ISRAEL: G. Willi Food seeks acquisitions as H1 profits sink
- Half-year net profit falls 33%
- Net sales dip 0.4%
- Operating profit decreases 40%
Kosher food specialist G.Willi Food has said it will pursue acquisitions after seeing profits plunge in the first half of its fiscal year.
Israel-based G.Willi's chairman, Zwi Williger, said on Wednesday (15 August) that the firm sees an opportunity to use spare cash for "synergetic acquisitions". He said economic uncertainty means the price of deals is likely to fall.
G.Willi is keen to show it can improve shareholder returns after seeing net profit for the six months to the end of June drop by a third on the same period of last year, to NIS8.9m (US$2.2m). Operating profit slid by almost 40%, to NIS10.3m, said the group, which is one of Israel's largest food importers.
The firm only booked a 0.4% dip in net sales, to NIS140m, but margins were damaged as hard-hit consumers traded down to cheaper foods and global food commodity costs continued to rise.
Williger said: "As with the second half of 2011 and the first quarter of 2012, second quarter 2012 results were affected by continued consumer pressure to reduce prices."
The company, he said, is focused on containing costs. "Going forward, we anticipate a significant increase in the level of uncertainty in the global economy and in particular - challenges pertaining to food commodities that exceeded global inflation rates. In Israel, economic uncertainty coupled with ongoing consumer demand for price reductions will not enable us to increase prices."
In the second quarter, net sales dropped by 5.4% to NIS66.3m. Operating profit fell by 48% to NIS5.55m and net profit slid by 44% to NIS4.1m.
YAVNE, Israel, August 15, 2012 /PRNewswire/ --
G. Willi-Food International Ltd. (WILC) (the "Company" or "Willi-Food"), a global company specializing in the development, marketing and international distribution of kosher foods, today announced its unaudited financial results for the second quarter and the six-months ended June 30, 2012.
Second Quarter Fiscal 2012 Highlights
- Sales decreased 5.4% from second quarter of 2011 to NIS 66.3 million (US$ 16.9 million)
- Gross profit decreased 21.2% from second quarter of 2011 to NIS 16.5 million (US$ 4.2 million), or 24.9% of sales
- Operating income decreased 47.9% from second quarter of 2011 to NIS 5.5 million (US$ 1.4 million), or 8.4% of sales
- Net income decreased 43.8% from second quarter of 2011 to NIS 4.1 million (US$ 1.0 million), or 6.2% of sales
- Cash and securities balance of NIS 203.7 million (US$ 51.9 million) as of June 30, 2012
Willi-Food's operating divisions include Willi-Food, a distributor of a broad variety of kosher foods, and its wholly-owned Gold Frost, a designer, developer and distributor of branded kosher dairy food products.
Second Quarter Fiscal 2012 Summary
Sales for the second quarter of 2012 decreased by 5.4% to NIS 66.3 million (US$ 16.9 million) from NIS 70.1 million (US$ 17.9 million) recorded in the second quarter of 2011. The decline in sales in the second quarter of 2012 was a result of the timing of the Passover festival that it sells fell during the first quarter this year, while last year it sales fell during the second quarter.
Gross profit for the second quarter of 2012 decreased by 21.2% to NIS 16.5 million (US$ 4.2 million) compared to NIS 21.0 million (US$ 5.4 million) recorded in the second quarter of 2011. Second quarter gross margin was 24.9% compared to gross margin of 29.9% for the same period in 2011. The decrease in gross profit and gross margins was primarily due to reductions in the prices of certain of our products as a result of the ongoing national protest against the cost of food products and continued pressure from our customers to reduce prices and due to an increase in global prices of food products compounded by the recent strengthening of the U.S. dollar versus the NIS (which depreciated 5.6% in the second quarter of 2012) and the continued effects of the global economic recession.
Willi-Food's operating income for the second quarter of 2012 decreased by 47.9% to NIS 5.5 million (US$ 1.4 million) compared to NIS 10.7 million (US$ 2.7 million) recorded in the second quarter of 2011. Selling expenses increased by 12.7% from the comparable quarter of 2011, primarily due to increase in advertising and promotion expenses. Selling expenses as a percentage of sales increased in the second quarter of 2012 to 10.5% compared to 8.8% in the second quarter of 2011. General and administrative expenses decreased by 7.8% from the comparable quarter of 2011, primarily due to a decrease in management profit-related bonuses. General and administrative expenses as a percentage of sales decreased in the second quarter of 2011 to 6.0% from 6.2% in the second quarter of 2011.
Willi-Food's income before taxes for the second quarter of 2012 decreased by 36.2% to NIS 5.4 million (US$ 1.4 million) compared to NIS 8.5 million (US$ 2.2 million) recorded in the second quarter of 2011. Willi-Food's profit from continuing operations for the second quarter of 2012 decreased by 38.6% to NIS 4.1 million (US$ 1.0 million) from NIS 6.7 million (US$ 1.7 million) recorded in the second quarter of 2011.
Willi-Food's net income in the second quarter of 2012 decreased by 43.8% to NIS 4.1 million (US$ 1.0 million) from NIS 7.3 million (US$ 1.9 million) recorded in the second quarter of 2011. Willi-Food's net income attributed to the owners of the Company in the second quarter of 2012 decreased 41.2% to NIS 4.1 million (US$ 1.0 million), or NIS 0.32 (US$ 0.08) per share, compared to NIS 7.0 million (US$ 1.8 million), or NIS 0.51 (US$ 0.13) per share, recorded in the second quarter of 2011.
Willi-Food generated NIS 8.7 million (US$ 2.2 million), or NIS 0.67 (US$ 0.17) per share from continuing operating activities in the second quarter of 2012.
Willi-Food ended the second quarter of 2012 with NIS 203.7 million (US$ 51.9 million) in cash and securities and with no short-term debt. Willi-Food's shareholders' equity at the end of June 2012 was NIS 318.5 million (US$ 81.2 million).
Willi-Food's sales for the six-month period ending June 30, 2012 decreased by 0.4% to NIS 140.0 million (US$ 35.7 million) compared to sales of NIS 140.5 million (US$ 35.8 million) in the first half of 2011. Gross profit for the period decreased by 17.4% to NIS 32.2 million (US$ 8.2 million) compared to gross profit of NIS 39.0 million (US$ 9.9 million) for the first half of 2011. First half gross margins in 2012 were 23.0% compared to gross margins of 27.7% in the same period of 2011.
Operating income for the first half of 2012 decreased by 39.5% to NIS 10.3 million (US$ 2.6 million) from NIS 17.0 million (US$ 4.3 million) reported in the comparable period of last year. First half 2012 income before taxes decreased by 26.7% to NIS 12.0 million (US$ 3.0 million) compared to NIS 16.3 million (US$ 4.2 million) recorded in the first half of 2011. Net income for the first half of 2012 decreased by 33.7% to NIS 8.9 million (US$ 2.3 million) from NIS 13.5 million (US$ 3.4 million) in the first half of 2011. Net income attributable to the owners of the Company for the first half of 2012 decreased by 31.4% to NIS 8.9 million (US$ 2.3 million), or NIS 0.69 (US$ 0.18) per share compared to net income attributable to the owners of the Company for the first half of 2011 of NIS 13.0 million (US$ 3.3 million), or NIS 0.96 (US$ 0.24) per share.
Mr. Zwi Williger, Chairman of Willi-Food commented, "As with the second half of 2011 and the first quarter of 2012, second quarter 2012 results were affected by continued consumer pressure to reduce prices which accordingly, caused us to reduce the prices of some of our products. The actions taken in the recent quarters, by way of price reductions, resulted in a decrease of our profitability. Our results were also affected by the depreciation of the NIS versus the U.S. dollar by more than 5% in the second quarter. Going forward, we anticipate a significant increase in the level of uncertainty in the global economy and in particular - challenges pertaining to food commodities that exceeded global inflation rates. In Israel, economic uncertainty coupled with ongoing consumer demand for price reductions will not enable us to increase prices even with the global price increase of food products and the U.S. dollar strengthening."
Mr. Williger concluded, "In light of the anticipated continued depreciation of the NIS and the global price increase of food products, our foreseeable challenges ahead will be to manage our expenses and in particular the cost of our products in order to accommodate our customers' continued anticipated desire to acquire lower cost products. However, we believe that this period presents us with an opportunity utilize our cash on hand to acquire synergetic companies at prices lower than before. We continue to look for opportunities to create additional value for our shareholders."
The Company will host a conference call to discuss results on Wedensday, August 15, 2012 at 11:00 AM Eastern time. Interested parties may participate in the conference call by dialing 1-877-941-8416 (US), or 1-480-629-9808 (International), approximately 10 minutes prior to the scheduled start time. Interested parties can also listen via a live Internet webcast, which will be available on the day of the call through the following link:
A replay of the conference call will be available for 14 days from 2:00 PM EST on August 15, 2012 through 11:59 PM EST on August 29, 2012 by dialing 1-877-870-5176 (US), or 1-858-384-5517 (International), access code 4558985. In addition, a recording of the call will be available via the following link for one year:
NOTE A: Convenience Translation to Dollars
The convenience translation of New Israeli Shekels (NIS) into U.S. dollars was made at the rate of exchange prevailing on June 30, 2012, U.S. $1.00 equals NIS 3.923. The translation was made solely for the convenience of the reader.
NOTE B: IFRS
The Company's consolidated financial results for the three-month and six-month ended June 30, 2012 are presented in accordance with International Financial Reporting Standards ("IFRS").
NOTE C: Discontinued Operations
Discontinued operations are measured and presented in accordance with the provisions of IFRS 5 "Non-current Assets Held for Sale and Discontinued Operations". The results of discontinued operations are presented in the income statement in a separate item below income from continuing operations.
About G. Willi-Food International Ltd.
G. Willi-Food International Ltd. (http://www.willi-food.com) is an Israeli-based company specializing in high-quality, great-tasting kosher food products. Willi-Food is engaged directly and through its subsidiaries in the design, import, marketing and distribution of over 600 food products worldwide. As one of Israel's leading food importers, Willi-Food markets and sells its food products to over 1,500 customers in Israel and around the world including large retail and private supermarket chains, wholesalers and institutional consumers. The company's operating divisions include Willi-Food in Israel and Gold Frost, a wholly owned subsidiary who designs, develops and distributes branded kosher, dairy-food products.
Original source: G. Willi-Food
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