G. Willi-Food International reports Q4 net earnings of US$800,000, down 60.3% from year-ago period amid ongoing national protest against cost of food products, continued recession and economic uncertainty; sales down 16.8% to US$15.5M
March 29, 2012
– G. Willi-Food International Ltd. (NASDAQ: WILC) (the "Company" or "Willi-Food"), a global company specializing in the development, manufacturing, marketing and international distribution of kosher foods, today announced its financial results for the fourth quarter and the fiscal year ended December 31, 2011.
Fourth Quarter Fiscal 2011 Highlights
* Sales decreased 16.8% from fourth quarter of 2010 to NIS 59.1 million (US$ 15.5 million)
* Gross profit decreased 60.4% from fourth quarter of 2010 to NIS 7.5 million (US$ 2.0 million), or 12.7% of sales
* Operating loss of NIS 4.1 million (US$ 1.1 million) compared to operating income of NIS 6.2 million (US$ 1.6 million) in the fourth quarter of 2010
* Net income decreased 65.4% from fourth quarter of 2010 to NIS 2.8 million (US$ 0.7 million), or 4.7% of sales
* Net income attributed to the owners of the Company decreased 60.3% from fourth quarter of 2010 to NIS 2.9 million (US$ 0.8 million), or 5.0% of sales
* Cash and securities balance of NIS 198.1 million (US$ 51.8 million) as of December 31, 2011
As announced by the Company on December 18, 2011 and January 2, 2012, Willi-Food sold its entire 51% ownership interest in Shamir Salads for NIS 12 million to other shareholders of Shamir Salads as a result of settlement of a dispute with those shareholders. In addition, the Company received NIS 1.5 million in past due management fees as part of the settlement. As a result of the sale, the results of the operation of Shamir Salads, which comprised the entire manufacturing segment, is presented as discontinued operations. See Note C below.
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.
Fourth Quarter Fiscal 2011 Summary
Sales for the fourth quarter of 2011 decreased by 16.8% to NIS 59.1 million (US$ 15.5 million) from NIS 71.0 million (US$ 18.6 million) recorded in the fourth quarter of 2010. The decrease in sales in the fourth quarter was primarily due to ongoing national protest against the cost of food products as well as continued recession and economic uncertainty.
Gross profit for the fourth quarter of 2011 decreased by 60.4% to NIS 7.5 million (US$ 2.0 million) from NIS 18.9 million (US$ 5.0 million) recorded in the fourth quarter of 2010. Fourth quarter gross margin was 12.7% compared to gross margin of 26.7% for the same period in 2010. 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 continued pressure from our customers to reduce prices, an increase in global prices of food products compounded by the recent strengthening of the U.S. dollar versus the NIS (which depreciated 2.9% in the fourth quarter of 2011) and the general effects of the global economic recession. The Company expects the decline in its gross margins to continue in the first quarter of 2012 compared to 2011 first quarter's gross margins. To the extent that customer pressure to reduce prices continues, or global prices of food products continue to increase, or the depreciation of the NIS versus the U.S. dollar continues, the Company's gross margins may be impacted beyond the first quarter of 2012.
Mr. Zwi Williger, Chairman of Willi-Food commented, "As with the third quarter, fourth quarter results were affected dramatically by reduced customer consumption of our food products combined with ongoing pressure by customers to lower food selling prices, both of which caused us to decrease the selling price of some of our products. This quarter was also affected by an increase in global purchase prices, depreciation of the NIS versus the U.S. dollar, and an environment of continued recession and uncertainty in the financial markets in our home market and abroad. We believe that Willi-Food's results in the first quarter of 2012 will continue to be impacted by these forces, including significant economic headwinds."
Willi-Food's operating loss for the fourth quarter of 2011 was NIS 4.1 million (US$ 1.1 million) compared to operating income of NIS 6.2 million (US$ 1.6 million) recorded in the fourth quarter of 2010. Selling expenses decreased by 12.1% from the comparable quarter of 2010, primarily due to aggressive expense reduction initiatives. Selling expenses as a percentage of sales increased in the fourth quarter of 2011 to 12.3% compared to 11.7% in the fourth quarter of 2010. General and administrative expenses decreased by 3.6% from the comparable quarter of 2010. General and administrative expenses as a percentage of sales increased in the fourth quarter of 2011 to 7.3% from 6.3% in the fourth quarter of 2010.
Willi-Food's loss before taxes for the fourth quarter of 2011 was NIS 1.6 million (US$ 0.4 million) compared to income before taxes of NIS 8.3 million (US$ 2.2 million) recorded in the fourth quarter of 2010. Willi-Food's loss from continuing operations for the fourth quarter of 2011 was NIS 0.6 million (US$ 0.2 million) compared to income from continuing operations of NIS 6.9 million (US$ 1.8 million) recorded in the fourth quarter of 2010.
Willi-Food's income from discontinuing operations increased 194.8% to NIS 3.4 million (US$ 0.9 million) compared to NIS 1.2 million (US$ 0.3 million) recorded in the fourth quarter of 2010. Fourth quarter income from discontinuing operations in 2011 and 2010 includes the Company's manufacturing segment comprised of Shamir Salads. The income from discontinuing operations in the fourth quarter of 2011 mainly represents the net capital gain from sale of Willi-Food's 51% ownership interest in Shamir Salads.
Willi-Food's net income in the fourth quarter of 2011 decreased 65.4% to NIS 2.8 million (US$ 0.7 million) from NIS 8.1 million (US$ 2.1 million) recorded in the fourth quarter of 2010. Willi-Food's net income attributed to the owners of the Company in the fourth quarter of 2011 decreased 60.3% to NIS 2.9 million (US$ 0.8 million), or NIS 0.22 (US$ 0.06) per share, compared to NIS 7.4 million (US$ 1.9 million), or NIS 0.55 (US$ 0.14) per share, recorded in the fourth quarter of 2010.
Willi-Food ended the fourth quarter of 2011 with NIS 198.1 million (US$ 51.8 million) in cash and securities and with no short-term debt. Willi-Food's shareholders' equity at the end of December 2011 was NIS 310.3 million (US$ 81.2 million).
Fiscal 2011 Highlights
* Sales decreased 2.5% from fiscal 2010 to NIS 264.4 million (US$ 69.2 million)
* Gross profit decreased 19.0% from fiscal 2010 to NIS 61.7 million (US$ 16.1 million), or 23.3% of sales
* Operating income decreased 37.6% from fiscal 2010 to NIS 17.1 million (US$ 4.5 million), or 6.5% of sales
* Net income decreased 38.6% from fiscal 2010 to NIS 18.5 million (US$ 4.85 million), or 7.0% of sales
* Net income attributed to the owners of the Company decreased 35.0% from fiscal 2010 to NIS 18.3 million (US$ 4.79 million), or 6.9% of sales
Fiscal 2011 Results
Willi-Food's sales for fiscal 2011 decreased by 2.5% to NIS 264.4 million (US$ 69.2 million) from NIS 271.1 million (US$ 71.0 million) reported in fiscal 2010. Gross profit for the year decreased 19.0% to NIS 61.7 million (US$ 16.1 million) from NIS 76.2 million (US$ 19.9 million) in fiscal 2010. Fiscal 2010 gross margins were 23.3% compared to gross margins of 28.1% in fiscal 2010.
Operating income for fiscal 2011 decreased by 37.6% to NIS 17.1 million (US$ 4.5 million) from NIS 27.4 million (US$ 7.2 million) reported in in fiscal 2010. Fiscal 2011 income before taxes decreased by 43.4% to NIS 18.3 million (US$ 4.8 million) from NIS 32.3 million (US$ 8.4 million) recorded in fiscal 2010. Net income for fiscal 2011 decreased by 38.6% to NIS 18.5 million (US$ 4.8 million) from NIS 30.2 million (US$ 7.9 million) reported in fiscal 2010. Net income attributable to the owners of the Company for fiscal 2011 decreased by 35.0% to NIS 18.3 million (US $4.8 million), or NIS 1.35 (US$ 0.35) per share, compared to net income attributable to the owners of the Company for fiscal 2010 of NIS 28.2 million (US$ 7.4 million), or NIS 2.18 (US$ 0.57) per share.
Mr. Williger commented, "Going forward, we are facing a significant increase in the level of uncertainty in the global economy. In Israel, economic uncertainty is coupled with changes in the Israeli market and ongoing consumer demand for price reductions that we expect will negatively affect our results in the beginning of 2012. Due to the global and Israeli economic situations affecting our customer base both in the retail and wholesale markets, and both in Israel and abroad, we expect that growth in sales will cease in 2012. We expect net income for the first quarter of 2012 to be significantly lower than the comparable prior quarter."
Mr. Williger continued, "This is the first quarter that we are reporting our results with Shamir Salads as a discontinued operation. The results we achieved as majority owners of Shamir Salads were disappointing, while the conflict and arbitration proceeding between Willi-Food and the other shareholders diverted management's time and attention from our core business. With that now behind us, we anticipate being able to focus on core business development issues."
Mr. Williger concluded, "Our foreseeable challenge will be to manage expenses, and in particular the cost of our products, in order to accommodate our consumers' continued desire to acquire lower cost products. However, we believe that this period of economic uncertainty presents an opportunity for us to utilize cash on hand to purchase 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 Thursday, March 29, 2012 at 11:30 AM Eastern time. Interested parties may participate in the conference call by dialing 1-877-941-2068 (US), or 1-480-629-9712 (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: http://viavid.net/dce.aspx?sid=0000953E
A replay of the conference call will be available for 14 days from 2:30 PM EST on March 29, 2012 through 11:59 PM EST on April 13, 2012 by dialing 1-877-870-5176 (US), or 1-858-384-5517 (International), access code 4526651. In addition, a recording of the call will be available via the link shown above 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 December 31, 2011, U.S. $1.00 equals NIS 3.821. 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 fiscal year ended December 31, 2011 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.