Yavne, Israel, August 27 - G. Willi-Food International Ltd., one of Israel's largest food importers and a single-source supplier of one of the world's most extensive ranges of quality kosher food products, today announced its unaudited financial results for the second quarter and first six months ended June 30, 2008.
Second Quarter Fiscal 2008 Summary
- 41.7% increase in sales over second quarter 2007
- 27.3% increase in gross profit over second quarter 2007
- Operating loss of NIS 1.4 million (US $0.4 million) compared to operating income of NIS 2.8 million (US $0.8 million) in second quarter 2007, mainly as a result of approximately NIS 4.6 million (US $1.4 million) expense in connection with the closing down of WF Laish (approximately NIS 2.6 million, US $0.8 million) and as a result of final arbitration award entered against the Company in the Vitarroz arbitration (approximately NIS 2.0 million, US $0.6 million) described below.
Revenues for the second quarter of fiscal 2008 increased by 41.7% to NIS 79.0 million (US $23.6 million) compared to revenues of NIS 55.8 million (US $16.6 million) in the second quarter of 2007. Willi-Food's organic growth in the home market of Israel and sales from each of the Company's subsidiaries has been particularly strong through the half year.
The Company now consists of Willi-Food, Gold Frost, the Baron joint venture, Danish dairy distributor and Shamir Salads. Sales synergies and the wide product mix that each of these divisions provide to the Company's network of distribution channels is gaining momentum. In addition, as a result of broader distribution, sales generated from most of the subsidiaries have surpassed expectations of Willi-Food. To date, the only underperforming subsidiary of the Company has been WF Kosher Food Distributors Ltd. - Laish Israeli ("WF Laish"), whose operations were recently shut down.
Gross profit for the second quarter of 2008 increased by 27.3% to NIS 16.8 million (US $5.0 million) compared to gross profit of NIS 13.2 million (US $3.9 million) in the second quarter of 2007. Second quarter gross margin was 21.2% compared to 23.6% for the same period in 2007. The price of global food commodities has remained volatile during the year to date.
However, despite the effects of global inflationary costs on food production and supply, Willi-Food expects to maintain its historical gross margins through the full fiscal year by maintaining tight controls of its cost of sales.
Mr. Zwi Williger, President and COO of Willi-Food commented, "Second quarter results were strong despite the current operating environment affecting global food manufacturers and distributors. While consumers and manufacturers alike have acclimated to the global inflationary rise in food costs, we do not believe that the cost of food will stabilize in the near future. In light of this, Willi-Food's solid top line growth reflects the synergies found in bringing together a broad range of premium kosher products to our internal and external distribution channels. We will continue to work on diversifying our product base, expanding our distribution channels and maintaining control of our cost of sales."
Willi-Food's operating loss for the second quarter of 2008 was NIS 1.4 million (US $0.4 million) compared to operating income of NIS 2.8 million (US $0.8 million) reported in the comparable quarter of last year. Second quarter selling expenses as a percentage of revenues decreased to 10.7% compared to 11.3%. In addition, general and administrative expenses as a percentage of revenue increased to 9.8% from 7.3% as a result of the transitional activities related to the closing down of WF Laish, in the amount of approximately NIS 2.6 million (US $0.8 million). An additional expense is related to a final arbitration award entered against the Company for damages in the amount of NIS 2.0 million ($0.6 million) to be paid to Vitarroz in connection with litigation initiated by Vitarroz in 2005, described below. We expect these percentages to be in line with historical trends when we report results for the third quarter of fiscal 2008.
Willi-Food's second quarter 2008 loss before taxes was NIS 1.1 million (US $0.3 million) compared to income before taxes of NIS 3.4 million (US $1.0 million) recorded in the second quarter of 2007. Second quarter 2008 net loss was NIS 1.4 million (US $0.4 million), or NIS -0.19 (US$ -0.06) per share compared to a net income of NIS 3.2 million (US $0.95 million), or NIS 0.23 (US$0.07) per share, recorded in the second quarter of 2007.
Willi-Food ended the quarter with NIS 79.1 million (US $23.6 million) in cash and securities and approximately NIS 14.1 million (US $4.2 million) in short-term debt.
Six-Month Results
Willi-Food's revenues for the six-month period increased by 45.8% to NIS 185.5 million (US $55.3 million) compared to revenues of NIS 127.2 million (US $38.0 million) in the first half of 2007. Gross profit for the period increased 38.6% to NIS 46.8 million (US $14.0 million) compared to gross profit of NIS 33.8 million (US $10.1 million) for the six month
period in 2007. First half gross margins were 25.2% compared to gross margins of 26.6% in the same period in 2007.
Operating income for the first half of 2008 increased by 3.9% to NIS 13.4 million (US $4.0 million) from NIS 12.9 million (US $3.9 million)reported in the comparable period of last year. First half 2008 income before taxes was NIS 12.0 million (US $3.6 million) compared to NIS 12.4 million (US $3.7 million) recorded in the first half of 2007. Net income for the first half of 2008 was NIS 8.2 million (US $2.5 million), or NIS 0.64 (US $0.19) per share compared to net income for the first half of 2007 of NIS 9.6 million (US $2.9 million), or NIS 0.73 (US $0.22) per share.
Arbitration Award
As previously disclosed, the Company (and related parties) and Vitarroz Corp. agreed to submit their claims relating to alleged breach of contract and related claims to an arbitration panel. On August 25 2008, the arbitration panel has granted an award against the Company in the amount of approximately NIS 2.0 million (US $0.6 million). Among other things, the panel found that the press release issued by the Company announcing the termination of the proposed acquisition of the Vitarroz business by the Company constituted a breach of contract and violation of the covenant of good faith and fair dealing. In addition, the panel rejected the Company's counterclaims. As the Company did not expect the arbitration panel to enter an arbitration award against it, the Company did not reserve any amounts for this award. The Company is currently evaluating its legal options with respect to this matter with its legal advisers.
Outlook
Mr. Williger commented, "Willi-Food's diversification strategy is working. Our top line growth is a reflection of the synergies we have created to channel the broad range of products coming from our own sourcing and that of our subsidiaries."
"We have been able to grow revenues and contain costs to an acceptable degree despite the immediate challenges pertaining to food commodities currently exceeding global inflation rates. This was made possible through diversification, as each operating company in the Willi-Food family produces a different product range to be channeled into our growing
distribution network.
"The foreseeable challenges ahead will be in managing the volatile cost of our product base, which can vary monthly. While consumers are accepting of the increase in food costs, rapid changes to our product pricing would lead to attrition of our customer base both in the retail and wholesale markets. With the closing of WF Laish in the US, we are carefully reviewing our merger and acquisition strategy. The US, however, remains a strategic region of interest for Willi-Food, and for now, we are objectively seeking potential partnerships to distribute our products with distributors who wish to grow their volume and diversify their line of premium kosher products. Our line of products includes over 600 exclusively distributed products by Willi-Food and Shamir Salads."
Mr. Williger continued, "The results of this reporting quarter were impaired by NIS 2.6 million (US $0.8 million) in expenses related to the closing down of WF Laish, and to a final arbitration award entered against the Company in the amount of NIS 2.0 million (US $0.6 million) in connection with litigation initiated by Vitarroz in 2005. The balance sheet
is now currently clean and we anticipate moving forward with the progress of Willi-Food."
Mr. Williger concluded, "We had hoped to provide guidance for the remainder of the fiscal year, but we will not be able to do so because commodity and food prices remain in a state of flux, and change from month to month. However, we still believe that the Company is on track to end the full fiscal year profitable and expect to grow 2008 sales to be in excess
of NIS 330 million (US $100 million). We look forward to discussing our results in more detail in our conference call."
G. WILLI-FOOD INTERNATIONAL LTD.
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, December 31, June 30, December 31,
2008 2007 2008 2007
NIS US dollars (*)
(in thousands)
ASSETS
Current assets
Cash and cash equivalents 46,712 61,649 13,936 18,391
Marketable securities 32,413 31,267 9,670 9,328
Trade receivables 77,188 63,728 23,027 19,012
Other receivables and 9,406 4,374 2,806 1,305
prepaid expenses
Inventories 33,469 29,166 9,985 8,701
Total current assets 199,188 190,184 59,424 56,737
Fixed assets
Cost 54,447 44,569 16,243 13,296
Less: accumulated 11,658 8,355 3,478 2,492
depreciation and
amortization
42,789 36,214 12,765 10,804
Other assets, net 22,105 13,069 6,595 3,899
264,082 239,467 78,784 71,440
LIABILITIES AND SHAREHOLDERS'
EQUITY
Current liabilities
Short-term loans 14,053 5,978 4,193 1,783
Trade payables 40,981 33,961 12,226 10,132
Related parties 2,475 3,945 738 1,177
Other payables and 13,527 3,655 4,035 1,090
accrued expenses
Total current 71,036 47,539 21,192 14,182
liabilities
Long term liabilities
Long term loan 953 - 284 -
Deffered tax 38 118 11 35
Accrued severance pay 598 163 179 49
Total long term 1,589 281 474 84
liabilities
Warrants to issue shares 101 1,040 31 310
Shareholders' equity
Ordinary shares NIS
0.10 par value
(authorized -
50,000,000
shares, issued and
outstanding
- 10,267,893 shares 1,113 1,113 332 332
Additional paid-in 59,056 59,056 17,618 17,618
capital Capital fund 247 - 74 -
relating to Goodwill
Foreign currency (863) (414) (257) (123)
translation reserve
Retained earnings 118,842 112,233 35,454 33,482
Minority Interest 12,961 18,619 3,866 5,555
191,356 190,607 57,087 56,864
264,082 239,467 78,784 71,440
(*)Convenience translation into U.S. dollars
G. WILLI-FOOD INTERNATIONAL LTD.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Six months Three months
ended June 30,
2008 2007 2008 2007
NIS
In thousands (except per share and share data)
Sales 185,481 127,216 79,036 55,771
Cost of sales 138,659 93,439 62,271 42,601
Gross profit 46,822 33,777 16,765 13,170
Selling 17,538 12,316 8,436 6,312
expenses
General and
administrative
expenses 13,901 8,566 7,752 4,088
Other (Income)
Expense 1,981 (9) 1,981 (9)
Total
operating
expenses 33,420 20,873 18,169 10,391
Operating
income
(Expense) 13,402 12,904 (1,404) 2,779
Financial 2,026 2,534 1,207 1,743
income
Financial 3,465 3,025 936 1,143
expense
Income 11,963 12,413 (1,133) 3,379
(expense)
before
taxes on
income
Taxes on 3,750 2,861 312 193
income
Income after 8,213 9,552 (1,445) 3,186
taxes on
income
Related to:
Company 6,609 7,455 (1,986) 2,332
Shareholders'
Minority 1,604 2,097 541 854
interest
Net income 8,213 9,552 (1,445) 3,186
Earnings per
share data:
Earnings per
share:
Basic 0.64 0.73 (0.19) 0.23
Diluted 0.64 0.73 (0.19) 0.23
Shares used in
computing
basic and
diluted
earnings per
ordinary
share: 10,267,893 10,267,893 10,267,893 10,267,893
G. WILLI-FOOD INTERNATIONAL LTD.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Continued.........
Six months
ended June 30,
2008 2007
US dollars (*)
In thousands (except per share and share data)
Sales 55,334 37,952
Cost of sales 41,366 27,876
Gross profit 13,968 10,076
Selling 5,232 3,674
expenses
General and
administrative
expenses 4,147 2,555
Other (Income)
Expense 591 (3)
Total
operating
expenses 9,970 6,226
Operating
income
(Expense) 3,998 3,850
Financial 605 756
income
Financial 1,034 902
expense
Income 3,569 3,704
(expense)
before
taxes on
income
Taxes on 1,119 854
income
Income after 2,450 2,850
taxes on
income
Related to:
Company 1,972 2,224
Shareholders'
Minority 478 626
interest
Net income 2,450 2,850
Earnings per
share data:
Earnings per
share:
Basic 0.19 0.22
Diluted 0.19 0.22
Shares used in
computing
basic and
diluted
earnings per
ordinary
share: 10,267,893 10,267,893
(*) Convenience translation into U.S. dollars