Elite Industries reports slim NIS 2m profit for Q3

Sales by Elite Int'l slid 36% in euro terms, but firm says cutbacks will be evident in future reports
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With Reuters

The Tel Aviv-traded Elite Industries food conglomerate published another poor quarterly report, but said it expected foreign investments to begin to pay off with strong growth seen in 2002.

Elite will continue to invest in Eastern Europe and Brazil since the Israeli market had little room for further growth, the company said after posting third-quarter earnings per share of NIS 0.04 compared with NIS 0.72 a year earlier.

Chief financial officer Avi Ben Assayag said Elite had been forced to look for alternative markets to create growth. "In Brazil alone we invested $40 million last year. We expect these investments to show good results from next year onward," Ben Assayag said.

Elite presented net profit of only NIS 2 million for the third quarter compared with NIS 33 million in the parallel quarter of 2000.

Revenue eroded by 2.2% from the parallel to NIS 509 million, the company said.

"Our third quarter results are a direct outcome of the pace of our investments to establish Elite in foreign countries that was speeded up during the third quarter," chairman Ofra Strauss-Lahat told reporters. Elite, which makes chocolate, snacks, coffee, candy and cakes, has invested heavily in Romania, Bulgaria, Ukraine, Croatia, Poland, Turkey, Brazil, Belgium and France.

Quarterly sales in Israel and abroad, through Elite International, skidded 7.5% from the parallel to NIS 302 million. The company blamed the drop on falling effective sales prices, in parallel with a drop in raw materials prices; delayed new product launches; and the closing of more Rega Matok candy shops in Israel.

Operating profit slid to NIS 23.8 million for the third quarter, from NIS 54 million in the third quarter of 2000. The company blamed the erosion mainly on increased marketing costs in Israel and mainly abroad, rising management and general costs, and restructuring.

Financing costs soared in the third quarter to NIS 12.6 million, from NIS 5 million in the parallel, mainly because the company borrowed more.

For the nine months, revenues slid slightly to NIS 1.51 billion, from NIS 1.58 billion in the parallel period of 2000. Net profit collapsed by 60% to NIS 39 million, from NIS 101 million.

Managing director Giora Bar Dea said Elite had started to adjust its operating expenses to the level of revenues during the third quarter. "This will lead to a significant improvement in operating profitability in 2002," he said.

One step was massive layoffs from the company headquarters in Tel Aviv. The company says it cannot yet assess the financial result of its cutbacks, but they will be evident in its fourth-quarter profit and loss statement and 2002 results.

Elite International reported sales turnover of NIS 207 million for the third quarter, up 6.7% from the parallel. But in euro terms, its sales slide by 35.8%. The company stopped using a joint distribution agreement it had with a Polish company, which halted all sales of non-coffee products in Poland.