Yavne, Israel, March 12 - 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 range of quality kosher food products, today announced its audited financial results for the fourth quarter and fiscal year ended December 31, 2008.
Fourth Quarter Fiscal 2008 Summary
- 34.8% increase in sales over fourth quarter of 2007
- 7.4% gross profit in fourth quarter of 2008
- Operating loss of NIS 6.7 million (US $1.8 million) in fourth quarter 2008
- Loss before taxes of NIS 10.5 million (US $2.8 million) in fourth quarter of 2008
- Loss after taxes of NIS 8.6 million (US $2.3 million) in fourth quarter of 2008
- Net loss related to Company Shareholders of NIS 7.5 million (US $2.0 million) in fourth quarter of 2008
Sales for the fourth quarter of fiscal 2008 increased by 34.8% to NIS 84.6 million (US $22.3 million) compared to sales of NIS 62.8 million (US $16.5 million) in the fourth quarter of 2007. Willi-Food's organic growth in its home market of Israel was very slow in the fourth quarter, and most of the sales increase resulted from the recent consolidation of the revenues of the two subsidiaries - Shamir Salads and the Danish dairy distributor.
Gross profit for the fourth quarter of 2008 increased by 14.6% to NIS 6.3 million (US $1.7 million) compared to gross profit of NIS 5.5 million (US $1.4 million) in the fourth quarter of 2007. Fourth quarter gross margin was 7.4% compared to gross margin of 8.7% during the same period in 2007.
As previously announced by the Company on December 29, 2008, during the fourth quarter of 2008, the global purchase prices of food products sharply decreased, resulting in the sharp decrease in the selling prices of the Company's products as well. Because the Company's commitments to purchase food products were based on higher prices from its vendors, the immediate consequence was a decline in the gross margin in the fourth quarter of 2008 and the Company expects a further decline until approximately mid 2009 when the Company will complete the sale of the inventory in the orders from vendors backlog acquired at the higher prices.
The decrease of global purchase prices of food products compounded with the recent strengthening of the U.S. dollar versus the NIS (a depreciation of more then 11% of the value of the NIS in the fourth quarter of 2008) and the general effects of the global economic recession, led to a gross margin of 7.4% in the fourth quarter of 2008. The gross margin for the fourth quarter of 2007 was also impacted by an impairment charge in the amount of NIS 3.2 million (US $0.8 million) for expired and unsaleable Laish inventory.
To the extent that global purchase prices of food products continue to decline, or the depreciation of the NIS versus the U.S. dollar will continue (the depreciation of the NIS versus the U.S. dollar from January 1, 2009 through March 10, 2009 was 12%), the Company's gross margins may be impacted beyond the second quarter of 2009 because the Company must continue to purchase inventory from foreign vendors in advance to take into account the time for manufacture and shipment of products.
Mr. Zwi Williger, President and COO of Willi-Food commented, "Fourth quarter results were affected by the sharp decrease in global purchase prices, the depreciation of the NIS versus the U.S. dollar, the continued environment of uncertainty in the global financial markets, and the recession that has begun in our home market. We believe that Willi-Food's results in 2009 will be affected by the economic situation and significant recession that has affected our customers and the global markets."
Willi-Food's operating loss for the fourth quarter of 2008 decreased by 25.9% to NIS 6.7 million (US $1.8 million) compared to NIS 9.0 million (US $2.4 million) reported in the comparable quarter of last year. Selling expenses as a percentage of revenues increased in the fourth quarter of 2008 to 9.4% compared to 8.5% in the fourth quarter of 2007. General and administrative expenses as a percentage of revenue decreased in the fourth quarter of 2008 to 4.7% from 10.5% in the fourth quarter of 2007.
General and administrative expenses in the fourth quarter of 2007 included an unrecoverable accounts receivables adjustment in the amount of NIS 2.2 million (US $0.6 million) at Laish. In addition, impairment of goodwill related to the Danish dairy distributor was NIS 1.1 million million (US $0.3 million) in the fourth quarter of 2008 compared to an impairment of goodwill related to Laish in the ammount of NIS 3.1 million (US $0.8 million) in the fourth quarter of 2007.
Willi-Food's loss before taxes for the fourth quarter of 2008 increased by 22.2% to NIS 10.5 million (US $2.8 million) compared to loss before taxes of NIS 8.6 million (US $2.3 million) recorded in the fourth quarter of 2007. Willi Food's net loss related to Company Shareholders in the fourth quarter of 2008 decreased by 5.1% to NIS 7.5 million (US $2.0 million), or NIS 0.73 (US $0.19) per share compared to a net loss related to Company Shareholders of NIS 7.9 million (US $2.1 million), or NIS 0.77 (US $0.20) per share, recorded in the fourth quarter of 2007.
Fiscal 2008 Summary
- 39.9% increase in sales over fiscal 2007
- 33.2% increase in gross profit over fiscal 2007
- 48.1% increase in operating income over fiscal 2007
- 76.4% decrease in income before taxes on income over fiscal 2007
- 94.2% decrease in income after taxes on income over fiscal 2007
- Net loss related to Company Shareholders of NIS 0.8 million (US $0.2 million) in fiscal 2008 compared with net income related toCompany Shareholders of NIS 2.3 million (US $0.6 million) in fiscal 2007.
Willi-Food's sales for fiscal 2008 increased by 39.9% to NIS 349.2 million (US $91.9 million) compared to sales of NIS 249.7 million (US $65.7 million) in fiscal 2007. Gross profit for 2008 increased 33.2% to NIS 67.6 million (US $17.8 million) compared to gross profit of NIS 50.7 million (US $13.3 million) for the prior year. Gross margin in 2008 was 19.4% compared to gross margin of 20.3% in 2007.
Operating income in 2008 increased by 48.1% to NIS 7.4 million (US $2.0 million) from NIS 5.0 million (US $1.3 million) reported in 2007. Income before taxes in 2008 decreased by 76.4% to NIS 1.7 million (US $0.5 million) compared to NIS 7.3 million (US $1.9 million) recorded in 2007. Net loss related to Company Shareholders in 2008 was NIS 0.8 million (US $0.2 million), or NIS 0.08 (US $0.02) per share, compared to net income related to the Company Shareholders, of NIS 2.3 million (US $0.6 million), or NIS 0.23 (US $0.06) per share, recorded in 2007.
Outlook
Mr. Williger commented, "Willi-Food is facing a global recession that we expect will harm our results in 2009 - both in terms of sales and net profit. In 2008, we faced challenges pertaining to food commodities that exceeded global inflation rates. Our top line growth was 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 expect that growth to stop in 2009 due to the global economic situation and to increased unemployment both of which are affecting, and we expect will continue to affect, our customer base, both in the retail and in the wholesale markets, in Israel and abroad."
Mr. Williger concluded, "In light of the anticipated continued recession and increasing unemployment rates, our foreseeable challenges ahead will be in managing our expenses, and in particular the cost of our products, to an acceptable degree in order to accommodate our consumers' anticipated desire to acquire lower cost products. We hope that in these difficult times we will be able to maintain our customer base both in the retail and in the wholesale markets."