Production Line Glitch Cuts Caro's Sales, Finance Income Boosts Profit
Caro, a beverage company controlled by Shlomo Rodev and Roni Gat's Shipping and Supply, reported a decline in revenue and gross profit for the second quarter. The company, which markets mineral water Ein Gedi and soft drinks like Spring, Tapuzina, and RC Cola through its subsidiary Yofora, saw its revenue drop by 8.3% to NIS 187 million. This decrease was attributed to the timing of the Passover holiday, which fell in the first quarter this year, and a shortage of certain products due to delays in replacing a production line.
The production line replacement, initiated in February, was prolonged because foreign technicians could not enter Israel due to Operation "Shag'at Ha'aryeh" (Lion's Roar), forcing the company to rely on local technicians. This extended installation period led to a shortage of some manufactured beverages, resulting in an estimated NIS 16 million loss in sales for the first half of the year. The company anticipates a further NIS 10 million reduction in sales for the third quarter due to the ongoing shortage, though the production line is now reportedly operating at full capacity.
Despite the sales dip, Caro managed to improve its gross profit margin to 50% from 47.9% in the same period last year. This improvement was primarily driven by a decrease in the prices of some raw and packaging materials, which were not passed on to consumers. Additionally, Caro recorded significantly lower "other expenses" compared to the previous year, which included a NIS 14 million fine from the Competition Authority for violating food law.
The company's operating profit saw a substantial increase of approximately 51% to NIS 22.7 million. This was further bolstered by a surge in financing income, reaching NIS 4.2 million compared to just NIS 96,000 in the prior year. This increase in financing income was driven by proceeds from the sale of Tafugan, a producer of chips and frozen vegetables, to Green Lantern Fund, interest on deposits, and currency exchange differences.
Consequently, Caro concluded the quarter with a net profit attributable to shareholders of NIS 13.5 million, a 69% increase from NIS 8 million in the corresponding quarter of the previous year. The company also noted that up to 4% of its sales are to Israeli customers who then transfer goods to Gaza.
