STRAUSS GROUP August 7 th , 2018 H1 and Q2 2018 Earnings Presentation
Disclaimer This presentation does not constitute an offering to purchase or sell securities of Strauss Group Ltd. (the “ Company ” ) or an offer for the receipt of such offerings. The presentation's sole purpose is to provide information. The information contained in the presentation and any other information provided during the presentation (the “ Information ” ) does not constitute a basis for investment decisions and does not comprise a recommendation, an opinion or a substitute for the investor's sole discretion. The Information provided in the presentation concerning the analysis of the Company's activity is only an extract, and in order to receive a complete picture of the Company's activity and the risks it faces, one should review the Company's reports to the Israel Securities Authority and the Tel Aviv Stock Exchange. The Company is not liable, and will not be held liable, for any damage and/or loss that may be caused as a result of use of the Information. The presentation may contain forward-looking statements as defined in the Israeli Securities Law, 5728-1968. All forward-looking statements in this presentation are made based on the Company's current expectations, evaluations and forecasts, and actual results may differ materially from those anticipated, in whole or in part, as a result of different factors including, but not limited to, changes in market conditions and in the competitive and business environment, regulatory changes, currency fluctuations or the occurrence of one or more of the Company's risk factors. In addition, forward-looking forecasts and evaluations are based on information in the Company ’ s possession while preparing the presentation. The Company does not undertake any obligation to update forward-looking forecasts and evaluations made herein to reflect events and/or circumstances that may occur after this presentation was prepared. . 2
GAAP to Non-GAAP Reconciliations In addition to reporting financial results in accordance with generally accepted accounting principles (GAAP), the Company provides non-GAAP operating results which include the results of jointly controlled entities as if they were proportionately consolidated. Strauss Group has a number of jointly controlled companies: the Três Corações joint venture (3C) - Brazil (a company jointly held by Strauss Group (50%) and by the São Miguel Group (50%) in Brazil), Sabra Dipping Company (a 50%/50% JV with PepsiCo in the U.S. and Canada), Strauss Frito-Lay Ltd. (a 50%/50% JV with PepsiCo Frito-Lay in Israel) and PepsiCo Strauss Fresh Dips & Spreads International (a 50%/50% JV with PepsiCo outside the U.S. and Canada) (1) . In addition, non-GAAP figures exclude any share-based payments, mark to market of commodity hedging transactions as at end-of-period, other expenses or income and taxes referring to these adjustments. Company Management believes that these measures provide investors with transparency by helping to illustrate the underlying financial and business trends relating to the Company's results of operations and financial position and comparability between current and prior periods. Management uses these measures to establish and monitor budgets and operational goals and to evaluate the performance of the Company. Please see the GAAP to non-GAAP reconciliation tables in the Company's MD&A Report for a full reconciliation of the Company's GAAP to non-GAAP results. (1) In Q2'17 the subsidiary Strauss Water signed a series of share exchange and transfer agreements with companies of the Haier Group, as well as a joint venture agreement, with the aim of restructuring the Haier Strauss Water joint venture in China. The change in respect of the above agreements was reflected in the non- GAAP reports commencing in the third quarter of 2015. For further information, see Note 12.6 to the Consolidated Financial Statements as at December 31, 2015 . 3
Giora Bardea Strauss Group Interim C.E.O. 4
Q2 2018 Financial Highlights NIS mm; Non-GAAP Q2'18 Sales: NIS 2103mm; growth: 3% (1) Q2'18 Organic growth excluding FX: 6.4% Q2'18 gross margins: 38.7% (up 180 bps vs. Q2'17) EBIT and EBIT margins: NIS 207mm (up 11.2%); 9.9% (up 80 bps vs. Q2'17) Net income and net margins: NIS 112mm (up 14%); 5.3% (up 50 bps vs. Q2'17) EPS: 0.97 (up 10.6% VS. Q2'17) 5
YTD 2018 Financial Highlights NIS mm; Non-GAAP YTD 2018 Sales: NIS 4270mm; growth: 3.5% (1) YTD 2018 Organic growth excluding FX: 7.1% YTD 2018 Gross margins: 38.5% (up 130 bps vs. YTD 2017) EBIT and EBIT margins: NIS 461mm (up 12.7%); 10.8% (up 90 bps vs. YTD 2017) Net income and net margins: NIS 258mm (up 21%); 6% (up 80 bps vs. YTD 2017) EPS: 2.25 (up 15.3% VS. YTD 2017) 6
Strauss Israel – Outstanding Momentum Continues • Top line growth of 5.6% during the quarter continues to surpass growth of the overall Food & Beverage market which grew 1.1% during the quarter (1) • PRO product suite continues to gain strong momentum • Market share at 12.0% • Gross margins impacted by product mix and higher milk prices • Innovation continues with new product launches • We continue to focus on delivering healthier products with less sugar, salt and fat contents 7 * Source: Storenext
Strauss Coffee – Q2 2018 Top Line Growth 5.5% in Local Currencies • Quantities sold grew across most geographies, mainly in Brazil • Overall top line hurt by BRL devaluation, negative impact of NIS 56 million • Significant margin expansion in coffee across geographies due to lower green coffee prices • Brazil 3C (1) continues to lead growth with 7.4% increase in local currency for the quarter and 11.5% for 2018 • 3C (1) market share in Brazil R&G was at 27.0% (2) at the end of Q2 2018 (1) Note: Três Corações joint venture (Brazil): a company jointly held by the Group (50 %) and by the São Miguel Group ( 50%) (3C) (2) Source: Nielsen 8
International Dips and Spreads • Sales continue to improve in Q2 up by 10% • Hummus market share in North America continue to rise towards pre-recall level and was at 60.6% at the end of June • Sabra EBIT more than doubles to NIS 40 million (for 100% company) • Sabra profit margins expand significantly to 11.2% from 5.6% • Obela sales were up 19.5% during the quarter • Market penetration efforts continue in new markets – Germany and New Zealand • Sabra continues to be a global market leader and the no. 1 producer of Hummus in North America 9
Strauss Water • In Q2 Strauss Water continued the strong momentum of the previous quarters • Sales at Strauss water (excluding HSW) are up 10.6% during the quarter, due mainly to increased sales in Israel on the back of the Maze T launch • Sales of HSW (100%), water JV in China, grew by 13.7% (6.2% excluding FX) in Q2 2018 to NIS 145 million from NIS 127 million in Q2 2017 and by 8.5% in 1H 2018 to NIS 266 million from NIS 245 million in 1H 2017 (4.5% excluding FX) • Net profits at HSW grew by 18.7% (10.8% excluding FX) during the quarter to NIS 18 million compared to NIS 16 million in Q2 2017 and declined -3.5% (-8.1% excluding FX) in 1H 2018 to NIS 25 million compared to NIS 26 million in 1H 2017 10
Shahar Florence Strauss Group C.F.O. 11
Q2 2018 12
Strong Organic Sales Growth Continues 6.4% in Q2 Q2 2018 Consolidated Sales NIS mm; Non-GAAP • Organic growth excluding FX : +6.4% 2200 2100 2,103 2000 2,042 1900 1,933 Negative translation 1800 differences = NIS 53 1,839 1700 1600 1500 1400 1300 Q2'15 Q2'16 Q2'17 Q2'18 13
Q2 2018 Sales by Segment NIS mm; Non-GAAP; % sales contribution 2,500 120% 2,103 2,000 100% 100% 80% 1,500 60% 978 1,000 778 40% 47% 37% 500 20% 197 150 0 9% 7% - 0% Overall Group Strauss Coffee Strauss Israel Dips & Spreads Water Other Growth '18/'17 3.0% -0.3% 5.6% 10.7% 10.6% -100% growth excl. Organic '18/'17 FX 6.4% 5.5% 5.6% 10.8% 10.5% na 14
Q2 Sales Bridge NIS mm; Non-GAAP; Q2 ’ 17 to Q2 ’ 18 Sales Higher volumes Sales growth in Primarily due to the growth in due to ongoing both Sabra and weakening of the BRL Higher volumes Strauss- innovation Obela (NIS -56mm) in most Water; among others geographies despite lower selling prices in 14 Max Brenner 19 some 41 disposal 51 (53) (11) 2,042 2,103 2,114.0 125 million +6.4% organic growth Group Sales, Q2 Coffee Strauss Israel International Dips Strauss Water Effect of M&A Group Sales, Q2 2017 & Spreads Translation 2018 Differences * 15
Q2 Consolidated Gross Profit and Gross Margins NIS mm; Non-GAAP Excl. FX: 10.1% 90.0% 813 800 753 733 80.0% 689 700 70.0% 600 60.0% Negative translation differences NIS -15 500 50.0% 38.7% 400 37.9% 36.9% 37.4% 40.0% 300 30.0% 200 20.0% 100 10.0% 0 0.0% Q2'15 Q2'16 Q2'17 Q2'18 16
Q2 2018 Gross Profit and Gross Margins NIS mm; Non-GAAP; % Margin 900 813 800 Increase volumes and increased profit 700 margins in 3C (Brazil) Higher volumes, due to lower green 600 affected by sales mix coffee prices and higher milk price 500 Higher profits in Water and 400 352 Sabra 300 300 161 200 100 38.7% 46.3% 38.6% 36.0% - Overall Group Strauss Israel Strauss Coffee Dips & Spreads + Other D = 60mm D = 12mm D = 34mm D = 14mm GP & GM Q2 ’ 17 NIS 753 NIS 287 NIS 318 NIS 148 36.9% 38.9% 32.4% 46.0% 17
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