Strauss Group announces results for first quarter 2013
Posts strong operating profit due to solid performance by Strauss Coffee’s international operations

The Group’s sales in the first quarter totaled NIS 2.0 billion and were impacted by the erosion of the average exchange rate of the Brazilian Real versus the Shekel;

The Group posted a record non-GAAP operating profit, which amounted to NIS 214 million

Gadi Lesin, President and Chief Executive Officer of the Strauss Group, commented, “Strauss’s international activity continued to prove its strength in the quarter, expanding profit despite a significant negative impact from changes in relevant currency exchange rates. Our home market in Israel also maintained its positive performance. Overall, the Group posted strong operating results thanks mainly to the improvement in the international coffee business as well as the dips and spreads segment, and as a result of the continued implementation of streamlining processes across all of the Group’s businesses. At the same time, we are continuing to invest in the Group’s future growth drivers and in innovation in all areas of our activity. Our goal remains to continue to deliver real added value to consumers, while enhancing our strength as a leading Group.”

Key data on the first quarter of 2013[1]

Commencing in the first quarter of 2013, the Strauss Group retroactively applied IFRS 11 – Joint Arrangements. The significance of the standard is that businesses which are jointly controlled by Strauss and a partner are no longer presented according to Strauss’s relative holding in the entity, but in a separate row (“Income of equity-accounted investees” in the statements of income and in the other statements in the relevant section). The reporting method does not alter the Group’s profit. As this is a change in reporting method only, and in light of the fact that the Group’s non-GAAP reports and the manner in which Management measures the results of operations of subsidiaries have remained unchanged, the Group continues to present the activity segments in the identical manner in which they were presented in prior periods.

• Sales totaled NIS 2.0 billion (compared with NIS 2.1 billion last year), a decrease of 2.5%; excluding the negative impact of changes in exchange rates, organic sales grew by 0.1% over the last year.

• Non-GAAP gross profit totaled NIS 767 billion (38.1% of sales) compared to NIS 731 billion in the corresponding quarter last year (35.4% of sales), an increase of 4.9%.

• Non-GAAP operating profit (EBIT) totaled NIS 214 million (10.6% of sales) compared to NIS 168 million in the corresponding quarter last year (8.1% of sales), an increase of 27.5%. The growth was primarily due to the significant growth in the profits of International Coffee and International Dips and Spreads.

• Non-GAAP net income attributable to the Company’s shareholders totaled NIS 103 million (5.1% of sales) compared to NIS 65 million in the corresponding quarter last year (3.2% of sales), an increase of 57.2%.

• Cash flows from operating activities (GAAP) amounted to a negative cash flow of NIS 25 million compared to a negative cash flow of NIS 86 million in the corresponding quarter last year.

• Net credit (GAAP) as at March 31, 2013 totaled NIS 1,306 million (compared to NIS 1,471 million on March 31, 2012 and NIS 1,199 million on December 31, 2012.

ANALYSIS OF FINANCIAL RESULTS

Following are the condensed financial accounting statements of income (GAAP) for the quarters ended March 31, 2013 and 2012 (in NIS millions)*:

The Company’s shareholders

108

57

90.4

Non-controlling interests

32

17

92.7

* Financial data were rounded off to NIS millions. The percentages change were calculated on the basis of the exact figures in NIS thousands

Following are the adjustments to the Company’s non-GAAP management reports (NIS millions):

– Adjustments for IFRS 11 (change from the equity method in the GAAP report to the proportionate consolidation method (according to the segmental information based on the Group’s management accounting (non-GAAP) and internal reports):

The Company’s shareholders

108

–

108

57

–

57

Non-controlling interests

32

–

32

17

–

17

–       Additional adjustments to the non-GAAP management reports (share-based payment, valuation of hedging transactions, other expenses and taxes referring to these adjustments):

The Company’s shareholders

103

65

57.2

Non-controlling interests

29

19

57.8

Following are the condensed results of business operations (based on non-GAAP management reports) for the quarters ended March 31, 2013 and 2012 (in NIS millions):

The Company’s shareholders

103

65

57.2

Non-controlling interests

29

19

57.8

Following are the condensed results of business operations (based on non-GAAP management reports) of the major business sectors for the quarters ended March 31, 2013 and 2012 (in NIS millions):

For further information:

Investor Relations Director

Strauss Group Ltd.

972-54-5772195

972-3-6752545

talia.sessler@strauss-group.com

 Osnat Golan

VP Communications & Digital, Spokesperson

Strauss Group Ltd.

972-52-8288111

972-3-6752281

Gil Messing

External Communications Director

Strauss Group Ltd.

972-54-2525272

[1] Based on non-GAAP data, which do not include share-based payment, valuation of the balance of commodity hedging transactions as at end-of-period, and other income and expenses, unless stated otherwise.

May 28^th, 2013: Appendix to Strauss Group Press Release Regarding First Quarter 2013 Results

(Selected sections from the MD&A Report)

ANALYSIS OF THE BUSINESSS RESULTS OF THE GROUP

General

The Strauss Group posts a record in the Group’s non-GAAP operating profit in the first quarter of the year, mainly thanks to strong results accomplished by Strauss Coffee.  The Group’s sales decreased in the first quarter of 2013 by 2.5% compared to the corresponding quarter last year.  Organic growth excluding the impact of changes in currency exchange rates in the quarter amounted to 0.1%.  The gross profit and operating profit (non-GAAP) increased by 4.9% and 27.5%, respectively, mainly as a result of the significant growth in the profits of Strauss Coffee and the International Dips & Spreads activity.

Sales

In the first quarter of 2013 the Group’s sales decreased by NIS 52 million.  Following are the components of the change in the quarterly sales and the rates of increase (decrease), according to the Company’s major activity sectors:

The decrease in the Group’s sales in the first quarter reflects a decline in export sales of green coffee in Três Corações (approximately NIS 40 million). In addition, translation differences into Shekels amounted to approximately NIS 65 million on the Group level.  These differences are mostly due to the erosion of the average rate of the Brazilian Real in the first quarter of 2013 versus the Shekel (approximately 13% compared to the average rate of the Real in the corresponding quarter last year).  The erosion led to a decrease of NIS 56 million in the Group’s share of the sales of Três Corações in the first quarter of 2013, which are presented by the Group in Shekels.  Excluding export sales of green coffee in Brazil and the Brazilian Real depreciation impact, sales growth in Brazil amounted to approximately 18% compared to the corresponding quarter last year.

Sales also decreased in the Fun & Indulgence and coffee segments in Israel as a result of the timing of Passover and the decrease in distribution days of dry products.  By contrast, the decrease was partly offset by growth in the International Dips and Spreads activity thanks to growth in sales by Sabra in the USA, which was achieved despite the erosion of the average exchange rate of the Dollar versus the Shekel compared to the average rate in the corresponding quarter last year, and as a result of Obela’s sales, which began in the second quarter last year.

Further explanations on the Group’s sales in the first quarter are included in the chapter “Analysis of the Business Results of the Group’s Major Business Units”.

Gross Profit

The Group’s non-GAAP gross profit in the first quarter of 2013 grew by approximately NIS 36 million compared to the corresponding quarter last year, mainly as a result of the growth in the gross profit of the coffee business (an increase of approximately NIS 35 million).   This is explained mainly by a considerable improvement in gross profit in Brazil (see Note 7 to the financial statements).  The gross profit of the Israel sector decreased by approximately NIS 3 million, mainly because of a decrease in sales by Strauss Israel due to the timing of Passover and a decrease in distribution days of dry products; this decrease was partly offset by continuing streamlining processes in production and an improvement in the Company’s product mix.  The rest of the growth (approximately NIS 4 million) is explained by an increase in the aggregate gross profit of the International Dips and Spreads activity and the “Other” segment.  Further explanations on the Group’s gross profit in the first quarter of 2013 are included in the chapter “Analysis of the Business Results of the Group’s Major Business Units”.

Operating Profit before Other Income (Expenses)

The non-GAAP operating profit in the first quarter of 2013 grew by approximately NIS 46 million compared to the corresponding quarter last year.  Following are the components of the change in the non-GAAP operating profit in the quarter compared to the corresponding period, according to the Company’s major activity sectors:

The increase in the Group’s operating profit in the first quarter is evident in all areas of activity, particularly in the operating profit of Strauss Coffee in Brazil.  In the “Other” segment the growth in the operating profit is due to a decrease in operating expenses in Strauss Water’s new operations in China and the UK.  The improvement in the operating profit of the International Dips & Spreads Activity was mainly the result of continued streamlining processes in Sabra and growth in Sabra’s sales (in total, approximately NIS 5 million); this increase was partly offset by an increase of NIS 1 million in the Group’s share of Obela’s operating expenses in the quarter.  The improvement in the operating expenses of Strauss Israel was due to the continued streamlining of G&A and selling and marketing expenses.  Further explanations on the Group’s operating profit in the first quarter of 2013 are included in the chapter “Analysis of the Business Results of the Group’s Major Business Units”.

Financing Expenses, Net

Net financing expenses in the first quarter of 2013 totaled NIS 26 million (21 million according to the equity method) compared to expenses of NIS 40 million last year (34 million according to the equity method).  Most of the decrease in financing expenses compared to the corresponding quarter in 2012 is the result of an increase last year in expenses in respect of the revaluation of foreign currency positions due to the significant strengthening of some of the Group’s operating currencies.  By contrast, the decrease in financing expenses this year was offset in part by an increase in debt balances and in average loan life versus the corresponding period in 2012.

The Consumer Price Index (on the basis of the known Index) to which the Debentures Series B and other loans are linked had no significant impact on financing expenses (an increase of 0.01% in the present quarter, whereas in the corresponding quarter last year there was no change in the known Index).

Net credit (according to the equity method) as at March 31, 2013 totaled NIS 1,306 million compared to NIS 1,471 million on March 31, 2012 and NIS 1,199 million on December 31, 2012.

Taxes on Income

In the first quarter taxes on income (non-GAAP) amounted to NIS 56 million, reflecting an effective tax rate of 29.9%, whereas last year taxes on income amounted to NIS 44 million and the effective tax rate was 34.6%. The decrease in the effective tax rate in the quarter compared to the corresponding quarter last year is mainly the result of a material decrease in existing businesses in which respect no deferred taxes were created.  The effective tax rate in the current quarter is still higher than the statutory tax rate in Israel and is mostly due to expenses in countries where the Company is developing new business, in which respect no deferred taxes were created.

Income for the Period Attributable to the Company’s Shareholders

Non-GAAP income attributable to the Company’s shareholders in the first quarter of 2013 increased by approximately NIS 38 million compared to the corresponding period last year.  The increase in non-GAAP income attributable to the Company’s shareholders was the result of the increase in the Group’s non-GAAP operating profit (NIS 46 million) and the decrease in financing expenses (NIS 14 million).  The increase was offset in part as a result of the increase in the Group’s tax expenses (NIS 12 million), and by the increase in income attributable to the non-controlling interest (NIS 10 million).

Comprehensive Income for the Period (according to the GAAP report)

The other comprehensive income includes profit or loss items carried directly to equity, particularly differentials arising from the translation of foreign currency in respect of investment in overseas subsidiaries and the revaluation of securities available for sale.  The GAAP other comprehensive income in the first quarter amounted to approximately NIS 58 million, compared to other comprehensive income of NIS 112 million in the corresponding period last year.  In the reported period losses in respect of translation differentials, which are the main component of the other comprehensive income, amounted to NIS 82 million compared to a profit of NIS 37 million arising from translation differentials in the corresponding period last year.  The translation differentials are the result of the weakening of part of the Group’s operating currencies abroad in relation to the Shekel, which was expressed in the quarterly movement in the foreign currency translation reserve.

LIQUIDITY, SOURCES OF FINANCE AND FINANCIAL CONDITION (ACCORDING TO THE GAAP REPORT)

Cash flows used in operating activities in the first quarter of 2013 amounted to a negative cash flow of NIS 25 million, compared to a negative cash flow of NIS 86 million in the corresponding quarter last year.  The improvement in cash flows from operating activities is mainly due to an improvement in the income for the period compared to the corresponding period, with the setoff of a greater increase in working capital in the current period versus the corresponding period.

Cash flows used in investing activities in the first quarter amounted to a negative cash flow of NIS 59 million compared to a negative cash flow of NIS 239 million last year.  The difference is mainly due to the grant of long-term loans in the first quarter of 2012 in an amount of NIS 108 million and to deferred expenses totaling NIS 50 million, primarily in respect of the transaction involving the operation of the freeze-dried coffee production site in Germany.

Cash flows provided by (used in) financing activities in the first quarter of 2013 amounted to a positive cash flow of NIS 226 million compared to a negative cash flow of NIS 2 million used in financing activities in the corresponding period last year.  The change is primarily due to the proceeds of the issue of debentures in the amount of NIS 247 million in 2013.

The Company’s cash and cash equivalents as at March 31, 2013 totaled NIS 868 million, compared to NIS 735 million on December 31, 2012.  In accordance with Company policy, these assets are invested mainly in deposits (most of them in Shekels and Dollars).  Additionally, the Company has short-term investments in securities (mainly in financial funds).

The Company’s liquidity ratio as at March 31, 2013 is 1.89 compared to 1.67 on December 31, 2012.  On March 31, 2013 liabilities in respect of long-term loans and credit (including current maturities) amounted to NIS 2,376 million compared to NIS 2,146 million on December 31, 2012.  On March 31, 2013 short-term credit (excluding current maturities) amounted to NIS 21 million compared to NIS 4 million on December 31, 2012.  On March 31, 2013 supplier credit totaled NIS 688 million, compared to NIS 727 million on December 31, 2012.

Total assets in the Company’s Consolidated Statement of Financial Condition as at March 31, 2013 amounted to NIS 6,719 million, compared to NIS 6,512 million on December 31, 2012.

Reportable credit – further to Note 22.3 to the Periodic Report – Financial Criteria – the ratio of equity attributable to the Company’s shareholders to total assets in the Company’s Consolidated Statement of Financial Condition as at March 31, 2013 is 28.8%, compared to 29.0% on December 31, 2012.  The net financial debt-to-EBITDA ratio as at March 31, 2013 is 1.8, similar to the ratio on December 31, 2012.  The Company is in compliance with the required financial criteria.

ANALYSIS OF THE BUSINESS RESULTS OF THE GROUP’S MAJOR BUSINESS UNITS

Strauss Coffee

In the global coffee operation the Group focuses on the development, manufacture, marketing and sale, mainly of branded coffee products, in Brazil (through Três Corações), Russia, Israel, Poland, Romania, Serbia and Ukraine.  This area of activity is divided into two activity segments: Israel Coffee and International Coffee.

In 2012, according to Euromonitor the Strauss Coffee was the fourth largest company in the world retail coffee market (excluding cafés), with a market share of 3.3% in financial value terms (3.2% in 2011) (Strauss Coffee’s market shares include 100% of the sales of Três Corações).

Following are the condensed results of business operations based on non-GAAP management reports of the Coffee Company by reported segments for the quarters ended March 31, 2013 and 2012 (in NIS millions):

Sales

In the first quarter of 2013 Strauss Coffee’s sales decreased by approximately NIS 59 million.  The drop in sales was mainly due to differentials arising from translation into Shekels following the erosion of the average exchange rate of the Brazilian Real in the first quarter versus the Shekel (an erosion of approximately 13% compared to the average exchange rate in the corresponding quarter last year). Additionally, green coffee export sales from Brazil by Três Corações decreased (approximately NIS 40 million; Strauss Coffee’s share – 50%).  Excluding the currency impact and the decrease in green coffee sales in Brazil, Strauss Coffee’s sales grew by 3.5%.

Gross profit

In the first quarter of 2013 the gross profit in the coffee business grew by NIS 35 million compared to the corresponding quarter last year, mainly as a result of the improvement in Três Corações’s gross profit.  In 2012 the Company implemented a price increase in all countries where Strauss Coffee is active, excluding Israel.  The cost of green coffee of the Robusta species, which is the main raw ingredient in coffee, remained without significant change compared to the corresponding quarter last year.  The cost of green coffee of the Arabica species decreased.  Additionally, the cost of sales decreased as a result of an overall improvement in the freeze-dried instant coffee supply chain (in NDKW’s operating parameters and in terms of trade vis-à-vis external suppliers. NDKW is the freeze-dried production facility in Germany; its produce is sold mainly in Russia).  In total, these influences amounted to an increase of 5.3% in the gross profit margin, which in the first quarter of 2013 was 34.3%.

Operating profit

In the first quarter of 2013 the operating profit increased by NIS 34 million compared to the corresponding period last year.  The growth in operating profit was mainly due to the growth in Três Corações’s gross profit.  The operating profit margin improved by 3.9% and amounted to 11.3%.

Strauss Coffee sales by major geographical regions

Following is the scope of sales of the coffee business in the major geographical regions, and growth rates for the quarters ended March 31, 2013 and 2012 (in NIS millions):

* The growth rate in the local currency neutralizes the impact of changes in exchange rates in the different countries in relation to the Shekel on the growth in the countries’ sales.

(1)    Três Corações sales in the first quarter of 2013 include sales amounting to NIS 63 million of green coffee and NIS 18 million of corn.  In the first quarter of 2012 sales of green coffee amounting to NIS 103 million and corn amounting to NIS 17 million were included.

Distribution of coffee sales by geographical region in 2013 and 2012:

Brazil – Três Corações (the company is jointly held by the Group (50%)). Data reflect 50% – Strauss Coffee’s share

Três Corações continues to be a significant player in the Brazilian coffee market.  The company’s average market share in R&G in the first quarter of 2013 remained on the level of around 20%, similar to the corresponding quarter last year (market share in value terms according to A.C. Nielsen).

The company’s sales in the first quarter decreased by approximately NIS 30 million compared to the corresponding period last year.  Excluding translation differences into Shekels, sales increased by NIS 26 million.  The decrease in sales is the result of the erosion of the average exchange rate of the Brazilian Real versus the Shekel in the first quarter of 2013 (NIS 56 million or 13% erosion compared to the average exchange rate in the corresponding quarter last year).  Additionally, green coffee sales decreased by approximately NIS 40 million.  The growth in Três Corações’s sales in the first quarter of 2013 excluding green coffee sales and the currency impact was approximately 18% compared to the corresponding quarter last year.

Following the focus placed by Management on improving R&G margins in Brazil and as a result of the volume increase in sales of powdered juice drinks under the Frisco brand, the company’s gross profit improved considerably (see Note 7 to the financial statements) compared to the corresponding period last year.  The improvement in R&G margins in Brazil also contributed to growth in Três Corações’s operating profit, which in the first quarter of 2013 increased by approximately NIS 36 million (see Note 7 to the financial statements).

The former USSR countries

The Company’s sales in the region decreased by NIS 13 million in the first quarter of 2013 compared to the corresponding quarter last year (a decrease of NIS 6 million excluding the currency impact).  The decrease in the Company’s sales in the region was due in part to the erosion of the Ruble versus the Shekel (an erosion of approximately 3% compared to the average exchange rate last year, or NIS 7 million).  The decrease in sales was also influenced by the erosion of prices, especially in the Russian coffee market, due to the intensified competition.

The Group has continued to invest in the development of its capabilities in the areas of production and the supply chain, coupled with an improvement in the cost structure and in operational efficiency in Russia.  In December 2012 construction of the roast and ground coffee plant in Strunino, Russia was completed on a plot acquired as part of the Le Café transaction in November 2010.  At the beginning of the quarter the Group announced that Strauss Coffee had acquired a further 49% of Le Café and Instanta, thus completing the acquisition of 100% of the shares of the companies.  Strauss Coffee is to pay an amount of US$13.4 million for the shares.  The transaction will be financed by Strauss Coffee’s own resources and is subject to approval by the anti-trust authority in Russia.

The new R&G manufacturing plant, together with the instant coffee packaging plant owned by Le Café, are in the process of becoming Strauss Russia’s principle infrastructure for production, packaging and logistics. Their activity is accompanied by the continued operation of the freeze-dried instant coffee plant in Germany, the produce of which is sold mainly in Russia.

Poland

The Company’s sales in the region increased by approximately NIS 2 million in the first quarter of 2013 compared to the corresponding quarter last year.  The growth in sales was expressed mainly in sales of the MK Premium brand, which has become the Number 2 player in the premium R&G market in Poland.

Romania

The Company’s sales in Romania decreased by NIS 6 million in the first quarter of 2013 compared to the corresponding period last year.  Sales were influenced by a more intensive competitive dynamic and by the erosion of the Romanian Lei versus the Shekel (2% erosion compared to the average exchange rate of the Lei in the corresponding quarter last year).

Serbia

The Company’s sales in Serbia increased by NIS 3 million in the first quarter of 2013 compared to the corresponding period last year.  Following the shift to distribution and sales services by the Company (replacing the use of outside services), which began in 2012, the Company has continued to benefit from savings in distribution costs and from enhanced effectiveness of these services.

Israel

The Company’s sales in Israel decreased by NIS 13 million in the first quarter of 2013 compared to the corresponding quarter last year, mainly because of a smaller number of selling days in the quarter compared to the corresponding period.

The operating profit of Israel Coffee grew by NIS 8 million, mainly as a result of the sales mix and a reduction in head office costs, as well as the erosion of the exchange rate of the Dollar compared to its average exchange rate in the corresponding quarter last year and a decrease in the cost of Arabica compared to last year.

The Group’s Activity in Israel

The Strauss Group is the second-largest company in the Israeli food industry, and in the first quarter of 2013 according to StoreNext figures held a 12.1% share of the total retail domestic food and beverage market (on a quarterly average, in value terms) compared to 12.3% in the first quarter of 2012.  The Israeli market is the Group’s home market, where it is active in various categories.

Sales by the entire activity of the Strauss Group in Israel include sales by the Health & Wellness and Fun & Indulgence divisions, the coffee activity in Israel, Strauss Water Israel (Tami4) and Max Brenner in Israel.

In the first quarter sales by the Strauss Group’s entire activity in Israel totaled NIS 1,063 million compared to NIS 1,097 million last year, a decrease of 3.1%.

Strauss Israel

The Group develops, manufactures, sells, markets and distributes a broad variety of branded food and beverage products in Israel.  In line with the Group’s focus on the development of products and solutions preferred by the consumer, the Group’s products in Israel center on providing a response to two leading consumption trends, “Health & Wellness” and “Fun & Indulgence”.  This structure supports the Company in contending with the challenges in the business environment.

Following are the condensed results of business operations based on non-GAAP management reports of Strauss Israel by activity segments, for the quarters ended March 31, 2013 and 2012 (in NIS millions):

Strauss Israel has concluded a quarter of a slight decrease in sales coupled with a slight increase in the operating profit, attributed mainly to the implementation of streamlining processes and an improvement in the sales mix.  According to StoreNext, in the first quarter of 2013 the Israeli food and beverage market grew by approximately 3.9% in financial value.  In the same period, according to StoreNext, Strauss’s retail sales in Israel grew by 2.0% in financial value.

Sales

In the first quarter of 2013 Strauss Israel’s sales decreased by approximately NIS 16 million compared to the corresponding quarter last year.  Most of the decrease (approximately NIS 15 million) is explained by the Fun & Indulgence segment, and is mainly due to the decrease in the actual number of distribution days of dry products compared to the corresponding period last year as a result of the timing of Passover.

Gross profit

In the first quarter of 2013 Strauss Israel’s gross profit decreased by approximately NIS 3 million, with a 0.3% improvement in the gross profit margin, compared to the corresponding quarter last year.  The improvement in the gross profit reflects the continued streamlining processes implemented in production and an improvement in the Company’s product mix.  This improvement was achieved in spite of the rise in raw material prices compared to the corresponding period last year (mainly energy and raw milk – the price per liter rose by about 10%), which was offset in part by a revision of prices in a number of dairy categories by an average of 2.5%.

Operating profit

In the first quarter of 2013 Strauss Israel’s operating profit increased by approximately NIS 2 million and the operating profit margin improved by about 0.5% and amounted to 12.5% of sales.  The improvement in the operating profit margin is due to the improvement in the gross profit margin and to the continued streamlining of G&A and selling and marketing expenses.

The International Dips and Spreads Activity 

The Group develops, manufactures, sells, markets and distributes dips and spreads through Sabra in the USA and Canada, and through Obela in Mexico and Australia.  The activities of Sabra and Obela are each carried out through joint ventures between the Group and PepsiCo (each party holds 50%).  The Group’s holdings in Sabra and Obela are treated in the equity method.

Sabra

Following are selected financial data on Sabra’s activity (reflecting 100%):

According to IRI, Sabra’s market share in the 12 weeks ended on March 24, 2013 was 26.6% of the total refrigerated flavored spreads category (Number 1 in the market), compared to 24.0% in the corresponding period last year.   Sabra’s share of the hummus category in the same period was 57.5%, compared to 55.5% last year.

In the same period, according to IRI, Sabra led approximately 58% of the growth of the refrigerated flavored spreads category and 68% of the growth of the hummus category.

Sales

Sabra’s sales grew by approximately NIS 24 million in the first quarter of 2013 compared to the corresponding quarter last year.  Most of the growth in sales was due to significant volume growth in hummus sales.  Strong growth was also posted in sales of guacamole, fresh salsa and yogurt based dips. Sabra’s Classic Guacamole was the Number 1 SKU in guacamole in the USA in the four weeks ended on March 24, 2013.  By contrast, sales in Shekels were adversely impacted by the erosion of the average exchange rate of the Dollar in the first quarter of the year versus the Shekel (2% erosion compared to the average exchange rate in the corresponding quarter last year).

Operating profit

In the first quarter the operating profit increased by NIS 9 million, with a 3.1% improvement in the operating profit margin compared to the corresponding period last year.  The growth in the operating profit was mainly due to the improvement in the operating profit margin following various continued streamlining processes in production, and to the growth in sales.

Obela

Obela is active in Mexico and Australia and is expected to expand into additional countries in the future. Obela’s sales were initiated in the second quarter of 2012.  The company’s operations were launched in June 2012 with the opening of a new production facility in Mexico, to which the production lines from Sabra’s previous salad factory in Astoria, New York, were transferred.  In the second quarter of 2012 Obela acquired an existing refrigerated salads business in Australia from PepsiCo.  In the third quarter of 2012 expansion in Australia continued through the acquisition of the Australian company Copperpot, which specializes in refrigerated salads.

Following are selected financial data on Obela’s activity (reflecting 100%):

Obela’s sales in the first quarter of 2013 amounted to NIS 19 million.  The non-GAAP operating loss totaled NIS 9 million in the quarter, compared to a non-GAAP operating loss of NIS 7 million in the corresponding quarter in 2012.

Other Operations

The Group has activities which are included in the financial statements as the “Other Operations” segment. The main activities in this segment are Strauss Water and Max Brenner.

Strauss Water

Strauss Water engages in the development, manufacture, marketing and sale of systems for the purification, filtration, heating and cooling of drinking water for the home market and away-from-home consumption, on the basis of a long-term commitment to its customers.  Strauss Water developed the Maze technology, a breakthrough in the purification and treatment of water.  Strauss Water is active in Israel through the Tami4 brand; in the UK through a joint venture with the Virgin Group, under the Virgin Pure brand; and in China through a joint venture active in water solutions for the home between Strauss Water and the Chinese consumer electronics and home appliances giant, Haier Group, which operates under the brand Haier Strauss Water.  As at the date of this report, the company sells Strauss Water products in five cities in China – Beijing, Shanghai, Qingdao and Shenzhen, and in Taiyuan .

In January 2013 a new water purifier, the WaterMaker Young, was launched in China, which joins the WaterMaker Premium already sold in that country.  The new appliance does not require a connection to the water line, is sold at a lower price than the WaterMaker Premium, and is available in two versions: hot water/cold water or hot water/water at room temperature.

In the first quarter Strauss Water launched the Tami 4 Touch water bar, which has a new, colorful and convenient user interface based on quantity dispensing buttons and enhanced functionality offering the user a variety of dispensing options.

In the first quarter of 2013 Strauss Water’s sales amounted to NIS 104 million compared to NIS 99 million in the corresponding period last year, an increase of 5%.

Max Brenner

Max Brenner applies an operating model that combines branches operated under franchise with branches owned by the Company.  At the date of this report, forty-five Max Brenner Chocolate Bars are in operation in Israel and around the world: forty-one under franchise and four owned by the Company (in the USA: New York, Philadelphia, Las Vegas and Boston).  The Max Brenner branches are spread throughout Australia (31), Israel (6), the USA (4), Singapore (3) and the Philippines (1).  Max Brenner continues to invest in the development of infrastructure required to support the company’s operating model and plans to open new locations in the coming year.

In the first quarter of 2013 Max Brenner’s sales totaled NIS 30 million compared to NIS 35 million last year, a decrease of 14.7%.  Excluding the impact of the exchange rate and the sale of the five branches in Israel to a franchisee, sales in the quarter grew by 8.4%.

For further information: