Zwi Williger - Chairman Gil Hochboim - Chief Executive Officer

Ian Dominguez - Stillwater

Ladies and gentlemen welcome to the G Willi Food Shareholders 2013 Third Quarter Earnings Conference Call. During this presentation all participants will be in a listen-only mode. After the presentation, we will have a Q&A session. (Operator Instructions). As a reminder, this conference is being recorded today, Wednesday, November 06, 2013. Joining us today are Zwi Williger, Chairman and Gil Hochboim, CEO. Before we begin, I remind all listeners that throughout this call, the company and its representatives may make forward-looking statements within the meaning of 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 the successful execution of the company’s strategic 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. Important factors that could cause actual results to differ materially from those expressed in the 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 its 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 turn the presentation over to Zwi Williger, please go ahead, sir.

All right. Thank you very much. Good morning and good afternoon. Welcome to our call to discuss corporate activity and result of the third quarter of 2013. We are very pleased with our results in the third quarter as we continue build on a strong momentum of the last several quarters. During the quarter we organically increased sales and operating income by approximately 13% and 26% respectively compared to the same period of last year. Despite of the strategy this year the month of September has only 30 working days due to the Oliver calendar in Israel and further expanded the gross margin. We continue to gain traction with the new customer while product sales to existing customer also continue to grow. Following to the national protest in 2011 against the rising price of food products customer realized if they can obtain a food product from us of a comparable or better quality than [others] of a leading but at more favorable price causing our customer base and demand for our products to increase. We believe that past year this national protest continue to benefit our business and market positions. By offering high quality food products at a competitive price we are not only growing our position in the kosher segment but also we are gaining share from the leading brands. Our financial results is significantly improved over the five quarters as a result of this shift in the consumer behavior combined with our strategy to organically grow our customer base and product line while at the same time expanding our margin. The growing demand for quality kosher food product globally continue to drive our business and we have taken step both domestically and internationally to capitalize on this trend. As we see consumer demand for kosher food continue to increase, we are confident that our focused market strategy and the introduction of higher margin food products target to health conscious and kosher consumer will continue to support our growth. We believe that the strong foundation had positioned us for continue expansion. Our focus on higher margin product has produced strong revenue in growth over the past five quarter. We are pleased to see that this momentum continue so far in the fourth quarter of 2014 as October sale was more than 25% over October 2012 sales. Moving forward we intend to capitalized increasing demand for both kosher and health conscious consumer and try to deliver some of their highest margins in the industry. At this point Gil will review of the financial and afterwards, I will add some concluding remark.

Thanks Zwi. Good morning and afternoon everyone. I will now review the third quarter 2013 financial results. I would like to remind everyone that the company is reporting in accordance to the International Financial Reporting Standards and the numbers are being converted from Israeli shekels to U.S. Dollars at an exchange rate of ILS 3.537 equal to one dollar. Third quarter sales increased approximately 13% to $22.3 million, compared to sales of $19.8 million in the third quarter of 2012. As we outlined that this growth was a result of the growing market demand as well as the shift in consumer behavior to cost conscious consumers who recognized our product as a viable alternative to the more expensive leading trends. Gross profit increased approximately 7% to $5.9 million in the third quarter of 201 compared to gross profit of $4.6 million in the same period last year. Gross margins were 26.2% compared to 23.2% in the third quarter of 2012. The gross margin improvement resulted from a favorable mix of products revenue during the quarter. Selling expenses increased approximately 31% to $2.5 million compared to $1.9 million in the third quarter of 2012. This increase was primarily due to higher promotion vehicle and transportation expenses resulting from the growth in sales. Selling expenses as a percentage of sales increased to 11.3% in the third quarter of 2013 compared to 9.7% in the same period of 2012. G&A expenses as a percentage of sales increase to 5.9% in the third quarter of 2013 compared to 5.5% in the same period of 2012. Third quarter operating income was $2 million compared to $1.6 million in the same period of 2012. Net income for the third quarter increased approximately 37% to $2.4 million or 10.9% of sales compared to $1.8 million or 9% of sales recorded in the third quarter of 2012. Earnings per share for the third quarter were $0.19 per share compared to $0.14 per share recorded in the same period of 2012. For the first nine months of 2013 our sales increased approximately 21% to $71.8 million compared to $59.4 million in the same period of 2012. Operating income during the first nine months of 2013 increased approximately 55% to $7 million from $4.5 million in the same period of 2012. Net income for the first nine months of 2013 increased by approximately 62% to $7 million or 9.7% of sales from $4.3 million or 7.2% of sales reported in the same period of 2012. Turning to the balance sheet at the end of the third quarter of 2014 Willi-Food had $61.6 million in cash and securities, no short-term debt and $101 million in shareholders equity. The continued strength in our balance sheet, accurately reflects the growth of the overall business. With that I will return the call back to you Zwi.

Thanks Gil. We’re operating in a highly competitive market where abundant a recognition high quality and focus are our key element to success. We think to distinguish ourselves from our competitor by becoming highly margin business in the low margin industry. Our current product line including more 600 innovative quality kosher product is building exclusively by Willi Food. These products are either distributed under the Willi Food brand or can be specialized under the international brand. The broad based plans of our business have enabled us to deliver a superior result during the last five quarter. We have expanded our customer base while continuing to delivering improved margin by focusing on reducing production costs and sales and general expenses. We're excited about the opportunity to see for the full growth in the kosher market and in our business. We intend to reinvest in the development of the company in order to maximize profitability to increase long-term value for our shareholders. Finally I would like to thanks our shareholder for supporting Willi Food as we implement our strategy. We believe that our performance of supply the market with a healthy and innovative kosher product at a competitive prices even stronger than ever. And remain focused on building our business entrepreneur company with strong return to the shareholder. We will continue to look for opportunities to create additional value for our shareholder. I would like now to turn the call over to operator for question-and-answer. Operator?

Thank you very much. (Operator Instructions). Our first question is from [James Veranda] with Sidoti and Company. Please go ahead.

Hi guys how are you?

Good, how are you?

Good. Thanks. The return of roughly $1.2 million in interest income during the quarter what was that outstanding from can you be specific on what that was?

Can you repeat your question, we didn’t hear you?

The interest income line for the quarter was about $1.2 million, what was the cause of that?

Hopefully maybe more because of certainly (inaudible) in earlier quarter’s call most of money that is in our company more than $60 million right now are on bonds, government bonds that will [impact] a little bit of that 10% is equity and something like that.

Okay.

As you can you see, we've been [earning] in this quarter and we earned more than $1 million from gaining of this --.

Okay. And I guess just in terms of operating leverage, how much incremental cost is involved during the quarter on your OpEx line, I mean I am guessing there were expansion issues for US and Europe and that caused your operating expenses to go up a little bit?

Not so much as you say, as we think the [capacity] was less than hundreds of thousands of dollars not so much and the expansion is not maybe taking some expenses as maybe your thoughts right now. And to do some expansion on the first quarter of 2014, we want our chilled and frozen distribution network, but this is on our budget as we believe we want to increase our business in this segment more than 25%, this is our plan. And for this we are going to buy some tracks and we are going to buy some other stuff in order to do it. But this will be really into the business plan. So it’s not really affecting our business and it’s very small money compared to the business that we believe that we are going to have.

Okay alright. And I guess with all the cash on hand have you guys thought about I guess implementing a dividend at all?

No we are not thinking of giving dividend we are still thinking that the amount that’s in the company is for the growth of the company we are, there is a lot of planning in 2014 to expand our business into different segment. And as we say always and our people are already [fed up], but we are still looking to do some acquiring to do some merger and acquisition. We are still looking to find the right company for us and the money that we have in our company will likely utilize it for expanding the company. I believe that the shareholder in our company will be much more certified if we will increase the business and we will expand our strategy and we will show much more, we will show better results that we are showing now even the result is very good I think this will effect much more with parts of the shares and to give just dividend.

Okay alright. Thanks guys.

Thank you. And our next question comes from Brian [Games] with Springhouse Capital. Please go ahead.

Hi Zwi. Congratulations on another good quarter. Two questions with the movement in the calendar obviously it’s hard to track, can you talk about what the fourth quarter should look like in terms of sales or what your expectation is? And then sales and margins, and then just in general the growth has been really impressive, how long do you think you can keep up kind of double-digits sales growth going into next year?

On September we have only 13 working days and this has really affect our revenue. This is holiday that we are here and then a lot of breaching days so we just work seven days. On October as we already said, we increased our revenue by 25% compared to last year which is excellent. You have to understand that here the size of the company in the food section is consumption in the last in the third quarter went down 2.5%. As a result of the Willi of the supermarket chain in Israel already was there, the (inaudible) last year. We are really exceptional in this industry and the margin of our company showing very well already in the first quarter in the first month of --. And I believe our target for 2014 includes our 19% to 28% and close to 30% which is what we believe and this is what we are building right now to reach up to 30% gross margin.

And then in the fourth quarter would you expect the October sales growth to continue for November and December?

Yes, I believe so. It looks like promising.

And then next year just in general, do you think you can, I know it’s a factor of the number of new products and you’re fighting headwind of slowly declining as well as food market, but could you continue to grow double digit fixture?

(inaudible) 2014 including our revenue for at least 20% and also to increase our gross margin. This is our plan.

Okay. Thanks.

(Operator Instructions). Our next question is from Ian Dominguez with Stillwater. Please go ahead. Ian Dominguez – Stillwater: As you mentioned with the cash on the balance sheet that you're still looking to grow the business potentially with some acquisitions, can you tell us what kind of hurdle rate you require for return on invested capital?

What we are looking, we are looking to acquire companies and (inaudible) we want to be make sure that we have a control on the company that we're going to acquire. Unfortunately, we have over the bad experience with the acquired company in America and we look some money, because we didn't have a control and we have a very poor management. So this is a key of buying the company. To buy company is very easy. We have a lot of companies who are offering them to us, but we want to be sure that this is going to be good for us and going to fit to our expectations. And also we want to have a control of what's going on in the company, if we’re going to do it with a company invested or we are going to do it in Europe. So this is where we’re really putting our finger and we want to be sure that we will succeed on this. We’re fit to our about working progress, some investment banks who are in contact with us, who are regularly offering us companies. We are checking these (inaudible) and we are always doing due diligence, I'm not going to say that we are not interested. I also found that we already use that, we find a good company for us in order to expand our business stream and to utilize the management in our company to expand our business. Ian Dominguez – Stillwater: Thank you. Just one more can you briefly went over this, but what is the composition going to be of the investment portfolio, did you say it’s roughly 90% government bonds, 10% equities or is that?

We're very conservative, we're not going to trying to reach the money that within our company, so 90% is likely American government bonds and 10%, it’s in equity also with AAA companies, it’s not something that we are trying to reach the money, we understand this money is not we are not playing in the stock market, it’s a money that we need to our company. Ian Dominguez – Stillwater: Thank you.

Thank you. And our next question is from [Bill Garrison] who is a private investor. Please go ahead.

Just wondered if you could expand a little bit in terms of the expectations for an improvement in gross margin, is that next year, is that largely a function of just the product portfolio maturing or do you anticipate contribution from additional products that might offer even higher margins than you’re currently experiencing?

We're planning to launch in 2014 around 25 to 30 new items, also the product that we put in the market this year and also going very fast as we see it’s already in the last three months. And we see a very good demand for the product. We're making a lot of money, we're making good margin in this product that will be developed together with our R&D section. And then I believe this product will gain market share in 2014 because our product is much cheaper than the leading brand and we still continue to have good margin and also as I said in the beginning we’re going to build a new segment, which we’re working right now in order to increase our portfolio on product line. Regarding the margin, as I said before to somebody who asked me already, we are planning to -- regarding the revenue, we believe that we’re going to increase our revenue organically next year by 20% and our hope also we would be able to increase our margin across 28% to 30%.

Okay. And lastly, could you talk about international opportunities at this point?

We already increased in our internationally businesses. In the third quarter, we increased our businesses compared to 2012 by I think 200 or something percent. We are going to develop a super market chain. I know that we have a lot of meeting on January, February next year in some of the super market chain in America as we are working with them on a private level and hopefully we will be able to succeed to close some deals which (inaudible) power company and I am sure that we’ll see good results.

Okay. Thank you very much.

Thank you. And I am showing no further questions. I’ll turn the call back over to Mr. Williger.

Okay. Thank you very much for joining us today, and we look forward to all showing our progress in the future call. Thank you very much for your support. Bye, bye.

Thank you. Ladies and gentlemen, just a reminder that a replay of this conference call will be available for 14 days from 2 PM Eastern Standard Time on November 6, 2013 through 11:59 PM Eastern Time on November 20, 2013 by dialing 1-877-870-5176 from the U.S. or 1-858-384-5517 for international callers. The access code is 4645872. In addition, a recording of the call will be available at viavid.net for one year. We thank you for your participation. You may now disconnect.