Strauss Group’s profit has been heavily dented by a chocolate recall because of Salmonella and the related closure of a production plant in Israel.
The company showed growth in some areas but this was offset by a decline in sales in the confectionery division and the Sabra hummus business, both of which operated on a partial scale in the half-year. The firm also reported a decline in operating profit.
The confectionery recall in April and adjustments at Sabra’s Virginia plant, coupled with the rising costs of raw materials, shipping, and energy, led to a drop of 59.1 percent in operating profit to $62.6 million in the half-year.
Figures come from Strauss Group’s financial results for the first half and second quarter of 2022.
The company is preparing to gradually resume operations at the confectionery production site in Nof Hagalil, Israel. It has performed cleaning and invested in infrastructure to ensure improved quality and food safety standards.
Permission for a restart is still pending from the Israeli Ministry of Health. The agency suspended the plant’s approval for three months after an inspection in April. Investigators were trying to clarify whether 21 patients of various ages were linked to the contamination.
From 300 samples, about 30 positives were found. Salmonella was detected on a production line and in the liquid chocolate used to make finished products.
Elite branded items such as cakes, wafers, snacks, rice cakes, chewing gum, and toffee candies were recalled from countries including the United States, Canada, Australia, Brazil, France, Germany, Italy, Netherlands, and Spain, and the United Kingdom.
Committee to assess contamination
Giora Bardea, Strauss Group CEO, said: “The first six months of 2022 reflect the group’s inherent resilience as a diverse global company and its ability to successfully contend with a challenging macroeconomic environment along with internal challenges. In the past few months, we have simultaneously tackled two complex incidents — the confectionery recall in Israel and the adjustments at Sabra’s plant in the United States — both of which have negatively affected the group’s results in the current half-year,” he said.
“We are wrapping up a quarter of strong revenue growth but a drop in our bottom line, mainly because of the effects of elevated raw material and energy prices as well as events in the confectionery division and Sabra.”
Earlier this month, Strauss decided to establish an independent committee that will examine the Salmonella incident, discuss courses of action and make recommendations to the company’s board of directors.
Strauss Israel recorded a 30.8 percent drop in sales in the fun and indulgence segment, which totaled $125 million in the six-month period, as a result of the confectionery recall.
Market share in the first half of 2022 decreased to 10.7 percent from 12.2 percent because of the recall.
The second quarter recall included a $53.1 million hit to sales and a $23.3 million impact on net income. The first-half figures show a $64.8 million loss in sales because of the recall and $59 million impacting net income.
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