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Growth in coffee sales in Brazil, Russia lifts Strauss Group results

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Success in selling coffee to Brazilians, coupled with a one-time boost, helped Israel-based Strauss Group report a 35% surge in quarterly earnings - although the group’s shares eased back from record highs.


Strauss Group, whose coffee brands include Ambassador and Doncafe, reported attributable earnings of 125m shekels for the July-to-September quarter, up from $92m shekels a year before.


The extent of the gain reflected largely the purchase of TPG Capital Management’s 25.1% stake in the group earlier this year for E257m, with operating profits up by just 3.4%.


Strauss Group also reported a 39% jump year on year to 2.29bn in its debt level.


However, the company flagged “outstanding results” in coffee, its main earner, which saw operating profits rise 8.5% to 122m shekels for the quarter, with growth outside Israel at 10.5%.


Brazil, Russia growth


The coffee division achieved sales that Strauss also termed “outstanding”, up 12.2% year on year, down “mainly to increased volumes in Brazil and Russia”, besides higher prices “in most geographies”.


In the former Soviet Union, Strauss’s second largest market, sales rose 9.3% to 160m shekels, thanks to growth in both volumes and prices “despite a continued competitive environment”.


In Brazil - where Strauss has a 50% stake in Tres Coracoes, the country’s top coffee operator in the retail market – sales rose 22.3% to 565m shekels, with operating profits growing even faster, “despite continued economic and political unrest”.


Key market


Indeed, Tres Coracoes - in which Brazilian family-owned firm São Miguel owns the other 50% - claimed a share of 25.2% of the country’s roast and ground coffee market in the quarter, Nielsen data showed.


That represented a rise of 1.0 point over the past three months for a market which is becoming a key battleground for the global giants, with Jacobs Douwe Egberts highlighting it earlier this year was one in which it is seeking double-digit growth.


Meanwhile, Strauss’s coffee price rises come against a mixed market for raw beans, with average values of arabica coffee so far this year, at 135 cents a pound, marginally lower than the 136 cents-a-pound average for the whole of 2016, the group said.


Robusta coffee bean prices have averaged $2,088 a tonne so far this year, above the $1,742 a tonne seen for the whole of 2016.


‘Robustness and stability’


Gadi Lesin, the Strauss Group president, said that the company “continues to post excellent financial results in all key metrics.


“The results of our operations in key countries,” combined with a strategy of focusing on core businesses, “have generated robustness and stability the group can continue to build on”.


Nonetheless, Strauss Group shares, which closed the last session at a record high of 7270 shekels, eased 1.0% to 7,99 shekels in afternoon deals in Tel Aviv.

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