Production line repair cut Karur's sales — financing income boosted the bottom line
The timing of the Passover holiday and a delay in replacing a production line hurt the revenues of the Karur company, which closed the second quarter with a decrease in revenue. However, an increase in financing income allowed the company to boost its net profit by 69%.
The timing of the Passover holiday and a delay in replacing a production line hurt the revenues of the Karur company, controlled (67.41%) by Shlomo Rodav and Roni Gat's Sfanot Ve-Aspaka — the company closed the second quarter of this year with a decrease in revenues and a hit to gross profit. Through the Jafora company, the second-largest beverage company in Israel, Karur markets mineral water under the Ein Gedi brand and soft drink brands Spring, Tapuzina, RC Cola, Schweppes, and others.
Karur's revenues for the quarter totaled 187 million shekels, a decrease of 8.3% compared to the corresponding quarter. In addition to the timing of the Passover holiday, which fell in the first quarter this year, Jafora's sales were also negatively affected by a shortage of some of the products the company markets, due to the prolonged replacement of one of its production lines.
In February, Jafora began replacing a production line, but Operation Iron Swords prevented foreign technicians from arriving in Israel, and it carried out the line installation using local technicians. The non-arrival of the foreign technicians led to the installation process taking longer than the company's plans, and this caused a shortage of some of the beverage products it produces. In light of the shortage, in the first half of the year, the decrease in sales of some products totaled about 16 million shekels compared to the corresponding period.
In the current quarter, the installation of the production line has not yet been completed, but the company reports that in recent days it has been producing at full capacity. At Jafora, they expect that the product shortage will also have an impact on third-quarter sales, in a way that will lead to a decrease of 10 million shekels in sales compared to the corresponding quarter. On the other hand, the company notes that part of the decrease was offset by selling products to Israeli customers who transfer the goods to the Gaza Strip, and that sales to those customers account for up to 4% of its total sales.
The decrease in sales turnover affected Karur's gross profit, which fell by about 4.3% during the quarter and totaled 93.6 million shekels. Despite this, the company managed to improve its gross profit margin to 50%, compared to 47.9% in the corresponding quarter last year, mainly due to a decrease in the prices of some raw materials and packaging, which was not reflected in product prices.
In the corresponding quarter, Karur recorded other expenses in the amount of 13.3 million shekels, after the Competition Authority imposed a fine of 14 million shekels on it for violating the Food Law, compared to expenses of about 140 thousand shekels in the current quarter. The company's operating profit improved to about 22.7 million shekels, an increase of about 51% compared to the corresponding quarter.
Receipts from the sale of the Tapugan company, a manufacturer of chips and frozen vegetables, to the Green Lantern fund, interest on deposits, and currency exchange differences boosted Karur's financing income to 4.2 million shekels in the current quarter, compared to income of 96 thousand shekels in the corresponding quarter last year.
The company ended the quarter with a net profit attributable to shareholders of 13.5 million shekels, compared to 8 million shekels in the corresponding quarter — an increase of 69%.
