Strauss to Slow Growth Abroad as Shares Slump: Israel Overnight
Strauss Group Ltd. (STRS), the Israeli food maker that gets more than half its sales overseas, will slow its international expansion as the European debt crisis curbs global growth, Chairman Ofra Strauss said.
“We will really do more in the countries in which we operate and I doubt we’ll enter into new countries in the next year,” Strauss, 51, said in a Bloomberg Television interview yesterday from New York. “It’s the side effects of the economic situation in Europe.”
Shares of the country’s second-biggest food producer are down 15 percent this year, headed for their worst annual drop since 2008. Smaller rival Osem Investments Ltd. (OSEM), which is owned by Nestle SA, has dropped 7.7 percent this year. The Bloomberg Israel-US 25 Index of the largest New York-traded Israeli companies rose for a third day, led by Teva Pharmaceutical Industries Ltd. (TEVA)
Strauss oversaw a tripling of revenue during her decade running the company, spearheading its push into the U.S., eastern Europe and Brazil as the stock rose 91 percent. She has been ranked by Fortune and the Financial Times as one of the world’s most influential women in business, and led the company’s response to Israeli protests over the high cost of living earlier this year by cutting prices for some products.
Concern Europe’s debt crisis will curb demand for Israeli exports has pushed the Tel Aviv’s TA-25 Index 18 percent lower this year. The Bloomberg Israel-US 25 Index rose 0.7 percent to 84.83 by 11 a.m. in New York, paring its annual drop to 18 percent.
The company’s revenue hasn’t been hurt because most of its stores in Europe are in the eastern half of the continent, which has been less affected by the turmoil, Strauss said.
“The big question for us is whether and how the eurozone will affect Russia, Poland, Romania,” said Strauss, who oversaw 12 acquisitions totaling $767.8 million during her time running the company, according to data compiled by Bloomberg.
Teva, the world’s largest maker of generic drugs, may profit on sales of versions of Pfizer Inc.’s Lipitor without being involved in the medicine’s production or marketing. The shares rose 0.6 percent in New York to $39.97.
Teva will share profit from the first six months of sales under an agreement with Ranbaxy Laboratories Ltd. India’s biggest drugmaker didn’t disclose terms of the agreement when announcing U.S. clearance to sell generic Lipitor yesterday. Denise Bradley, a spokeswoman for Petach Tikva, Israel-based Teva, said Teva isn’t supplying ingredients for the copies, which will be made by Ranbaxy, said Denise Bradley, a
Nice Systems Ltd. (NICE), an Israeli company that provides analytical tools for recording service transactions, agreed to buy Merced Systems Inc. for about $150 million to expand its offerings.
The acquisition of Redwood Shores, California-based Merced gives Nice access to the U.S. company’s customer list, which includes Coca-Cola Co., Bell Canada and Dell Inc., Nice Chief Financial Officer Dafna Gruber said by phone.
Nice gained 2.2 percent to $34.71, the highest level in two weeks. The Tel Aviv shares added 1 percent to 126.60 shekels, or the equivalent of $33.87.
Strauss has outperformed Israel’s benchmark index this year and trades at 27 times estimated earnings, almost three times the 9.9 average for members of the TA-25 Index. (TA-25)
Strauss said the protests in June and July that drew more than 250,000 people onto the streets of Tel Aviv will affect the Petach Tikva, Israel-based company because of the price cuts of as much as 12 percent for some of its dairy products.
“Like in the rest of the world, we saw some demonstrations, social unrest over the cost of living,” Strauss said. “We decreased some of the prices of our products to do the right thing for this situation in Israel and of course it will affect us.”
The demonstrations and boycotts, which started as prices for cottage cheese climbed, prodded closely-held Tnuva Food Industries Agricultural Co-Op In Israel Ltd., which controls about 70 percent of the dairy market, to cut its recommended selling prices by as much as 15 percent.
Strauss said Nov. 16 that third-quarter net income rose to 47 million shekels ($12.6 million) from 42 million shekels a year earlier. Revenue increased to 2.02 billion shekels from 1.77 billion shekels.
Strauss has been buying companies in Poland, Serbia, Montenegro and Brazil to offset slowing growth at home. The company’s joint venture with PepsiCo Inc. to sell spreads including hummus overseas saw a 34 percent increase in sales to 576 million shekels in the first nine months of the year.
The company’s coffee revenue climbed to 18 percent to 1.02 billion shekels in the third quarter.
“Their international business looks very interesting,” said David Kaplan, an analyst at Barclays Plc. “The question is will Strauss be able to start relooking at increasing its reach and market share, not just in Brazil but in the rest of America.”
The Strauss company was founded by Ofra’s grandparents in the 1930s after they emigrated from Germany.
“Israel is our home base,” she said. “It’s where we started. It’s our inspiration. It’s more than just sales for us. That’s where our culture, our values come from.”
Israel, whose population of 7.7 million is similar in size to Switzerland, has about 60 companies traded on the Nasdaq stock market, the most of any country outside North America after China. It is also home to the largest number of startup companies per capita in the world.
Strauss, who rang the opening bell at the New York Stock Exchange this week, said the company isn’t considering listing shares in the U.S.
“To list in New York, at least our sales in the U.S. need to be much larger, so we don’t have any plans at the moment to be listed more than in the Israeli stock exchange,” she said.
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