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Executives

Zwi Williger – Chairman

Gil Hochboim – CEO

Analysts

Jeff Graf – Springhouse Capital

G Willi Food International Ltd (WILC) Q1 2013 Earnings Call May 8, 2013 11:00 AM ET

Operator

Hello ladies and gentlemen and welcome to the G Willi Food Shareholders 2013 First Quarter Earnings Conference Call. During this presentation all parties will be in a listen-only mode. After the presentation we will have a question-and-answer session at that time. (Operator Instructions) As a reminder, this conference is being recorded today, Wednesday, May 8, 2013.

Joining us today are Zwi Williger, Chairman and Gil Hochboim, CEO. Before we begin, I would like to remind all listeners that throughout this call, the company and its representatives may make statements which cause to forward-looking statements within the meaning of the Safe Harbor Provisions of the Private Securities Legislation Reform Act of 1995. Investors are cautioned that any such forward-looking statements are not guarantees of future performance or a successful execution of company’s future plan and involve risk and uncertainties that could cause actual results to differ materially from such statements. Actual results may differ materially from those expressed in the forward-looking statements. And for factors that could cause actual results to differ materially from those expressed in forward-looking statements are described in the company’s periodic filings with the Securities and Exchange Commission, including the Company’s Annual Report on Form 20-F as well as in our recent earnings press release. Zwi will open today’s call and provide an overview of the first quarter and recent events. Gil will then review the financials and return the call to Zwi for concluding remarks. I would now like to turn the presentation over to Zwi Williger, please go ahead.

Zwi Williger

Thank you. Good morning and good afternoon. Welcome to our call to discuss the corporate activity and result of first quarter of 2013. We are very pleased to report a robust first quarter with a strong organic sales growth, 23% in operating profit, up to 94%.

Our net income in the first quarter increased by 71% to $2.3 million with a margin of 9.1% of the sales.

Earnings per share in the first quarter were $0.80. Our strong performance in the first quarter was driven by expand sales volume, higher-margin products to new and existing customers. With the sales increase in all of our business segments, we were able to achieve the highest quarterly sales in the Company’s history.

As we see consumer demand for kosher foods continuing to increase, we were confident that our focused marketing strategy and the introduction of higher-margin products targeted to health-conscious and kosher consumers will continue to support our growth in the remainder of 2013.

We operated in a highly competitive market, brand recognition, high-quality and exceptional taste are key elements to our success. We distinguish ourselves by continually innovative new products, our product line now including more than 600 kosher products building exclusively by Willi Foods.

These products are either distributed under the Willi Food brand or can be specialized and distributed under the customer private – Throughout the last year, we introduced great taste, new higher-margin food products, developing together with our supplier.

We implemented our plan to increase the awareness of our newly added product by initiating promotion and hard sale activities, which we believe create broad awareness to our new and all products and broadened our customer base. This plan has helped us to achieve our goal to expand position in the market due to our broad range of quality-conscious food products.

We are going to introduce a new product line of the kosher ice cream composed of 40 different items. This product line-up is newly added to our broad and extensive range of quality-conscious food products, of which, big part compromise of innovative food products. This new product help us to drive our sales in the first quarter.

We plan to continue research and developing of the new products which we believe will provide us a competitive edge, we continue developing new innovative food products we plan to launch additional product line in the near future. Our focus on the high-margin product has produced a good result. We saw this in the revenue and marketing products for the second half of 2012 and on the first quarter of 2013.

And we see this momentum continuing on the second quarter of 2013 with the sales in the month of April 2013 was more than 40%, I repeat more than 40% over the sale in April 2012. We believe we will achieve revenue and profit growth in the second quarter – over the second quarter of 2012, driven primarily by existing and new product development and distribution.

We anticipate our new product business will generate healthy growth. We remain committed to deliver some of the highest margins in the industry and capitalizing our increased demand from the health-conscious consumers. We believe the foundation of our business is strong and we are well positioned to continue our expansion. Our strategies to cross-market, our innovative products for kosher and health-conscious consumer.

At this point, Gil will review the financial and afterwards I will add some concluding remarks.

Gil Hochboim

Thanks. Good morning. Now we’ll review the first quarter of 2013 financial results. I would like to remind everyone that the company is reporting in accordance to the International Financial Reporting Standards and numbers are been converted from Israeli shekel to dollars as in the same period of 3.48 shekel is equal to one dollar.

First quarter sales increased 23% to $24.8 million, compared to sales of $20.2 million in the first quarter of 2012. The growth in sales in the first quarter was mostly driven by the introduction of new products in the first quarter of 2013 and well until now and in the first quarter of 2013 increased awareness of the company’s products following increased sales and promotion activities initiated during the quarter.

Gross profit increased 33% to $5.9 million in the first quarter of 2013, compared to gross profit of $4.3 million in the first quarter of 2012. 2013 first quarter gross margin were 23.6% compared with 21.3% in the first quarter of 2012.

The increase in gross margin in the first quarter was primarily due to the introduction of new higher-margin products into the product line-up, increased sales of existing higher-margin products and by the strengthening of the New Israeli Shekel versus the U.S. dollar and Euro while in 2012 first quarter gross margins were affected by the national protest against the cost of food products that resulted in price reductions of certain products.

Selling expenses increased 9% to $2.1 million compared to $1.9 million in the first quarter of 2012, primarily due to the increase in promotion expenses and recent investments resulting from the incremental increase in sales. Selling expenses as a percentage of sales decreased to 8.3% in the first quarter of 2013, compared to 9.4% in the first quarter of 2012.

General and expenses as a percentage of sales decreased to 5.2% in the first quarter of 2013 compared to 5.6% in the first quarter of 2012. First quarter operating income was $2.5 million, compared to $1.3 million in the first quarter of 2012. EBITDA for the first quarter of 2013 increased 71% to $2.3 million or 5.1% compared to $1.3 million or 6.6% of sales recorded in the first quarter of 2012.

Earnings per share for the first quarter was $0.18 per share, compared to $0.10 per share recorded in the first quarter of 2012.

Turning to the balance sheet, we ended the first quarter of 2013 Willi Food had $53.9 million of cash and securities net from short-term debt and almost $94 million of shareholders equity.

With that, let me turn the call back to Zwi.

Zwi Williger

Okay, thank you Gil. The broad based strength of our business has enabled us to deliver record results of the first quarter. We have expanded our product line and continue to deliver improved margin. We have developed these higher margin products specifically to improve our profitability. Moreover, we are able to differentiate our company throughout by becoming the high margin business and low margin business.

Overall, I am very pleased with the progress we made in the past year, both in the terms of 2013 first quarter financial results and perhaps of greater importance in how we are implementing our plan to develop and introducing new higher-margin products that improve our profitability.

We are excited about the opportunity we see for growth in the kosher market and we are excited by Willi Food growth possibility. We believe we have taken the appropriate measure to position Willi Food for the stronger fiscal 2013 by adding new premium higher-margin food products in our product line and by focusing on reducing production cost and sales and general and administrative expenses. We remain focused on maximizing long-term profitability.

I would like to thank our shareholders for supporting Willi Food as we continue our mission to supply the markets with innovative kosher and healthy lifestyle products. We believe that our platform for which to do is now stronger than ever and we are very focused on building up Willi Food into an excellent company with a bright future and good opportunity for return on equity to shareholders.

We continue to look for the opportunity to create additional value for our shareholders. I would like to turn the call over to the operator for question and answers. Operator?

Question-and-Answer-Session

Operator

Thank you very much. (Operator Instructions) And our first question comes from the line of Jeff Graf from Springhouse Capital. Please go ahead.

Jeff Graf – Springhouse Capital

Zwi, you had mentioned a 40% growth rate, but I missed what that was related to. Can you just go over what grew 40%?

Zwi Williger

On the second quarter of 2013 on the month of April, our revenue already increased compared to 2012, April 2012 by 40%.

Jeff Graf – Springhouse Capital

Okay. And then for the entire second quarter, what kind of growth rate are you expecting?

Zwi Williger

We are expecting between 25% to 30%.

Jeff Graf – Springhouse Capital

To, 30% and what kind of gross margin would you expect for the second quarter?

Zwi Williger

On the first month of – on the month of April our gross margin was very close to 30%.

Jeff Graf – Springhouse Capital

Okay, would you expect to be able to sustain that for the rest of the second quarter?

Zwi Williger

I believe it’s going to be on the average of more than 25%.

Jeff Graf – Springhouse Capital

Okay, and then just one final question, it looks like you spent $1.2 million in U.S. dollars on CapEx in the quarter. What was that related to?

Zwi Williger

We are building here a facility for the cheese products that we are developing here. We are going to have a second facility and also some facility to produce our ice cream which we are starting immediately after – in the middle of May. So we bought some – and we bought also, we build a facility to packing and slicing and grading all kind of cheese that we are importing.

Jeff Graf – Springhouse Capital

Great, okay, thank you very much.

Zwi Williger

You are welcome.

Operator

(Operator Instructions)

Zwi Williger

Okay, so if no questions anymore?

Operator

No, I show no questions in the queue. I would like to turn the call back over to you Mr. Williger.

Zwi Williger

Okay, thank you very much for all of you to joining us today and we look forward to sharing our focus in future in calls. Thank you very much. Bye-bye.

Operator

Thank you ladies and gentlemen. Just as a reminder, a replay of this conference will be available for 14 days from 2 PM Eastern Standard Time on May the 8th 2013 to 11:59 PM Eastern Standard Time on May the 22nd 2013 by dialing 1-877-870-5117 or 1-858-384-5517 for international callers. The access code is 4617957. In addition, a recording of the call will be available at viavid.net for one year. We appreciate your participation and you may now disconnect.

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