Hello everyone, and thank you for joining us today. We're welcoming you to the Strauss Group Q3 2024 Results. Following management's formal presentation, we will conduct a short Q&A session. Please feel free to post any questions you may have in the chat box or in the Q&A section of the Zoom. As a reminder, this online Zoom conference is being recorded and will be uploaded to the Investor Relations of Strauss Group website. I would like to remind everyone that this online webinar may contain projections or other forward-looking statements regarding future events or the future performance of the company. These statements are only predictions and may change as time passes. Strauss does not assume any obligation to update that information.
Actual events or results may differ materially from those projected, including as a result of changing industry and market trends, reduced demand for our products, the timely development of our new products and their adoption by the market, increased competition in the industry, and price reductions, as well as due to risk identified in the documents filed by the company with the Israel Securities Authority. Online with us today are Mr. Shai Babad, Strauss Group President and CEO, and Mr. Ariel Chetrit, Strauss Group CFO. As usual, we shall start with a recap of the quarterly results by CEO Shai and then move on to the financial highlights of the quarter presented by Ariel. Shai, the stage is yours.
Thank you very much, Tellem, and welcome everybody to our quarterly investors conference. As you know, like we opened in the previous quarters, Israel is still a state of war. This is, of course, affecting our country, affecting the citizens of Israel, affecting our company, and affecting our employees. We have been very much involved in a lot of activities to try to support, to aid, and to assist the citizens of Israel from the north to the south, donating a lot of our products to the different areas which are suffering now from the war. You can see several examples on the slides that we are presenting now.
This has been part of our life for the past year, and we all wish and pray that the war will be over soon, that all the hostages will come back home, and that our soldiers will come back safely to their families. Before going to the quarter's results, a couple of words on the deal we just published two days ago, three days ago. We sold our part, 50% of our part in Sabra, our fresh and dips company in the U.S., our hummus company in the U.S., for a sum of $244 million, which is equivalent to ILS 900 million. The cash flow from this deal will amount to ILS 730 million, and the net profit from this deal is around ILS 320 million, as was reported. Ariel, the CFO, who will follow after me, will go into the details of this deal.
We are continuing our work in consumer centricity, working very hard on our brands on new launches of products, addressing new communities and also the needs of our consumers. A couple of examples that you can see here. One is we have made convenient packaging for our snacking, our salty snacks, which helps people with disabilities and eye disabilities, seeing disabilities, to open the products, and also, you can see here, we have launched a new campaign on our confectionery. We had a huge campaign when we got back on shelf with our confectionery, and now we brought up a new campaign with our confectionery snacks, dealing with, we call it the drawer of sweet snacks, who was a huge campaign here in Israel.
And on the bottom, you can see several of our new products who have to do with the confectionery, salty snacks, some of our protein products that we brought into the market, and others. Diving into Q3 results, we see that in these results we've concluded a 15.4% growth, organic growth in revenues. We still continue to grow in gross profit with the highest gross profit ever reported. Also, in EBIT, there's a small growth here. I must say that there are one-timers that affected this quarter and the equivalent quarter last year. If we take out the derivative loss this quarter, we come to ILS 241 million in EBIT. And if last year we take out the one-timer that we had in the insurance payment that we got from Sabra, last year we finished with ILS 165 million.
So overall, it's approximately ILS 75 million increase when we compare apples- to- apples without one-timers between Q3 last year and Q3 this year. And the net profit this quarter is 102 million ILS. Nevertheless, you can see the profitability is going down. EBIT profitability is amounting to 7.4% and net to 3.4%, mainly affected by cost of goods, mainly affected by the increase of coffee prices, green coffee prices, and cocoa prices, which are affecting drastically our results. When we look at the yearly results, we see kind of the same phenomena as we see in the Q3, a substantial increase of almost 7% organic growth, which is more than we stated in our strategy of 5%, ILS 2.6 billion in gross profit, ILS 568 million in EBIT.
Again, here, if we take out the derivatives that we have, the one-timer derivatives that we have lost on cocoa prices, this will amount to year-to-date to ILS 622 million instead of the ILS 578 million that you see, and if last year we take out the one-timer with the insurance, it amounts to ILS 544 million. Overall, approximately ILS 80 million difference between the EBIT this year to the EBIT last year, an increase if we exclude out the one-timers. Nevertheless, you can see that margins are 7%, again, due to very high increase in cocoa prices and in coffee prices. Green coffee, Robusta, have increased more than 100% in the past 12 months.
Arabica is around 80%, and cocoa is an increase of 240%-250% since last year, and those, of course, are drastically affecting, substantially affecting our results, and net profit sums up to ILS 344 million. When we go and break it down to the different segments and different categories we have in Israel, so Health & Wellness, we see a small growth. Mainly, the growth is not substantial as we want it to be because we have capacity issues. In Yotvata, one of our dairies, we've reached almost the limit of capacity of production that the factory can produce. This year, we'll open up some of those loopholes and we'll be able to increase the capacity to meet demand. Nevertheless, due to productivity activity that we've been implementing according to our strategy, we have increased EBIT from ILS 100 million to ILS 120 million and also increasing the margins by 2%.
When we look at Fun & Indulgence, also here, substantial increase in revenues, mostly in confectionery. I'm happy to say that the turnaround of confectionery is almost complete. We got back, and I'll show it in the next slide. We're getting back to the same market shares that we had before the recall. And also profitability, we've managed to get this segment from a loss to profitability. And if we add to that the ILS 18 million that we've reported in losses of derivatives, this sums up to ILS 27 million this quarter, which amounts to approximately 8% in margins, showing that the Fun & Indulgence segment is getting back to close to margins and profits that we had pre-recall. Coffee Israel, here we continue, unfortunately, we stay almost with the same profit, but we continue to deteriorate in margins.
The reason is, of course, green coffee prices increase, which is substantially affecting our results. Here is just to show you what happened to the market share of confectionery, leading back to 28% market share compared to the 28%-29% that we had before the recall. So we got back to the same market shares. Nevertheless, this is done with less than a half of the same SKUs that we had before the recall. So before the recall, we had something like 400 SKUs in confectionery. Now we operate with less than 200 SKUs. So we get the same revenues and the same market shares, but with less than 50% of the SKUs that we had before the recall. And this is part of our strategy to be very, very focused on what is core, what are the core SKUs, what really generates healthy growth for us.
And we've discussed the results of this segment in the previous slide. When we talk about coffee, our International Coffee, so here also there's a small increase compared to last year in EBIT, huge increase in net sales. The reasons are, of course, the increase in green prices. Green prices have been increasing drastically from last year, and we have been trying to catch up with increasing prices, sales prices in Brazil. Unfortunately, we are lagging behind, so there's a time lag between the green coffee price increase to our sales price because green coffee prices are continuing to increase, and while we catch up, the green prices continue to erode, and therefore, our ability to compensate fully and to get margins up in green coffee in our sales price has been more difficult. You can see that margins here also are a little bit deteriorating, and this has an effect.
Unfortunately, we are far from where we wanted to be in Brazil when it comes to the margins of green coffee, but nevertheless, we are still maintaining profitability and increasing EBIT. Here, one word regarding Brazil. Brazil profits, EBIT is consisted of R&G and also Non-R&G segments. All our Non-R&G segments are in line with our strategy of more than 5% growth and double-digit margins, and they constitute around 30, approximately 30% of the activity in Brazil, and when I get to the strategy, I'll speak about later about how do we better hedge that and how do we better invest in the non-R&G activity. When we look at our Water business, so here, same trends as we see in all the segments, also growth. Here, the growth is more moderate. We must say that white electronics has been reducing in Israel and in many parts of the world.
We actually managed to increase this segment, although by a low % in Israel. In China, there is a substantial increase in revenues. When we look at the EBIT, we can see that we have improved. We have increased EBIT from last year and also improved margins from 9.5% to the double-digit that we put in the strategy. Last but not least, talking about the strategy, just to remind everybody and also to show how this is in line with the deal we just published two or three days ago. When we published the strategy, we said we have three pillars of growth for the strategy: stronger home base in Israel, where in Israel we invest a lot in the core, whether it's the confectionery, our dairies, our salty snacks, our coffee, our salads.
In each one of them, we do innovation and we put each other core SKUs, what are mainly the snacking SKUs as part of our strategy? We talked a lot about the snacking and the trends of snacking and how do we see where our products cover most of the snacking categories, so how do we see our snacking categories grow on the one hand, so that's our focus on the core, but on the other hand, the new engine of growth, as you all know, we are investing in a new plant that we are building in the north for alternative milks products, and here we'll take all our dairy products and have them in alternative milk produced in our new factory, and this will be a new line of significant products that are supposed to bring substantial growth to our portfolio.
So this is Israel and the engines of growth in Israel. When we look at Brazil, we talked about R&G and our intention to continue to remain the number one player and the strongest player in Brazil. But on the other hand, we are investing a lot in non-R&G. This will be done through M&As. We've done in the past. We will continue to do M&As in the future. All our non-R&G categories, such as protein drinks, such as alternative milk, such as the coffee machines and the beans that we have and the capsules that we have in Brazil, all of them are double-digit margin businesses.
And since the platform in Brazil today reaches out 200,000 endpoints, 200,000 clients, we want to make sure that on that distribution platform, we add new products from the Non-R&G segments that will help us increase profitability on the one hand, but also hedge, better hedge R&G prices and green coffee prices and improve the health of the business in Brazil with, of course, substantial growth of 5% and more in Brazil. And last but not least, our Water business. We are now in the process of launching new products in our Water business and transferring our water company from a single product company to a multi-product company. This will include having different sets of price and different price offering of products to our customers from low prices to medium prices to premium prices, but also different functionalities that our new products will bring.
In the next year, in 2025, there will be several launches of those products in different price range and in different functionalities, and of course, this is part of our engine of growth. In addition, in China, we will continue our journey to become the biggest player in POU in China in point of use, water purification systems in China. We have been number three. I'm happy to announce that we are number two now. I'm also happy to state that we have received a dividend from our activity there of ILS 30 million and also a loan that was supposed to be paid in China from China back to Strauss Water in 2026. Because of the situation of the company and because the company is doing well and the good cash flow of the company, that loan was repaid before its time.
And we actually received the ILS 50 million loan back, altogether ILS 80 million that we have received from China and China becoming a number two in market share in the POU segment with strategy to become number one until the end of 2026. So in our water international water player, we want to make sure that we have those new products in Israel and then in the different geographies in which we play now and also look at other geographies. And last but not least, all those three engines of growth lie on how do we make the company better, future-ready, and resilient. This has two main streams into it, one stream has to do with performance. When we talked about the strategy, we have launched that we want to improve our performance and our performance by ILS 300 million . We are on the journey of doing that.
We have concluded about 1/3 of that journey already, and by the end of 2026, we want to make sure we complete the journey, so our performance and our excellence and our operational excellence will be done in a much better way, and on the other hand, the second stream that has to help us become future-ready and resilient is everything that has to do with our culture. How do we become more agile? How do we become more accountable and more execution-oriented? How do we become more adaptable to change? There are streams running in parallel to make sure that the change in the culture is addressing and is fit to our growth engines and to the changes, all the changes that occur today in the outside world, and that pillar is, of course, essential in order for us to implement our strategy.
When we talk about the strategy, portfolio optimization, and making sure that our portfolio is set right to the strategy is part of what we announced two, three days ago. As we've seen, Sabra did not do the turnaround. We thought that the turnaround plan for Sabra is something that might take too long. Also doing it together in the partnership will put obstacles on Sabra to do the turnaround that they need to do. Therefore, we divested it. We believe that PepsiCo now, without the antitrust and the legal obstacles that were set or limitations that were set by legal, will able Sabra to continue its journey in its turnaround to become successful again. We are sure that PepsiCo will take Sabra and will lead it to the next stage.
For us, this deal, of course, generated very, very good multiples and a very, very good value for Sabra and also helps us make sure that we focus on our core activity and it's fully in line with our strategy. The money that we'll get from Sabra, around ILS 730 million, mostly will go to reduce the debt and therefore to reduce debt to EBITDA multiples and leverage and net debt to EBITDA. And also some of it, small part of it, will go into CapEx, into the continuation of investing in our infrastructure, in our quality, in food safety, in digitalization, in our IT systems to make sure that we are future-fit and ready to promote and to continue to push all our growth engines, which you can see here on the slide. And with that, I'll pass it to Ariel. Thank you very much, Shai.
Good day, everybody. Thank you for joining us in this conference. I will go briefly through the Q3 results and then elaborate a little bit on the financial effect of the sale of our stake in Sabra and Obela to PepsiCo that we announced on this Friday. Starting with the Q3 top-line results, you can see that our sales grew, increased by around 12%, which is a significant increase in sales. If you look on the right-hand side of the slide, you can see that the sales increased in all of our reporting segments. In Strauss Israel, we experienced a 9% increase in sales. This increase is due to, first of all, a big volume increase in most of our categories, but mainly in the Confectionery category, where we experienced an increase of more than 30% in sales this quarter relative to the Q3 of last year.
Another factor for the growth of sales was the fact that we increased our pricing during the previous year and a half, which also affected a boost to our top line. The third factor was an improvement in our mix. Our shekel to kilo sold is higher than the previous quarter last year. If we look at the coffee segment, we can see an increase of almost 80% in sales. This is mainly due to the increase that was made to our selling prices due to the input of green coffee inflation. We increased our selling prices in all of our countries outside of Israel, both in Central and Eastern Europe and in Brazil.
We can see that we also grew in our sales with Water, although, as Shai explained before, the white electronics sales in Israel is declining due to the war and the macroeconomic state here. Here with our water appliances, we are still growing even at a slower rate, even if it's a slower rate than we were used to before the war. We're sure we will go back to the previous growth rate of mid-single- digit once the war in Israel ends. If we go to the operating profit, we can see that our non-GAAP operating profit is ILS 223 million compared to ILS 212 million in the Q3 of 2023. As Shai explained, if we look at it apples to apples, we should deduct the one-time reimbursement that we received in Sabra in the Q3 of last year of ILS 48 million.
If we also deduct the effect of the derivatives, cocoa derivatives, the loss that we recorded in the Q3 of ILS 18 million , we can see that there is an apples-to-apples improvement of more than ILS 70 million . This is just to stress the fact that we are continuing our positive momentum from last year. This improvement, we can see, is very strong in the segment of Strauss Israel, improvement of ILS 35 million in the operating profit and more than 2% in our operating margin to 11.5% this quarter. In the Coffee segment, we improved our operating profit by ILS 8 million , although the operating margin is a little bit decreasing due to the fact that the green coffee prices are rising much higher than what we're able to raise our selling prices.
But we are trying to do our best to fill in the gaps and complete our price raises in the next coming quarters. We can see that specifically in Brazil, in the quarters where we are able to increase our selling prices in a significant manner and catch up with the increasing input inflation, we improve our results dramatically. So this is a signal to what will come in the future. Once the input prices, the green coffee prices will stabilize and even go down a little bit, we will see an increase not only in the Três Corações results in monetary terms, but also in the margins. And this is why in our strategy, we stated that we expect Brazil eventually to be able to manifest 6%-8% operating profit.
If we look at our net income, we see a decline of ILS 18 million quarter- over- quarter from ILS 120 million in the Q3 of last year to ILS 102 million in the current quarter. We see that the main reason for that after the operating profit is an increase in our financial expenses of ILS 20 million. This is due to the fact that last year in the Q3, we recorded an income of around ILS 10 million from our derivatives of foreign exchange translation. And also, we experienced an increase in our finance expenses due to the fact that our net debt has grown over the past year by close to ILS 400 million. Thus, we're paying higher interest expenses.
But we should remember also the fact that in the previous quarter, the one-time income from the reimbursement in Sabra of ILS 48 million, which also is represented here in the net income of the Q3 2023. Therefore, this is not apples- to- apples. Apples- to- apples, we are growing also in our net income. Last but not least, our net debt to EBITDA, we are increasing in our net debt to, sorry, in our net debt to ILS 3.2 billion the 30th of September. Our gearing ratio has increased to 2.8. But having said that, we should take also into consideration the deal that we published this Friday and maybe talk a little bit about the financial effect of this deal. So after selling 50% of Sabra and Obela, the effect of this deal will be recorded in the Q4.
Once we published it, we will publish our annual statements in March of 2025. So in the Q4 of 2024, we will register a net profit in our accounting statements of ILS 320 million. Our equity will increase by around ILS 400 million. The contribution for this deal from PepsiCo will be around ILS 900 million. And the net cash flow from this deal will be around ILS 730 million after paying taxes in the U.S., mainly in the U.S., executing this deal. So this will decrease our net debt to around ILS 2.4 billion from ILS 3.2 billion to ILS 2.4 billion. And it will decrease our gearing ratio to around 2 and make sure that we are fully aligned with the requirements from the rating agencies so that we maintain our AA+ rating.
And furthermore, of course, we will have much more financial flexibility for the future. If we look at the effect on our future P&L structure, non-GAAP managerial P&L structure, we will see a decline in our top-line sales by around ILS 500 million, ILS 500 million . On our operating profit, we will be flat. The change will not be significant since Sabra and Obela are at around the break-even point in their operating profits. But in our net income, we will see an increase due to the fact that our net debt will decrease and our financial expenses will also decrease by a few dozens of millions of shekels.
Therefore, increasing our net income and therefore our net income rate to sales will increase due to this deal. We will end with that our preview of this quarter and open the session to Q&A.
Thank you, Ariel. Thank you, Shai. And now we'll go over the Q&A section. One question we have already received regarding the strategic initiatives and how are we in terms of strategy implementation at the moment? What's our status?
So, as I mentioned, we are in line with our strategy implementation. The strategy implementation had several pillars into it. One was optimizing and focusing on our core. We're in line of closing SKUs. We are in line on investing on the core activities. Another part of it was portfolio optimization. We're in the journey and in line with portfolio optimization. Sabra is part of what you've seen is part of our portfolio optimization. Second part of it was some of the investments we have done in Israel. And we are also in line with our productivity efforts, which is also part of our strategy. As you remember, we set to have ILS 300 million over three years in pro forma improvement.
More or less, we've done 1/3 . We'll do 1/3 this year. So we align with that as well. With setting up growth initiatives here also, we see that all our core activities, which we're investing in, are growing in the way that we're even more than what we've projected to the market. We also look at our future growth engines, such as the plant-based that we are building here in Israel, such as M&As in Brazil in the non-R&G, and such as all the product launches that we plan within the next year in our Water business. And in all of those, according to the milestones that we set to ourselves, we are in line. So overall, we are in line with that. One remark that I would like to say, we also said that we're going to reach double-digit margins by the end of 2026.
Due to very, very high cocoa prices and coffee prices, we are a bit behind there with where we wanted to be and where we projected to be. Nevertheless, our growth is higher than 5%, and therefore it makes it difficult to get the margins into those double- digits, and cocoa and green coffee prices, as I mentioned before, has a substantial effect. Looking into the future, all forecasts are talking about cocoa prices kind of mitigating, also coffee prices mitigating over the next year or two, and once this will happen, our projections are that with everything that we are doing on productivity, on culture, on performance, on focusing on our core, on divestments and portfolio optimization, all of those steps that we are doing will help us keep in line with the strategy that we have projected and we put into the market.
Thank you, Shai. One of the questions we received is if we can explain the growth in Israel, and does it have anything to do with seasonality effects?
No, the growth in Israel is partially because of price increases that we've done last year due to increase in cost of raw materials. Some of it is volume growth in some of the segments. This is mainly the growth. As you know, since 2021, everywhere around the world, not just in Israel, everyone is encountering substantial inflation and increase in cost of goods. This, of course, is affecting the business. Part of it is being rolled over to consumers by price increases.
Another question we received is, what do we plan to do with the net proceeds from the Sabra deal?
So, as Ariel mentioned, and as I mentioned before, most of it will go to reducing the debt and reducing the leverage that we have today from the 2.8 to around 2. Okay, thank you. Unless we have any other questions, thank you all for joining us today.
This concludes.
One more thing that I said, reducing the debt will, of course, decrease our expenditure on finance expenses. So this will help us increase our net profit as well. Sorry, Tellem for that.
Thank you for joining us today. This concludes our Q3 quarterly results. And thank you and have a nice day.