G. Willi-Food International Ltd.

First-quarter 2017 sales increased 0.8% to NIS83.3 million from NIS82.6 million in the first quarter of 2016. Gross profit rose 6% to NIS22 million, and gross margin improved to 26.4% from 25.2%. Operating expenses were NIS15.4 million versus NIS12.8 million a year ago, and operating income was NIS6.6 million versus NIS8 million. Net income decreased 10% to NIS4.3 million from NIS4.7 million, and EPS was $0.32 versus $0.36. Management did not provide formal quarterly or full-year revenue/EPS guidance, but said quarterly sales and marketing expense should stay around the current level and cash flow is expected to turn positive in upcoming quarters as inventory levels normalize.

Iram Graiver said the company was “pleased” with the quarter and emphasized that results support its strategy of improving the brand and product mix. He highlighted the improvement in gross margin and said the company is rationalizing the portfolio by focusing on a more favorable mix of products. His tone was constructive but pragmatic, framing higher marketing spend as a long-term investment to improve consumer acceptance, expand to new customers, and grow market share.

Pavel Buber walked through the quarter in shekels and highlighted that sales reached NIS83.3 million, gross profit was NIS22 million, and gross margin improved to 26.4%. He noted operating expenses of NIS15.4 million and said the quarter included a NIS3 million non-cash foreign-exchange expense tied to the shekel’s strengthening, while net financial expenses excluding non-cash items were about NIS80,000. He also said net cash used in operating activities was NIS43.3 million, mainly because of higher inventory for Passover and an NIS6 million increase in trade receivables, and that the company ended the quarter with NIS193 million in cash and equivalents/fair value financial assets, NIS377 million net of long-term debt, and NIS395 million in equity.

This transcript does not include an analyst Q&A section; the call moved from prepared remarks directly to closing comments. The most notable management commentary on future questions was that marketing expense should remain at roughly the current level, and that cash flow should improve in the next quarters as inventory normalizes. Management also reiterated that the foreign-exchange hit was non-cash and linked to the shekel’s strengthening versus currencies in which much of the cash is held.