Israel-based food group G. Willi-Food reported a surge in earnings for the first quarter of the year, as cost savings fell significantly due to lower management salaries, outpacing a dip in sales.

G. Willi-Food revealed operating income increased by 284% to NIS8m (US$2.1m) versus NIS2.1m in the prior year. Selling expenses were down 13% year on year, while general and administrative costs dropped 18.8%, the group revealed. Willi-Food attributed the improvement to the “significant” decrease in management salaries following the departure of its chairman and president Zwi Williger and president Joseph Williger. 

Willi-Food announced in November last year the Williger brothers, alongside then CEO and CFO Gil Hochboim, were standing down. At the time, the company remained silent on reasons for the departures. However, it has since emerged the company has been accused of breaching domestic “securities laws” and unspecified “criminal offences” as part of a securities probe

The group’s chairman and indirect controlling shareholder Gregory Gurtovoy was detained by the authorities. Willi-Food has not confirmed whether the departures of the Williger brothers and Hochboim were linked to the investigation.

Willi-Food’s net income in the first quarter was NIS4.7m, compared to NIS2.6m recorded in the first quarter of 2015.

While operating and net profits were up on last year, the company revealed sales in the period dropped 4.1%. Revenue fell to NIS82.6m from NIS86.2m recorded in the first quarter of 2015. Willi-Food attributed the drop to the timing of the Passover holiday, the impact of shortage of inventories, and the “market decline in food product consumption” by the Israeli consumer.

Commenting on the result, CEO Iram Graiver said: “We are very pleased to report a strong quarter with the new management team. Our financial results have significantly improved, we continued to gain traction with new customers while product sales to existing customers also continued to grow as a direct result of our new strategy to organically grow our customer base and product line and in addition to improve our commercial relations with our suppliers. 

“Moving forward, we intend to continue to leverage market demand in order to maximise our revenues and expand margins. We intend to reinvest in the development of the company in order to maximise profitability and increase long-term value for our shareholders.”

Alongside the first-quarter results, Willi-Food provided a statement on the probe from the Israeli Securities Authority. It said a search was conducted at the company’s offices on 17 February by the regulator. Documents and computers were seized.

“To the best of the company’s knowledge a number of executives in the group are being investigated by the authority,” Willi-Food said. It confirmed Gurtovoy was detained for interrogation by the authority for three days, after which, he was placed under house arrest for a period of two weeks, which has since ended. 

“According to the exhibit attached to the arrest warrant, Mr. Gurtovoy was arrested on the suspicion of the crimes of fraudulent acquisitions under aggravating circumstances, falsifying corporate documents, fraud, breach of trust in a corporation, money laundering, as well as misleading reporting,” Willi-Food said. “To company management’s knowledge, the investigation by the authority relates to an investment of approximately US$2.25m made during January 2016 from sums previously held in a bank account of a subsidiary of the company in the form of bonds of a European company, which allegedly served as a collateral to a loan obtained by the controlling shareholder or another individual, and which was unrelated to the company’s operations.”

Willi-Food said the investment was carried out by B.H.W.F.I Ltd., a wholly owned subsidiary of the company. It said it was “apparent” the “ultimate controlling shareholder” of the European company that issued the bonds is Meinl Bank.