Written by: Aaron Katsman | May 28, 2008
Aaron Katsman
IsraelNewsletter.com
The inflation bug has most of us worried. Recently in Israel the CPI was released and showed a 4.7% surge in prices. This is obviously not just a problem in Israel. Throughout the world, inflation, especially food inflation, is alive and well, and has been for quite some time. While at first glance investors might think that food stocks should benefit from higher prices, in practice they have performed poorly over the last few quarters. They have been unable to pass on their higher costs to consumers.
This is why today’s earnings report from G. Willi Food International (WILC), is interesting. For consumers, the earnings report signals more food price hikes coming down the road. For G. Willi, it means a return to strong growth.
Why?
Because commenting on the report, CEO Zwi Williger said, ” Furthermore first quarter’s results demonstrate that we are beginning to regain the momentum that had been building over the past few years as we have been able to successfully pass on some of our costs to our customers.”
The problem that has plagued food stocks of late is that they haven’t been able to pass on costs. The fact that G. Willi has started to do so, potentially could prove to be a big boost to their bottom line.
As for its report, the company showed strong revenue growth aided by recent acquisitions, like Shamir Salads, who produce healthy Mediterranean salads, like Hummous.
While the company refrained from providing guidance for the rest of the year, if we see a drop in the price of food materials, G. Willi could potentially benefit.
Disclosure: Author’s fund has a position in WILC. He has no position in any other stock mentioned as of 5/28/08.
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Aaron Katsman is Managing Editor of the Israel Opportunity Investor newsletter. He is lead portfolio manager for the Israel Growth Portfolio and Managing Director of America Israel Investment Associates, LLC. For more information, go to www.israelnewsletter.com or call 1-888-327-6179, or email aaron@profile-financial.com.
Written by: Aaron Katsman | November 29, 2007
Aaron Katsman
www.IsraelNewsletter.com
G. Willi-Food International Ltd(WILC), one of our favorites here at Israelnewsletter.com, reported a 21% increase in revenues for Q3 ‘07 versus the same quarter ‘06. As expected profit decreased as the company suffered from a drop in margins. The worldwide increase in dairy prices impacted G. Willi’s Q3 gross margins, as they declined to 20% compared to 27% in the same period a year ago.
Mr. Zwi Williger, President and COO of Willi-Food commented, “Third quarter results are in line with our expectations for the period. In this period, nearly all of our shortfalls can be attributed to gross margin decline in our dairy business. As previously stated, Willi Food and the global dairy industry continues to experience cost pressures due to weather related problems, reduced milk production, cessation of EU dairy export subsidies at the same time that consumption and demand for dairy has increased in growing emerging markets. These factors have negatively impacted Willi Food’s near term sales and gross margins on cheeses and other products.”
Mr. Williger continued, “While we believe that this trend shall continue through the remainder of the year, we anticipate that the cost of raw food materials will stabilize by mid-2008. In the interim, we are successfully leveraging our infrastructure, hedging our strategic direction through smart acquisitions and setting the stage for growth in 2008.”
The company continues to grow and we continue to like this for the long-term. With limited volume the stock price is subject to large swings. Long-term investors should keep their eye focused on the long-term regarding this stock. As they continue to execute their business plan, I would expect the stock to continue to move up.
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Disclosure: Author has a position in WILC. He holds no position in any other stock mentioned, as of 11/29/07.
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Aaron Katsman is the lead portfolio manager for the Israel Growth Portfolio and Managing Director of America Israel Investment Associates, LLC. For more information, go to www.israelnewsletter.com or call 1-888-327-6179, or email aaron@profile-financial.com.
Written by: Aaron Katsman | October 3, 2007
By Aaron Katsman
www.IsraelNewsletter.com
G. Willi-Food(WILC), one of Israel’s fastest growing food companies and IsraelNewsletter favorite, has announced a non-binding memorandum of understanding to buy 51% of the Russian eggs and slaughterhouse company owned by Arcadi Gaydamak(also majority owner of G.Willi) for an estimated $32.6 million. Many believe that Gaydamak wants to merge his egg and poultry business in Russia with Willi-Food, and then Willi-Food will manage the entire business. Gaydamak is the largest supplier of eggs in Moscow and this deal will give Willi-Food a significant market share in the Russian market. Willi-Food also intends to begin marketing kosher food products to Moscow’s Jewish community.
Since last week when I wrote that the stock had dropped to attractive levels and was a good trade, the stock has moved up about 12%. In analyzing the company most analyst focus, including my own, was always focused on their kosher food business in the U.S. This news of breaking into the Russian market, makes for an intriguing long-term investment. Now they plan on growing the business on two seperate tracks, something that should propel revenues sharply higher, and change the company from a niche food company into a truly global food play.
I think that all this news adds up to the fact we can say “Dos V’danya” to these low stock prices.
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Disclosure: Author’s fund is long WILC as of 10/03/07.
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Aaron Katsman is the lead portfolio manager for the Israel Growth Portfolio and Managing Director of America Israel Investment Associates, LLC. For more information, go to www.israelnewsletter.com or call 1-888-327-6179, or email aaron@profile-financial.com.
Written by: Aaron Katsman | September 25, 2007
By Aaron Katsman
www.IsraelNewsletter.com
In the midst of the Jewish New Year and 3 week long holiday season, food has been playing an essential part in my life. Since I can’t get food out of my mind, I decided to revisit an Israeli food company that has been recently sporting a stock price which has been doing nothing but falling. G. Willi-Food(WILC), one of Israel’s fastest growing food companies and IsraelNewsletter favorite, has been in a freefall of late and yesterday saw a closing price of $5.61. The stock is currently trading at around 18.5 times earnings and with a PEG of 0.85, the stock looks very cheap compared to competitors.
Willi Food continues to execute their business model, and drive their expansion into the US kosher food market. As I have mentioned in the past, the kosher food market is very large and growing rapidly. Look for WILC to continue to profit from this trend for years to come.
In late August the company reduced estimates, but still expects to show revenue growth of between 30-40%. This is still very strong growth and I think the stock has been unfairly punished, and trading in the $5.50-$6.00 makes for an intriguing long-term investment.
Sorry to cut this short but I need to eat. Happy holidays.
Please see our Disclaimer HERE.
Disclosure: Author’s fund is long WILC as of 9/25/07.
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Aaron Katsman is the lead portfolio manager for the Israel Growth Portfolio and Managing Director of America Israel Investment Associates, LLC. For more information, go to www.israelnewsletter.com or call 1-888-327-6179, or email aaron@profile-financial.com.
