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UPDATE 1-Food producer Strauss expands coffee stake as profit hit by recall
March 28, 2017 / 9:52 AM / 9 months ago

UPDATE 1-Food producer Strauss expands coffee stake as profit hit by recall

* Q4 net profit 58 mln shekels vs 74 mln year earlier

* To buy remaining 25.1 pct of Strauss Coffee for 257 mln euro (Adds details, CEO comments)

By Steven Scheer and Tova Cohen

TEL AVIV, March 28 (Reuters) - Israeli food company Strauss Group reported a 22 percent drop in quarterly profit on Tuesday, hurt by a recall of its Sabra spreads in the United States, and said it was buying back the rest of its coffee subsidiary.

Strauss, which produces snacks, fresh foods and coffee, said it had agreed to buy back a 25.1 percent stake in Strauss Coffee from buyout firm TPG Capital Management, which had been looking to sell, for 257 million euros ($279 mln).

“Strauss Coffee gives us more operational flexibility by being 100 percent owners of the company,” Strauss CEO Gadi Lesin told Reuters, noting the deal was accretive to earnings.

TPG, which bought its stake in 2008 for $293 million, had asked Strauss to float Strauss Coffee but Lesin said there were no plans in the short term to spin it off and take it public.

“With Strauss Coffee as sole owner ... management is better positioned to focus on the strategic decisions for the company,” said Barclays analyst Tavy Rosner, who estimated Strauss Coffee’s value at $1 billion.

Strauss is the second-largest company in the Israeli food and beverage sector and is a market leader in roast and ground coffee in central and eastern Europe and Brazil.

The group reported adjusted net profit of 58 million shekels ($16 million) for the fourth quarter, down from 74 million a year earlier. Revenue rose 7.2 percent to 2.03 billion shekels.

Lesin said the group “continued to exceed market growth rates in our home base in Israel and Strauss Coffee posted a set of excellent results for 2016.”

Coffee sales grew 21 percent to 1.06 billion shekels in the quarter as EBIT profit rose 23 percent.

Sales at the group’s international dips and spreads joint ventures with PepsiCo fell 27 percent in the wake of the recall in November over concerns of listeria bacteria.

The company has a 60 percent share of the hummus market in the United States and Lesin said sales were recovering to pre-recall levels and the company was bolstering regulations at its U.S. plant where the bacteria was found.

Strauss said in November the recall would reduce operating profit by $5 million. ($1 = 3.6100 shekels) ($1 = 0.9210 euros) (Editing by Susan Fenton)

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