GuruFocus -
- Organic Growth: 6% in Q2 2024.
- Strauss Israel Segment Growth: More than 6% due to confectionery recovery and pricing actions.
- Coffee Segment Growth: Over 7% organically, driven by pricing adjustments.
- Water Sales Growth in Israel: 3% increase in sales despite war impact.
- China Water Business Growth: Double-digit growth of more than 13%.
- Gross Profit: Maintained at similar levels to Q2 2023 despite increased cocoa and coffee prices.
- Net Profit: Maintained at similar levels to Q2 2023, aided by tax incentives.
- EBIT Impact: Acknowledged a loss of ILS27 million due to derivatives in cocoa purchasing.
- Dividend and Loan from China: ILS80 million distributed, including ILS50 million loan and ILS30 million dividend.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Strauss Group Ltd (XTAE:STRS) reported an organic growth of 6% in Q2 2024, driven by strong performance in core categories.
- The company has successfully regained market share in its confectionery business, reaching pre-recall levels.
- Strauss Group Ltd's water business in Israel and China continues to show growth, with double-digit growth in China.
- The Israeli Competition Authority approved the sale of a factory, aligning with the company's portfolio optimization strategy.
- Strauss Group Ltd is seeing positive results from its productivity efforts, which are expected to improve margins once commodity prices stabilize.
- The ongoing war in Israel has negatively impacted certain product categories, such as salty snacks and fresh salads.
- Cocoa and coffee prices have significantly increased, affecting the company's margins, particularly in the confectionery and coffee segments.
- In Brazil, the company experienced a planned reduction in market share due to price increases in response to rising green coffee prices.
- The Sabra business continues to face challenges, including overcapacity and struggles to regain market share.
- One-time derivatives losses of ILS27 million impacted the company's EBIT, primarily due to high cocoa prices.
A: Yes, it was primarily due to high cocoa prices, which increased by 240%. We cannot adjust prices to match such an increase. However, we believe cocoa prices will decline, and our productivity efforts will help stabilize margins.
Q: Can you provide an update on the strategy plan and progress made so far? What are the next steps?
A: Our strategy focuses on doubling down on core categories, improving productivity, and optimizing our portfolio. We are on track with our goals, subject to stabilization of cocoa and coffee prices. We aim to increase core operations from 65% to 85%.
Q: What were the one-off expenses in the other category? Should we expect more in the future?
A: The other category includes recurring expenses from Sabra Obela and Kitchen Hub activities, not one-off expenses. These are expected to be between ILS10 million to ILS20 million per quarter.
Q: How is the company handling the impact of the war in Gaza on its operations?
A: The war has affected our salty snacks and fresh salads in Israel, as well as some coffee sales. However, the impact is not substantial. We hope for a resolution soon, which would positively impact growth in these categories.
Q: What is the outlook for the coffee segment, particularly in Brazil?
A: We are the market leader in Brazil and have increased prices to offset green coffee price hikes. This has slightly reduced market share but is part of a planned strategy to regain margins. We expect improvements as coffee prices stabilize.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.