20-F: G. Willi-Food International Reports Increased Profitability in 2024 Amidst Economic Challenges

G. Willi-Food International's 20-F filing reveals a 6% increase in revenue and a significant improvement in gross profit for fiscal year 2024, despite economic and geopolitical headwinds in Israel.

Summary

• G. Willi-Food International Ltd. reported a 6% increase in revenue for fiscal year 2024, reaching NIS 575.8 million.
• Gross profit increased by 33.8% to NIS 161.3 million, representing 28.0% of revenues, compared to 22.2% in the previous year.
• Selling expenses decreased by 6.7% to NIS 68.9 million.
• The company's operating profit before other expenses increased significantly by 227.2% to NIS 66.3 million.
• Net profit for the year increased by 122.1% to NIS 70.3 million, or NIS 5.07 per share.
• The company faced challenges including the war in Israel, export restrictions from Turkey, and increased shipping costs due to attacks in the Red Sea.
• The company is expanding its logistics center, with an expected completion date at the end of 2025, at an estimated cost of NIS 115 million.
• The company is involved in several legal proceedings, including lawsuits and class action claims related to labeling and other issues.

Sentiment

Score: 7

Explanation: The document presents a mixed sentiment. While the financial results show significant improvements in revenue and profitability, there are also challenges and risks related to the economic and political situation in Israel, competition, and legal proceedings. The positive financial performance is tempered by the uncertainties and potential liabilities.

Positives

• Significant increase in gross profit and gross margins due to improved commercial terms and a focus on more profitable products.
• Decrease in selling expenses, contributing to improved profitability.
• Strong financial income from revaluation of securities and interest/dividend income.
• Ongoing expansion of the logistics center to improve operational efficiency.
• The Israeli economy showed strength and recovery in economic activity in the second half of 2024.

Negatives

• The company faced challenges due to the war in Israel, including economic disruption and increased shipping costs.
• The company incurred a NIS 11.4 million expense related to an agreement with the Israel Competition Authority.
• The company is involved in several legal proceedings, which could result in financial liabilities and reputational damage.
• The company is exposed to potential risks due to its purchase of most of its inventory from countries outside the State of Israel.

Risks

• Dependence on a small number of principal clients, with a risk of payment defaults.
• Exposure to fluctuations in exchange rates, particularly the NIS against the USD and Euro.
• Reliance on a limited number of key suppliers, with potential adverse effects if prices increase or engagements are terminated.
• Intense competition in the Israeli food distribution business.
• Potential product liability claims for misbranded, adulterated, contaminated, or spoiled food products.
• Possible interruptions to the storage facility in Yavne, Israel.
• Economic and political instability in Israel and the Middle East.
• Cyber-attacks on the company's information systems.
• Inability to win tenders on tax exempt import quotas published by the Ministry of Finance.

Future Outlook

The company is focused on expanding its product lines, entering new fields of activity, improving its logistics system, and further expanding into international food markets.

Industry Context

The food distribution business in Israel is highly competitive, with competition from both local manufacturers and importers. The company faces competition from existing competitors and potential newcomers to the market.

Comparison to Industry Standards

• The document does not contain specific information to compare the results to global benchmarks.
• The document does not contain specific information to compare the results to specific comparible companies.
• The document does not contain specific information to compare the results to specific projects.

Legal Proceedings

• The company is involved in a lawsuit filed in 2018 against its former controlling shareholder and several former directors and officers.
• Mr. Iram Graiver, former CEO of the Company, filed a lawsuit to the Regional Labor Court in Tel Aviv Jaffa claiming payment of social rights and different compensations at the total amount of NIS 2,377,305.
• A lawsuit and a motion to approve it as class action was filed on August 2, 2021, against the Company and another five respondents to the District Court.
• A lawsuit and a motion to approve it as class action was filed on November 8, 2021, against the Company to the District Court.
• On February 20, 2023, the Company's subsidiary Euro European Dairies received from the Ashdod Customs House, a notice of a charge for a deficit of NIS 1.75 million, which includes interest and fine.
• On July 10, 2024, a lawsuit and a request for class action certification were filed with the Central District Court of Israel against the Company.
• On September 12, 2024, a lawsuit and a request for class action certification were filed with the Central District Court of Israel against the Company's subsidiary Euro Dairy Europe and four additional respondents.
• On July 17, 2024, the Company reached an agreement with the Competition Authority regarding the payment of financial sanctions totaling approximately 11.6 million NIS for alleged violations of the Food Industry Competition Promotion Law of 2014, without admission of violation.
• On July 21, 2024, following the above referenced agreement with the Competition Authority, a request for document disclosure was filed pursuant to Section 198a of the Companies Law, 5759-1999, in the Tel Aviv-Jaffa District Court against the Company to examine the possibility of filing a derivative claim for alleged violations of the Food Industry Competition Promotion Law, 5774-2014.

Related Party Transactions

• The company provides certain services to Willi-Food on an on-going basis, including office space and certain management, financial and administrative services, pursuant to a services agreement effective May 19, 1997, as most recently amended on June 4, 2020 and as extended on March 14, 2023.
• On March 14, 2023, a General Meeting of the Shareholders of the Company approved a new management services agreements pursuant to which Messrs. Yosef Williger and Zwi Williger are to serve as CEO of the company and chairmen of the Board of Directors, respectively.
• On February 27, 2025, a General Meeting of the Shareholders of the Company approved a new management services agreements pursuant to which Messrs. Yosef Williger and Zwi Williger are to serve as CEO of the company and chairmen of the Board of Directors, respectively.

Stakeholder Impact

• Shareholders: The company's improved financial performance and dividend policy could positively impact shareholders.
• Employees: The company's ability to maintain an effective workforce and provide employment opportunities is important for employees.
• Customers: The company's focus on providing high-quality food products and maintaining adequate inventory levels is important for customers.
• Suppliers: The company's relationships with over 125 suppliers worldwide are important for ensuring a stable supply of products.
• Creditors: The company's strong financial position and ability to meet its obligations are important for creditors.

Next Steps

• The company will continue to focus on expanding its product lines and diversifying into additional product lines.
• The company will continue to improve its logistics system, including continued investment in the construction of the new logistics center.
• The company will continue to locate, develop and distribute additional food products.
• The company will continue to penetrate new food segments within Israel through the establishment of food manufacturing factories or the establishment of business relationships and cooperation with existing Israeli food manufacturers.
• The company will continue to further expand into international food markets, mainly in the U.S. and Europe, by purchasing food distribution companies, increasing cooperation with local existing distributors and/or exporting products directly to customers.
• The company will continue to penetrate new markets in other countries through the establishment of business relationships and cooperation with representatives in such markets, subject to a positive political climate.

Key Dates