ISRAEL: G.Willi 9M profits slide on pricing pressures

By Michelle Russell | 29 November 2012

  • Net profit slides 3.2%
  • Operating profit down 24.8%
  • Net sales climb 2.3%
G.Willi said it is "cautious" about the impact of the ongoing national protest against the cost of food products

G.Willi said it is "cautious" about the impact of the ongoing national protest against the cost of food products

Kosher food specialist G. Willi-Food has recorded a drop in nine-month profits as the firm experienced commodity cost increases and pressures from supermarkets to reduce prices.

Net income in the nine months to the end of September dropped 3.2% to NIS15.2m (US$3.9m). The group said continued pressure from its customers to reduce prices as a result of ongoing protests against the cost of food, affected earnings. Operating income also slid in the period, by 24.8% to NIS16m.

Sales, however, climbed 2.3% to NIS210.1m, driven by new product launches in the third quarter and increased sales activities initiated in the last year.

Chairman Zwi Williger said: "We are understandably cautious regarding ongoing global commodity price inflation and the impact of the ongoing national protest against the cost of food products, but we believe we are well-positioned to limit any impacts."

Show the press release

G. Willi-Food Reports Q3 2012 Net Income up 179% from Q3 2011

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 third quarter and the nine-months ended September 30, 2012.
Third Quarter Fiscal 2012 Highlights
Sales increased 8.0% from third quarter of 2011 to NIS 70.1 million (US$ 17.9 million)
Gross profit increased 5.4% from third quarter of 2011 to NIS 16.3 million (US$ 4.2 million), or 23.2% of sales
Operating income increased 34.7% from third quarter of 2011 to NIS 5.7 million (US$ 1.5 million), or 8.1% of sales
Net income increased 179.1% from third quarter of 2011 to NIS 6.3 million (US$ 1.6 million), or 9.0% of sales
Cash and securities balance of NIS 216.1 million (US$ 55.2 million) as of September 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.
Third Quarter Fiscal 2012 Summary
Sales for the third quarter of 2012 increased by 8.0% to NIS 70.1 million (US$ 17.9 million) from NIS 64.9 million (US$ 16.6 million) recorded in the third quarter of 2011. The increase in sales in the third quarter of 2012 was mostly driven by the introduction of new products in the third quarter and the increased awareness of the Company's new products following increased sales activities initiated during the past year.
Gross profit for the third quarter of 2012 increased by 5.4% to NIS 16.3 million (US$ 4.2 million) compared to NIS 15.4 million (US$ 3.9 million) recorded in the third quarter of 2011. Third quarter gross margin was 23.2% compared to gross margin of 23.8% for the same period in 2011. The decrease in gross margins was primarily due to the continued pressure from our customers to reduce prices as a result of the ongoing national protest against the cost of food products.
Willi-Food's operating income for the third quarter of 2012 increased by 34.7% to NIS 5.7 million (US$ 1.5 million) compared to NIS 4.2 million (US$ 1.1 million) recorded in the third quarter of 2011. Selling expenses decreased by 7.3% from the comparable quarter of 2011, primarily due to a decrease in vehicles and transport expenses. Selling expenses as a percentage of sales decreased in the third quarter of 2012 to 9.7% compared to 11.3% in the third quarter of 2011. General and administrative expenses increased by 1.3% from the comparable quarter of 2011, primarily due to an increase in management profit-related bonuses. General and administrative expenses as a percentage of sales decreased in the third quarter of 2012 to 5.5% from 5.9% in the third quarter of 2011.
Willi-Food's income before taxes for the third quarter of 2012 increased by 125.4% to NIS 8.1 million (US$ 2.1 million) compared to NIS 3.6 million (US$ 0.9 million) recorded in the third quarter of 2011. Willi-Food's profit from continuing operations for the third quarter of 2012 increased by 157.5% to NIS 6.3 million (US$ 1.6 million) from NIS 2.4 million (US$ 0.6 million) recorded in the third quarter of 2011.
Willi-Food's net income in the third quarter of 2012 increased by 179.1% to NIS 6.3 million (US$ 1.6 million) from NIS 2.3 million (US$ 0.6 million) recorded in the third quarter of 2011. Willi-Food's net income attributed to the owners of the Company in the third quarter of 2012 increased by 168.2% to NIS 6.3 million (US$ 1.6 million), or NIS 0.49 (US$ 0.13) per share, compared to NIS 2.3 million (US$ 0.6 million), or NIS 0.17 (US$ 0.04) per share, recorded in the third quarter of 2011.
Willi-Food generated NIS 12.6 million (US$ 3.2 million), or NIS 0.97 (US$ 0.25) per share from continuing operating activities in the third quarter of 2012.
Willi-Food ended the third quarter of 2012 with NIS 216.1 million (US$ 55.2 million) in cash and securities and with no short-term debt. Willi-Food's shareholders' equity at the end of September 2012 was NIS 324.9 million (US$ 83.0 million).
Nine-Month Results
Willi-Food's sales for the nine-month period ending September 30, 2012 increased by 2.3% to NIS 210.1 million (US$ 53.7 million) compared to sales of NIS 205.4 million (US$ 52.5 million) in the first nine-month of 2011. Gross profit for the period decreased by 10.9% to NIS 48.5 million (US$ 12.4 million) compared to gross profit of NIS 54.4 million (US$ 13.9 million) for the nine-month period in 2011. First nine-month gross margins in 2012 were 23.1% compared to gross margins of 26.5% in the same period of 2011.
Operating income for the first nine months of 2012 decreased by 24.8% to NIS 16.0 million (US$ 4.1 million) from NIS 21.2 million (US$ 5.4 million) reported in the comparable period of last year. Income before taxes for the first nine months of 2012 increased by 0.9% to NIS 20.1 million (US$ 5.1 million) compared to NIS 19.9 million (US$ 5.1 million) recorded in the first nine months of 2011. Net income for the first nine months of 2012 decreased by 3.2% to NIS 15.2 million (US$ 3.9 million) from NIS 15.7 million (US$ 4.0 million) in the first nine months of 2011. Net income attributable to the owners of the Company for the first nine months of 2012 decreased by 0.9% to NIS 15.2 million (US$ 3.9 million), or NIS 1.17 (US$ 0.30) per share compared to net income attributable to the owners of the Company for the first nine months of 2011 of NIS 15.4 million (US$ 3.9 million), or NIS 1.13 (US$ 0.29) per share.
Business Outlook
Mr. Zwi Williger, Chairman of Willi-Food commented, "We are pleased with our overall performance and our third quarter 2012 results, especially in the current challenging environment of increased competition resulting from customer demand to reduce prices despite the global inflation in the purchase prices of food commodities . We grew sales and gross profits while controlling SG&A expense growth. Third quarter operating income increased by nearly 35% and net income increased by nearly 180%, despite pressure imposed on the Company by the supermarket chains to reduce prices and despite the well-known pressures in commodity costs inflicted worldwide. Throughout 2011 and 2012 we have introduced great-tasting, higher margin food products developed together with our suppliers. We implemented our plan to increase the awareness to our newly added products, by initiating promotion and hard sale activities that we believe created broad awareness to our new and old products and broaden our customer base. This plan has helped us achieve our goals to strengthen our position in the market, due to our broad range of quality food products."
Mr. Williger concluded, "Looking forward, we are confident that we can deliver sales and profit growth in the fourth quarter of 2012 and in 2013 compared to the comparable periods. The fourth quarter of 2012 is off to a good start, and we believe that the positive momentum will continue in recently introduced products, and that several new product line introductions can further boost sales. We are understandably cautious regarding ongoing global commodity price inflation and the impact of the ongoing national protest against the cost of food products, but we believe we are well-positioned to limit any impacts. We will sustain our flexible purchasing strategy and are highly focused on reducing production costs and SG&A expenses. We continue to look for opportunities to create additional value for our shareholders."

Original source: G.Willi Foods

Sectors: Commodities & ingredients, Financials, Private label

Companies: G. Willi-Food

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