Osem Investments Limited · 2015-11-22 · development, economics, control and budget, long term...
Transcript of Osem Investments Limited · 2015-11-22 · development, economics, control and budget, long term...
Osem Investments Limited
Financial Statements
September 30, 2015
INVESTMENTS LTD
Contents
Page
The Board of Directors' Report on the Company Business
for the nine Month Period ending 30 September 2015 A-J
Condensed Interim Consolidated Financial Statements as at 30 September 2015 (Unaudited)
Auditors' review report 1
Condensed Interim Consolidated Statement of Financial Position 2
Condensed Interim Consolidated Statement of Profit and Loss 4
Condensed Interim Consolidated Statement of Comprehensive Income and Expenses 5
Condensed Interim Consolidated Statement on Changes in Shareholders Equity 6
Condensed Interim Consolidated Statement of Cash Flows 8
Notes to the Condensed Interim Consolidated Financial Statements 9
Condensed Interim Separate Financial Statements as at 30 September 2015 (Unaudited)
Auditors' review report 12
Condensed Interim Information on Seperate Financial Position 13
Condensed Interim Information on Seperate Profit and Loss 15
Condensed Interim Information on Seperate Comprehensive Income and Expenses 16
Condensed Interim Information on Seperate Cash Flows 17
Additional Information 18
Report on the effectiveness of the internal control over the interim consolidated financial reporting
A
19 November 2015
The Board of Directors' Report on the Company Business for the Nine Month Period ending 30 September 2015
The Board of Directors of Osem Investments Ltd. (hereinafter: (hereinafter – “the Company”) is honored to present to the
shareholders the Board of Directors Report for the Nine month period ending 30 September 2015, in accordance with
Securities Regulations (periodic and immediate reports) -1970. The figures appearing in the Report of the Board of
Directors are based on the Consolidated and Audited Financial Statements as at 30 September 2015. The financial figures
and the results of activities of the Company are influenced by the financial figures and the results of activities of its
subsidiary companies The Company and its subsidiaries shall be referred to collectively as "the Group" or the "Osem
Group".
In certain cases, details will be presented, describing events which occurred after the date of the financial statements and
shortly before the publication of the report, as well as additional figures at Company level only.
This report has been prepared taking into consideration that the reader of the report has at his disposal the Board of
Directors' Report on the Company as at 31 December 2014.
A. The explanations of the Board on the Company state of affairs
Key figures from the Description of the Corporation's Business
Business environment - Osem Investments Ltd. is the parent company incorporating the Osem Group of companies.
The Group focuses on the manufacturing and marketing of Food products and ranks among the largest food
manufacturers and marketers in Israel. The Group produces more than 2,000 different food items currently
manufactured in eleven production plants in Israel and overseas and marketed through regional distribution centers.
The Group also exports its products to various countries, primarily to Europe and the USA.
Strategic alliance with Nestle. Nestle is the largest shareholder of Osem and holds about 63.7% of the Company. The
Company has exclusive agreements of cooperation with the Nestle Group in Switzerland, to market and distribute
Nestle's products in Israel by Osem’s marketing and sales systems. There is also an agreement on possible
manufacturing of some of Nestle's products locally. In addition the Company has exclusive agreements with the Nestle
Group for the use of intellectual property, knowhow and Nestle trademarks in which Nestle owns the rights. In
addition, Osem receives technical assistance in R&D and has extensive right of use of Nestle know-how for the use of
the Osem Group. This know-how includes among others technical, scientific, marketing, logistic and sales, production,
IT and financial knowledge and expertise. The Group receives IT and computer services from Nestle as part of Nestle's
GLOBE Template Solution.
AAA Credit Rating for Osem. In March 2015, Midroug Company extended the AAA rating Osem had received and
gave a stable rating outlook. Osem is the first and only industrial company in Israel, which is not a government
enterprise, to ever receive an AAA rating. This rating attests to the strong financial liquidity level of the Group.
B
Legislation in the food industry - In March 2014 the Law for the Promotion of Competition in the Food Industry was
approved which deals with, among others, the regulation of suppliers and wholesalers and the geographical
competition among wholesalers, this being based on the recommendations of the Food Committee. The law took effect
on 15 January 2015 and was associated with, among others, the changes in the method of relationship with the large
retailers and the adjustment of commercial activities as required by the law. Consequently, the agreements were
modified so that payments made in the past for services received from large retailers were converted to discounts in
invoices. This change has no effect on operating and net income.
Change in structure - for the purpose of improving planning procedures for the short, medium and long term and for
the efficiency of different processes within the organization, the decision was made to set up a new unit under the
leadership of the deputy to the CEO. This unit will unite all the planning functions existing within the various
departments and will take control of cross organizational processes, in all the topics related to strategy and business
development, economics, control and budget, long term factory planning, Group marketing including the handling of
innovation, readiness for the new consumer in the digital age and responsibility over the computer department which
will support the building of these processes. The change became effective in April 2015.
Creditors arrangement with Mega - One of the main customers of the Group in Israel, Mega Retail Chain Ltd.
(hereinafter "Mega"), submitted a request for a creditors arrangement to the district court in Lod, according to section
350 of the companies Law 5759 - 1999. In the Month of July 2015 the court approved the creditors arrangement which
included debt rescheduling to banks and suppliers and obligation on the part of the Mega owners to infuse funds and
guarantees. As part of the arrangement with the suppliers, among them, the Osem Group, it was agreed on the deferral
for a period of two years of 30% of the balance due (existing at the time of submittal of the request) following this,
commencing 15 July 2017 the amount will be repaid in 36 equal monthly payments including interest. The balance of
the debt (70%) in four weekly installments, the first of which being on 31 July 2015 or at the original payment date, the
later of the two. As at the financial statement approval date the full balance of the debt (70%) was repaid. In
accordance with the policy of the Group whereby it acts to insure of the majority of debts of its customers in Israel,
consequently, the debt of Mega to Osem at the request date is fully insured by credit insurance except for the
deductible amount, for which accrual for doubtful debts has been recorded in periods previous to the creditors
agreement. In the evaluation of company management, taking into account the mentioned credit insurance, there is a
suitable accrual in the accounts of the company for the Mega liability.
C
Financial situation
The liquid financial assets (cash and cash equivalents, and other investments) of the Group as at the Balance Sheet
date amounted to the sum of NIS 552,621 thousand compared to the sum of NIS 635,745 thousand at the end of the
previous year, a decline of NIS 83,124 thousand.
The decline is mainly the result of distribution of dividend in the amount of NIS 150,000 thousand, investments in fixed
assets, and supplementing of advance tax payments.
The fixed assets and intangible assets amounted to the sum of NIS 2,093,118 thousand, compared to the sum of NIS
2,137,898 thousand at the end of the previous year. The gross investments during the period of reporting totaled the sum of
NIS 57,878 thousand.
The Groups investments were mainly for the expansion of factories and the acquisition of production lines, mainly in the
Sderot, Yokneam and Kiryat Gat (Bonjour) factories.
Total equity as at the Balance Sheet date amounted to the sum of NIS 2,637,432 thousand compared to the sum of NIS
2,501,698 thousand at the end of the previous year. The increase in the shareholders equity derives mainly from the
accumulation of current profits totaling NIS 293,743 thousand. Which was partially offset against dividend paid in the
amount of NIS 150,000 thousand. The shareholders equity constitutes 65.7% of the total of the balance sheet.
The total of the balance sheet amounted to the sum of NIS 4,014,304 thousand compared to the sum of NIS 3,985,526
thousand at the end of the previous year,
The structure of the balance sheet as at 30 September 2015 indicates continued expansion in the business activity which
is manifested by an increase in the gross investments in the fixed assets and current assets while at the same time reduction
in liabilities, growth in the equity,and expansion which allowed over time the reduction in short term bank credit and the
repayment of all long term loans from the banks and attests to continued financial strength.
D
Results of Activities
Total sales turnover for the first nine months of the year 2015 amounted to the sum of NIS 3,170,027 thousand
compared to NIS 3,224,393 thousand in the corresponding period last year, a decline of 1.7%. This mainly due to
increase in discounts which are partially the result of the implementation of the food law in January 2015 this effected
changes to commercial agreements with large retailers and payments made in the past for services (recorded as selling
expenses) were converted to discounts and reduced net sales.
All this does not effect the quantity sales which increased in the nine months by 3.2% from the level of 190,938 tons to
the level of 197,136 tons and this mainly from innovation in products, change in product mix (a larger increase in sales
of high weight products such as Nestea and pet food) and expansion of sales promotions and discounts representing
decrease in Osem product prices to the public.
Sales turnover for the three months of the third quarter 2015 amounted to the sum of NIS 1,075,235 thousand compared
to NIS 1,128,876 thousand in the corresponding period last year, a decline of 4.8%. This decline is the result of increase
in discounts which in part resulted from the conversion of certain expenses from selling expenses to discounts that reduce
the net sales following the food Law as mentioned above.
All this does not effect the quantity sales which increased in the third quarter by 1.2% from the level of 67,966 tons to the
level of 68,769 tons and this mainly due to innovation in products, change in product mix (a larger increase in sales of
high weight products such as Nestea and pet food) and expansion of sales promotions and discounts representing decrease
in Osem product prices to the public.
The growth rate in sales during the third quarter is lower than the growth rate during the first nine months of the year this
being in light of the fact that the third quarter was negatively affected by the timing of the High Holidays (less selling
days compared to last year) and as a result of the cessation of loss making sales of a group of products in the USA.
Sales to the local market for the first nine months of the year amounted to the sum of NIS 2,678,664 thousand compared
to the sum of NIS 2,724,208 thousand in the corresponding period last year, a decline of 1.7%.
As mentioned, the decline in sales is the result of increased discounts, resulting from the initial implementation of the
food law commencing January 2015. In the framework of the law, commercial agreements were modified with the large
retailers, and payments made in the past for services (which were recorded under selling expenses) were converted to
discounts in invoices.
The Groups overseas sales for the first nine months of the year amounted to the sum of NIS 491,363 thousand compared
to the sum of NIS 500,185 thousand in the corresponding period last year, a decline of 1.8%.
The decline in overseas sales is mainly results from the cessation of loss making sales of a group of products in the USA
in the meat substitute category which was active under the "Veggie Patch" brand.
The gross profit of the Group in the first nine months of the year 2015 amounted to the sum of NIS 1,286,852 thousand
compared to NIS 1,353,903 thousand in the corresponding year, a decline of 5.0%.
The gross profit of the Group in the three months of the third quarter of the year 2015 amounted to the sum of NIS
437,975 thousand compared to NIS 474,456 thousand in the corresponding year, a decline of 7.7%.
E
The decline in gross profit results from, among others, the increase in discounts partially due to selling expenses which
were converted into discounts reducing sales turnover and gross profit this following the initial implementation of the
food law as mentioned above.
The Operating Profit of the Group before other income and expenses for the first nine months of the year amounted
to NIS 411,601 thousand compared to NIS 409,268 thousand in the corresponding period last year, a growth of 0.6%.
The Operating Profit of the Group before other income and expenses for the three months of the third quarter of the
year 2015 amounted to NIS 144,737 thousand compared to NIS 144,427 thousand in the corresponding period last year, a
growth of 0.2%.
Due to the initial implementation of the food law expenses previously recorded as selling expenses were converted to
discounts. This change has no effect on the operating profit which maintained steady in comparison to the corresponding
period last year. The stability in operating profit was maintained thanks to the reduction in advertising and administrative
expenses and by directing the resources for the benefit of sales promotions and discounts which were expressed in price
reductions to consumers.
F
The operating profit of the Group in the first nine months of the year amounted to the sum of NIS 403,492 thousand
compared to NIS 399,314 thousand in the corresponding year, a growth of 1.0%.
The operating profit of the Group in the three months of the third quarter of the year 2015 amounted to the sum of NIS
140,245 thousand compared to NIS 137,029 thousand in the corresponding year, an increase of 2.3%.
The Profit of the Group for the first nine months of the year amounted to NIS 293,743 thousand compared to NIS
299,703 thousand in the corresponding period last year, a decline of 2.0%.
The profit profit of the Group in the three months of the third quarter of the year 2015 amounted to the sum of NIS
101,907 thousand compared to NIS 102,010 thousand in the corresponding year, a decline of 0.1%.
The decline in net profit is the result of, among others, the increase in net finance expense.
Selling, marketing and distribution expenses for the first nine months of the year declined from the level of NIS
735,002 thousand to the level of NIS 673,017 thousand and represented 21.2% of the turnover compared to 22.8% in the
corresponding period last year. The decline in selling expenses results from the decline in advertising expenses and from
commencement of the implementation of the food law in January 2015 and consequently selling and marketing expenses
declined by NIS 40.5 million in favor of the increase in discounts and promotions included under net sales.
General and administrative expenses for first nine months of the year, decreased and represented 6.4% of the turnover,
compared to 6.5% in the corresponding period last year.
Other expenses, net for the first nine months of the year totaled the sum of NIS 8,109 thousand compared to the sum of
NIS 9,954 thousand in the corresponding period last year.
Net financing expense of the Group for first nine months of the year increased and amounted to the sum of NIS 11,457
thousand compared to NIS 2,292 thousand in corresponding period last year.
The increase in finance expense mainly results from the fact that last year were included finance income from return of
obligations from authorities which bore interest and decreased finance expense last year.
Liquidity and financing sources
The current ratio as at the balance sheet date is 2.00
The quick ratio as at the balance sheet date is 1.60
The high liquidity ratio and liquidity reserve funds of the Group have constituted the main financing sources for further
expansion of the Group business activities in different product categories, expansion of production lines, and this is
accompanied by foreign financing if necessary.
The cash flow for first nine months of the year from current operations amounted to the sum of NIS 183,795 thousand
compared to the sum of NIS 430,663 thousand in the previous year. The cash flow from operating activities from
supplementing of advance tax payments, deferral of 30% of the Mega obligation in accordance with the creditors
agreement and from the effect of the initial implementation of the food law according to which bonus to chains is paid
currently in current invoices and not after the end of the year as was done previously. As a result of this, in cash flow
terms, for the first nine months of the year 2015 both current bonuses relating to year 2015 and the total yearly bonuses
for year 2014 were paid.
G
Analysis of the Groups business results according to operating segments
Culinary segment - for the first nine months of the year sales amounted to NIS 681,925 thousand compared to NIS
727,039 thousand in the corresponding period last year a decrease of 6.2%. The profit declined from a level of NIS
77,818 thousand to a level of NIS 66,338 thousand
In the third quarter of the year sales decreased from NIS 252,229 thousand to NIS 222,228 thousand, a decline of 11.9%.
The profit declined from a level of NIS 24,924 thousand to a level of NIS 14,491 thousand
The decline in sales results, among others, from increased competition, from payments made in the past as part of selling
expenses and following the food law were converted to discounts which decrease net sales. The sales and profit in the
third quarter were also negatively affected by the timing of the High Holidays.
Bakery, beverages, snacks and breakfast cereals segment - for the first nine months of the year sales amounted to NIS
864,087 thousand compared to NIS 871,114 thousand in the corresponding period last year a decrease of 0.8%. The profit
increased from a level of NIS 198,231 thousand to a level of NIS 198,695 thousand In the third quarter of the year sales
decreased from NIS 306,706 thousand to NIS 289,871 thousand, a decline of 5.5%. The profit declined from a level of
NIS 70,083 thousand to a level of NIS 63,201 thousand
The decline in sales results, among others, from payments made in the past as part of selling expenses and following the
food law were converted to discounts which decrease net sales. The sales and profit in the third quarter were also
negatively affected by the timing of the High Holidays.
International segment - for the first nine months of the year sales amounted to NIS 487,791 thousand compared to NIS
496,627 thousand in the corresponding period last year a decrease of 1.8%. The profit declined from a level of NIS
41,900 thousand to a level of NIS 30,988 thousand
In the third quarter of the year sales decreased from NIS 162,690 thousand to NIS 152,032 thousand, a decline of 6.6%.
The profit increased from a level of NIS 8,017 thousand to a level of NIS 8,409 thousand.
In the first nine months of the year sales of salads of the international division in the USA increased by 17.6% - mainly
due to the launching of new products (the Swirl category in the salads segment). These sales were offset against a decline
of 9.1% sales in Europe due to, among others, weakening of the Euro and from cessation of loss making sales of a group
of products in the USA in the meat substitute category which was active under the "Veggie Patch" brand.
Infant nutrition segment - for the first nine months of the year sales amounted to NIS 253,081 thousand compared to
NIS 260,995 thousand in the corresponding period last year an decline of 3.0%. The profit increased from a level of NIS
39,351 thousand to a level of NIS 48,342 thousand.
In the third quarter of the year sales decreased from NIS 93,944 thousand to NIS 88,212 thousand, a decline of 6.1%. The
profit increased from a level of NIS 13,070 thousand to a level of NIS 17,956 thousand.
The decline in sales results, among others, from payments made in the past as part of selling expenses and following the
food law were converted to discounts which decrease net sales. The increase in profit results from, among others, one
time income from damages claim.
Professional market and Assamim Gift Packages segment - for the first nine months of the year sales amounted to NIS
304,516 thousand compared to NIS 309,154 thousand in the corresponding period last year a decline of 1.5%. The profit
declined from a level of NIS 20,061 thousand to a level of NIS 16,833 thousand
In the third quarter of the year sales increased from the level of NIS 102,727 thousand to the level of NIS 103,315
thousand, an increase of 0.6%. The profit declined from a level of NIS 5,896 thousand to a level of NIS 5,597 thousand
The decline in sales and profit results from, among others, from the decline in inbound tourism which affects the
professional market activity.
H
Other Activities segment - for the first nine months of the year sales amounted to NIS 614,198 thousand compared to
NIS 593,165 thousand in the corresponding period last year an increase of 3.5%. The profit amounted to the sum of NIS
55,065 thousand compared to the sum of NIS 36,750 thousand last year,
In the third quarter of the year sales increased from the level of NIS 222,553 thousand to the level of NIS 231,843
thousand, an increase of 4.2%. The profit increased from a level of NIS 23,841 thousand to a level of NIS 36,589
thousand.
The increase in sales and profit are the result of, among others, improvements in ice cream in light of the fact that last
year, at the height of the season, the category suffered from the effects of the "Tzuk Eitan" campaign and also from the
improvement due to innovation and the launching of new products especially in the pet foods field.
I
B. Exposure to and management of market risks
During the statement period there were no significant changes in the exposure of the Company and the method of
their market risks management in relation to the Company's reports on this subject for the year ending 31 December
2014.
C. Provisions on disclosure related to the Corporation's financial reporting
Critical estimates
No significant changes were made during the first quarter of the year 2015 in relation to critical accounting
estimations which the Company uses for the financial reports.
Financial date related to the parent company
In accordance with regulation 38d of the Securities Regulations (periodic and immediate reports) An appendix is
attached to the Board of Directors report, separate financial statements of the Company (“Solo Report”), with the
examining auditor’s opinion attached.
Dividends
On 3 March 2015, the Company distributed a dividend for the sum of NIS 150 million.
D. Corporate Governance Aspects
Disclosure regarding the procedure of approval of the financial statements
a. The organs in charge of the super control include the members of the board, the CEO, and the Deputy CEO of
Finance. The identity of the organs is specified in the Periodic Report in Regulation 26 and 26(A) in Chapter D
of the Periodic Report.
b. The Balance Sheet Committee for the examination of the financial statements
General: The Company board of directors has decided to establish a Balance Sheet Committee which will
examine the financial statements of the Company and which will make recommendations with regard to the
approval of the financial statements, after the Committee has discussed the financial statements prior to making
recommendations. A representative of the Company external auditor attends the meetings of the Committee for
the examination of the financial statements and the Internal Auditor of the Company attends these meetings as
well. The Balance Sheet Committee for the examination of the financial statements also act as members of the
Audit Committee
Members of the Balance Sheet Committee: The Committee comprises four members (who also hold the office
of directors in the Company) - Dr. Liora Meridor (Public Director), Gaby Hake Adv., Yaki Yerushalmi (Public
Director) and Yossi Alsheich (independent director). Dr. Liora Meridor presides as the Committee Chair. The
appointment of the Committee members was made based on their skills, including their professional
experience, their qualifications and additional institutions or boards in which they hold office, as the case may
be, based on their classification by the Company Board of Directors (prior to their appointment as directors of
the Company), and based on their accounting and financial skills and also based on their declaration (which
was submitted prior to their appointment) and based on their ability to read and understand financial statements
(see Section 26 in Chapter D of the Periodic Report).
J
The discussions of the Balance Sheet Committee: On 12 November 2015 the Committee discussed material
reporting issues in the financial statements and formulated its recommendations to the Board on the procedure for
approving the financial statements. The Committee recommended to the Board that the financial statements be
approved. In addition to the Committee members the Company's External Auditor, the Company CEO, the Deputy
CEO of Finance and the Chief Accountant of the Company, and the Company Internal Auditor attended the
Committee meeting. In the framework of its meetings, for the purpose of forming its recommendation, the
Committee examined the material issues related to financial reporting and examined among other issues the material
estimates and valuations that were made in relation to the financial statements, the internal controls related to the
financial reporting, the integrity and diligence of the financial reporting from all its relevant aspects, the accounting
policies which were adopted and the accounting treatment applied on material affairs of the Company. In addition,
the certified accountants of the External Auditor have given their view on the issues that were presented. To make
its recommendations, the Company CEO and the Deputy CEO of Finance gave an overview to the Committee
members on the situation of the Company, its financial results and on the other issues the Committee discussed, as
specified above, and answered the questions of the Committee Members At the end of the meeting the Committee
recommended to the Board of the Company to approve the financial statements.
The Board of Directors wish to thank the management and the employees for the efforts they have invested and the
achievements they have attained and express their hope for further cooperation on both sides.
Dan Propper Itzik Saig
Chairman of the Board of Directors CEO
Somekh Chaikin Telephone 972 3 684 8000
KPMG Millennium Tower Fax 972 3 684 8444
17 Ha'arba'a Street, PO Box 609 Internet www.kpmg.co.il
Tel Aviv 6100601 Israel
Somekh Chaikin, an Israeli partnership and a member firm of the KPMG network of independent member firms
affiliated with KPMG International Cooperative (“KPMG
International”), a Swiss entity.
Review Report to the Shareholders of Osem Investments Limited
Introduction
We have reviewed the accompanying financial information of Osem Investments Limited and its
subsidiaries (hereinafter – “the Group”) comprising of the condensed consolidated interim statement
of financial position as of September 30, 2015 and the related condensed consolidated interim
statements of income, comprehensive income, changes in equity and cash flows for the nine and three
month periods then ended. The Board of Directors and Management are responsible for the
preparation and presentation of this interim financial information in accordance with IAS 34 “Interim
Financial Reporting”, and are also responsible for the preparation of financial information for this
interim periods in accordance with Section D of the Securities Regulations (Periodic and Immediate
Reports), 1970. Our responsibility is to express a conclusion on this interim financial information
based on our review.
We did not review the condensed interim financial information of certain consolidated subsidiaries
whose assets constitute 13.8% of the total consolidated assets as of September 30, 2015, and whose
revenues constitute 16.3% and 17.3% of the total consolidated revenues for the nine and three month
periods then ended, respectively. The condensed interim financial information of those companies
was reviewed by other auditors whose review reports thereon were furnished to us, and our
conclusion, insofar as it relates to amounts emanating from the financial information of such
companies, is based solely on the said review reports of the other auditors.
Scope of Review
We conducted our review in accordance with Standard on Review Engagements 1, "Review of
Interim Financial Information Performed by the Independent Auditor of the Entity" of the Institute of
Certified Public Accountants in Israel. A review of interim financial information consists of making
inquiries, primarily of persons responsible for financial and accounting matters, and applying
analytical and other review procedures. A review is substantially less in scope than an audit
conducted in accordance with generally accepted auditing standards in Israel and consequently
does not enable us to obtain assurance that we would become aware of all significant matters that
might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review and the review reports of other auditors, nothing has come to our attention that
causes us to believe that the accompanying financial information was not prepared, in all material
respects, in accordance with IAS 34.
In addition to that mentioned in the previous paragraph, based on our review and the review reports
of other auditors, nothing has come to our attention that causes us to believe that the accompanying
interim financial information does not comply, in all material respects, with the disclosure
requirements of Section D of the Securities Regulations (Periodic and Immediate Reports), 1970.
Somekh Chaikin
Certified Public Accountants (Isr.)
November 19, 2015
1
Condensed Interim Consolidated Statement of Financial Position
As at September 30 As at September 30 As at December 31
2015 2014 2014
(Unaudited) (Unaudited) (Audited)
NIS thousands NIS thousands NIS thousands
Assets
Cash and cash equivalents 455,889 511,035 471,197
Bank deposits and other investments 96,732 1,187 164,548
Accounts receivable - customers 844,910 765,294 693,674
Debtors and debit balances 28,652 15,841 27,578
Income tax 16,595 6,508 10,694
Inventory 367,420 348,536 398,972
Total current assets 1,810,198 1,648,401 1,766,663
Employee benefits 252 195 379
Fixed assets 1,068,696 1,108,442 1,110,855
Intangible assets 1,024,422 978,334 1,027,043
Prepaid expenses 51,027 38,248 33,539
Deferred taxes 59,709 43,361 47,047
Total non-current assets 2,204,106 2,168,580 2,218,863
Total assets 4,014,304 3,816,981 3,985,526
Dan Propper - Chairman of the Board
Itzik Saig - CEO
Pinhas Kimelman - Deputy CEO, Finance
Date of approval of financial statements: 19 November 2015
2
INVESTMENTS LTD
As at September 30 As at September 30 As at December 31
2015 2014 2014
(Unaudited) (Unaudited) (Audited)
NIS thousands NIS thousands NIS thousands
Liabilities
Loans and short term credit from banks 9,819 31,750 7,845
Accounts payable - suppliers 688,908 714,489 756,676
Other creditors 201,444 230,823 224,462
Income tax 3,378 8,286 10,895Dividend declared - - -
Total current liabilities 903,549 985,348 999,878
Liability for acquisition of non-controlling interest in subsidiary 358,681 333,369 372,902
Employee benefits 17,274 6,105 17,819
Deferred taxes 97,368 89,215 93,229
Total non-current liabilities 473,323 428,689 483,950
Total liabilities 1,376,872 1,414,037 1,483,828
Equity
Share capital 176,772 176,772 176,772
Premium on shares 444,212 444,212 444,212
Capital reserves (71,802) (67,985) (63,793)
Retained earnings 2,086,876 1,848,477 1,943,149
Total equity attributable to equity holders of the company 2,636,058 2,401,476 2,500,340
Non-Controlling interests 1,374 1,468 1,358
Total equity 2,637,432 2,402,944 2,501,698
Total liabilities and equity 4,014,304 3,816,981 3,985,526
The accompanying notes to the condensened interim financial statements are an integral part of them.
3
INVESTMENTS LTD
Condensed Interim Consolidated Statement of Profit and Loss
For the nine months ending For the three months ending For the year ending
As at September 30 As at September 30 As at September 30 As at September 30 December 31
2015 2014 2015 2014 2014
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Audited)
NIS thousands NIS thousands NIS thousands NIS thousands NIS thousands
Sales 3,170,027 3,224,393 1,075,235 1,128,876 4,256,620
Cost of sales 1,883,175 1,870,490 637,260 654,420 2,475,319
Gross profit 1,286,852 1,353,903 437,975 474,456 1,781,301
Selling, marketing and distribution expenses 673,017 735,002 229,975 258,193 970,635
General and administrative expenses 202,234 209,633 63,263 71,836 268,325
Operating profit before other expenses 411,601 409,268 144,737 144,427 542,341
Other expenses, net 8,109 9,954 4,492 7,398 10,772
Operating profit 403,492 399,314 140,245 137,029 531,569
Finance expenses (13,452) (11,226) (2,553) (1,540) (24,880)
Finance income 1,995 8,934 217 337 21,131
Financing costs, net (11,457) (2,292) (2,336) (1,203) (3,749)
Profit before taxes on income 392,035 397,022 137,909 135,826 527,820
Taxes on income 98,292 97,319 36,002 33,816 131,264
Profit for the period 293,743 299,703 101,907 102,010 396,556
Attributed to:
Equity holders of the company 293,727 299,364 101,752 101,884 396,324
Non-Controlling interests 16 339 155 126 232
Profit for the period 293,743 299,703 101,907 102,010 396,556
Earnings per NIS 1 par value ordinary shares
Primary and fully diluted (in NIS) 2.65 2.71 0.92 0.92 3.58
The accompanying notes to the condensened interim financial statements are an integral part of them.
4
INVESTMENTS LTD
Condensed Interim Statement of Comprehensive Income and Expenses
For the three months ending For the year ending
September 30 September 30 September 30 September 30 December 31
2015 2014 2015 2014 2014
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Audited)
NIS thousands NIS thousands NIS thousands NIS thousands NIS thousands
Profit for the period 293,743 299,703 101,907 102,010 396,556
Other comprehensive income (loss)
Amounts to be transferred to profit or loss
after specific requirements are met
(8,009) 368 9,772 3,695 4,560
Amounts that will not be transferred to profit or loss
Actuarial gains from defined benefit plan - - - - (3,117)
Income tax on components of other comprehensive income - - - - 826
Other comprehensive income (loss) for period,
net of tax (8,009) 368 9,772 3,695 2,269
Total comprehensive income for
the period 285,734 300,071 111,679 105,705 398,825
Attributed to:
Equity holders of the company 285,718 299,732 111,524 105,579 398,596
Non-Controlling interests 16 339 155 126 229
Total comprehensive income for
the period 285,734 300,071 111,679 105,705 398,825
The accompanying notes to the condensened interim financial statements are an integral part of them.
Foreign currency translation differences for foreign operations
For the nine months ending
5
INVESTMENTS LTD.
Notes to the Financial Statements as at 30 September 2015 (unaudited)
6
Condensed Consolidated Reports on Changes in Shareholders' Equity
Capital reserve
from acquisition
Non
Total
of rights not
conferring
control
Total Equity
Controlling
Interest
Company's
equity holders
Retained
earnings
Other Reserves in consolidated
subsidiary
Translation
reserve fund
Premium on
Shares Share Capital
NIS thousands NIS thousands NIS thousands NIS thousands NIS thousands NIS thousands NIS thousands NIS thousands NIS thousands
For the nine month period ending
30 September 2015 (unaudited)
2,501,698 1,358 2,500,340 1,943,149 5,694 (41,675) (27,812) 444,212 176,772 Balance as at 1 January 2015 (audited)
(8,009) - (8,009) - - - (8,009) - - Foreign currency exchange difference
293,743 16 293,727 293,727 - - - - - Net earnings for the period
285,734 16 285,718 293,727 - - (8,009) - - Total recognized comprehensive income for the period
(150,000) - (150,000) (150,000) - - - Dividend paid
2,637,432
1,374
2,636,058
2,086,876
5,694
(41,675)
(35,821)
444,212
176,772
Balance as at 30 September 2015
For the nine month period ending
30 September 2014 (unaudited)
2,252,873 1,129 2,251,744 1,699,113 5,694 (41,675) (32,372) 444,212 176,772 Balance as at 1 January 2014 (audited)
368 - 368 - - - 368 - - Foreign currency exchange difference
299,703 339 299,364 299,364 - - - - - Net earnings for the period
300,071 339 299,732 299,364 - - 368 - - Total recognized comprehensive income for the period
(150,000) - (150,000) (150,000) - - Dividend paid
2,402,944
1,468
2,401,476
1,848,477
5,694
(41,675)
(32,004)
444,212
176,772
Balance as at 30 September 2014
The accompanying notes are an integral part of these
consolidated financial statements.
INVESTMENTS LTD.
Notes to the Financial Statements as at 30 September 2015 (unaudited)
7
Condensed Consolidated Reports on Changes in Shareholders' Equity (Cont.)
Capital reserve
from acquisition
Non
Total
of rights not
conferring
control
Total Equity
Controlling
Interest
Company's
equity holders
Retained
earnings
Other Reserves in consolidated
subsidiary
Translation
reserve fund
Premium on
Shares Share Capital
NIS thousands NIS thousands NIS thousands NIS thousands NIS thousands NIS thousands NIS thousands NIS thousands NIS thousands
For the three month period ending
30 September 2015 (unaudited)
2,525,753 1,219 2,524,534 1,985,124 5,694 (41,675) (45,593) 444,212 176,772 Balance as at 1 July 2015
9,772 - 9,772 - - - 9,772 - - Foreign currency exchange difference
101,907 155 101,752 101,752 - - - - - Net earnings for the period
111,679 155 111,524 101,752 - - 9,772 - - Total recognized comprehensive income for the period
2,637,432
1,374
2,636,058
2,086,876
5,694
(41,675)
(35,821)
444,212
176,772
Balance as at 30 September 2015
For the three month period ending
30 September 2014 (unaudited)
2,297,239 1,342 2,295,897 1,746,593 5,694 (41,675) (35,699) 444,212 176,772 Balance as at 1 July 2014
3,695 - 3,695 - - - 3,695 - - Foreign currency exchange difference
102,010 126 101,884 101,884 - - - - - Net earnings for the period
105,705 126 105,579 101,884 - - 3,695 - - Total recognized comprehensive income for the period
2,402,944
1,468
2,401,476
1,848,477
5,694
(41,675)
(32,004)
444,212
176,772
Balance as at 30 September 2014
For the year ending 31 December 2014 (audited)
2,252,873 1,129 2,251,744 1,699,113 5,694 (41,675) (32,372) 444,212 176,772 Balance as at 1 January 2014
4,560 - 4,560 - - - 4,560 - - Foreign currency exchange difference
(2,291) (3) (2,288) (2,288) - - - - - Actuarial losses (net after tax)
396,556 232 396,324 396,324 - - - - - Net earnings for the year 2014
398,825 229 398,596 394,036 - - 4,560 - - Total recognized comprehensive income for the period
(150,000) - (150,000) (150,000) - - - - - Dividend paid
2,501,698
1,358
2,500,340
1,943,149
5,694
(41,675)
(27,812)
444,212
176,772
Balance as at 31 December 2014 (audited)
The accompanying notes are an integral part of these consolidated
financial statements.
INVESTMENTS LTD
Condensed Interim Consolidated Statement of Cash Flows
For the three months ending For the year ending
September 30 September 30 September 30 September 30 December 31
2015 2014 2015 2014 2014
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Audited)
NIS thousands NIS thousands NIS thousands NIS thousands NIS thousands
CASH FLOWS FROM OPERATING ACTIVITIES
Profit for period 293,743 299,703 101,907 102,010 396,556
Adjustments:
Depreciation 94,593 90,009 32,890 30,202 121,337
Amortization of intangible assets, prepaid and other expenses 13,762 28,829 2,799 9,858 36,918
Loss from sale of fixed assets, net 574 3,671 9 3,359 3,023
Finance costs, net 11,457 2,292 2,336 1,203 3,749
Tax expenses on income 98,292 97,319 36,002 33,816 131,264
Changes in derivatives 76 380 2,096 (78) (9,749)
Changes in inventory 30,339 43,094 41,811 33,426 (4,463)
Changes in accounts receivable and other debtors (170,115) (63,059) (16,392) 27,353 7,527
Changes in accounts payable and other creditors (75,396) 7,498 (75,359) 12,749 32,073
Changes in employee benefits (418) 1,753 54 (77) 10,166
Income taxes paid, net (113,112) (80,826) (38,246) (30,996) (109,522)
Net cash flows arising from operating activities 183,795 430,663 89,907 222,825 618,879
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of fixed assets (66,216) (65,697) (21,776) (20,079) (86,117)
Proceeds from sale of fixed assets 632 966 162 121 1,309
Deposits in banks and other investments, net 66,849 5,865 (559) 42 (157,505)
Investment in intangible assets and prepaid expenses (7,252) (21,909) (1,821) (4,864) (25,942)
Interest received 472 9,116 87 331 9,336
Net cash flows used in investing activities (5,515) (71,659) (23,907) (24,449) (258,919)
CASH FLOWS FROM FINANCING ACTIVITIES
Interest paid (11,531) (3,101) (217) (1,863) (10,552)
Credit from banking institutions and others, net 1,906 653 80 653 (24,885)
Repayment of other liabilities (31,623) (24,297) (2,129) (2,324) (32,887)
Dividend paid (150,000) (150,000) - - (150,000)
(191,248) (176,745) (2,266) (3,534) (218,324)
Change in cash and cash equivalents (12,968) 182,259 63,734 194,842 141,636
Cash and cash equivalents at beginning of period 471,197 328,059 390,499 315,143 328,059
Effect of fluctuations in exchange rate
on cash balances (2,340) 717 1,656 1,050 1,502
Cash and cash equivalents at end of period 455,889 511,035 455,889 511,035 471,197
The accompanying notes to the condensened interim financial statements are an integral part of them.
Net cash used in financing activities
For the nine months ending
8
INVESTMENTS LTD.
Notes to the Financial Statements as at 30 September 2015
9
Note 1 – The Reporting Entity
Osem Investments Ltd. (hereinafter: the "Company") is a company residing in Israel. The consolidated
financial statements of the Group as at 30 September 2015 include the statements of the Company and its
investee companies (hereinafter: "the Group").
The controlling party in the Company is Nestlé S.A. Switzerland. The Group is engaged in the manufacturing
and marketing of food products.
The securities of the Company are listed for trading on the Tel Aviv Stock Exchange.
Note 2 – The basis for the preparation of the Financial Statements
The condensed consolidated interim statements have been prepared in accordance with IAS 34 – Interim
Financial Reporting – and do not include all the information required in the full annual reports. The summary
should be read together with the financial statements for the year which ended on 31 December 2014
(hereinafter –“ yearly financial statements”). Also, these reports were prepared in accordance with part 4 of
the Securities and Exchange Commission standards (periodic and immediate reports) 5740-1970.The use of
estimates and judgement and for the preparation of the interim financial statements, were consistent with
those used for the preparation of the year end financial statements.
Note 3 – Main Principles of Accounting Policy
The accounting policy of the Group as it relates to these condensed consolidated interim financial statements,
is the policy applied in the yearly financial statements.
Note 4 – Seasonality
The Group’s sales are affected by the timing of Jewish Holidays with an emphasis on New Year and
Passover. The annual seasons also have an affect on certain groups of products. The seasons of Winter and
Autumn are characterized by greater consumption of soups, casseroles and soup almonds as compared to the
Summer and Spring seasons which are characterized by higher consumption of ice cream and concentrates as
compared to the seasons of Winter and Autumn.
Note 5 – Segment Activity
months ending nineFor the
10December 20 Bakery Professional
30 September 2015 (unaudited) Beverages Infant And Gift Adjustment to
Culinary Snacks Cereals International Nutrition Packages Others Consolidated Consolidated
NIS NIS NIS NIS NIS NIS NIS NIS
Thousands Thousands Thousands Thousands Thousands Thousands Thousands Thousands
Segment sales 681,925 864,087 487,791 253,081 304,516 614,198 (35,571) 3,170,027
Segment results 66,338 198,695 30,988 48,342 16,833 55,065 (4,660) 411,601
Expenses not allocated (8,109)
Financing costs, net (11,457)
Profit before taxes on income
392,035
INVESTMENTS LTD.
Notes to the Financial Statements as at 30 September 2015
10
Note 5 – Segment Activity (Cont.)
months ending nineFor the
10December 20 Bakery Professional
September 2014 (unaudited)30 Beverages Infant And Gift Adjustment to
Culinary Snacks Cereals International Nutrition Packages Others Consolidated Consolidated
NIS NIS NIS NIS NIS NIS NIS NIS
Thousands Thousands Thousands Thousands Thousands Thousands Thousands Thousands
Segment sales 727,039 871,114 496,627 260,995 309,154 593,165 (33,701) 3,224,393
Segment results 77,818 198,231 41,900 39,351 20,061 36,750 (4,843) 409,268
Expenses not allocated (9,954)
Financing costs, net (2,292)
Profit before taxes on income
397,022
three months ending For the
10December 20 Bakery Professional
(unaudited) 5201 September30 Beverages Infant And Gift Adjustment to Culinary Snacks Cereals International Nutrition Packages Others Consolidated Consolidated
NIS NIS NIS NIS NIS NIS NIS NIS
Thousands Thousands Thousands Thousands Thousands Thousands Thousands Thousands
Segment sales 222,228 289,871 152,032 88,212 103,315 231,843 (12,266) 1,075,235
Segment results 14,491 63,201 8,409 17,956 5,597 36,589 (1,506) 144,737
Expenses not allocated (4,492)
Financing costs, net (2,336)
Profit before taxes on income
137,909
three months ending For the
10December 20 Bakery Professional
naudited)(u 4201 September30
Beverages Infant And Gift Adjustment to Culinary Snacks Cereals International Nutrition Packages Others Consolidated Consolidated
NIS NIS NIS NIS NIS NIS NIS NIS
Thousands Thousands Thousands Thousands Thousands Thousands Thousands Thousands
Segment sales 252,229 306,706 162,690 93,944 102,727 222,553 (11,973) 1,128,876
Segment results 24,924 70,083 8,017 13,070 5,896 23,841 (1,404) 144,427
Income not allocated (7,398)
Financing costs, net (1,203)
Profit before taxes on income
135,826
year ending For the Bakery Professional
(audited) 431 December 201 Beverages Infant And Gift Adjustment to Culinary Snacks Cereals International Nutrition Packages Others Consolidated Consolidated
NIS NIS NIS NIS NIS NIS NIS NIS
Thousands Thousands Thousands Thousands Thousands Thousands Thousands Thousands
Segment sales 972,696 1,135,363 672,032 358,480 416,777 747,438 (46,166) 4,256,620
Segment results 114,973 258,570 53,767 62,395 27,639 31,958 (6,961) 542,341
Expenses not allocated (10,772)
Financing costs, net (3,749)
Profit before taxes on income
527,820
INVESTMENTS LTD.
Notes to the Financial Statements as at 30 September 2015
11
Note 6 – Financial Instruments.
The Company has forward hedge transactions and options on exchange rates on supplier foreign
currency balances as at 30 September 2015 total face value of the transactions amounts to the sum of
NIS 213,424 thousand, (as at 30 September 2014 NIS 138,122 thousand) the fair value of the asset is
NIS 1,447 thousand (as at 30 September 2014 NIS 5,676 thousand).
The futures contracts are disclosed according to fair value as assets at Level 2: observable data, either
directly or indirecty, which are not included in Level 1 (quoted prices, not adjusted, on an active
market for similar instruments).
Note 7 – Events During the Financial Statement Period.
A. On 15 January 2015 the Law for the Promotion of Competition in the Food Sector took effect. The
law deals with, among others, the arrangement of activities between suppliers and retailers and in
geographic competition between retailers, this based on recommendations of the food committee. In
accordance with the decrees of the law, it is forbidden to transfer payments in money or money
equivalents from a supplier to a large retailer under certain circumstances and the manufacturers were
constrained to certain activities which were practiced until the implementation of the law. The
implementation of the law involves, among others, also changes in the method of connection with the
large retailers in order to adjust the commercial activities as required by the law. In the framework of
these adjustments, amounts paid in the past to retailers for separate services, today are expressed as a
discount to the selling price. In accordance with the above-mentioned, amounts which were classified
in the past under marketing and selling expenses in the profit and loss statement, are recorded as of this
quarter in the framework of the reduction in income.
B. One of the main customers of the Group in Israel, Mega Retail Chain Ltd. (hereinafter "Mega"), submitted
a request for a creditors arrangement to the district court in Lod, according to section 350 of the companies
Law 5759 - 1999. In the Month of July 2015 the court approved the creditors arrangement which included
debt rescheduling to banks and suppliers and obligation on the part of the Mega owners to infuse funds and
guarantees. Following discussions and following the balance sheet date, the court approved the creditors
arrangement which included debt restructuring of banks and suppliers and obligation of the owners of Mega
to input funds and guarantees. As part of the arrangement with the suppliers, among them, the Osem Group,
it was agreed on the deferral for a period of two years of 30% of the balance due (existing at the time of
submittal of the request) following this, commencing 15 July 2017 the amount will be repaid in 36 equal
monthly payments including interest. The balance of the debt (70%) in four weekly installments, the first of
which being on 31 July 2015 or at the original payment date, the later of the two. As at the financial
statement approval date the full balance of the debt (70%) was repaid. In accordance with the policy of the
Group whereby it acts to insure of the majority of debts of its customers in Israel, therefore the debt of Mega
to Osem at the request date is fully insured by credit insurance except for the deductible amount, for which
accrual for doubtful debts has been recorded in periods previous to the creditors agreement. In the
evaluation of company management, taking into account the mentioned credit insurance, there is a suitable
accrual in the accounts of the company for the Mega liability.
Osem Investments Limited
Separate Financial Statements
September 30, 2015
Somekh Chaikin Telephone 972 3 684 8000
KPMG Millennium Tower Fax 972 3 684 8444
17 Ha'arba'a Street, PO Box 609 Internet www.kpmg.co.il
Tel Aviv 6100601 Israel
Somekh Chaikin, an Israeli partnership and a member firm of the KPMG network of independent member firms
affiliated with KPMG International Cooperative (“KPMG
International”), a Swiss entity.
To:
The shareholders of Osem Investments Limited
Subject: Special auditors’ report on separate interim financial information according to
Regulation 38D of the Securities Regulations (Periodic and Immediate Reports) – 1970
Introduction
We have reviewed the separate interim financial information presented in accordance with
Regulation 38D of the Securities Regulations (Periodic and Immediate Reports) – 1970 Osem
Investments Limited (hereinafter – the Company) as of September 30, 2015 and for the nine and
three month periods then ended. The separate interim financial information is the responsibility of the
Company’s Board of Directors and of its Management. Our responsibility is to express a conclusion
on the separate interim financial information based on our review.
We did not review the separate interim financial information of investee companies the investments
in which amounted to NIS 443,375 thousand as of September 30, 2015, and the loss from these
investee companies amounted to NIS 12,489 thousand and NIS 3,483 thousand for the nine and three
month periods then ended, respectively. The financial statements of those companies were reviewed
by other auditors whose review reports thereon were furnished to us, and our conclusion, insofar as it
relates to amounts emanating from the financial statements of such companies, is based solely on the
said review reports of the other auditors.
Scope of Review
We conducted our review in accordance with Standard on Review Engagements 1, "Review of
Interim Financial Information Performed by the Independent Auditor of the Entity" of the Institute of
Certified Public Accountants in Israel. A review of separate interim financial information consists of
making inquiries, primarily of persons responsible for financial and accounting matters, and applying
analytical and other review procedures.
A review is substantially less in scope than an audit conducted in accordance with generally accepted
auditing standards in Israel and consequently does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in an audit. Accordingly, we do not
express an audit opinion.
Conclusion
Based on our review and the review reports of other auditors, nothing has come to our attention that
causes us to believe that the accompanying separate interim financial information was not prepared,
in all material respects, in accordance with Regulation 38D of the Securities Regulations (Periodic
and Immediate Reports) – 1970.
Somekh Chaikin
Certified Public Accountants (Isr.)
November 19, 2015
12
INVESTMENTS LTD
Condensed Interim Information on Separate Financial Position
As at September 30 As at September 30 As at December 31
2015 2014 2014
(Unaudited) (Unaudited) (Audited)
NIS thousands NIS thousands NIS thousands
Assets
Cash and cash equivalents 355,675 348,635 329,037
Bank deposits and other investments 86,332 1,187 153,945
Debtors and debit balances 9,394 3,682 10,948
Income tax 813 - -
Inventory 114,504 94,298 134,165
Total current assets 566,718 447,802 628,095
Balances related to subsidiary companies 1,887,060 1,742,276 * 1,784,338
Loans to subsidiary companies 52,953 62,544 52,533
Fixed assets 644,184 663,705 658,960
Intangible assets 570,619 529,916 571,731
Prepaid expenses 11,891 12,870 12,823
Total non-current assets 3,166,707 3,011,311 3,080,385
Total assets 3,733,425 3,459,113 3,708,480
Dan Propper - Chairman of the Board
Itzik Saig - CEO
Pinhas Kimelman - Deputy CEO, Finance
Date of approval of financial statements: 19 November 2015
13
INVESTMENTS LTD
As at September 30 As at September 30 As at December 31
2015 2014 2014
(Unaudited) (Unaudited) (Audited)
NIS thousands NIS thousands NIS thousands
Liabilities
Accounts payable - suppliers 300,120 307,699 354,234
Other creditors 346,237 334,709 * 384,329
Income tax - 8,537 9,568
Total current liabilities 646,357 650,945 748,131
Liability for acquisition of non-controlling interest in subsidiary 358,681 333,369 372,902
Employee benefits 17,138 6,048 17,673
Deferred taxes 75,191 67,275 69,434
Total non-current liabilities 451,010 406,692 460,009
Total liabilities 1,097,367 1,057,637 1,208,140
Equity
Share capital 176,772 176,772 176,772
Premium on shares 444,212 444,212 444,212
Capital reserves (71,802) (67,985) (63,793)
Retained earnings 2,086,876 1,848,477 1,943,149
Total equity 2,636,058 2,401,476 2,500,340
Total liabilities and equity 3,733,425 3,459,113 3,708,480
(*) Reclassified
The accompanying notes to the condensened interim financial statements are an integral part of them.
14
INVESTMENTS LTD
Condensed Interim Separate Information on Profit and Loss
For the three months ending
For the year
ending
September 30 September 30 September 30 September 30 December 31
2015 2014 2015 2014 2014
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Audited)
NIS thousands NIS thousands NIS thousands NIS thousands NIS thousands
Sales 1,024,037 1,029,498 326,233 347,095 1,377,171
Cost of sales 550,390 535,932 179,057 182,857 714,126
Gross profit 473,647 493,566 147,176 164,238 663,045
Selling, marketing and distribution expenses 196,999 217,608 * 68,713 74,895 * 286,744
General and administrative expenses 64,914 62,534 19,078 21,996 81,272
Operating profit before other income 211,734 213,424 59,385 67,347 295,029
Other income, net 8,050 7,516 3,259 2,696 10,982
Operating profit 219,784 220,940 62,644 70,043 306,011
Finance expenses (10,555) (10,440) (1,847) (3,136) (14,781)
Finance income 1,940 9,969 207 1,125 12,063
Financing costs, net (8,615) (471) (1,640) (2,011) (2,718)
Profit from subsidiaries 140,486 137,169 * 57,955 52,532 * 174,145
Profit before taxes on income 351,655 357,638 118,959 120,564 477,438
Taxes on income 57,928 58,274 * 17,207 18,680 * 81,114
Profit for the period 293,727 299,364 101,752 101,884 396,324
(*) Reclassified
The accompanying notes to the condensened interim financial statements are an integral part of them.
For the nine months ending
15
INVESTMENTS LTD
Condensed Interim Information on Seperate Comprehensive Income and Expenses
For the three months ending
For the year
ending
September 30 September 30 September 30 September 30 December 31
2015 2014 2015 2014 2014
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Audited)
NIS thousands NIS thousands NIS thousands NIS thousands NIS thousands
Profit for the period 293,727 299,364 101,752 101,884 396,324
Other comprehensive income (loss)
Amounts to be transferred to profit or loss
after specific requirements are met
(8,009) 368 9,772 3,695 4,550
Amounts that will not be transferred to profit or loss
Actuarial gains from defined benefit plan - - - - (3,099)
Income tax on components of other comprehensive income - - - - 821
Other comprehensive income (loss) for period,
net of tax (8,009) 368 9,772 3,695 2,272
Total comprehensive income for
the period 285,718 299,732 111,524 105,579 398,596
The accompanying notes to the condensened interim financial statements are an integral part of them.
For the nine months ending
Comprehensive income from subsidiary companies
16
INVESTMENTS LTD
Condensed Interim Information on Seperate Cash Flows
For the three months ending
For the year
ending
September 30 September 30 September 30 September 30 December 31
2015 2014 2015 2014 2014
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Audited)
NIS thousands NIS thousands NIS thousands NIS thousands NIS thousands
CASH FLOWS FROM OPERATING ACTIVITIES
Net profit for period 293,727 299,364 101,752 101,884 396,324
Adjustments:
Company's share in profits of subsidiaries (140,486) (137,169) * (57,955) (52,532) * (174,145)
Depreciation 48,652 47,815 16,436 15,972 63,692
Amortization of intangible assets and prepaid expenses 2,540 10,929 1,044 1,453 11,767Loss (profit) from sale of fixed assets, net 404 582 (8) (13) 603Finance costs, net 8,615 471 1,640 2,011 2,718Tax expenses on income 57,928 58,274 * 15,174 18,680 * 81,114Changes in derivatives 76 380 2,096 (78) (1,549)Changes in inventory 19,661 12,512 5,466 (338) (27,355)
2,755 8,927 (1) 6,752 217Changes in accounts payable and other creditors (69,436) 47,586 * 28,324 101,503 * 151,896Changes in employee benefits (535) 1,717 (92) (15) 10,243Income taxes paid , net (98,751) (58,065) (31,907) (27,519) (83,203)
Net cash flows arising from operating activities 125,150 293,323 81,969 167,760 432,322
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of fixed assets (35,193) (31,852) (12,247) (9,653) (38,723)Proceeds from sale of fixed assets 117 107 18 14 183Net cash from subsidiary investment activities - - - - 10,142Investment in intangible assets and prepaid expenses (496) (2,243) (403) (331) (3,332)Interest received 462 8,935 97 382 9,431Other investments, net 66,646 126 (538) 42 (152,641)Dividend received from subsidiaries 52,045 36,309 - - 36,309
83,581 11,382 (13,073) (9,546) (138,631)
CASH FLOWS FROM FINANCING ACTIVITIES
Interest paid (234) (133) (77) 34 (284)Repayment of other liabilities (31,623) (24,297) (2,129) (2,324) (32,887)Credit from banking institutions and others, net - - - - -Dividend paid (150,000) (150,000) - - (150,000)
(181,857) (174,430) (2,206) (2,290) (183,171)
Change in cash and cash equivalents 26,874 130,275 66,690 155,924 110,520
Cash and cash equivalents at beginning of period 329,037 218,379 289,012 192,711 218,379
Effect of fluctuations in exchange rate
on cash balances (236) (19) (27) - 138
Cash and cash equivalents at end of period 355,675 348,635 355,675 348,635 329,037
(*) Reclassified
The accompanying notes to the condensened interim financial statements are an integral part of them.
Changes in debtors and debit balances (including intercompany
balances)
Net cash flows arising from (used in) investing activities
Net cash used in financing activities
For the nine months ending
17
INVESTMENTS LTD.
Additional Information
18
1. General
The interim separate financial information is disclosed in accordance with regulation 38d of the securities regulations
(Periodic and Immediate Reports), -1970 relating to separate financial information for the company. It should be read
along with the Separate financial Information for the year ending 31 December 2014 and together with Condensed
Consolidated Interim Financial Statements as at 30 September 2015 (Heinafter – “the consolidated financial
statements”).
Included in this separate financial information is:
1. The Company – Osem Investments Ltd.
2. Consolidated Companies – companies, including partnerships, whose financial statements are fully
consolidated , directly or indirectly with the company’s financial statements.
3. Held companies – Consolidated subsidaries which the investment in them is included, directly or indirectly, in
the financial stetements on the basis of the balance sheet value.
Report for the third quarter of the year 2015 on the effectiveness of
the internal control over the financial reporting and over the
disclosure according to
Regulation 38C
Please find enclosed herewith the report for the third quarter of the year 2015
regarding the effectiveness of the internal control over the financial reporting
and over the disclosure according to Regulation 38C(a).
The management, with the supervision of the Board of Directors of Osem
Investments Ltd. (hereinafter - the corporation), is responsible for the
establishment and running of adequate internal control mechanism over the
financial reporting and over the disclosure in the corporation.
For this purpose, the management members are:
1. Itzik Saig - CEO
2. Pinhas Kimelman - Deputy CEO of Finance
3. Meir Imber - Deputy CEO of Operations
4. Ofer Green - Deputy CEO and CEO of Noga Ice Cream
5. Nizan Goldberg –CEO of Osem Group Commerce
6. Hagit Adler – CEO of ONP
7. Ori Ben Shai – CEO of Snacks, Bakery, Beverages & Cereal Division
8. Zahava Martonovits – CEO of Culinary Division
9. Billy Yanko – CEO of Bonjour
10. Barak Strozberg – VP of Human Resources
11. Nili Zur – Deputy CEO and CEO of International Division
12. Tzippi Hammer – CEO of New Business Division
13. Avi Ben-Assayag – Deputy CEO. Responsible for the areas of strategy and
business development, finance and budget control, demand planning, long-
term enterprises design, excellence unit, information systems and corporate
marketing.
Internal control over the financial reporting and over the disclosure includes
controls and procedures existing in the corporation, which were planned by the
CEO and the most senior office holder in the financial section or under their
supervision, or by someone who actually performs the above mentioned roles,
with the supervision of the board of directors of the corporation, which are
designed to provide a reasonable degree of assurance as to the credibility of
the financial reporting and on the preparation of the financial statements in
accordance with the Law, and to ensure that the information that the
Corporation is required to disclose in the reports published is in accordance
with the law, that it was collected, processed, summarized and reported in a
timely manner and in the format prescribed by the law.
The internal control includes, inter alia, controls and procedures that have
been planned to ensure that the information the corporation is required to
disclose is accumulated and sent to management of the Corporation, including
the CEO and the senior official on the Financial Section or to someone who
actually performs the above mentioned roles, so as to enable the making of
decisions in a timely manner, with regard to the disclosure requirements
Due to its structural limitations, the internal control over the financial
reporting and the disclosure is not designated to provide absolute assurance
that any misleading presentation or omission of information in the statements
will be prevented or will be discovered.
In the Quarterly Report on the effectiveness of the internal control over the
financial reporting and over the disclosure, which was enclosed with the
interim report for the period ended on 30 June 2015 (hereinafter - the last
quarterly report on the internal control), the internal control was found to be
effective.
Until the date of the report, the Board of Directors and the Corporation
management were not made aware of any event or matter where there is cause
to change the evaluation of the effectiveness of the internal control, as set out
in the last quarterly report relating to internal control.
As of date of the report, based on the statement in the last quarterly report on
the internal control, and based on information that has been brought to the
attention of management and the board of directors as mentioned above, the
internal control is effective.
Management statements
(a) Statement of the CEO according to Regulation 38C(d)(1):
Management Statement
Statement of the CEO
I, Itzik Saig, declare that:
1. I have evaluated the quarterly report of Osem Investments Ltd. (hereinafter:
the corporation) for the third quarter of the year 2015 (hereinafter: the reports).
2. To my knowledge, the reports do not include any incorrect presentation of a
material fact and they do not lack any presentation of a material fact that is
required, so that the presentations included in them, in light of the
circumstances in which these presentations have been included, are not
misleading with regard to the period of the reports
3. To my knowledge, the financial statements and the other financial information
included in the reports properly reflect, from every material aspect, the
financial situation, results of activities and cash flow of the Corporation as of
the dates and for the periods to which the reports refer
4. I have revealed to the auditing accountant of the Corporation, the Board of
Directors and the Audit Committee of the BOD of the Corporation, based on
my most current evaluation of the internal control over financial reporting and
disclosure:
A. All the significant lacks in control and material weaknesses in the
determinations or activation of the internal control mechanism, relating
to the financial reporting and disclosure that might reasonably be
expected to negatively influence the capability of the Corporation to
collect, process, summarize or report the financial information in a
manner that might leave room for doubt as to the credibility of the
financial reporting and the preparation of the financial statements in
accordance with the provisions of the law; and that –
B. Any fraud, whether material or not material, involving the general
manager or anyone directly subordinate to him or involving other
employees who have a significant position in the internal control over
the financial reporting and disclosure.
5. I, alone or together with others in the Corporation:
A. Have determined controls and procedures, or verified the
determination and the existence of controls and procedures under my
supervision, that are designed to ensure, that material information that
refers to the Corporation, including its consolidated companies, as
defined in the Securities Regulations (Preparation of Annual Financial
Reports) - 2010, is brought to my notice by others in the Corporation
and in the consolidated companies, especially during the period of the
preparation of the reports; and that –
B. Have determined controls and procedures, or verified the
determination and existence of controls and procedures under my
supervision, that are designed to ensure in a reasonable manner, the
credibility of the financial reporting and preparation of the financial
reports in accordance with the provisions of the law, and in accordance
with the accepted accounting regulations
C. Have not been informed of any event or matter that has occurred
during the period, between the date of the last quarterly report as of 30
June 2015 and the date of this report, that might be such as to change
the conclusion of the Board of Directors and management with regard
to the effectiveness of the internal control over the financial reporting
and disclosure of the corporation.
The above does not derogate from my responsibility or the responsibility of anyone
else according to the law.
19 November 2015 Signature - Itzik Saig
CEO
(b) Declaration of the most senior office holder in Finance, as
per Regulation 38C(d)(2)
Management Statement
Declaration of the most senior office holder in Finance
I, Pinhas Kimelman, declare that:
1. I have evaluated the interim financial statements and other financial
information included in the interim reports of Osem Investments Ltd.
(hereinafter: the corporation) for the third quarter of the year 2015
(hereinafter: the reports or the interim period reports).
2. To my knowledge, the interim financial statements and the other financial
information included in the reports of the interim periods, do not include any
incorrect presentation of a material fact and they do not lack any presentation
of a material fact that is required, so that the presentations included in them, in
light of the circumstances in which these presentations have been included, are
not misleading with regard to the period of the reports.
3. To my knowledge, the interim financial statements and the other financial
information included in the reports for the interim period, properly reflect,
from every material aspect, the financial situation, results of activities and
cash flow of the Corporation as of the dates and for the periods to which the
reports refer.
4. I have revealed to the auditing accountant of the corporation, the Board of
Directors and the Audit Committee of the BOD of the Corporation, based on
my most current evaluation of the internal control over financial reporting and
disclosure:
A. All the significant lacks in control and material weaknesses in the
determinations or activation of the internal control mechanism, relating
to the financial reporting and disclosure, as it relates to the interim
financial statements and the other financial information included in the
interim reports, that might reasonably be expected to negatively
influence the capability of the Corporation to collect, process,
summarize or report the financial information in a manner that might
leave room for doubt as to the credibility of the financial reporting and
the preparation of the financial statements in accordance with the
provisions of the law; and that –
B. Any fraud, whether material or not material, involving the general
manager or anyone directly subordinate to him or involving other
employees who have a significant position in the internal control over
the financial reporting and disclosure.
5. I, alone or together with others in the Corporation:
A. Have determined controls and procedures, or verified the
determination and the existence of controls and procedures under my
supervision, that are designed to ensure, that material information that
refers to the Corporation, including its consolidated companies as
defined in the Securities Regulations (Preparation of Annual Financial
Reports) 2010, is brought to my notice by others in the Corporation
and the consolidated companies, especially during the period of the
preparation of the reports; and that –
B. Have determined controls and procedures, or verified the
determination and existence of controls and procedures under my
supervision, that are designed to ensure in a reasonable manner, the
credibility of the financial reporting and preparation of the financial
reports in accordance with the provisions of the law, and in accordance
with the accepted accounting regulations
C. Have not been informed of any event or matter that has occurred
during the period, between the date of the last quarterly report as of 30
June 2015 and the date of this report, that relates to the interim
financial statements and any other financial information included in the
interim period reports, that might be such as to change, in my opinion,
the conclusion of the Board of Directors and management with regard
to the effectiveness of the internal control over the financial reporting
and disclosure of the corporation.
The above does not derogate from my responsibility or the responsibility of anyone
else according to the law.
19 November 2015 Signature - Pinhas Kimelman
Deputy CEO of Finance