STRAUSS GROUP May 29 th , 2017 Q1 2017 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 Q1 ’ 15 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
Gadi Lesin Strauss Group C.E.O. 4
Q1 2017 Financial Highlights NIS mm; Non-GAAP Q1'17 Sales: NIS 2083mm; growth: 10.8% (1) Q1'17 Organic growth excluding FX: 7.4% Q1'17 gross margins: 37.4% (down -120 bps vs. Q1'16) EBIT and EBIT margins: NIS 223mm (up 5%); 10.7% (down -60 bps vs. Q1'16) Net income and net margins: NIS 116mm (up 8.1%); 5.5% (down -20 bps vs. Q1'16) EPS: 1.08 (up 8.1% VS. Q1'16) 5
Strauss Group – Focusing on Actively Managing our Portfolio Q1 Highlights • Acquisition of 25.1% of TPG stake in Strauss Coffee • Sale of Max Brenner to local Israeli Franchisee • Acquisition of additional 15% shares of Haier Strauss Water • Sale of Gan Shmuel shares 6
Strauss Israel – Very Strong Quarter • Very strong top line growth of 5.5% continues – due to product mix; strong sales of core products and the timing of Passover • Market share gains continue trend of past year and rise to 12% (*) • Operating profitability increases a stellar 7.5%, despite the continued implementation of extensive employee benefits • Operating margins rise to 12.9% • Innovation continues – Splendid, Milky Mouse, Danone Greek, Pro Triple Zero, Milk drinks and Premium cookies • Efficiency measures help sustain margins • We continue to focus on delivering healthier products with less sugar, salt and fat contents 7 * Source: Storenext
New Product Launches in Q1 8
Strauss Coffee – Stellar Top Line Growth of 23.3% • Organic sales growth excluding FX grow 13.2% • Growth attributed to increased volumes and selling prices in most geographies • Very strong performance in International Coffee sales; 28% top line growth and 15% EBIT growth • Particularly strong performance in Eastern Europe • Considerable market share gains in almost all geographies • Performance in LC vs last year has improved significantly across the P&L • Positive currency effect – NIS 60 million; NIS 58 million from BRL appreciation • 3C (1) operating profit declines 18.9% (in local currency) due to lower R&G sales • 3C market share in R&G continues to rise and reaches 24.9% (2) in Q1 (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: Neilsen 9
International Dips and Spreads • Sabra continues to be a global market leader and the no. 1 producer of Hummus in North America • Whilst sales are down YoY Sabra continues to ramp up post November recall • Food safety remains our top priority • Sabra is on track to return to pre recall market share levels; currently at 56.4% for the last 4 weeks ending May 14 th • Obela sales in Australia up 34.5% • Obela on track to penetrate the European market via the Florentine platform 10
Strauss Water • Water business improves on all fronts; Sales, EBIT and Cash Flows • Water sales continue to grow in Q1 2017 by 9.9% to NIS 125m • Acquisition of additional 15% shares of Haier Strauss Water • Sales of HSW, water JV in China, almost double to NIS 117.9 million from NIS 59.2 million in Q1 2016. • Net profit of HSW for 2016 was NIS30 million and net profit for Q1 2017 was NIS 9.5 million, compared to NIS 6.1 million, an increase of 55% in Q1 2016 11
Shahar Florence Strauss Group C.F.O. 12
Q1 2017 13
Strong rong Sales es Growth wth - 10.8 0.8% % in Q1 2017 es NIS mm; ; Non-GAAP GAAP Q1 2 2017 17 Consol olidated dated Sales • Organic growth excluding FX : +7.4% Prior to Food Law 2000 2,083 1,973 1,930 1,880 1500 Food Law NIS -16mm Positive translation differences = NIS 51 1000 500 0 Q1'14 Q1'15 Q1'16 Q1'17 14
Q1 2017 Sales by Segment NIS mm; Non-GAAP; % sales contribution 2,500 120% 2,083 100% 2,000 100% 80% 1,500 60% 961 1,000 818 40% 46% 39% 500 20% 160 144 7% 8% - 0% Overall Group Strauss Coffee Strauss Israel Dips & Spreads Other ’ 17 /’ 16Gr owth 10.8% 23.3% 5.5% -13.7% 3.3% growth excl. Organic ’ 17 /’ 16 FX 7.4% 13.2% 5.5% -11.0% 5.7% 15
Q1 Sales Bridge Primarily BRL (NIS NIS mm; Non-GAAP; Q1 ’ 15 to Q1 ’ 16 58mm) 143 51 10 2,083 +7.4% organic growth (1) 1,880 Group sales, 9 months Net Organic Growth M&A Effect of Translation Group sales, Q2 2016 2015 Differences (1) Excluding translation differences 16
Q1 Sales Bridge Decline in sales NIS mm; Non-GAAP; Q1 ’ 15 to Q1 ’ 16 following recall 10 8 42 51 112 (20) Higher volumes due to Sales growth in innovation, improved 2,083 Primarily Strauss-Water; offset product mix and timing BRL by decrease in Max of Passover Brenner Sales Mainly Higher 1,880 selling prices and 2,095 volumes in most markets Group sales, Q1 Coffee Translation Strauss Israel M&A Other International Dips Group sales, Q1 2016 differences effect* & Spreads 2017 Três Corações joint venture (Brazil): a company jointly held by the Group (50 %) and by the São Miguel Group (50 %) (“ 3C ”). (1) 17
Q1 Consolidated Gross Profit and Gross Margins NIS mm; Non-GAAP excl. FX: +5.9% 90.0% 790 780 800 729 726 80.0% 700 70.0% 600 60.0% Positive translation differences NIS 11 500 50.0% 40.0% 38.6% 400 37.4% 37.8% 40.0% 300 30.0% 200 20.0% 100 10.0% 0 0.0% Q1'14 Q1'15 Q1'16 Q1'17 18
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