Strauss board of directors ordered the company's management to examine raising a debt of NIS 400 million

Strauss board of directors ordered the company's management to examine raising a debt of NIS 400 million. The debt raised from a bank, other financial institution or by issuing bonds will be used to repay credit and finance the company's current activities. The board of directors also decided not to distribute a dividend on the 2022 profits.
Strauss announced earlier today the increase in the prices of its products by an average of 2.9%. It seems that the avoidance of dividend distribution stems, in part, from a desire to avoid harsh public criticism. The company explained that the decision to raise prices, for the first time in 12 years, was made after significant efficiency measures. Strauss stated that the price increase covers only a small part of the price increases in the products that the company absorbs.
At Strauss, which is managed by Shay Babed, they explained that one of the reasons for the move is a tens of percent increase in the prices of raw materials, energy, packaging and other production inputs. The scope of all the costs together amounts to NIS 300 million per year.
In the last two years, raw milk prices have increased by 30%; And the prices of corn, wheat, and soybean oil increased by 200%. During that time, the price of oil jumped by 70%, the price of sugar rose by 140%, the price of cocoa climbed by 125%, and the prices of packaging materials rose by 45%.
A recall at the Nof HaGalil candy factory reduced the company's revenues by NIS 345 million, the operating profit by NIS 341 million, and the net profit by NIS 263 million in January-September 2022.
The net profit of Strauss in January-September 2022 amounted to NIS 96 million, a decrease of 82% compared to the corresponding period in 2021. The malfunctions at the Nof HaGalil plant and at the hummus plant in Virginia, USA, and the erosion of profitability at Strauss Dairy, were also reflected in a sharp drop of 78% in the cash flow surplus from current operations to only NIS 131 million in January-September 2022. The drop in the cash flow surplus emphasizes the Strauss's need to raise debt.
Strauss designates the proceeds from the debt raising for debt recycling in the amount of 250 million shekels by the company itself, and 500 million shekels in the Strauss group as a whole. The Strauss bonds with an average life of 2.76 and 7.49 years are trading at yields of 3.9% and 4.2%, respectively, i.e. at a spread of 0.57% and 0.87%, compared to the yield of government bonds with a similar average life.