Earnings call transcript: Strauss Group’s Q2 2025 Misses EPS Forecast, Stock Dips

Strauss Group reported its Q2 2025 earnings, revealing a significant miss on earnings per share (EPS) compared to forecasts. The company posted an EPS of 0.69, falling short of the expected 1.06, marking a surprise of -34.91%. Despite an 11.5% increase in net sales to 3.1 billion NIS, the stock saw a decline of 1.22% in pre-market trading, reflecting investor disappointment. According to InvestingPro analysis, the company is currently trading below its Fair Value, suggesting potential upside opportunity despite recent challenges. The company highlighted improvements in EBIT and market share but faced challenges from higher financing expenses and tax rates.

Key Takeaways

• EPS missed the forecast by 34.91%, contributing to a 1.22% stock decline.
• Net sales increased by 11.5% year-over-year to 3.1 billion NIS.
• Operating profit margins expanded, despite higher financing costs.
• New product launches and market expansion efforts were highlighted.
• Guidance for 2026 targets 10-12% EBIT margin improvement.

Company Performance

Strauss Group’s Q2 2025 performance showed notable growth in sales, with net sales increasing by 11.5% compared to the same quarter last year. InvestingPro data reveals the company maintains a strong financial position with a healthy current ratio of 5.25 and moderate debt levels. The company reported significant improvements in EBIT, driven by enhanced operational efficiency and market expansion. Strauss maintained or increased its market share in core categories within Israel and strengthened its position in the Brazilian coffee market. However, challenges in China’s online sales market persisted. InvestingPro subscribers have access to 7 additional key insights about Strauss Group’s financial health and growth prospects.

Financial Highlights

• Revenue: 3.1 billion NIS, up 11.5% year-over-year
• EBIT: Increased by over 60% to 240-255 million NIS
• Net Debt to EBITDA Ratio: 2.4
• Market Share in Israel: Increased to 35.1% from 34.1%

Earnings vs. Forecast

Strauss Group’s EPS of 0.69 fell short of the forecasted 1.06, resulting in a negative surprise of 34.91%. This marks a notable deviation from previous quarters, where the company had either met or exceeded expectations. The shortfall is attributed to increased financing expenses and higher tax rates, which offset gains from operational efficiencies.

Market Reaction

The market reacted negatively to the earnings miss, with Strauss Group’s stock price declining by 1.22% in pre-market trading. This movement contrasts with the company’s 52-week high of 9,698 and low of 5,555. The decline reflects investor concern over the earnings miss and its potential impact on future performance.

Outlook & Guidance

Looking ahead, Strauss Group is targeting a 5% annual growth rate and is reviewing its EBIT margin target of 10-12% for 2026. InvestingPro analysts forecast a robust 75% revenue growth for FY2025, suggesting strong momentum in the company’s growth initiatives. The company anticipates improved performance in its Fun and Indulgence segment and sees growth potential in milk alternatives and water purification markets. New product launches and capacity expansions are expected to support these targets. For detailed analysis and comprehensive valuation metrics, investors can access the full Pro Research Report, available exclusively to InvestingPro subscribers.

Executive Commentary

Shay Babad, CEO of Strauss Group, emphasized the company’s strategic shift toward becoming a multiproduct company. "We are a purpose-driven company, and our purpose is nourishing a bit of tomorrow," he stated. Babad also highlighted the company’s efforts to close the gap between green coffee prices and its pricing in Brazil, as well as its expansion in the water business.

Risks and Challenges

• Higher financing expenses and tax rates impacting net income.
• Volatility in the coffee market and stabilization of cocoa prices.
• Competitive challenges in China’s online sales market.
• Potential supply chain disruptions affecting productivity initiatives.
• Macroeconomic pressures that could influence consumer spending.

Q&A

During the earnings call, analysts inquired about the new Jotvatta facility’s impact on market demand, with expectations to address 20-25% of unmet needs. Questions also focused on potential relief in commodity pricing, particularly cocoa, and the limited impact anticipated from JDE Peet’s acquisition.

Full transcript - Strauss Group (STRS) Q2 2025:

Rifka Neufeld, Head of Investor Relations, Strauss Group: Welcome to Strauss Group Second Quarter and First Half Year of twenty twenty five Results Earnings Call. On our call today, management will provide a review of the results, followed by a questions and answer session. You are encouraged to post your questions to the Q and A function in the Zoom. As a reminder, this online Zoom earnings call is being recorded Tuesday, 08/26/2025. A recording of this call will be available on the company’s website a few hours after the call.

I would like to remind everyone that this online webinar may contain projections or other forward looking statements regarding future events or the future performance of the company. These statements are only predictions and may change as time passes. Strauss Group does not assume any obligation to update this information. Actual events or results may differ materially from those projected, including as a result of changing industry and market trends, reduced demand for our products, the timely development of our new products and their adoption by the market, increased competition in the industry and price reductions, as well as due to risks identified in the documents filed by the company with the Israeli Security Authority. On line with me today are Mr.

Shay Babad, Strauss Group’s President and CEO and Mr. Toby Fishbein, Group CFO and myself, Rifka Neufeld, Head of Investor Relations. We will begin with a review of the quarterly results by CEO, Shay Babad, and then move on to the financial highlights of the quarter presented by CFO, Toby Fishbein. We will then move on to a Q and A session. Shay, the floor is yours.

Shay Babad, President and CEO, Strauss Group: Thank you very much, Rivka. Thank you very much, everybody, for joining us today. In the following presentation, I will try in the next fifteen to twenty minutes to give you some overview and the primary events in our business results for quarter two twenty twenty five and for the 2025. So let’s get started. Yeah.

We’ll be going through some difficulties, some technical difficulties, which will be solved in a sec. In the meantime, you can hold back, relax. Great. So let’s get started. As you know, we are a purpose driven company, and our purpose is nourishing a bit of tomorrow.

And every quarter, we try to find what we did to serve our purpose. So there are three major events this quarter that we thought that we we should highlight in in serving our purpose. One is, unfortunately, we had the war in June with Iran and and trying to maintain business continuity, taking care of our frontliners in the South and in the North Of Israel, and also taking care of our employees, and also making sure that all our customers receive all the food that we produce and all the products that we produce on time without delays, I think is something which was very, very important and is part of the food security that we provided to the State Of Israel. Second thing that we’ve done this quarter was also gluten free line of products in our confectionery business. We actually took the whole line of products that we have in our confectionery and made them gluten free, which is of course very, very important to the audiences and the consumers that are gluten free.

And third, we published our ESG report with our ESG focuses and we’ve got the platinum rating on our ESG report. If we look at the highlights of the quarter, so we can see that there was a very strong growth this quarter. If we take out if you look at platform activity and we take out Sabra and which we sold last year and Serbia, in the coffee business that we sold last year, we have about approximately 17% growth platform from quarter to quarter. And if I remember correctly, 13% without that, which is very, very strong growth. Most of this growth was led by price increase, but not only, also by quantities and volumes that we increased.

If we look at our EBIT operational profit here also, we see very, very strong results, more than 60% improvement from approximately 180,000,190 million to $240,000,002 €55,000,000 depending if you exclude or not exclude our operations in our kitchen. If we look, although so EBIT wise, we did do a tremendous improvement. But when we look at net income and we look at our cash flow, here there was a big gap. And when we try to understand what was the gap between the EBIT and the net income, it comes from financial expenses and from taxes. In the financial expenses this quarter, when it comes to the strengthening of the shekel and our hedging activity on the shekel here is where we suffered, and and Toby will elaborate on that later on.

Here is where we suffered what we think is not part of our platform activity, but more of an ex organic onetime events that affected the net income. And the other effect was the tax issue because we gave we were given a dividend from the Sabra deal that happened, and we got the dividend in the second quarter. This had an impact on our ability to deduct taxes this quarter and had and therefore, our tax percentage this year this quarter in our solo was much higher than we usually have. And those two effects, of course, led to a lower net income. On our productivity, we are on journey.

We can see that our productivity helped us receive the high EBIT that we finished in Q2 and we see that what we set in the strategy to do is actually taking place. We also continue to executing our strategy in our core activities and our core categories with a big turnaround in Brazil, which I’ll emphasize on later on, and we also see there that we are on track. Madrug, Moody’s actually upgraded our outlook to stable, affirming our AA1 rating from negative to stable, and this was also very good news for us. And we did a successful expansion of our Bond series and raised ILS $465,000,000 in a very good raise with very good margins. When we look at the results here, so we talked about the net sales and the growth in it.

So it’s the first time, by the way, that we crossed the ILS 3,000,000,000 barrier for a quarter. I think that for this quarter, the SEK $255,000,000 is a kind of a record for Strauss definitely in the past, I don’t know, five, six years. But when we look at the net income, here is where the gap, and we discussed it before. And we also see one thing I would like to emphasize, you can also see that there’s a huge gap when we took H1 from 153,000,000 for the whole half in this half twenty twenty five compared to H1 twenty twenty four, sixty million out of that are tax assessments that last year we got a refund for, and this year we didn’t have them, and it’s part of the gap. One other thing that I would like to emphasize here is the cash flow.

Although we did better than last year in the second quarter, and we see the trend, still the cash flow is very low. We are expected to be on a positive cash flow towards the end of the year and to continue to improve that dramatically. What happened in the first quarter, and we discussed this first quarter, is the working capital, the effect of the cost of material cost of materials and material goods. And there, we saw that the coffee prices, especially in Brazil, green coffee prices, affected a lot of the working capital and therefore affected our free cash flow. Here we just see the prices and what happened to the prices in the last three years.

It’s a huge and drastic jump in Robusta, in Arabica and also in cocoa prices. If we look quarter to quarter, the only place where we see a small reduction is in cocoa prices. Yet it’s very important to emphasize here is that those are the spot prices What we, of course, have is inventory prices and also prices of cost of goods of cocoa that comes from also the inventory and also from hedging activity that we have. And therefore, we actually experienced an increase in costs of goods for cocoa in quarter two, and hence the results of funding indulgence, which I’ll discuss soon.

When we look at the results of Israel, so here Strauss, Israel, we saw we see a nice growth of 9%. Some of it is volume, some of it is price increase. We also see that when we look at Health and Wellness, the segment did really well with increase of sales, but also a very nice increase in EBIT. And when we look at funding indulgence, here is where we see the problem. Although here you don’t see it, you see from minus twelve:one, but last quarter, last year, we had a EUR 27,000,000 hedging activity in cocoa that we lost.

And therefore, if we want to compare apples to apples, so it’s like plus 15 to plus one. The reasons that funding dodgement has deteriorated is because this quarter we actually faced the highest of all the last quarters cost of goods of cocoa, which of course affected our results. Looking forward, there are two action plans that we took in place in order to make sure that we improve this. One, we raised prices in Israel from the July 1 of our confectionery. And second, since you saw there is a reduction of cocoa in the past few weeks, we actually extended our hedging activity in cocoa so that in the next few quarters due to the decrease in cocoa prices and due to our hedging activity and also due to the fact that we raised prices, we are expected to substantially increase our profits and our margins in Fun and Indulgence.

And when you look at coffee in Israel, it’s it was a very good quarter. We actually also got volume increase in coffee, especially in Roasted and Ground, which is was more stable and even decreasing in the past quarters. And this quarter, we actually managed to increase it and hence a nice increase in sell. In EBIT, as you can see, there’s not a huge improvement. The reason that it stayed the same is due to the fact that coffee prices have increased drastically, and this, of course, has an effect on our business.

Looking forward also here, we had a price increase in coffee in our coffee segment here in Israel, which will help us also improve profits and profitability. If we look at our brands in Israel, so I’m happy here to say that we manage in all our core brands as part of our strategy to focus on the core, to increase our market share in all our major brands, whether it’s the coffee, whether it’s the confectionery, the snacks or confectionery chocolate tablets, whether it’s the milk drinks, whether it’s our yogurts or desserts or whether it’s our salty snacks. In all in most of our core categories, we increased market share. In the overall market share of all our categories in Israel, we increased by one point. Last year, we were 34.1%.

This year, we are 35.1%, and this is in spite of the price increase that we had in some of the segments, a little bit in the milk segment, but a lot in the confectionery and coffee business. When we look at our international coffee business, so here is the major turnaround in our delivery of our strategy. We were able to close the gap between the raise of green coffee prices and our pricing in Brazil. And what happened is that the profitability of our R and D business in Brazil raised dramatically. And here you can see that there is a huge jump from last quarter from NIS 61,000,000 to NIS 102,000,000.

In profit, soon we’ll see Brazil. Most of this comes from Brazil. And of course, there’s a 30% increase, almost 30% increase in sales, which again, most of it, if not all of it, comes from the price increase that we had, some of it in Central And Eastern Europe and most of it in Brazil. And you can see the start we started the margin improvement in our international coffee business. And our challenge for our next few quarters is to maintain that, although coffee prices have increased lately by 20% in the past two weeks, is to continue to push price forward when we can and to maintain the high prices so that the margins remain high.

If we go to Brazil, so here you can actually see the very good results in the second quarter of Brazil. Brazil have reached an 8% EBIT margin with 88,000,000 profit in a quarter. This is records high ever of our Brazilian business. And most of it was able because of our ability to roll the prices to the consumers. In Brazil, we increased prices in the past year by 100% on our R and G portfolio, 100% price increase in one year.

And since coffee prices green coffee prices have actually stabilized a little bit, we’ve managed to get the profits up and margins up to 8%. You can see the difference between both quarters. This also includes our non R and D activity, which is very profitable, which is on double digit profitability and is growing according to the strategy. In the first if you look at the first half, you can see that the first half is also much better than last year, but the major jump was on the second half, 30,000,000 were produced in the first quarter and €88,000,000 were produced in the second quarter. And a lot of it most of it is due to the pricing activity that we took place in Brazil.

Another important point to say in Brazil is that we did all that. We increased prices by 100% and increased profitability and also increased market share. So we actually strengthened our position as the number one player and increased our market share by approximately 1%. If we look at our world business, and here we are also mainly up to track. There’s a small increase in sales.

We were expecting to get a high increase in sales. The reason that sales didn’t increase as much as as as we wanted is due to the war in June in Israel. Sales, of course, in our water business was lower in that period. And also in China, and I’ll speak about China in a second, competition is increasing. This has affected, of course, also the EBIT.

We wanted and we expected a higher increase in EBIT, but mostly the business is growing as we expect. There was a huge turnaround in The U. K. With good results in The U. K.

Our business in China has continued to grow, and the company is working on from becoming a single product company to a multiproduct company. And we will launch We already launched two new machines, one soda machine and another one in under the sink machine here in the Israeli market. And I’ll talk about later on a new launch that we’re going to have soon, but the company is shifting. And from one product, we are going to be a multiproduct company already with three two new products in the market. There’ll be an additional two to three new products this year from a different price range and also different variety of functionality, which will help us grow the business in Israel, but also bring that into our international joint ventures and grow the business further there.

If we look at China, so here you can actually see a decrease in the net income. By the way, the net income here, as you know, is consolidated into the EBIT of the total company. There’s a decrease and not much increase in sales. The reasons for that is that Xiaomi, our competitors in the past two quarters have done a very good job in the sales online. They actually became number one sales online with new platforms of water purification systems that they brought into the market.

And what we have done in order to retaliate is also to give a lot of discounts discounts on the one hand. On the other hand, we some CapEx investments into new platforms that we’re going to put on the online. And looking forward in the next quarter or two, we think there’s going to be a tight competition in order to regain our position back in the online sales in China in our journey to become the number one player in China. Right now, we are between number two or number two to three, and we want to get back to and we want to get to being number one. And in that journey, we will continue as we invested in our factory in a second factory in China, which will help us many which will help us grow further, which will help us bring new platforms of products into the market.

And for us, here, China is a huge potential of the market. When we talk about our productivity, so we are on track. We set in our strategy to bring between 300,000,000 to $400,000,000 in productivity. We can say that we are on track. And the second thing we can say is that we can already see in the results of this quarter, the improvement in our EBIT and the improvement in our operating profit, which partially part of it, a big part of it is a result of our productivity activity.

It comes from the different streams that we have of changing how we do things, of bringing digitalization, of bringing new methods, of bringing new tools into the company, and also training our people and changing the mindset. It goes in procurement. It goes in our revenue management, in operational excellence, in logistics, in supply chain, everywhere across the company. And I can say that we are on track and even I think we will be able to exceed. And now just a few words about looking forward, moving forward for to the next quarter or two things, engines of growth that we have ahead of us.

I’m very, very happy to announce that our factory that we build in the North For Milk Alternatives for alternative milk has actually launched, and first products will be in the market in the next few weeks, and it started production. This is very, very, very exciting for us. It’s a new factory, a new plant that we invested a lot of money in, and it will help us bring new variety of products into the market. It will help us also live to our purpose of nourishing a better tomorrow with serving the audience and serving the consumers with different variety of alternatives with the very, very good and strong brand that we have with our partners with Danone of Alpro, but also to give our products, trials products in the milk alternatives version. And this is a huge engine of growth for us.

The second growth engine which we are very part of is that today most of our milk drinks are sold by in the South. And unfortunately, for the last year or even more than a year, we had capacity constraints, which means that we have 2520% to 25% more demand than we can serve, which means we are leaving about 20 of sales, 2025% of sales on the floor without being able to serve it. We will be able to grow with the current capacity that we had due to productivity that we have done in operations by increasing the OEE of our lines. But now in the last quarter, we’re going to install the new line in Jotvatta, which will increase dramatically our capacity. Hence, we are expecting to have a huge jump next year in our sales in our milk drinks division.

And in our water business, a huge new launch is expected in the next few weeks. We call it the Shabbat machine for Orthodox Jews and for the Orthodox community. It it will be a water purification machine that can be also used in Shabbat for religious people. In Israel, it’s a very, very, very big segment, but also in The US. And we think that this machine in Israel is gonna boost sales for our water business here in Israel on the one hand, and later on can also be taken on Israel for the Jewish community around the world, the religious Jewish community around the world.

And just in a glance and summing up, when we look at our strategies, so you can see that we have a very strong focus on our home base. We managed to grow market share. We managed to improve profitability, putting aside funding indulgement, which, as I said, cocoa prices have kind of diverted or or delayed our plans. But with the price increase and with our hedging activity and with cocoa current current cocoa prices that we see now going ahead, we think that this will get back on track. Definitely by the 2026, we’ll be on track to what we promised to deliver.

So overall, Israel, with the focus on the core, with the focus on the major brands, is on track. When we look in Brazil, coffee and beer, and I’m happy to say that the you could start already start to see the results of the turnaround. A lot of it is due to the price increase. Some of it is due to the non RNG activity that we are expanding and growing in Brazil and also productivity that is done in Brazil. And Brazil has been growing way more than 5% that we put in the strategy, but also improving its profitability and improving our profit.

And if we look at our international water business here also, we see that the company has continued to grow quarter over quarter over quarter. And we also see now the shift from a single product company to a multiproduct company. It will start in Israel, but then we wanna take it globally. And we think that with the new products that we are have launched and also will launch, it will help us grow the company even further with the turnaround also that we’ve done in UK. And all of that is on the base of becoming future ready and resilient, which is our productivity and resiliency and performance, which you you saw already that we improved on the one hand and on also on the health and our people, the culture.

There’s been a lot of work. I haven’t talked about it here now, but we talked about it before in the strategy. There’s a lot of work done on changing the culture of being more execution oriented, of becoming more future fed, of making sure that our people are aligned to everything that we’ve done. And that work together with productivity and together with the three inches of growth that you see here, home base, coffee and water, we are managing to execute our strategy. Next slide.

Last slide. And with that, I’ll finish. So from the targets that we set in the strategy, we believe that in four of them, we are definitely on track. Top line growth, I think we already exceeded the 5% growth for 2024, 2026, although 2026 haven’t happened I’ll jump to the third one. Productivity, we’re on track.

We believe we’ll achieve this target. CapEx, we are achieving this target and also focusing on the core. We believe that we will achieve 85% of our activity will be core with the sale of Sabra, sale of Servia, and the fix around and the turnaround of what we found in indulgence, we believe we will be there. Last target that we still have a question mark, we are not changing it yet because we don’t have anything different, but we will have a definitely very big look at it, is the 10% to 12% EBIT margins in 2026. You can see that we’ve started improving our margins substantially.

We started another process of building 2026 budget. We will look to that into that very deeply in the next few months, and we’ll see whether we can achieve this target. I just wanna put a star next to it that when we set the targets, we talked about a 5% growth each year. We didn’t look at the cost of goods inflation that we encountered in the past three years, which led to a much higher growth in 5% due to the pricing that we have done. Now of course, if you price and you only cover the cost of goods through that pricing, and pricing as in Brazil was 100%, the only thing you do is just cover the cost, and therefore, the EBIT margins are declining.

So with that substantial growth that we are going to show for 2024, 2026, we’ll have to see whether we can maintain the EBIT margins of 10% to 12% or whether we can maintain the EBIT number that we thought that we can get to if we would have grown only 5% onwards. This is yet to be seen. For now, we are leaving the target as it is. Once we’ll do the budget, we’ll have more to say. And with that, I’ll transfer to do the deep dive into the results to Toby.

Toby, the floor is yours.

Toby Fishbein, Group CFO, Strauss Group: Thank you, Shay. Looking at the quarter sales more closely, we see continued growth in all segments, amounting to an 11.5% year over year increase in net sales for the group to 3,100,000,000.0, with the most significant contribution coming from COF International, especially Brazil. Excluding the impact of a stronger shekel, group net sales increased 15.5%. On the right hand side, we see that COF International became our largest business segment in terms of net sales after achieving significant growth during the quarter. Moving to the sales of the first half of the year on the next slide, we see similar trends as in the second quarter.

On slide 23, it is important to note the impact of the previously announced loss on cocoa derivatives, which totaled 49,000,000 shekels in 2025 and shekels in 2024. Excluding this impact, gross profit was stable in the second quarter and declined slightly in the first half of the year. Turning to slide 24. The group delivered significant improvement in EBIT in both Q2 and H1. Higher operating profit and margin can be attributed to the higher net sales achieved and ongoing productivity measures, and despite the impact of raw material price inflation.

Looking at the next slide, we can see operating profit and margins achieved by business segments. Excluding the one off cocoa derivative impact, Strauss Israel also improved EBIT versus 2024, with a similar margin of 10.3%, while in the first half of the year EBIT also improved with a slightly lower margin of 10.9% in comparison to 11%, despite much higher green coffee and cocoa input costs. On Slide 26, we see that higher financing and tax expenses led to lower net income both in the quarter and first half of the year. Financing expenses increased in Q2 by NIS 57,000,000, of which NIS 42,000,000 were attributed to the impact of the stronger NIS on FX hedging and FX differences as of 06/30/2025. The smaller part of the increase in financing expenses was due to higher interest paid, mainly related to financing working capital and higher interest rates in Brazil.

In the first half of the year, out of the 57,000,000 increase in financing expenses, 33,000,000 were attributed to the stronger NIS. This means that we saw both in Q2 and 2025 financing expenses which were above the normative level we should see were it not for the shekel appreciation. Taxes were also higher in the 2025 and the first half of the year, reflecting tax income and a lower than normal effective tax rate recorded in 2024, following the release of provisions due to tax assessment completed, as well as profit mix in 2025, which resulted in a higher effective tax rate than we would expect going forward. Looking at the free cash flow on slide ’28. In the second quarter, we saw an improvement both versus Q2 of last year and Q1 of this year, with less cash consumed, supported by higher EBITDA and lower tax payments, and despite higher financing expenses and CapEx.

On slide 29, net debt and the gearing ratio increased slightly in comparison to 2025, mainly due to working capital needs and dividend payments, but were lower than the second quarter of last year. Our leverage remains at a healthy level, with net debt to EBITDA ratio at 2.4, and we expect it to go down during the second half of the year. The recent upgrade to stable outlook and confirmation of our strong AA1 rating from Midrug further reflects our strong financial position. Let’s now take a closer look at our segments, starting with Strauss Israel. Sales in the 2025 reflected growth across the board, supported by improved sales mix, higher volumes as well as some pricing.

Looking quarter over quarter, in 2024, we still consolidated the fresh vegetables business, which was divested in December, and it should be noted that during June our retail coffee elite retail activity was divested as well. Moving to the sales in the first half of the year, see a similar picture. Moving to EBIT on slide 34, as mentioned, we saw the impact of the previously announced cocoa derivative loss on the funnel indulgence sector. When excluding this loss, the impact of high cocoa input prices continued to impact the results. Moving to Coffee International on slide 36.

We see strong growth in sales that was driven primarily by pricing. These sales growth mostly offset green coffee input cost inflation, while operational efficiencies supported margins. Moving to slide 37, we can see the geographical breakdown of sales. And sales growth was achieved across the board with most regions maintaining market share and even improved market positioning in Poland. On slide 38 we see a very similar picture for the first half of the year.

However, here we still see the impact of volume growth in the 2025 in certain geographies. Moving to the water business. On slide 41, we see four to 5% top line growth in Q2, as well as in H1 of this year, driven by higher installed base, higher sales both in Israel and The UK, and better sales mix, while these were moderated by the impact of the war with Iran in terms of the activity in Israel. It is worth noting that the gross profit was positively impacted by exchange rates and productivity measures, while higher Strauss Water contributed lower equity gains, as Shay explained before. With that, we conclude management’s presentation and we will open the call for questions.

Rifka Neufeld, Head of Investor Relations, Strauss Group: Thank you very much. The first question we have is from Chris Reimer from Barclays. What are the expected benefits of the new Jotvita facility? And can you give any color on the market for alternative milk?

Shay Babad, President and CEO, Strauss Group: So the new benefits, as I mentioned in my presentation, is that today, there’s a demand for at least another 20%, 25% of sales which we don’t give an answer to, we don’t deliver on. And therefore, the market is always lacking and consumers are always lacking quantities in the different retailers. Hence, with the new line, we’ll be able to meet market demand and to have a substantial jump in our sales immediately in volumes and, of course, in value. So this is a huge benefit, and of course, that will bring also extra EBIT and also improve the margins. So this is regarding that.

And some light on the alternative. The alternative milk market in Israel is quite huge. It’s getting to be 1,000,000,000 market. Our position in that market is quite low. We are approximately 17%, 18% market share.

The main reason is that we didn’t have manufacturing abilities. We have very, very strong brands. We have the Alpro brand, which belongs to Danone, which is worldwide known but also known in Israel. But our ability to produce it and to sell it in Israel was limited because we didn’t have our own production facility. Now that we have our own production facility, we will be able not just to do Alpro and alternative milks.

We will be able to take our yogurts and our desserts, which is a huge market today, and we are the market leader there, and to actually give our brands also in in in milk alternatives, which is also big news. So we think that both of those things are, for the next few years, are very good and substantial engines of growth to our business here in Israel.

Rifka Neufeld, Head of Investor Relations, Strauss Group: Thank you, Shay. The next question: what, if any, relief are you seeing in commodity pricing? And are you having any success with diversification in sourcing?

Shay Babad, President and CEO, Strauss Group: So we see some relief. Of course, as I mentioned before, we see that in coffee prices, we’ve managed to it’s kind of maintained and we managed to roll the prices. We are not happy with the last two, three weeks, again, increasing coffee of the 20% that was an increase, but we believe that we’ll be managed to handle it. When we look at cocoa prices, we will see future relief. If cocoa prices cocoa prices at their at their highest were around 11,000, 12,000, and and now they are back to around 5,300, if I remember the price today.

So it’s a huge decrease on the one end. On the other hand, they started up from 2,000, 2,500. So they’re still very high. Yet with prices of 5,000, 5,500, we believe that there’ll there’ll be a huge relief and that we’ll see funding indulgement segment, as I mentioned before, with the pricing activity that we took that took place on the July 1, get back on track and do the full turnaround. And yes, we do the diversification of sourcing, especially in cocoa, which we change all our methods of sourcing the past few months.

And also the ratio that we source because in cocoa, for the ones who know, there’s the price of cocoa, also the ratio that you pay. So we managed to improve the ratio and also to improve the price. So we believe that all those segments will give us some kind of relief. And looking in the next few quarters, we are expecting to see that come into place in the results.

Rifka Neufeld, Head of Investor Relations, Strauss Group: Thank you. One additional question that we received is how do you see the impact of the acquisition of JDE Pete by Keurig on the markets the group operates in?

Shay Babad, President and CEO, Strauss Group: So I think that on the market that the group operates in, there will not be much impact because the huge competition that will probably be, as was written in all the analysis that was made on this, is with Nestle in The US. And I think that there there that that’s where the biggest impact will be. In Brazil, it’s mostly an RNG market. JD is already there. We don’t see that the the new joint venture, Doctor Pepper, is going to bring something new to Brazil that will will enhance the competition there the way we look at it.

And the second market is Israel. And also in Central Eastern Europe, we don’t see much effect in the countries that we operate because JD is already a competitor there in all the places that we operate. So we don’t see a big change for us in the geographies that we are operating. Toby mentioned to me one remark, which is very important. We are happy to see the multiple that was given due to that, and the multiple that was given to the coffee business.

And although we are in Brazil and in Israel, it’s not the same geography as The US, we hope that you will adopt that multiple also in your models for our coffee businesses in Brazil and elsewhere.

Rifka Neufeld, Head of Investor Relations, Strauss Group: Thank you. These are all the questions we received for today. So I will now return the call to Shay for closing remarks.

Shay Babad, President and CEO, Strauss Group: So again, thank you very, very much for joining us here today. I think that what we see from the results is a, there’s a very, very strong growth and the ability of the company to grow in quantities, but more important, to deal with the challenges of inflation of cost of goods and to roll those prices into the consumers. B, you mentioned, see, that we managed to implement our strategy and also to through our productivity activity to do turnaround to some of our businesses and to bring their margins up and to and their profits up such as Brazil. Yet we still have to interpret that into the last line of the net profit, and we think that the onetime event, as Toby mentioned and I mentioned in my presentation, of the financial cost because of the Shekel and the taxes because of the assessments and dividend from Sabra, those are things we don’t think will follow-up in the next few quarters. And we hope to see and we expect to see an improvement there.

We are expected to continue to push on our core activity to get back on track on executing our strategy. And I think that this quarter is a good example of already the delivery and the execution of things that we talked in the strategy and coming up into life. And thank you very, very much, all of you, for joining us.

Rifka Neufeld, Head of Investor Relations, Strauss Group: Thank you for joining Strauss Group’s Q2 H1 twenty twenty five earnings call. With that, we conclude our call. Thank you.

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