Strauss: Strauss Group Ltd (SGLJF) Q3 2024 Earnings Call Highlights: Record Revenue Growth and Strategic ...

Release Date: November 25, 2024 For the complete transcript of the earnings call, please refer to the full earnings call transcript . Positive Points Strauss Group Ltd ( SGLJF ) reported a 15.4% organic growth in revenues for Q3 2024, marking a significant achievement. The company achieved its highest gross profit ever reported, indicating strong financial performance. Strauss Group Ltd ( SGLJF ) successfully sold its 50% stake in Sabra for $244 million, generating a net profit of 320 million shekels. The confectionery segment showed a substantial turnaround, returning to profitability and regaining market share. The company is investing in new growth areas, such as alternative milk products and expanding its water business, aligning with its strategic goals. Negative Points Profitability declined, with net profit margins dropping to 3.4%, primarily due to increased costs of goods. The company faced significant cost pressures from rising green coffee and cocoa prices, impacting overall margins. Strauss Group Ltd ( SGLJF ) experienced capacity issues in its dairy segment, limiting growth potential. The war in Israel has affected the company's operations and market conditions, posing ongoing challenges. Despite efforts, the coffee segment's margins continue to deteriorate due to the inability to fully offset rising input costs with price increases. Q & A Highlights Warning! GuruFocus has detected 7 Warning Signs with SGLJF. Q : What is the current status of Strauss Group's strategic initiatives and their implementation? A : Unidentified_2 (CEO): We are in line with our strategy implementation, focusing on optimizing our core activities and portfolio. The sale of Sabra is part of our portfolio optimization. We are also on track with our productivity efforts, aiming for a 300 million shekel improvement over three years. Our growth initiatives, including plant-based products and new launches in our water business, are progressing as planned. However, due to high cocoa and coffee prices, we are slightly behind on achieving double-digit margins by 2026. We expect these prices to mitigate in the future, aligning us with our strategic goals. Q : Can you explain the growth in Israel and whether it is affected by seasonality? A : Unidentified_2 (CEO): The growth in Israel is primarily due to price increases from last year, driven by rising raw material costs, and volume growth in certain segments. This growth is not related to seasonality but rather a response to global inflation and increased costs since 2021. Q : What are the plans for the net proceeds from the Sabra deal? A : Unidentified_2 (CEO): Most of the proceeds will be used to reduce our debt, lowering our leverage from 2.8 to around 2. This will also decrease our financial expenses, thereby increasing our net profit.