August 10, 2017 / 12:35 PM / a year ago

Israeli foodmaker Strauss profit rises, foreign sales to drive growth

JERUSALEM, Aug 10 (Reuters) - Israeli food company Strauss Group reported a 25 percent rise in quarterly profit on Thursday, boosted by strong coffee sales overseas, and said its international markets would continue to drive growth.

Strauss, a maker of snacks, dairy products, chocolate and coffee, said it made 97 million shekels ($27 million) excluding one-off items in the second quarter, up from 78 million a year earlier. Revenue rose 5.6 percent to 2.04 billion shekels, also helped by strong growth in its water division.

Strauss CEO Gadi Lesin declined to give an exact forecast for overall revenue growth this year but estimated it would be in the high double digits.

Strauss is the second-largest company in the Israeli food and beverage sector with an overall market share of 12 percent, although it is a market leader with a share of 60 percent or more for some products.

Its sales in Israel rose 3.4 percent to 737 million shekels, while global coffee sales climbed 14.8 percent to 833 million.

"Our strategy is to gain market share and do better than the competition in Israel but the potential of growth is outside our home base. Our growth engines are international," Lesin told Reuters.

He said Strauss had no plans to expand further globally but there was a large potential for growth in coffee sales. "We saw a very strong quarter in Russia, Ukraine and Brazil."

Strauss is one of the market leaders for roast and ground coffee in central and eastern Europe and Brazil.

At the end of March, Strauss agreed to buy a 25.1 percent stake in Strauss Coffee for 257 million euros ($301 million) from buyout firm TPG Capital Management.

Lesin said that after mass protests against the high cost of living in Israel in 2011, Strauss lowered prices of many items while cutting costs and becoming more efficient and productive.

Its share price has risen some 12 percent so far in 2017, outpacing the blue-chip Tel Aviv 35 index, which has dropped 7 percent.

Sales at Sabra, the group's international dips and spreads joint venture with PepsiCo, fell 13 percent in the wake of a hummus recall in November over concerns about listeria.

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

Lesin said Sabra was a big challenge, though. "It may take a couple of quarters," he said. "We are recovering so in the future we will see growth again." ($1 = 3.5965 shekels) ($1 = 0.8538 euros) (Reporting by Steven Scheer; editing by David Clarke)

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