November 14, 2021

Good vintage: The contribution of Bitan Wines (Yeinot Bitan) led Electra Consumer to sum up a quarter with growth in revenue and operating profit.

Despite the erosion in the profits of its core activity in the field of import and marketing of electrical products, the consolidation of the food retail chain's activity in its reports led to a 110% increase in Electra Consumer's revenue to NIS 1.55 billion in the third quarter.

Aviv Levy 14/11/2021

Zvika Schwimmer, CEO of Electra Consumer/ Photo: Tamar Mazafi

Consolidation of the activity of the food retail chain Bitan Wines in the reports of Electra Consumer Products (ECP) helped it conclude the third quarter of the year, in a positive direction – from the revenue line to the operating profit. This, despite an erosion in its core activity of import and marketing of electrical products and operating networks for the sale of electrical products.

In the bottom line, ECP's quarterly net profit fell by 75%, to NIS 55 million, after it enjoyed last year huge profits of about NIS 200 million from the sale of Golan Telecom and concluded the entire year 2020 with an impressive net profit of about NIS285 million.

Neutralizing the effect of the sale of Golan Telecom, ECP's net profit from continuing operations for the third quarter of this year, jumped by almost 50% to NIS 61 million, with the support of consolidating the results of Bitan Wines.

Bitan Wines Herzliya branch/ Photo: Eyal Yitzhar

In a quarterly summary, ECP presented revenues of NIS 760 million from the operations of Bitan Wines - which led to a climb of 110% in ECP's quarterly revenues, which reached NIS 1.55 billion, and subsequently the company also showed an improvement in gross and operating profit and their share of sales. The operating profit presented by Bitan Wines activity in a quarterly summary was about NIS 31 million.

From the proforma reports presented by ECP it appears that the closure and sale of branches of Bitan Wines chain last year eroded the quarterly gross profit of Bitan Wines by about 6% to NIS 243 million, but those closures and sales helped improve the gross profit margin from sales, and the increase of one-time revenues.

Segmentation of operating profit of ECP

In NIS millions

The acquisition of the food chain was completed in May 2021

ECP, headed by CEO Zvika Schwimmer, completed the acquisition of control of the Bitan Wines food chain from the couple Nahum and Nurit Bitan last May, together with the Phoenix Insurance Group, so that together their holdings reach about 50% of the chain.

Its acquisition by ECP with an investment of NIS 200 million in exchange for the allotment of new shares and the purchase of existing shares (from the Bitan family), in addition to a NIS 50 million loan provided to Bitan Wines, was carried out after Bitan Wines ran into financial difficulties.

Bitan Wines currently operates about 150 supermarket branches throughout the country under the Mega, Bitan Wines and Shuk Mehadrin brands, and employs about 3,800 employees, in addition to the 750 employees it hires through staffing companies.

" The timing of the Tishrei holidays affected sales "

The segmentation of ECP's activities into sectors shows that revenues from imports and marketing of electrical products in the third quarter eroded by about 9%, to NIS 320 million, while revenues from its electric retail operations, through the electrical warehouses and Shekem Electric chains, increased by a similar rate (about 8%) to NIS 471 million.

This while the quarterly operating profit from the two areas of activity decreased, in the range of about 8% -13%, and stood at about NIS 32 million in the import and marketing of electrical products and about NIS 25 million in the electrical products retail arm.

The company, controlled by the Elco Group of the brothers Daniel and Michael (Mikey) Zelkind, attributes the erosion in revenues from the import and marketing activities of electrical products to the sale of a company in France that engaged in the field of air-conditioners abroad, and was carried out at the beginning of the second quarter of this year, and note that by neutralizing this effect, the quarterly sales turnover remains unchanged.

Michael (on the right) and Daniel Zelkind owners of Elco Company/ photo: Israel Hadari

Regarding the activity of the electricity networks, the ECP notes that the improvement in revenues "was due to the opening of new branches and the company's entry into a duty-free store in the second quarter," when the data presented by the company shows a 13% decline in sales of identical stores, "mainly due to Tishrei holidays that occurred this year in September, during which there were few sales days compared to last year."

In the summary of its first nine months this year, ECP is showing a positive direction in all its operating segments. During this period, its revenues climbed by 70%, to NIS 3.15 billion, while the net profit eroded almost 50% to NIS 149 million after the effect of the sale of Golan Telecom last year, and by neutralizing it the net profit from continuing operations doubled and reached NIS 159 million.

Electra Consumer Products share has climbed by about 45% since the beginning of the year and reflects the company's value of about NIS 3.5 billion.

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