Tomer Food Reports Significant Loss Amid Inventory Crisis and Trading Suspension
Translated & summarized from Calcalist by baba
Tomer Food reported a NIS 21.3 million net loss for the first half of the year, with its stock trading suspended due to an inventory crisis. Founder Doron Kimel will step down as chairman following revelations of his influence on inventory valuations. The company is implementing new controls and governance measures after an independent review identified errors and control failures. Tomer Food is also working with banks to address non-compliance with financial covenants.
The story in 6 lines · by baba
- Tomer Food reported a NIS 21.3 million net loss in its first-half results, with stock trading suspended.
- Founder Doron Kimel will step down as chairman due to his influence on inventory valuations.
- Gross profit margins declined due to lower logistics revenue and destroyed goods from pests.
- An independent committee recommended strengthening internal controls and corporate governance.
- The company is not meeting financial covenants with banks and is renegotiating terms.
- Tomer Food is seeking approval to resume regular trading of its shares.
Tomer Food has released its first-half financial results, reporting a net loss of NIS 21.3 million. This loss is attributed to a one-time expense related to the company's listing on the stock exchange in May. The company's stock trading has been suspended for over a month and a half.
Doron Kimel, the company's founder, who served as both Chairman and CEO, will step down from his chairman role. This decision follows the discovery that he influenced inventory valuations, leading to the current crisis. As part of the lessons learned, the company has also placed compliance under Guy Freeman, the CFO and Deputy CEO, who was appointed last month.
The company's sales grew by 7.8% to NIS 129.5 million in the first half. However, gross profit margins declined to 19.4% from 21.5% in the same period last year. This decrease is due to lower revenue from storage and logistics services and the destruction of goods because of pest infestations. Operating profit also fell to 4.6% from 5.7% year-over-year.
The crisis was exacerbated by the resignation of CFO Avital Cherny in August, just one day after her appointment, due to inventory discrepancies she found in prior company reports. This led to the suspension of the company's stock trading and an immediate investigation into inventory management practices.
An independent committee, serving as both the audit and review committee, conducted a thorough examination with the help of external consultants. They reviewed findings, identified involved parties, and distinguished between errors, control failures, and intentional actions. The committee has proposed recommendations to strengthen internal controls, oversight, and corporate governance to prevent future failures. Key recommendations include appointing a CFO responsible for financial reporting, subordinating compliance to the CFO, and separating the CEO and Chairman roles, currently held by the controlling shareholder.
Additionally, Tomer Marketing is not meeting its financial covenants with its banking corporations. All loans, including long-term debt of approximately NIS 32.1 million, have been reclassified as current liabilities. The company has received waivers from its banks regarding immediate repayment demands due to non-compliance, with a requirement to establish new financial covenants based on IFRS reporting by the end of November.