Strauss sees salmonella affair lopping one third off profit

Ofra Strauss and Giora Bardea  credit: Eyal Izhar

Strauss Group estimates that the product recall and the shutdown of its Elite factory will reduce profit by NIS 170-230 million in 2022.

Strauss Group (TASE: STRS) has released initial estimates of the financial consequences of the recall of its products and the shutdown of the Elite chocolate factory at Nof Hagalil, following the discovery of salmonella in the factory's products. Strauss Group notified the Tel Aviv Stock Exchange of the expected impact on its financial results for the first quarter and for 2022 as a whole.

Strauss Group, headed by Giora Bardea and controlled by the Strauss family, estimates a hit to consolidated net profit in the first quarter financials, due to be released at the end of this month, of NIS 115-215 million.

The estimate takes into account loss of sales revenue because of refunds to customers, the cost of collecting recalled products from stores, destruction of stocks, the cost of compensation to consumers as determined by the company, and other ancillary costs, and also the tax effect. The company makes clear that at the moment the figures are estimates only, based on the known facts at this time, and that the estimates have not been approved by the company's authorized bodies.

Strauss Group sees a hit to annual profit of NIS 170-230 million, based on estimates of the cost of restoring the Elite factory to full production capacity, loss of profits during the time that the factory is out of action, other ancillary costs, and estimates of insurance coverage for some of the damage sustained by the company.

According to Strauss Group's annual report for 2021, its share of the chocolate bars market in Israel was 52%. In 2021, revenue from the confectionary and baked goods segment was NIS 850 million. The food company's net profit rose 16% in 2021 to NIS 639 million. Revenue totaled NIS 8.75 billion, representing growth of 4.8% in comparison with 2020.

Strauss Group says that at present it is unable to estimate the future effect of the salmonella affair on its market share in confectionary, and that this will partly depend on when the factory reopens, and also on indirect effects of the product recall event.

The company also said that it was unable to estimate the outcome of lawsuits in connection with the product recall that have been filed and that might be filed in the future.

Published by Globes, Israel business news - - on May 12, 2022.

© Copyright of Globes Publisher Itonut (1983) Ltd., 2022.

Ofra Strauss and Giora Bardea  credit: Eyal Izhar
Ofra Strauss and Giora Bardea credit: Eyal Izhar
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