The tax on sugar led Yaffora to bitter results

The tax on sugar, which came into effect at the beginning of 2022, Hurt the performance of Yepaura Tabori, The second largest beverage company, and it must be assumed that it is anxiously awaiting the fulfillment of the new government’s election promise to cancel the tax of up to NIS 1 per liter of sugary drink.

The reports of Karor Holdings, the controlling owner of Paora, indicate that the company ended 2022 with a 13.85% decrease in sales, which amounted to approximately NIS 854 million, and with a 35.9% drop in net profit, which amounted to approximately NIS 84 million.

Although over a month has passed since the decree canceling the sugar tax was closed to public comments, Finance Minister Bezalel Smotrich has yet to sign it. The main company (Coca Cola Israel) chose not to wait for the tax reduction, and announced a price increase of 6.7% that will take effect immediately after Passover, and it is possible that the deterioration in Yafaora’s results could signal that the company will take a step similar to that of the main company.

Besides the decrease in sales, the company faced a change in the mix of products sold and the increase in the price of most raw materials. This led to a sharp decrease of approximately 20% in gross profit, which amounted to approximately NIS 369 million, and the erosion of gross profitability to 43% of sales compared to 46.7% in 2021.

Yapaura registered a slight decrease of only 10.3% in sales and marketing expenses, and maintained the scope of management and marketing expenses at NIS 47 million. The operating profit fell by about 43% and amounted to about NIS 90 million, and the operating profitability was cut to 10.6% compared to 15.9% in 2021.

It seems that even if the sugar tax is abolished, Yapaora will face other challenges that weigh on it. As revealed in “Calcalist”, last October Mi Eden, whose products have been distributed by Yepaura for 17 years, announced thatTransferred the distribution of the water brand to the Tempo company. Bifora is still examining the consequences of the announcement, which may harm its revenues or cause it considerable expenses due to the need to find an alternative to marketing mineral water of a different product and to build a new brand. In addition to this, Yapaura, the partner in the Ein Gedi mineral water company, has used Eden Water to distribute its products and Ein Gedi brand products in Eilat, and is now examining distribution alternatives. Bifora warns that if no alternative is found, the company may reduce the distribution system of the group, which will lead to layoffs.

Karor Holdings also holds a 37.5% stake in Tfugan, which controls (48%) the frozen chips category, and faces a regulatory challenge on this front as well. As part of the agricultural reform, an amendment to the customs tariff decree was published about a year ago, according to which the customs duty on the import of fruits and vegetables will be reduced, as well as the duties on frozen vegetables, including frozen potatoes. This is a gradual plan, which will be spread over several years, but the company expects that it will have a negative impact on Tefugen’s activity.

In addition, Karor Holdings, which is controlled by Shlomo Rodev and Roni Gat, is worried about the legal revolution led by the government: “The events surrounding the reform may lead to economic changes in the Israeli economy, such as the weakening of the shekel, the increase in inflation and an additional interest rate increase by the governor of the Bank of Israel. Damage to the strength of the Israeli economy may harm the company’s results “.

The salary cost of the company’s five senior executives amounted to NIS 8.6 million. The cost of Roni Gat’s salary, CEO and chairman of the board of directors of Ypaura Tabori, amounted to NIS 2.887 million. The salary of Doron Glazer, who served as deputy CEO and was recently appointed CEO, amounted to NIS 2.02 million, and the salary of Shlomo Rodev, chairman of the Karor board, amounted to NIS 1.42 million.