dips & Spreads

524

-9.9%

-5.5%

23

-39

-63.3%

4.3%

-630 bps










Other (2)

433

-1.8%

7.3%

35

11

47.3%

8.2%

+280 bps

Total Group

6,335

7.2%

7.3%

631

22

3.6%

10.0%

-30 bps










(1) 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, valuation of the balance of commodity hedging transactions as at end-of-period, including adjustments required for deferral of profit or loss from commodity derivatives until the inventory is sold to external parties, and other income and expenses, net, 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 D&S figures reflect Strauss's 50% share in Sabra and Obela. Other Operations figures include Strauss's share in the joint venture in China, Haier Strauss Water (HSW). Until August the Company held a 34% stake in the joint venture, and commencing in September, its percentage holding increased to 49% following the acquisition of an additional 15%.

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)

Third Quarter


2017

2016

Change

Sales

1,399

1,378

1.6%

Cost of sales excluding impact of commodity hedges

855

826

3.6%

Adjustments for commodity hedges

-1

-1


Cost of sales

854

825

3.6%

Gross profit

545

553

-1.4%

% of sales

39.0%

40.1%


Selling and marketing expenses

308

314

-1.8%

General and administrative expenses

96

96

-0.7%

Total expenses

404

410


Share of profit of equity-accounted investees

26

51

-48.7%

Operating profit before other expenses

167

194

-13.7%

% of sales

12.0%

14.1%


Other expenses, net

0

-25


Operating profit after other expenses

167

169

-1.6%

Financing expenses, net

-22

-37

-38.8%

Income before taxes on income

145

132

8.6%

Taxes on income

-37

-31

15.9%

Effective tax rate

25.2%

23.6%


Income for the period

108

101

6.3%

Attributable to the Company's shareholders

94

69

37.0%

Attributable to non-controlling interests

14

32

-58.8%

Condensed financial accounting (GAAP)

First nine months


2017

2016

Change

Sales

4,095

3,972

3.1%

Cost of sales excluding impact of commodity hedges

2,473

2,387

3.6%

Adjustments for commodity hedges

18

-28


Cost of sales

2,491

2,359

5.6%

Gross profit

1,604

1,613

-0.6%

% of sales

39.2%

40.6%


Selling and marketing expenses

935

911

2.7%

General and administrative expenses

275

269

2.1%

Total expenses

1,210

1,180


Share of profit of equity-accounted investees

120

154

-21.9%

Operating profit before other expenses

514

587

-12.5%

% of sales

12.6%

14.8%


Other expenses, net

-7

-43


Operating profit after other expenses

507

544

-6.9%

Financing expenses, net

-90

-93

-2.9%

Income before taxes on income

417

451

-7.7%

Taxes on income

-77

-119

-35.9%

Effective tax rate

18.3%

26.4%


Income for the period

340

332

2.4%

Attributable to the Company's shareholders

274

242

13.2%

Attributable to non-controlling interests

66

90

-26.7%





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

Investor Conference

Strauss Group will host an Investor Conference in Hebrew on Thursday, November 16, 2017 at 14:00 (Israel time) to review the Financial Statements of the Company for the third quarter.

To join the conference in Hebrew, please call 03-9180610.

Strauss Group will also host an Investor Conference in English on Thursday, November 16, 2017 at 17:30 Israel time (UK – 15:30, US Eastern Standard Time – 10:30) to review the Financial Statements of the Company for the third quarter.

To join the conference in English, please call:

UK: 0-800-917-9141

US: 1-888-407-2553

Israel: 03-918-0644

The Financial Statements for the third quarter of 2017 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

For further information please contact:

Daniella Finn

Director of Investor Relations

Strauss Group Ltd.

972-54-577-2195

972-3-675-2545

Daniella.Finn@Strauss-Group.com

Osnat Golan

VP Communications & Digital, Spokesperson

Strauss Group Ltd.

972-52-828-8111

972-3-675-2281

Or

Gil Messing

External Communications Director

Strauss Group Ltd.

972-54-252-5272

Gil.Messing@Strauss-Group.com

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