Carrefour turns profitable for Electra Consumer Products

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Electra Consumer Products’ share price has shot up, as its investment in the Carrefour franchise finally starts to bear fruit.

Electra Consumer Products (TASE: ECP), headed by Zvika Schwimmer and part of the Elco Group (TASE: ELCO) controlled by the Salkind brothers, continues to convert Mega and Yeinot Bitan supermarket branches to the Carrefour format, and after several difficult years it is starting to see the fruits of that effort.

In the third quarter of this year, Carrefour branches produced a profit for Electra Consumer Products, amounting to NIS 820,000, which compares with a loss of NIS 23 million in the corresponding quarter last year. This small profit is of course financially insignificant, but it signals that the move is starting to work. So far, Electra Consumer Products has converted 110 supermarket branches to the Carrefour brand (eight in the third quarter) out of 149 branches altogether, leaving 26 Mega branches and 13 Yeinot Bitan branches to go.

For the first nine months of 2024, Carrefour Israel still shows a loss, as the small third quarter profit does not cover the losses of the previous six months. Carrefour Israel posted a loss of NIS 46.2 million for the first nine months, representing a considerable improvement on the NIS 148 million loss in the corresponding period of 2023.

Electra Consumer Products’ revenue from the supermarket sector rose 7.2% in the third quarter to NIS 890 million, and operating profit before net other income and restructuring expenses shot up 2.5 times to NIS 38.2 million. For the first nine months, the food sector contributed NIS 2.5 billion to Electra Consumer Products’ top line, and switched to an operating profit before net other income and restructuring expenses of NIS 66.7 million, which compares with an operating loss of NIS 71.8 million in the corresponding period of 2023.

In May this year, Electra Consumer Products divested itself of its stake in 7 Eleven Israel, and sold the remaining branches to the Seven Express chain. In this case, Electra Consumer Products decided to cut its losses (which amounted to some NIS 70 million) quickly.

In the electrical retail sector too, the company has seen considerable improvement. It has 85 branches of electrical goods stores Mahsanei Hashmal and Shekem Electric. Third quarter sales rose 18% to NIS 678 million. The company says that excluding the duty free branches, whose business has been hit hard by the Swords of Iron war and the decline in passenger traffic at Israel’s airports, revenue in the sector rose by 22.5%.

Taking all of the group’s activity together, Electra Consumer Products’ total revenue in the third quarter was NIS 1.98 billion. Operating profit before net other income and restructuring expenses rose 27% in comparison with the third quarter of 2023 to NIS 91 million. The company posted a net profit for the quarter of NIS 27.1 million, which compares with a net loss of nearly NIS 16 million in the corresponding quarter.

For the first nine months of 2024, Electra Consumer Products posted a net profit of NIS 20.6 million, which compares with a net loss of NIS 130.6 million in the corresponding period of 2023.

The company makes no mention in its financials of the reform in imports of electrical goods, but it should benefit from it. In mid-August, the first stage of the reform came into effect, allowing the import into Israel of various products such as computers, microwave ovens, printers, and radio receivers with no bureaucracy, with the aim of opening up the local market to competition and lowering prices to the consumer.

The second stage of the reform is more significant for Electra Consumer Products. It includes more electrical goods such as refrigerators, washing machines, television sets, dishwashers, dryers, and so on. The Ministry of Energy estimates the electrical goods market in Israel at NIS 10 billion annually.

Electra Consumer Products’ share price on the Tel Aviv Stock Exchange is up by about 12%, bringing the company’s market cap to over NIS 2 billion. The share price is up 26% for the year to date, although in the past three years it has fallen by 45%.

Published by Globes, Israel business news - en.globes.co.il - on November 25, 2024.

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