protest outside Tnuva - Moti Milrod - 05102011
A protest outside Tnuva’s offices earlier this week: 'Stop milking us,' says one sign. Photo by Moti Milrod
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Student unions and organizers of the cottage cheese protest are planning to hold a "tashlich" ceremony outside Tnuva's offices today. The Jewish ceremony, traditionally held around Rosh Hashanah, involves casting one's sins into a large flowing body of water in order to purify one's self before the new year.

But in this version of tashlich, the organizers plan to dump a copy of the so-called McKinsey report into a tub of cottage cheese.

The report was apparently commissioned by Apax Partners back in 2007, when it was considering acquiring Tnuva. It stated that the company could raise the prices of products with inelastic demand by 15%. Tnuva's management, led by Apax Israel CEO Zehavit Cohen, adopted the policy recommended by the consulting firm, kicking off the price increases that led to the consumer protests that began in June.

"Tnuva hasn't given in yet, so the boycott is continuing," said organizers of the cottage cheese protest. They are planning more public outreach so that consumers realize that Tnuva goes beyond dairy products and also owns brands including Sunfrost frozen vegetables and Mama Off chicken products.

On Sunday, Tnuva announced that it would be lowering prices by 15% on a range of products, in response to the several months of protest. Shortly afterward, competitors Tara and Strauss announced their own price reductions.

Yesterday, Tara sent its new list of recommended prices to grocery store chains. The company is lowering the prices of 24 items. A significant portion of them are cheeses with special kashrut certificates or in large packages (of 500 grams or 750 grams ). Tara is not cutting the prices of 250 gram cups of white cheeses or cottage cheese. Chocolate puddings will be 8% less expensive, white cheeses will be 12% less expensive and yellow, sliced and grated cheeses will be 6% to 13% less expensive.

Sources at grocery stores said Tara was not able to take advantage of the boycott against Tnuva because it could not increase production at its factory. It is planning to move to a new factory at the Noam Industrial Park in the Negev within two years.

Tnuva earnings double

Tnuva's operating profit doubled after it was purchased by Apax Partners in 2008, the company's financial reports reveal.

Tnuva, a privately held company, published its financial reports for the first time ever yesterday in the wake of growing pressure. The Trajtenberg committee, charged with recommending methods to change the government's social and economic priorities, had called on the government to force privately held monopolies to publish their financial reports like publicly held companies. The recommendations have not received government or Knesset approval at this stage.

In 2010, Tnuva's net profit was NIS 517 million, an 19% increase over the figure from 2009. The company's revenues were NIS 7.2 billion in 2010, a 1.7% increase over 2009.

The increased revenues in 2010 stemmed from a 2.6% increase in revenues from local sales to NIS 6.9 billion, which was offset by a 14% decrease in revenues abroad, apparently primarily due to its Romanian dairy.

Tnuva's gross profit was NIS 2.1 billion in 2010, a 7% increase over the figure in 2009. Gross profit equaled 29.2% of total revenues, compared to 27.7% in 2009. The growth apparently was brought on by price increases. Another factor apparently was a 0.3% reduction in production costs, despite a 1.3% increase in materials costs and a 5.8% increase in labor costs.

Tnuva racked up operating profit of NIS 710 million in 2010, a nearly 17% increase over 2009. Its operating profit last year was equivalent to 9.8% of turnover, compared to 8.6% in 2009.

In comparison, competitor Strauss's operating profit was 8.5% of turnover in 2010, mostly because its international coffee operations were not very profitable (6.5% of sales ). But its health and quality of life division, 73% of whose sales come from the Strauss dairy, had operating profits equal to 12.6% of turnover in 2010.

Osem's operating profit was 12.7% of turnover in 2010, apparently due to the high operating profit margins of its snack food division, namely Bamba. Bamba brought Osem NIS 166 million in operating profit 2010, equal to 27.9% of EBITDA (earnings before interest, tax, depreciation and amortization). Total EBITDA was NIS 967 million in 2010, a 19.3% increase over 2009. Tnuva's EBITDA was equal to 13.3% of its 2010 turnover, compared to 12.3% in 2009.

Tnuva's share capital is worth NIS 2.1 billion, equal to 33% of its balance sheet. Tnuva had NIS 1.4 billion in cash, and NIS 100 million invested in money market-based mutual funds as of the end of 2010. In January 2011, the company distributed a NIS 1.3 billion dividend.

The company has NIS 400 million in short-term loans and NIS 1 billion in long-term loans. Its net profit would have increased even more sharply had it not had NIS 10 million in one-time expenses in 2010.

Tnuva paid taxes equal to 16.7% of profit after financing costs in 2010, down from 22.3% in 2009, because the company decided to use a NIS 60 million tax benefit in 2010, apparently after concluding that it was likely to be able to use its losses for tax purposes in the future due to its increased profitability.