TEL AVIV, May 28 (Reuters) - Net profit at Israeli food and drinks maker Strauss Group was hit in the first quarter by higher energy and raw material prices, despite increased sales.
The company said on Monday its net profit excluding one-off items fell to 65 million shekels ($16.9 million) from 70 million in the same period last year. The bottom line was also hurt by higher financing expenses and a rise in its effective tax rate.
Sales rose 16.5 percent to 2.065 billion shekels, buoyed by a 26.1 percent jump in its coffee business and a 30.5 percent rise in sales at its international spreads and dips joint venture with PepsiCo.
Strauss, a maker of snacks, fresh foods and coffee, is a market leader in roast and ground coffee in central and eastern Europe. It is the second-largest company in the Israeli food and beverage market with a 12.5 percent share.
"The group's gross and operating margins have eroded, due, among other things, to the rise in raw material prices compared to the corresponding period last year, and to the continuing increase in the prices of production inputs and energy, which are translated into annual incremental costs of tens of millions of shekels," President and Chief Executive Gadi Lesin said in a statement.
He said Strauss was continuing to implement efficiency measures and was preparing to launch its spreads and dips operations in Mexico and other areas together with PepsiCo.
Global coffee sales reached 1.05 billion shekels, boosted by growth in most of the geographical areas in which it operates.
Sales at Strauss Water, which makes drinking water purification systems, were flat at 99 million shekels. The company is preparing for a consumer launch of its products in the UK with the Virgin Group.