Strauss Group (STRS) Q3 2024 earnings summary

Executive summary

• Q3 2024 net sales rose 11.8% year-over-year to NIS 2,991 million, with organic growth of 15.4% excluding FX effects, led by strong recovery in Israel's Fun & Indulgence and international coffee segments.

• Net income fell 15.4% year-over-year to NIS 102 million, mainly due to higher finance expenses, FX headwinds, and input cost inflation.

• The group signed an agreement to sell its 50% stakes in Sabra and Obela to PepsiCo for approximately NIS 900 million ($243.8 million), expected to close in December 2024, generating a net profit of NIS 319–325 million and net cash flow of NIS 726–730 million.

• Strategic focus remains on core brands, portfolio optimization, and productivity improvements, with new product launches and investments in alternative milks and water business.

• The group is executing a revised 2024–2026 strategy, including an organizational efficiency plan and major portfolio changes.

Financial highlights

• Q3 gross profit was NIS 911 million (up 6.5%), EBIT NIS 223–241 million (up 4.2%), and EBITDA NIS 320–332 million; gross margin declined to 30.5%, EBIT margin to 7.4%, and net margin to 3.4%.

• YTD 2024 sales up 6.1% to NIS 8,334 million, with organic growth of 6.9%; gross profit NIS 2,626 million, EBIT NIS 568–578 million, net income NIS 344 million.

• Negative FX translation impacted sales by NIS -85 million in Q3 and NIS -60 million YTD, mainly due to BRL and UAH depreciation.

• Free cash flow in Q3 was negative NIS 98 million; operating cash flow was NIS 59–60 million; capex at NIS 157 million.

Outlook and guidance

• The sale of Sabra and Obela is expected to generate a net profit of NIS 319–325 million and net cash flow of NIS 726–730 million in 2024.

• Management targets double-digit margins by end of 2026, with growth engines in Israel, Brazil, and Water business.

• Annual savings of NIS 45–55 million expected from the efficiency plan, starting Q2 2024.

• Margin improvement anticipated as cocoa and coffee prices stabilize over the next 1–2 years, but ongoing input cost inflation and FX volatility remain risks.

• Uncertainty remains regarding the impact of the Swords of Iron War and regulatory changes on future results.