Alon Holdings Blue Square - Israel Ltd. Announces the Financial Results for the Second Quarter and the First Half of 2012

ROSH HA'AYIN, Israel, August 30, 2012 /PRNewswire/ --

Alon Holdings Blue Square-Israel Ltd. (NYSE and TASE: BSI) today announced its financial results for the second quarter ended June 30, 2012.

Increase in total results of the Company's segments (commercial and fueling sites segment Supermarkets segment, Non-food segment and Real estate segment) in this quarter amounted to NIS 161.6 million (U.S. $41.2 million) compared to NIS 123.8 million in the corresponding quarter last year.

  • In the commercial and fueling sites: increase in operating profit of 64% from NIS 33.2 million in the first quarter of this year to NIS 54.5 million in this quarter mainly from efficiency measures taken by the Company after reducing the marketing margin in September 2011 and expanding the activity in the convenience stores sector.
  • In the supermarkets segment-
    • The operating profit in the second quarter amounted to 2.0% compared to 1.1% in the first quarter of the year and 1.6% in the fourth quarter of 2011. The major improvement mainly derived from implementing efficacy measures and adjusting the expense structure.
    • Mega commenced the implementation of a strategic maneuver in 30 branches of the chain that shall include:
         o Exiting from 10 branches until the end of the year.
         o Launching new HD chain in national deployment of 20 branches.
      The operating profit rate excluding these branches is 3.4% in the second quarter of the year.

  • Mega expects that it shall complete the deployment of self-stewarding until the end of first quarter of 2013.
  • BSRE completed during this quarter the purchase of land in the wholesale market complex and recorded a gain of NIS 95 million from revaluating the commercial section. In addition, following a decrease in the holding rate in the residential section of the project, BSRE recorded a gain of NIS 19.6 million.
  • The Non Food segment: an operating loss of NIS 2.3 million in the first half of 2012 compared to an operating loss of NIS 1.6 million in the first half of 2011.
  • Toward the end of the second quarter, the Company launched cellular operations under the brand "YouPhone". YouPhone offers an unlimited program and Triple programs (food, gasoline and communication) in collaboration with the customers club.

The main results of the quarter as compared to the comparable quarter:

                                      2012                    2011
    Data in millions of NIS    H1      Q2       Q1      H1      Q2      Q1
    Net revenues             6,513.6 3,335.1 3,178.5 6,215.6 3,208.5 3,007.1
    Gross profit             1,419.4  720.8   698.6  1,481.5  752.0   729.5
    Operating profit          193.9   155.8   38.1    210.9   118.1   92.8
    Finance expenses, net     138.9   95.7    43.2    56.0    15.2    40.8
    Net profit for the
    period                    51.2    48.4     2.8    109.5   71.8    37.7


Results for the second quarter of 2012[1]

Gross revenues

Revenues (including government levies) in the second quarter of 2012 amounted to NIS 4,090.5 million (U.S. $1,042.7 million) as compared to revenues of NIS 3,890.0 million in the comparable quarter last year, an increase of 5.2%. The main increase in revenues was due to an increase in the revenues of Dor Alon compared to the corresponding quarter last year.

Revenues from sales, net

Revenues of the Commercial and Fueling sites segment - amounted in this quarter to NIS 1,575.8 million (U.S. $401.7 million) as compared to NIS 1,328.3 million in the corresponding quarter last year, an increase of 18.6%. The main increase was due to an increase in the price of petrol and an increase in sales in the convenience stores.

Revenues of the Supermarkets segment - amounted in this quarter to NIS 1,653.5 million (U.S. $421.5 million) as compared to NIS 1,766.5 million in the corresponding quarter last year, a decrease of 6.4%. The decrease in revenues was due to a reduction in the same store sales (SSS) at a rate of 7.6% which was mainly due to the increasing competition and opening of commercial areas and erosion in sale prices and was offset by the net opening of 8 new branches during the last 12 months.

Revenues of the non-food segment - a reduction in revenues by 8.5% from NIS 105.3 million in the second quarter of 2011 to NIS 96.4 million (U.S. $24.6 million) in the current quarter. The decrease in revenues is mainly due to a decrease in sales to franchisees following the closing of 20 franchised stores over the last 12 months and was partially offset by an increase in Na'aman and Vardinon and in stores transferred from franchise to self-operation.

Revenues of the real estate segment - an increase in rental income of 7.1% from NIS 8.4 million in the second quarter of 2011 to NIS 9.0 million (U.S. $2.3 million) in the current quarter, mainly due to an increase in leased space.

Gross profit in the second quarter of 2012 amounted to NIS 720.8 million (U.S. $183.7 million) (21.6% of revenues) as compared to gross profit of NIS 752.0 million (23.4% of revenues) in the comparable quarter last year. The decrease in the gross profit compared to the corresponding quarter last year was mainly due to the decrease in sales in the supermarkets segment following increasing competition and decrease in sales to franchisees in the non food segment as a result of discontinued operations of several franchisees and was partly offset by increase in the gross profit in the commercial and fueling segment.

In the Commercial and fueling sites segment, gross profit amounted to NIS 234.4 million (U.S. $59.7 million), (14.9% of revenues) compared to NIS 223.0 million in the comparable quarter last year (16.8% of revenues). The increase of 5.1% in the gross profit compared to the corresponding quarter last year mainly derived from convenience stores and was partly offset from the impact of changes in the prices of petrol on the value of inventory and the reduction of marketing margin of supervised gasoline.

In the Supermarkets segment, gross profit amounted to NIS 445.8 million (U.S. $113.6 million), (27.0% of revenues) compared to NIS 480.4 million in the second quarter of 2011 (27.2% of revenues), a decrease of 7.2% stemming from decrease in sales.

In the Non food segment, gross profit amounted to NIS 35.6 million (U.S. $9.1 million), (37.0% of revenues) compared to NIS 40.2 million in the comparable quarter last year (38.2% of revenues). The decrease in gross profit mainly drives from decrease in sales to franchisees, as aforementioned.  

Selling, general and administrative expenses in the second quarter of 2012 amounted to NIS 664.5 million (U.S. $169.4 million) (19.9% of revenues), compared to expenses of NIS 646.0 million (20.1% of revenues) in the comparable quarter last year, an increase of 2.9%. The main increase was recorded in the Commercial and fueling sites segment from adding new sites, in the real estate segment from recording a provision for management fees and from launching Alon Cellular.

In the Commercial and fueling sites segment, these expenses amounted to NIS 179.8 million (U.S. $45.8 million) compared to NIS 172.3 million in the second quarter of 2011, an increase of 4.3%, mainly deriving from opening new fueling sites and was offset partially by efficiency measures beginning from the fourth quarter of 2011.

In the Supermarket segment, selling, general and administrative expenses amounted to NIS 412.9 million (U.S. $105.2 million) compared to expenses of NIS 412.3 million in the comparable quarter in 2011. The expenses in this quarter include costs for net opening of 8 new branches during the last 12 months net of decrease in the expenses of SSS stores and due to efficacy measures.

In the Non food segment, these expenses amounted to NIS 42.3 million (U.S. $10.8 million) (an increase of 2.4%) compared to NIS 41.3 million in the comparable quarter in 2011. The increase derives from an increase in the retail activity and the transition from franchise into self-operated stores.

In the real estate segment, these expenses amounted to NIS 10.8 million (U.S. $2.8 million) compared to NIS 4.6 million in the comparable quarter in 2011. The increase derives from recording a provision for management fees in the mall company that builds the commercial spaces in the wholesale market complex in Tel Aviv.

Operating profit (before other gains and losses and changes in fair value of investment property) in the second quarter of 2012 amounted to NIS 56.3 million (U.S. $14.4 million) (1.7% of revenues) as compared to NIS 106.0 million (3.3% of revenues) in the comparable quarter last year, a decrease of 46.9%. The decrease in the operating profit was mainly due to decrease in sales in the Supermarkets segment and the increase in selling, general and administrative expenses in the Real estate segment, as aforementioned, and the costs of launching Alon Cellular.

In the Commercial and fueling sites segment, operating profit increased from NIS 50.7 million in the second quarter of 2011 to NIS 54.5 million (U.S. $13.9 million) due to increase in sales of the convenience stores that was partly offset by the influence of the reduction in marketing margin.

In the Supermarkets segment, operating profit decreased from NIS 68.0 million in the comparable quarter last year to NIS 32.4 million (U.S. $8.3 million) due to decrease in sales and increase in expenses as mentioned above.

In the Non food segment, operating loss of NIS 4.3 million in the comparable quarter in 2011  as compared to operating loss of NIS 7.0 million (U.S. $1.8 million) due to decrease in sales to franchisees as a result of discontinued operations.

In the real estate segment, transfer from operating profit of NIS 3.8 million in the comparable quarter in 2011 to operating loss of NIS 1.8 million (U.S. $0.5 million) due to increase in selling administrative and general expenses as aforementioned.

Changes in fair value of investment property in the second quarter of 2012 the Company recorded profit from the increase in the value of investment property in the amount of NIS 81.6 million (U.S. $20.8 million) compared to NIS 16.4 million in the comparable quarter last year. The profit in this quarter includes NIS 95 million from revaluation of the commercial section in the wholesale market complex in Tel Aviv.

Other income (expenses), net other income in the second quarter of 2012 amounted to NIS 17.8 million (U.S. $4.5 million) compared to other expenses of NIS 4.4 million in the comparable quarter last year. The income in this quarter includes a gain from decrease in holding rate and loss of control in the residential company in the wholesale market complex in Tel Aviv amounting to NIS 19.6 million (U.S. $5.0 million).

Operating profit amounted to NIS 155.8 million (U.S. $39.7 million) (4.7% of revenues) as compared to operating profit of NIS 118.1 million (3.7% of revenues) in the comparable quarter last year, an increase of 31.9%.

Finance costs, net in the second quarter of 2012 amounted to NIS 95.7 million (U.S. $24.4 million) as compared to net finance costs of NIS 15.2 million in the comparable quarter last year. The increase in finance costs, net derives from decrease in finance income. The comparable quarter last year includes revenues of NIS 70 million from revaluation of the option to purchase Diners shares that was realized in the third quarter of 2011.

Taxes on income in the second quarter of 2012 amounted to NIS 12.8 million (U.S. $3.3 million) (an effective tax rate of 20.9% as compared to the statutory rate of 25%) as compared to tax expenses totaled NIS 31.1 million in the comparable quarter last year (an effective tax rate of 30.2% as compared to the statutory rate of 24%). The decrease in the effective tax rate in this quarter derives from recording a gain from decrease in holding rate in respect of which, the Company did not record deferred taxes.

Net income for the second quarter of 2012 amounted to NIS 48.4 million (U.S. $12.3 million) compared to a net income of NIS 71.8 million in the second quarter of 2011. The net income in the second quarter of 2012 attributed to the Company's shareholders amounted to NIS 28.8 million (U.S. $7.3 million) or NIS 0.44 per share (U.S. $0.11) and the income attributed to non controlling interests amounted to NIS 19.6 million (U.S. $5.0 million).

Cash flows for the second quarter of 2012

Cash flows from operating activities: Net cash flow used in operating activities amounted to NIS 141.7 million (U.S. $36.1 million) in the second quarter of 2012 compared to NIS 218.4 million from operating activities in the comparable quarter last year. The decrease in this quarter cash flows from operating activities compared to the comparable quarter derives from purchase of real estate inventory by BSRE of NIS 247.0 million (U.S $63.0 million) compared to purchase of real estate inventory of NIS 2.1 million in the comparable quarter last year, increase in working capital needs mainly due to increase in petrol prices and  decrease in operating profit of approximately NIS 63.5 million (U.S $16.2 million) net of tax received, net amounting to NIS 26.8 million (U.S $6.8 million) in the second quarter of 2012 compared to tax paid, net amounting to NIS 20.9 million in the comparable quarter last year.

Cash flows used in investing activities: Net cash flows used in investing activities amounted to NIS 263.8 million (U.S. $67.2 million) in the second quarter of 2012 as compared to net cash used in investing activities of NIS 83.9 million in the comparable quarter. Cash flows used in investing activities in the second quarter of 2012 mainly included the purchase of investment property, property and equipment and intangible assets of total NIS 208.0 million (U.S. $53.0 million), including an investment of NIS 121.5 million (U.S. $31.0 million) for consummating the purchase of real estate in the commercial section of the wholesale market complex, the grant of long term loans of NIS 14.9 million (U.S. $3.8 million) mainly to the controlling shareholder, investment in restricted deposits of NIS 60.9 million (U.S. $15.5 million) and investments in securities of NIS 38.7 million (U.S. $9.9 million), net of proceeds from realization of securities of NIS 44.5 million (U.S. $11.3 million) and a dividend received amounting to NIS 11.0 million (U.S. $2.8 million).

In the second quarter of 2011 the cash flows used in investing activities mainly included the purchase of property and equipment, investment property and intangible assets of total NIS 85.8 million, investment in advances from purchasers of apartments of NIS 8.1 million and investments in short term deposits of NIS 3.2 million and was offset by interest received of NIS 7.7 million.

Cash flows from financing activities: Net cash flows from financing activities amounted to NIS 516.8 million (U.S. $131.7 million) in the second quarter of 2012 as compared to net cash flows used in financing activities of NIS 135.1 million in the corresponding quarter last year. The cash flows from financing activities in the second quarter of 2012 mainly included issuance of bonds of NIS 31.3 million (U.S. $8.0 million) and receiving loans of NIS 497.8 million (U.S. $126.9 million) that was offset by interest payments of NIS 60.5 million (U.S. $15.4 million), repayment of loans of NIS 68.3 million (U.S. $17.4 million) and bond repayment of NIS 88.2 million (U.S. $22.5 million). The net cash flows used in financing activities in the second quarter of 2011 included mainly, repayment of bonds of NIS 136.3 million, repayment of long term loans of NIS 66.6 million and payment of interest of NIS 54.6 million and was offset by receipt of long term loans of NIS 107.0 million and change in short term credit of NIS 32.7 million.

Comments of Management

Mr. David Weissman, Chairman of the Board of Directors and Chief Business Officer - "We are very pleased from the measures taken by Dor Alon for dealing with the issues of reducing the marketing margin and improving the operating profit. The real estate company continues to grow and currently is in stages of development and betterment of real estate investment properties. Mega embodies strength with over 200 branches deployed nationally in cities and outside cities and a strong equity. In the Supermarkets segment we reached conclusions to be specified later on.

In the Non food segment, we are in a changing process that is led by the new CEO and chairman".

Regarding the Supermarket segment Mr. Zeev Vurembrand, CEO, said: "The Supermarkets segment presents a material improvement in the operating profit compared to the business results during the two elapsing quarters. The improvement of the business results derives from implementing the efficacy measures taken in the first quarter and from adjusting the operating expense structure to the changing market.

In recent months the Company formulated a comprehensive plan on the deployment of braches and the brand structure of the Supermarkets segment where the Company contemplates to handle 30 branches individually in two activity channels - exit from 10 branches on one hand and formulating a new Heavy Discount chain in the remaining branches, on the other hand.

The Company sold the operations of 9 branches and concluded a rental agreement in an additional branch in a total area of 23,000 sq.m. This maneuver will be completed until the end of 2012.

The second section of this plan is launching a chain in Heavy Discount format under a new name and in national deployment of 20 branches. This chain shall be launched until the end of the year, shall lead the Heavy Discount segment in Israel and shall be operated under a new operating model alongside the Mega chains.

The table below sets forth the operating profit rate of the Supermarkets segment in the first half of 2012 divided to branches designated for sale and the strategic change as detailed above and the other active branches.

    Operating profit rate before other
    expenses and real estate revaluation  Second quarter of 2012
    30 Branches designated for sale or
    for transfer to the new HD chain      -5.3%
    The remaining branches                 3.4%


In addition, Mega Retail continues the implementation stage of the self-stewarding system which was commenced in May 2012. The self-stewarding system is deployed in 120 branches and its deployment shall be completed in all of the chain's branches in the course of the first quarter of 2013. This measure is expected to improve the operating profitability of the Company.


Results for the first half of 2012

Gross revenues

Revenues (including government levies) in the first half of 2012 amounted to NIS 7,986.9 million (U.S. $2,035.9 million) as compared to revenues of NIS 7,599.5 million in the comparable period last year, an increase of 5.1%. The main increase in revenues was due to an increase in the revenues of Dor Alon compared to the corresponding quarter last year.

Revenues from sales, net  

Revenues of the Commercial and Fueling sites segment - in the first half of 2012 amounted to NIS 3,006.1 million (U.S. $766.3 million) as compared to NIS 2,576.5 million in the first half of 2011, an increase of 16.7%. The main increase was due to an increase in quantity sales and increase in the prices of petrol.

Revenues of the Supermarkets segment - amounted in the first half of 2012 to NIS 3,279.5 million (U.S. $836.0 million) as compared to NIS 3,403.0 million in the corresponding period last year, a decrease of 3.6%. The decrease in revenues was due to a reduction in the same store sales (SSS) at a rate of 5.3% which was mainly due to the increasing competition and opening of commercial areas. This decrease was partially offset by the net opening of 6 new branches from the beginning of 2012.

Revenues of the non-food segment - amounted in the first half of 2012 to NIS 210.6 million (U.S. $53.7 million) compared to NIS 221.4 million in the first half of 2011 a decrease of 4.9%. The decrease in revenues is mainly due to a decrease in sales to franchisees and from closing stores by franchisees which was partially offset by an increase in Na'aman and Vardinon and in stores transferred from franchise to self-operation.

Revenues of the real estate segment - an increase in rental income of 15.6% from NIS 14.7 million in the first half of 2011 to NIS 17.0 million (U.S. $4.3 million) in the first half of 2012, due to an increase in leased space and increase of CPI.  

Gross profit in the first half of 2012 amounted to NIS 1,419.4 million (U.S. $361.8 million) (21.8% of revenues) as compared to gross profit of NIS 1,481.5 million (23.8% of revenues) in the comparable period last year. The decrease in the gross profit compared to the corresponding period last year was mainly due to the decrease in sales of the supermarket segment.

In the Commercial and fueling sites segment, gross profit amounted to NIS 439.6 million (U.S. $112.0 million), (14.6% of revenues) compared to NIS 441.4 million in the comparable period last year (17.1% of revenues). A decrease in gross profit of 0.1% compared to the corresponding period last year deriving from a reduction in the marketing margin of supervised gasoline and was partially offset by increase in the activity of convenience stores and the impact of changes in the petrol prices on the value of inventory.

In the Supermarkets segment, gross profit amounted to NIS 882.4 million (U.S. $225.0 million), (26.9% of revenues) compared to NIS 938.4 million in the corresponding period last year (27.6% of revenues), a decrease of 6.0% stemming from decrease in the sales of SSS stores and erosion of gross profit margin due to the public protest and the increasing competition.

In the Non food segment, gross profit amounted to NIS 84.4 million (U.S. $21.5 million), (40.1% of revenues) compared to NIS 86.9 million in the first half of 2011 (39.3% of revenues). The decrease in gross profit mainly drives from decrease in sales to franchisees.

Selling, general and administrative expenses in the first half of 2012 amounted to NIS 1,327.5 million (U.S. $338.4 million) (20.4% of revenues), compared to expenses of NIS 1,283.7 million (20.7% of revenues) in the first half of 2011, an increase of 3.4%. The main increase was recorded in the Supermarkets segment due to the costs relating to the opening of branches.

In the Commercial and fueling sites segment, these expenses amounted to NIS 351.9 million (U.S. $89.7 million) compared to NIS 340.4 million in the first half of 2011, an increase of 3.4%, mainly deriving from opening new fueling sites and was offset by efficiency measures beginning from the fourth quarter of 2011.

In the Supermarket segment, selling, general and administrative expenses amounted to NIS 832.8 million (U.S. $212.3 million) compared to expenses of NIS 820.8 million in the first half of 2011, an increase of 1.5% that resulted from net opening 6 new branches and increase in electricity expenses and was partly offset by a decrease in the salary, advertising and maintenance expenses.

In the Non food segment, these expenses amounted to NIS 86.7 million (U.S. $22.1 million) (an increase of 6.0%) compared to NIS 81.8 million in the first half of 2011. The increase derives from an increase in the rental fees and increase in minimum wage.

In the Real estate segment - these expenses amounted to NIS 16.6 million (U.S. $4.2 million) compared to NIS 8.4 million in the comparable period last year. The increase in expenses derives from recording a provision for management fees in the mall company which builds the mall in the wholesale market complex.

Operating profit (before other gains and losses and changes in fair value of investment property) in the first half of 2012 amounted to NIS 91.9 million (U.S. $23.4 million) (1.4% of revenues) as compared to NIS 197.8 million (3.2% of revenues) in the comparable period last year, a decrease of 53.5%. The decrease in the operating profit was mainly due to increasing competition in the supermarkets segment, decrease in retail sales in the non food segment and the increase in selling, general and administrative expenses in the Supermarkets segment and the commercial and fueling sites, from opening new supermarkets and new commercial and fueling sites.

In the Commercial and fueling sites segment, operating profit decreased from NIS 101.0 million in the first half of 2011 to NIS 87.7 million (U.S. $22.3 million) due to reducing the marketing margin the impact of which was offset following efficacy measures.

In the Supermarkets segment, operating profit decreased from NIS 117.6 million in the comparable period last year to NIS 49.6 million (U.S. $12.6 million) due to decrease in sales and increase in expenses as mentioned above.

In the Non food segment, operating loss increased from NIS 1.6 million in the first half of 2011 to operating loss of NIS 2.3 million (U.S. $0.6 million) in the current period due to decrease in sales to franchisees.

In the real estate segment, operating profit decreased from NIS 6.3 million in the first half of 2011 to operating profit of NIS 0.4 million (U.S. $0.1 million) due to recording a provision for management fees in the mall company which builds the mall in the wholesale market complex.

Changes in fair value of investment property in the first half of 2012 the Company recorded profit from the increase in the value of investment property in the amount of NIS 84.3 million (U.S. $21.5 million) compared to NIS 19.4 million in the comparable period last year. The profit in the first half includes NIS 95 million from revaluation of the commercial section in the wholesale market complex in Tel Aviv.

Operating profit in the first half of 2012 amounted to NIS 193.9 million (U.S. $49.4 million) as compared to operating profit of NIS 210.9 million in the comparable period last year, a decrease of 8.1%.

Finance costs, net in the first half of 2012 amounted to NIS 138.9 million (U.S. $35.4 million) as compared to net finance costs of NIS 55.9 million in the first half of 2011. The increase in finance costs, net derives from decrease in finance income. Last year, revenues were included  from revaluation of Diners option that was realized in the third quarter of 2011, net of decrease in finance costs this quarter in CPI linked loans following an increase of inflation at a lower rate than last year.  

Taxes on income in the first half of 2012 totaled NIS 8.5 million (U.S. $2.2 million) (an effective tax rate of 14.3% as compared to the statutory rate of 25%) as compared to tax expenses totaled NIS 46.8 million in the comparable period last year (an effective tax rate of 29.9% as compared to the statutory rate of 24%). The decrease in the effective tax rate in this period derives mainly from recording a gain from decrease in holding rate in respect of which, the Company did not record deferred taxes.

Net income for the first half of 2012 amounted to NIS 51.2 million (U.S. $13.1 million) compared to a net income of NIS 109.5 million in the first half of 2011. The income in the first half of 2012 attributable to the Company's shareholders amounted to NIS 22.5 million (U.S. $5.7 million) or NIS 0.34 per share (U.S. $0.09) and the profit attributable to the non-controlling interests amounted to NIS 28.7 million (U.S. $7.3 million).


Cash flows for the first half of 2012

Cash flows from operating activities: Net cash flow from operating activities amounted to NIS 21.1 million (U.S. $5.4 million) in the first half of 2012 compared to NIS 434.5 million from operating activities in the comparable period last year. The decrease in cash flows from operating activities compared to the comparable period mainly derives from purchase of real estate inventory by BSRE of NIS 247.8 million (U.S $63.2 million) compared to purchase of real estate inventory of NIS 4.1 million in the comparable period last year, increase in working capital needs mainly due to increase in petrol prices and  decrease in operating profit of approximately NIS 115.3 million (U.S $29.4 million) net of tax received, net amounting to NIS 16.3 million (U.S $4.1 million) in the first half of 2012 compared to tax paid, net amounting to NIS 40.6 million in the comparable period last year.

Cash flows used in investing activities: Net cash flows used in investing activities amounted to NIS 419.9 million (U.S. $107.0 million) in the first half of 2012 as compared to net cash used in investing activities of NIS 300.3 million in the comparable period last year. Cash flows used in investing activities in the first half of 2012 mainly included the purchase of property and equipment, investment property and intangible assets of total NIS 306.6 million (U.S. $78.2 million) as well as the grant of long term loans of NIS 38.6 million (U.S. $9.8 million) mainly to the controlling shareholders, investment in restricted deposits of NIS 69.9 million (U.S. $17.8 million) and investments in securities of NIS 133.9 million (U.S. $34.1 million), net of proceeds from realization of securities of NIS 109.8 million (U.S. $28.0 million) and receiving a dividend in the amount of NIS 11 million (U.S. $2.8 million).

In the first half of 2011 the cash flows used in investing activities mainly included the purchase of property and equipment, investment property and intangible assets of total NIS 176.6 million as well as the grant of short term loans of NIS 62.3 million mainly to the controlling shareholders and investment in advances from purchasers of apartments of NIS 95.4 million.

Cash flows from financing activities: Net cash flows from financing activities amounted to NIS 537.6 million (U.S. $137.0 million) in the first half of 2012 as compared to net cash flows used in financing activities of NIS 125 million in the corresponding period last year. The cash flows from financing activities in the first half of 2012 mainly included issuance of bonds of NIS 295.6 million (U.S. $75.3 million) and receiving long term loans of NIS 498.3 million (U.S. $127.0 million) that was offset by interest payments of NIS 117.4 million (U.S. $29.9 million), repayment of loans of NIS 188.1 million (U.S. $47.9 million) and bond repayment of NIS 92.1 million (U.S. $23.5 million). The net cash flows used in financing activities in the first half of 2011 included mainly, repayment of bonds of NIS 138.5 million, repayment of loans of NIS 126.1 million and payment of interest of NIS 110.3 million and was offset by increase in short term credit from banks of NIS 169.9 million and receipt of long term loans of 109.5 million.

Additional Information

  1. As of June 30, 2012, the Company operated 217 supermarkets divided as follows: Mega In Town -119; Mega Bool - 69; Zol Beshefa - 18; Eden Teva Market -20 of which 9 Eden within Mega, Dor Alon operated - 200 fueling stations and 204 convenience stores and the Bee Group operates 239 branches (some franchised).
  2. EBITDA (Earnings before Interest, Taxes, Depreciation, and Amortization)[2] In the second quarter of 2012 EBITDA was NIS 125.1 million (U.S. $31.9 million) (3.8% of revenues) compared to NIS 174.7 million (5.4% of revenues) in the comparable quarter of 2011. In the first half of 2012 EBITDA was NIS 231.0 million (U.S. $58.9 million) (3.5% of revenues) compared to NIS 335.5 million (5.4% of revenues) in the comparable period of 2011.

Events during the reporting period

  1. Effective January 2012, the Company applies the amendment to IAS 12, Taxes on Income - deferred taxes on investment property. The adoption of the standard was made retrospectively. The effect of the above change on the presented comparative figures are decrease in provisions  for deferred taxes of NIS 3 million and increase in accumulated earnings of NIS 2.4 million and increase in non -controlling interests of NIS 0.6 million. The above amendment had no material effect on the statement of income.  
  2. During the second quarter of 2012, Alon Cellular launched its operations under the brand name "You Phone" and commenced to provide services to its customers. At the same time, the Company acquired the full ownership of Alon Cellular.

The Commercial and fueling sites segment

a. Commitment for establishing a power plant

On February 8, 2012, a corporation controlled by Dor Alon (55% held) entered into a detailed agreement with Sugat Sugar Refineries Ltd. (Sugat) under which the corporation shall establish a power plant on its premises with total capacity of up to 124 Mega Watt. At the first stage, the plant capacity shall be 64 Mega Watt. Under the agreement, the power plant shall provide the energy needs of Sugat for 24 years and 11 months and in addition, the corporation may sell steam and electricity to third parties.

It was further agreed that in the stage preceding the first stage, the corporation shall connect the Sugat plant to the natural gas transmission systems, shall convert the existing energy plant of Sugat to a dual system enabling the operation by fuel oil and natural gas and shall operate and maintain for Sugat its existing energy plant, all as determined in the detailed agreement.

On March 1, 2012, the corporation entered into an agreement with Israel Natural Gas Lines Ltd. ("INGL") to connect Sugat to the national transmission system for natural gas and to provide natural gas transmission services by INGL (the agreement).    

Pursuant to the agreement, INGL shall establish the infrastructures that include, inter alia, the transmission piping and the facilities necessary to connect the Sugat plant to natural gas and shall install the infrastructures necessary for natural gas transmission to the power plant which is planned to be built by the corporation on the Sugat plant premises.  

The agreement is for a period until July 31, 2029 with a renewal option of five additional years.

Pursuant to the agreement, the corporation shall bear the connecting expenses to the transmission system which is estimated at NIS 15 million. In addition the corporation is committed to pay the current annual payments to INGL for transmission services until the end of the agreement term in an immaterial amount, regardless of whether the corporation uses the transmission services or not.  

On May 3, 2012, Alon Central Energy LP, a limited partnership held by a corporation controlled by Dor Alon, in which Dor holds a 55% interest and a third party holds a 45% interest, entered into a memorandum of understanding ("MOU")with Chiram Epsilon Ltd. ("Chiram"). Pursuant to the MOU, the partnership will invest NIS 75 million in exchange for the issuance of Chiram's shares reflecting 36.2% of Chiram's outstanding shares. Chiram holds 36.7% of the outstanding shares of Dalia Power Energy Ltd, which is engaged in the construction of a private power plant with an output 870 Mega Watt. It was agreed that the parties shall act to sign a detailed agreement to regulate the terms of the commitment and at the same time the partnership shall carry out due diligence. The partnership has the right to cancel the MOU according to the terms contained in the MOU and Chiram shall refund to the partnership the monies paid to Chiram until that date. The cancellation right is at the disposal of the partnership also if the due diligence reveals material facts that were not known to the partnership on Chiram or Dalia. The agreement is subject to prerequisites including the receipt of regulatory approvals, as far as required. The parties to the partnership shall guarantee the partnership's commitment according to the MOU, each party in its relative share, according to his holdings in the partnership.

b. On May 31, 2012, the Water and Energy Ministry updated the supervised marketing margin of gasoline 95 such that the marketing margin for self-service was increased by 4.7 Agorot per litter (before VAT) and the addition for full service was reduced by 3.8 Agorot per litter (before VAT). The above updating has no material effect on Dor Alon results in the reported period.

c. On June 28, 2012, the Palestinian authority informed Dor Alon on discontinuing the commitment with the company regarding the supply of fuels to Gaza strip effective October 1, 2012.

Supermarkets segment

As of June 30, 2012, the area of all branches reaches 386,400 sq.m. The sales per meter amounted in the second quarter of 2012 to NIS 4,302 (U.S. $1,097) compared to NIS 4,782 in the corresponding quarter last year.

Sales per meter amounted in the first half of 2012 to NIS 8,606 (U.S. $2,193.7) compared to NIS 9,223 in the first half last year.

In the period of six months ended June 30, 2012, 6 branches, net, were opened in a total area of 10,525 sq.m.

Non food segment

On April 18, 2012, Bee Group informed that it had reached an agreement with a franchisee (which operates together with others 24 stores in the non-food segment - hereafter the franchisee) which experiences financial difficulties. Based on the franchise terms with the franchisee and the said agreement, Bee Group will take over the majority of the stores and the inventory in exchange for the debt. Following the agreement and based on the value of the assets that Bee Group will assume, the Company recorded a provision for doubtful accounts in the statements of financial position for the year ended December 31, 2011 in the amount of NIS 11.2 million.

Real estate segment

a. Comverse Building

On May 13, 2012, BSRE signed a memorandum of understanding with a third party (the lessee), pursuant to which the Company agreed to erect a 23,000 square-meter office building on real property it owns in Ra'anana and also to construct a 2,300 square-meter basement (the structure), both of which will be leased to the lessee for 10 years for monthly rental fees of NIS 1,660 thousand linked to the CPI with a renewal option for an additional 5 years. The rental fees in this period shall increase by 7.5%. BSRE has undertaken to erect a surrounding structure at estimated cost of NIS 200 million and to perform all of the finishing work, as far as requested by the lessee, which is estimated at a cost NIS 75 million. BSRE will be entitled to receive from the lessee a payment equal to 7.5% of the cost of the finishing work in addition to monthly rental fees if BSRE will perform the finishing work.

BSRE has undertaken to finish the construction work and to transfer the building at the end of the final quarter of 2014. BSRE and the lessee have determined acceptable compensation mechanisms. As of the reporting date, BSRE obtained building permits to erect the building and the construction work has begun.

b. The wholesale market complex

  • On May 31, 2012, Tel Aviv Lev Towers Ltd. and the Tel Aviv City Mall Ltd. (in which BSRE holds indirectly 50% together with Gindi Investments 1 Ltd and its subsidiaries., "Gindi"), completed the purchase of lease rights for the period ended on August 31, 2099 for a part of the wholesale market complex in Tel Aviv. The Purchasers paid the Sellers the balance of the consideration in the aggregate amount of approximately NIS 730 million plus VAT.

    In order to pay the Balance of Consideration, the Purchasers received loans of NIS 730 million from a bank. The Loans were extended for 18 months where the principal shall be paid in one payment at the end of the period and the interest payments are payable quarterly. In addition to this loan, the Bank provided the Purchasers with an additional loan for two months in the amount of NIS 120 million to pay the VAT. To secure the loan, BSRE recorded a charge in favor of the Bank on the shares of Tel Aviv Lev Towers Ltd. and Tel Aviv City Mall Ltd. Furthermore, the land was charged in favor of the Bank.

    On June 29, 2011, BSRE and Gindi entered into an agreement constituting a appendix (the Appendix) to the Memorandum of Understandings dated April 15, 2010, (MOU) that regulates the relations between the company and Gindi in all that concerns the wholesale market complex in Tel Aviv. According to the Appendix, Tel Aviv Lev Towers allocated to Gindi one additional share of NIS 1 par value for NIS 300 thousand such that after the allocation, Gindi holds (by chaining) in 50.5% of the issued and outstanding share capital of Tel Aviv Lev Towers and BSRE (by chaining) holds 49.5% of the issued and outstanding share capital. On June 29, 2012, the parties completed the above allocation.

    The residential company ceased to exist under joint control in the financial statements in the second quarter of BSRE and therefore the investment in the residential company was recorded on equity method of accounting. BSRE recorded in the statements of operations a gain of NIS 19.6 million for the difference between the fair value of the Company's investment in the residential company upon losing control, and the investment balance as included in the books at this time.
  • As of June 30, 2012, BSRE recorded in its financial statements for the second quarter a gain of NIS 95 million from appreciation before taxes stemming from revaluation of real estate in the Tel Aviv City Mall Company.

c. Hadar Mall

On June 5, 2012, BSRE entered into a loan agreement to receive finance from a group of institutional companies in order to build an addition to the extension to the Hadar Mall in Jerusalem, of which BSRE holds 50% of the rights. The lenders will extend an amount of NIS 125 million over a period of 10 years during which an aggregate of NIS 42.5 million will be repaid in 17 bi-annual payments commencing on the 18th month subsequent to the date of the loan, and the remaining sum will be repaid in a one-time payment at the end of the loan term. BSRE has the option to obtain an additional loan of NIS 40 million upon the completion of the construction. The loan is linked to the CPI and bears annual interest of 4.1%. As collateral for the repayment of the loan, BSRE placed a charge on its rights in Hadar Mall in Jerusalem.

Issuance of bonds

  1. On January 4, 2012, the bonds series of BSRE (Series D) was expanded by a private offering of NIS 150,000 thousand par value of bonds (Series D) to institutional investors for 98.5% of their par value, reflecting a return of 5.8%.
  2. On January 25, 2012, Midroog announced on lowering its rating on bonds (series A and C) issued by the Company, from A1 to A2 with stable outlook. In addition, Midroog granted A2 rating with stable outlook for bonds up to NIS 200 million par value the Company intends to issue by expanding Series C or by issuance of new Series with a duration up to 6 years.
  3. On February 15, 2012, the bonds series of Dor Alon (Series D) was expanded by a private offering of NIS 119,900 thousand par value of bonds (Series D) to institutional investors for 100.95% of their par value, reflecting a return of 6.9%.
  4. On April 11, 2012, the bonds series of the Company (Series C) was expanded by a private offering of NIS 35,000 thousand par value of bonds (Series C) to institutional investors for 89.5% of their par value, reflecting a return of 5.7%.
  5. On May 23, 2012, Midroog announced that it had assigned a "P-1" rating to commercial paper of up to NIS 170 million nominal value, which may be issued in the future by the Company.
  6. During the second quarter, the Company's subsidiaries acquired NIS 17.3 million par value of bonds of Series C of the Company such that as of June 30, 2012, the subsidiaries hold 13.7% of bonds Series C. Following the acquisitions, the Company recorded finance income of NIS 3.4 million in the results of the second quarter.

Post balance sheet events

  1. On July 12, 2012, Eyal Baribua Ltd. (Eyal Baribua) a company held at rate of 50% by BSRE, entered into an agreement with a bank to provide credit line of NIS 90 million to Eyal Baribua to establish the logistic center in Kibbutz Eyal. The credit line shall be extended for the establishment period and after the completion of the construction and Mega's entry into the logistic center, the credit line shall be converted into a loan where NIS 63 million shall be repaid in quarterly payments over 14 years and the balance at the end of the loan term. The credit line and the loan shall bear variable annual interest rate linked to the Prime. As collateral for the loan repayment, the real estate rights shall be charged and for the establishment period a guarantee of Eyal Baribua shareholder was granted as well.
  2. On August 20, 2012, the bonds series of Dor Alon (Series D) was expanded by a private offering of NIS 46,000 thousand par value of bonds (Series D) to institutional investors for 101.08% of their par value, reflecting a return of 6.9%.
  3. According to the strategy of the Company for treating losing branches, the subsidiary, Mega Retail, in July and August 2012, signed agreements with third parties under which the Company transferred the lease rights and sold the equipment attributed to 9 of its branches for a total consideration of NIS 26 million.

NOTE A: Convenience Translation to Dollars

The convenience translation of New Israeli Shekel (NIS) into U.S. dollars was made at the exchange rate prevailing at June 30, 2012: U.S. $1.00 equals NIS 3.923. The translation was made solely for the convenience of the reader.

###

Alon Holdings Blue Square- Israel Ltd. (hereinafter: "Alon Holdings") is the leading retail company in the State of Israel and operates in four reporting segments: In its supermarket segment, Alon Holdings, through its 100% subsidiary, Mega Retail Ltd., currently operates 217 supermarkets under different formats, each offering a wide range of food products, "Near Food" products and "Non-Food" products at varying levels of service and pricing. In its "Non-Food" segment, Alon Holdings, through its 100% subsidiary BEE Group Retail Ltd., operates specialist outlets in self-operation and franchises and offers a wide range of "Non-Food" products as retailer and wholesaler. In the Commercial and Fueling Sites segment, through its 78.38% subsidiary, which is listed on the Tel Aviv stock exchange ("TASE"), Dor Alon Energy in Israel (1988) Ltd is one of the four largest fuel retail companies in Israel based on the number of petrol stations and a leader in the field of convenience stores.  Dor Alon operates a chain of 200 petrol stations and 204 convenience stores in different formats in Israel. In its Real Estate segment, Alon Holdings, through its TASE traded 78.22% subsidiary Blue Square Real Estate Ltd., owns, leases and develops yield generating commercial properties and projects.


Forward-looking statements

This press release contains forward-looking statements within the meaning of safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995.  Forward-looking statements may include, but are not limited to, plans or projections about our business and our future revenues, expenses and profitability. Forward-looking statements may be, but are not necessarily, identified by the use of forward-looking terminology such as "may," "anticipates," "estimates," "expects," "intends," "plans," "believes," and words and terms of similar substance.  Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual events, results, performance, circumstance and achievements to be materially different from any future events, results, performance, circumstance and achievements expressed or implied by such forward-looking statements.  These risks, uncertainties and other factors include, but are not limited to, the following:  the effect of the recession in Israel on the sales in our stores and on our profitability; our ability to compete effectively against low-priced supermarkets and other competitors; quarterly fluctuations in our operating results that may cause volatility of our ADS and share price; risks associated with our dependence on a limited number of key suppliers for products that we sell in our stores; the effect of an increase in the minimum wage in Israel on our operating results; the effect of any actions taken by the Israeli Antitrust Authority on our ability to execute our business strategy and on our profitability; the effect of increases in oil, raw material and product prices in recent years; the effects of damage to our reputation or to the reputation of our store brands due to reports in the media or otherwise; and other risks, uncertainties and factors disclosed in our filings with the U.S. Securities and Exchange Commission (SEC), including, but not limited to, risks, uncertainties and factors identified under the heading "Risk Factors" in our annual report on Form 20-F for the year ended December 31, 2011.  You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release.  Except for our ongoing obligations to disclose material information under the applicable securities laws, we undertake no obligation to update the forward-looking information contained in this press release.


ALON HOLDINGS BLUE SQUARE - ISRAEL LTD.

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

AS OF JUNE 30, 2012

(UNAUDITED)

                                                                 Convenience translation 
                               December 31,         June 30,            June 30,
                                   2011        2011         2012          2012
                               -----------    -------   --------    -------------------
                                               NIS                   U.S. dollars
                               ---------------------------------    -------------------
                                                    In thousands
                               --------------------------------------------------------
    A  s  s  e  t  s    
    CURRENT ASSETS:    
     Cash and cash equivalents     76,451     125,637    215,698                 54,983
     Investment in securities     300,053     291,867    315,407                 80,400
     Short-term bank deposits     103,942      95,203    101,611                 25,901
     Trade receivables          1,576,150   1,794,772  1,702,701                434,030
     Other accounts 
      receivable including
      current maturities of
      loans receivable            291,790     299,299    346,902                 88,428
     Derivative financial
      instruments                   2,543           -      1,409                    359
     Assets classified as held
      for sale                      3,610      54,210          -                      -
     Income taxes receivable      125,789      89,374    104,568                 26,655
     Inventories                  676,590     684,983    685,901                174,841
                                ---------   ---------  ---------                -------
                                3,156,918   3,435,345  3,474,197                885,597
                                ---------   ---------  ---------                -------    NON-CURRENT ASSETS:    
     Investments in associates    202,653       7,376    281,487                 71,753
     Derivative financial
      instruments                     896     159,328        270                     69
     Real estate inventories      100,035      86,498    106,927                 27,256
     Payments on account of real
      estate                      191,600     174,529          -                      -
     Investments in securities     33,159      29,128     37,480                  9,554
     Loans receivable, net of
      current maturities          182,654     143,068    195,384                 49,805
     Property and equipment,
      net                       2,942,487   2,936,440  2,947,170                751,254
     Investment property          576,093     536,438    935,645                238,503
     Intangible assets, net     1,461,070   1,468,148  1,455,791                371,091
     Other long-term receivables  142,331     152,008     36,123                  9,208
     Deferred taxes               104,321      68,401    115,580                 29,462
                                ---------   ---------  ---------                -------
                                5,937,299   5,761,362  6,111,857              1,557,955
                                ---------   ---------  ---------                -------
    Total assets                9,094,217   9,196,707  9,586,054              2,443,552
                                ---------   ---------  ---------                -------
                                ---------   ---------  ---------                -------
   



ALON HOLDINGS BLUE SQUARE - ISRAEL LTD.

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

AS OF JUNE 30, 2012

(UNAUDITED)

                                                            
                                                                 Convenience translation                                
                              December 31,           June 30,                   June 30,
                                     2011        2011        2012                  2012
                                ---------    --------   ---------         -------------
                                        NIS                                U.S. dollars
                                ---------------------------------         -------------
                                                       In thousands
                                -------------------------------------------------------
       Liabilities and
     shareholders' equity
 
    CURRENT LIABILITIES:
    Credit and loans from
    banks and others            1,036,928     632,273   1,144,484                291,737
    Current maturities of
    debentures and
    convertible debentures        212,726     140,980     258,539                 65,903
    Current maturities of
    long-term loans from
    banks                         311,642     338,039     259,156                 66,061
    Trade payables              1,243,914   1,432,815   1,343,268                342,408
    Other accounts payable
    and accrued expenses          730,985     793,308     755,885                192,681
    Customers' deposits            27,733      28,265      27,696                  7,060
    Derivative financial
    instruments                     2,814       6,724       9,377                  2,390
    Income taxes payable            6,311       2,253       4,672                  1,191
    Provisions                     78,266      73,042      71,379                 18,195
                                ---------    --------   ---------               --------

                                3,651,319   3,447,699   3,874,456                987,626
                                ---------    --------   ---------               --------
 
    NON CURRENT
    LIABILITIES:
    Long-term loans from
    banks and others, net
    of current maturities       1,240,487   1,362,958   1,368,318                348,794
    Convertible
    debentures, net of
    current maturities            118,826     119,101     119,771                 30,530
    Debentures, net of
    current maturities          2,034,047   2,140,119   2,218,311                565,463
    Other liabilities             264,597     266,159     158,885                 40,501
    Derivative financial
    instruments                    16,701      11,328       9,204                  2,346
    Liabilities in respect
    of employee benefits,
    net of amounts funded          62,245      52,809      60,649                 15,460
    Deferred taxes               *159,769    *134,866     173,851                 44,316
                                ---------    --------   ---------               --------
                                3,896,672   4,087,340   4,108,989              1,047,410
                                ---------    --------   ---------               --------
    Total liabilities           7,547,991   7,535,039   7,983,445              2,035,036
                                ---------    --------   ---------               --------
 
    EQUITY:
    Equity attributed to
    equity holders of the
    Company:
    Ordinary shares of NIS
    1 par value                    79,881      79,878     79,881                  20,362
    Additional paid-in
    capital                     1,219,279   1,219,282  1,219,279                 310,803
    Other reserves                (9,672)    (22,355)   (13,093)                 (3,337)
    Accumulated deficit        *(106,434)     * 9,312   (76,556)                (19,515)
                               ---------     --------  ---------               ---------
                               1,183,054    1,286,117  1,209,511                 308,313
 
    Non-controlling
    interests                   *363,172     *375,551    393,098                 100,203
                               ---------     --------  ---------               ---------
    Total equity               1,546,226    1,661,668  1,602,609                 408,516
                               ---------     --------  ---------               ---------
    Total liabilities and
    equity                     9,094,217    9,196,707  9,586,054               2,443,552
                               ---------     --------  ---------               ---------
                               ---------     --------  ---------               ---------
 
    * Retroactive application, see events during the reporting period
 



ALON HOLDINGS BLUE SQUARE-ISRAEL LTD.
CONSOLIDATED STATEMENTS OF INCOME

FOR THE SIX AND THREE MONTH PERIOD ENDED JUNE 30, 2012

(UNAUDITED)

                                                                        Convenience
                                                                        translation
                                                                        for the six
                    Year ended      Six months         Three months       months
                     December                                           ended June
                        31,       ended June 30,      ended June 30,        30,
                       2011       2011      2012      2011      2012       2012
                     ----------  -------- ---------  -------- ---------  ----------
                                                                           U.S.
                                            NIS                           dollars
                     --------------------------------------------------  ----------
                                 In thousands (except per share data)
                     --------------------------------------------------------------
    Revenues         15,296,255 7,599,468 7,986,855 3,890,000 4,090,473   2,035,905
    Less -
    government
    levies            2,813,671 1,383,885 1,473,242   681,536   755,385     375,540
                     ----------  -------- ---------  -------- ---------  ----------
    Net revenues     12,482,584 6,215,583 6,513,613 3,208,464 3,335,088   1,660,365
    Cost of sales     9,566,876 4,734,112 5,094,200 2,456,471 2,614,299   1,298,547
                     ----------  -------- ---------  -------- ---------  ----------
    Gross profit      2,915,708 1,481,471 1,419,413   751,993   720,789     361,818
    Selling,
    general and
    administrative
    expenses          2,638,845 1,283,690 1,327,514   645,959   664,464     338,393
                     ----------  -------- ---------  -------- ---------  ----------
    Operating
    profit before
    other gains and
    losses and
    changes in fair
    value of
    investment
    property            276,863   197,781    91,899   106,034    56,325      23,425
    Other gains           1,358     1,000    19,845         -    19,845       5,059
    Other losses       (19,577)   (7,284)   (2,195)   (4,375)   (2,023)       (560)
    Increase in
    fair value of
    investment
    property, net        41,913    19,445    84,334    16,390    81,649      21,497
                     ----------  -------- ---------  -------- ---------  ----------
    Operating
    profit              300,557   210,942   193,883   118,049   155,796      49,421
    Finance income      156,837   131,314    37,352    86,313    17,658       9,521
    Finance
    expenses          (332,839) (187,265) (176,299) (101,523) (113,374)    (44,940)
                     ----------  -------- ---------  -------- ---------  ----------
    Finance
    expenses, net     (176,002)  (55,951) (138,947)  (15,210)  (95,716)    (35,419)
    Share in gains
    of associates         5,746     1,317     4,804       104     1,201       1,225
                     ----------  -------- ---------  -------- ---------  ----------
    Income before
    taxes on income     130,301   156,308    59,740   102,943    61,281      15,227
    Taxes on income      46,588    46,805     8,524    31,114    12,848       2,173
                     ----------  -------- ---------  -------- ---------  ----------
 
    Net income for
    the period           83,713   109,503    51,216    71,829    48,433      13,054
                     ----------  -------- ---------  -------- ---------  ----------
                     ----------  -------- ---------  -------- ---------  ----------
 
    Attributable
    to:
    Equity holders
    of the Company       59,513    94,947    22,482    64,959    28,827       5,731
                     ----------  -------- ---------  -------- ---------  ----------
    Non-controlling
    interests            24,200    14,556    28,734     6,870    19,606       7,323
                     ----------  -------- ---------  -------- ---------  ----------
 
    Earnings per
    ordinary share
    or ADS
    attributable to
    equity holders
    of the company
    Basic                  0.90      1.44      0.34      0.99      0.44        0.09
                     ----------  -------- ---------  -------- ---------  ----------
    Fully diluted          0.79      1.41      0.34      0.95      0.44        0.09
                     ----------  -------- ---------  -------- ---------  ----------
    Weighted
    average number
    of shares or
    ADSs used for
    computation of
    earnings per
    share:
    Basic                65,940    65,925    65,954    66,947    65,238      65,954
                     ----------  -------- ---------  -------- ---------  ----------
    Fully diluted        66,167    66,395    65,954    66,253    65,238      65,954
                     ----------  -------- ---------  -------- ---------  ----------



ALON HOLDINGS BLUE SQUARE-ISRAEL LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX AND THREE MONTH PERIOD ENDED JUNE 30, 2012

(UNAUDITED)

                                                                       Convenience
                                                                       translation
                                                                       for the six
                                      Six months       Three months      months
                      Year ended         ended            ended           ended
                     December 31,      June 30,          June 30,       June 30,
                         2011       2011    2012      2011     2012       2012
                    ----------  -------- ---------  -------- ---------  ----------
                                                                          U.S.
                                                                       dollars in
                                     NIS in thousands                   thousands
                    --------------------------------------------------  ----------

    CASH FLOWS FROM
    OPERATING
    ACTIVITIES:
    Income before
    taxes on income   130,301     156,308    59,740  102,943    61,281      15,227
    Income tax
    received
    (paid), net      (79,368)    (40,626)    16,267 (20,946)    26,897       4,147
    Adjusments for
    cash generated
    from operations   576,664     318,828  (54,901)  136,487 (229,871)    (13,993)
                   ----------    -------- --------- -------- ---------  ----------
    Net cash
    provided (used
    in) by
    operating
    activities        627,597     434,510    21,106  218,484 (141,743)       5,381
                    ---------    --------  -------- -------- ---------   ---------
    CASH FLOWS FROM
    INVESTING
    ACTIVITIES:
    Purchase of
    property and
    equipment       (261,101)   (135,312) (121,351) (69,778)  (44,546)    (30,933)
    Purchase of
    investment
    property         (55,524)    (32,859) (150,018) (12,518) (144,743)    (38,241)
    Purchase of
    intangible
    assets           (30,717)     (8,476)  (35,225)  (3,483)  (18,701)     (8,979)
    Proceeds from
    collection of
    (investment in)
    short-term bank
    deposits, net     (5,858)       2,881     2,331  (3,226)   (4,212)         594
    Proceeds from
    sale of
    property and
    equipment          12,864      11,383     1,782      293     1,344         454
    Proceeds from
    sale of
    investment
    property           50,600           -     3,610        -     3,610         920
    Investment in
    restricted 
    deposits        (102,603)    (95,406)  (69,910)  (8,129)  (60,981)    (17,821)
    Proceeds from
    sale of
    marketable
    securities        118,957      48,424   109,807   28,822    44,560      27,989
    Investment in
    marketable
    securities      (122,646)    (46,800) (133,885) (25,128)  (38,694)    (34,128)
    Dividend
    received                -           -    11,000        -    11,000       2,804
    Acquisition of
    equity
    accounted
    investee         (36,415)           -         -        -         -           -
    Grant of loans
    to jointly
    controlled
    companies           (200)           -   (3,300)        -   (3,300)       (841)
    Grant of loans
    to controlling
    shareholders    (144,962)    (62,342)  (35,268)    (609)  (11,685)     (8,989)
    Payments on
    account of real
    estate            (9,187)           -  (16,347)        -   (5,841)     (4,167)
    Collection of
    long-term loans    22,885       5,114    10,561    2,087     7,190       2,691
    Net outflow
    from
    realization of
    proportionately
    consolidated
    company                 -           -   (3,085)        -   (3,085)       (786)
    Interest
    received           16,552      13,082     9,363    7,743     4,311       2,386
                    ---------    -------- --------- -------- ---------  ----------
    Net cash used
    in investing
    activities      (547,355)   (300,311) (419,935) (83,926) (263,773)   (107,047)
                    ---------   --------- --------- -------- ---------  ----------
 



ALON HOLDINGS BLUE SQUARE - ISRAEL LTD.

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX AND THREE MONTH PERIOD ENDED JUNE 30, 2012

(UNAUDITED)

 
                                                                       Convenience
                                                                       translation
                                                                       for the six
                      Year                                               months
                      ended     Six months ended   Three months ended     ended
                    December
                       31,          June 30,            June 30,        June 30,
                      2011       2011      2012       2011      2012      2012
                    ---------   --------- --------- -------- ---------  ----------
                                                                          U.S.
                                                                       dollars in
                                     NIS in thousands                   thousands
                    --------------------------------------------------  ----------
    CASH FLOWS FROM
    FINANCING
    ACTIVITIES:
    Purchase of
    treasury shares   (4,035)    (4,035)         -       (82)        -           -
    Dividends paid   (75,000)          -         -          -        -           -
    Dividend paid
    to
    non-controlling
    interests        (30,669)   (16,821)         -   (16,821)        -           -
    Issuance of
    debentures              -          -   295,567          -   31,325      75,342
    Repayment of
    debentures      (174,955)  (138,559)  (92,156)  (136,254) (88,249)    (23,491)
    Transactions
    with
    non-controlling
    interests in
    subsidiary
    without loss of
    control          (15,217)          -         -          -        -           -
    Receipt of
    long-term loans   213,648    109,547   498,259    107,000  497,759     127,010
    Repayment of
    long-term loans (382,557)  (126,110) (188,107)   (66,551) (68,304)    (47,950)
    Repayment of
    long term
    credit from
    trade
    payables          (1,750)      (870)         -      (435)        -           -
    Short-term
    credit from
    banks and
    others,
    net               582,503    169,990   142,141     32,669  204,853      36,233
    Proceeds from
    issue of shares
    relating to
    share based
    payments in the
    company and a
    subsidiary            143        140         -         16        -           -
    Acquisition of
    shares from
    non-controlling
    interests               -    (7,927)     (682)          -        -       (174)
    Interest paid   (222,771)  (110,348) (117,408)   (54,637) (60,528)    (29,928)
                    ---------  --------- ---------  -------- ---------  ----------
    Net cash
    provided by
    (used in)
    financing
    activities      (110,660)  (124,993)   537,614  (135,095)  516,856     137,042
                    ---------  --------- ---------  -------- ---------  ----------
    INCREASE
    (DECREASE) IN
    CASH AND CASH
    EQUIVALENTS AND
    BANK OVERDRAFTS  (30,418)      9,206   138,785      (537)  111,340      35,376
    Translation
    differences on
    cash and cash
    equivalents            37        (2)        23         10       26           6
    BALANCE OF CASH
    AND CASH
    EQUIVALENTS AND
    BANK OVERDRAFTS
    AT BEGINNING OF
    PERIOD            104,131    104,131    73,750    113,862  101,192      18,800
                    ---------  --------- ---------   -------- --------  ----------
    BALANCE OF CASH
    AND CASH
    EQUIVALENTS AND
    BANK OVERDRAFTS
    AT END OF
    PERIOD             73,750    113,335   212,558    113,335  212,558      54,182
                    ---------  --------- ---------   -------- --------  ----------
                    ---------  --------- ---------   -------- --------  ----------
 



(Continued - 2)

ALON HOLDINGS BLUE SQUARE - ISRAEL LTD.

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX AND THREE MONTH PERIOD ENDED JUNE 30, 2012

(UNAUDITED)

 
                                                                          Convenience
                                                                          translation
                                                                          for the six
                          Year                                              months
                          ended       Six months         Three months        ended
                        December
                           31,      ended June 30,      ended June 30,     June 30,
                          2011      2011      2012      2011      2012       2012
                     ---------   --------- --------- -------- ---------  ----------
                                                                             U.S.
                                               NIS                          dollars
                                                In thousands
                    ---------------------------------------------------  ----------
 
    (a) Net cash
        provided by
        operating
        activities:
        Adjustments
        for:
        Depreciation
        and
        amortization      273,746   135,872   138,362    67,934    68,492      35,269
        Increase in
        fair value of
        investment
        property, net    (41,913)  (19,445)  (84,334)  (16,390)  (81,649)    (21,497)
        Gain from
        decrease in
        holding rate in
        proportionately
        consolidated
        company                 -         -  (19,622)         -  (19,622)     (5,002)
        Share in gains
        of associates     (5,309)     (880)   (4,804)     (104)   (1,201)     (1,225)
        Share based
        payment             3,270     1,878       727       764       264         185
        Loss from sale
        and disposal of
        property and
        equipment, net      2,448       612     1,218     1,259       996         311
        Provision for
        impairment of
        property and
        equipment, net      7,815     1,305         -       928         -           -
        Loss (gain)
        from changes in
        fair value of
        derivative
        financial
        instruments     (107,553) (103,525)       766  (77,328)   (6,817)         195
        Linkage
        differences on
        monetary
        assets,
        debentures,
        loans and other
        long term
        liabilities        71,465    69,427    29,796    41,077    29,354       7,596
        Employee
        benefit
        liability, net        177     1,318   (1,596)       545       541       (407)
        Decrease
        (increase) in
        value of
        investment in
        securities,
        deposits and
        long-term
        receivables,
        net                 1,190     2,353   (2,342)       873   (1,495)       (597)
        Interest paid,
        net               184,963    84,109    96,111    39,649    48,480      24,499
        Changes in
        operating
        assets and
        liabilities:
        Investment in
        real estate
        inventories       (5,637)   (4,100) (247,803)   (2,117) (246,980)    (63,167)
        Payments on
        account of real
        estate
        inventories       (8,852)   (3,674)  (11,692)   (2,609)   (1,302)     (2,980)
        Decrease
        (increase) in
        trade
        receivables and
        other accounts    104,743 (136,030) (160,810)   187,684   226,415    (40,991)
        Increase in
        advances from
        purchasers of
        apartments        102,603    95,406    69,910     9,314    63,480      17,821
        Increase
        (decrease) in
        trade payables
        and other
        accounts
        payable          (10,198)   198,889   150,523 (181,861) (407,043)      38,370
        Decrease
        (increase) in
        inventories         3,706   (4,687)   (9,311)    66,869    98,216     (2,373)
                          -------   -------   -------   -------  --------    --------
                          576,664   318,828  (54,901)   136,487 (229,871)    (13,993)
                          -------   -------   -------   -------  --------    --------
                          -------   -------   -------   -------  --------    --------



(Concluded - 3)

ALON HOLDINGS BLUE SQUARE - ISRAEL LTD.

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX AND THREE MONTH PERIOD ENDED JUNE 30, 2012

(UNAUDITED)

                                                                        Convenience
                                                                        translation
                                                                        for the six
                            Year                         Three
                            ended       Six months       months        months ended
                          December                       ended
                             31,      ended June 30,    June 30,            June 30,
                      2011       2011     2012      2011         2012          2012
                     -------   -------  -------   -------     --------      --------
                                            NIS                         U.S. dollars
                    --------------------------------------------------  ------------
                                             In thousands
                    ----------------------------------------------------------------
    (b)
    Supplementary
    information
    on investing
    and financing
    activities
    not involving
    cash flows:
    Issue of
    shares upon
    conversion of
    convertible
    debentures             896          901     -       901          -            -
                      --------     -------- ------  --------   -------     --------
                      --------     -------- ------  --------   -------     --------
    Purchase of
    property and
    equipment on
    credit              10,769     (11,432) 8,879   (5,562)      3,949        2,263
                      --------     -------- ------  --------   -------     --------
                      --------     -------- ------  --------   -------     --------
    Advances from
    customers
    deposited in
    restricted
    use deposit              -     (21,673)     -     (316)          -            -
                      --------     -------- ------  --------   -------     --------
                      --------     -------- ------  --------   -------     --------
    Issue of
    shares
    against
    acquisition
    of shares in
    subsidiary         154,433            -     -          -         -            -
                      --------     -------- ------  --------   -------     --------
                      --------     -------- ------  --------   -------     --------
 


                                                                  Convenience
                                                                  translation
                             December 31,        June 30,           June 30,
                                 2011        2011        2012         2012
                              --------     --------    --------     --------    
                                             NIS                  U.S. dollars
                                               In thousands
                            --------------------------------------------------
                                               Alon Holdings
                            --------------------------------------------------
    Cash and cash
    equivalence                     1,909       2,273         900          229
    Investment in securities       64,657      62,119      67,025       17,085
                                 --------    --------    --------     --------
    Total assets                   66,566      64,392      67,925       17,314
                                 --------    --------    --------     --------
                                 --------    --------    --------     --------
    Short term and Long-term
    debt:
    Short term loans from
    banks                         195,764      74,157     130,632       33,299
    Long term loans from
    banks                         171,555     187,984     173,714       44,281
    Debentures                    232,341     317,326     252,252       64,301
                                 --------    --------    --------     --------
    Total long-term debt          599,660     579,467     556,598      141,881
                                 --------    --------    --------     --------
                                 --------    --------    --------     --------
    Equity:
    Equity attributable to
    equity holders of the
    company:                    1,183,054   1,286,117   1,029,511      308,313
                               ----------  ----------  ----------     --------
    Total debt, net           (1,716,148) (1,801,192) (1,698,184)    (432,880)
                               ----------  ----------  ----------     --------
                               ----------  ----------  ----------     --------



ALON HOLDINGS BLUE SQUARE - ISRAEL LTD.

RECONCILIATION BETWEEN NET INCOME FOR THE PERIOD AND EBITDA

FOR THE SIX AND THREE MONTH PERIOD ENDED JUNE 30, 2012

(UNAUDITED)

                                                                   Convenience
                                                                   translation
                                                                   for the six
                        Year                                         months
                       ended      Six months       Three months       ended
                      December
                        31,     ended June 30,    ended June 30,    June 30,
                        2011     2011     2012     2011     2012      2012
                       -------  -------  -------  ------- -------   ---------
                                                                      U.S.
                                                                   dollars in
                                    NIS in thousands                thousands
                       ------------------------------------------- ----------
 
    Net income for
    the period          83,713  109,503   51,216   71,829   48,433      13,054
    Taxes on income     46,588   46,805    8,524   31,114   12,848       2,173
    Share in gains of
    associates         (5,746)  (1,317)  (4,804)    (104)  (1,201)     (1,225)
    Finance expenses,
    net                176,002   55,951  138,947   15,210   95,716      35,419
    Other losses
    (gains), net        18,219    6,284 (17,650)    4,375 (17,822)     (4,499)
    Changes in fair
    value of
    investment
    property          (41,913) (19,445) (84,334) (16,390) (81,649)    (21,497)
    Depreciation and
    amortization       273,746  135,872  138,362   67,934   68,492      35,269
    Share based
    payment              3,270    1,878      727      764      264         185
                       -------  -------  -------  -------  -------      ------
    EBITDA             553,879  335,531  230,988  174,732  125,081      58,879
                       -------  -------  -------  -------  -------      ------
 



ALON HOLDINGS BLUE SQUARE - ISRAEL LTD.

FOR THE THREE AND SIX MONTH PERIOD ENDED JUNE 30, 2012

(UNAUDITED)

Note 1 - Segment reporting

The Company includes segment information according to IFRS 8. The reporting is based on the Company's organizational structure, the internal reporting, the allocation of resources and the decision-making process. The Company presents four segments: Supermarkets, Commercial and fueling sites, Non-food Retail and Wholesale and Real estate.

The Company's four operating segments consist of the following:

  1. Commercial and fueling sites - Through its subsidiary Dor-Alon the Company is engaged in the development, construction and operation of vehicle fueling stations, adjacent commercial centers and independent convenience stores, marketing of fuel products and other products through the fueling stations and convenience stores and direct marketing of distillates to customers. The commercial and fueling sites segment is presented according to the published financial statements of Dor-Alon, with reclassification of credit card fees and with the amortization of the excess of cost arising at the time of acquisition allocated to the reconciliation between the operating profit of the segment and the total operating profit.
  2. Supermarkets - The Company operates the second largest food retail chain in Israel. Through its subsidiary, Mega Retail Ltd. ("Mega Retail"), which operates Supermarket branches, the Company offers a wide range of food and beverage products and "Non-food" items, such as houseware, toys, small electrical appliances, computers and computer accessories, entertainment and leisure products and textile products and "Near-Food" products, such as health and beauty aids, products for infants, cosmetics and hygiene products. As of June 30, 2012, Mega Retail operated 217 supermarkets. This segment also includes properties owned through Blue Square Real Estate ("BSRE"), in connection with the supermarket operation of Mega Retail's stores (including warehouses and offices).
  3. Non-food (Retail and Wholesale) -Through its subsidiary, BEE Group Retail Ltd. ("BEE Group"), the Company is engaged in non-food retail and wholesale activities. As of June 30, 2012, BEE Group operated 239 non-food retail outlets, mostly through franchisees, with specialties in houseware and home textile, toys, leisure, and infant.
  4. Real Estate - Through its subsidiary BSRE the Company is engaged in generating yield from commercial centers, logistics centers and offices, land for the purpose of capital appreciation and deriving long-term yield as well as in the development of the "Wholesale Market" residency project.

ALON HOLDINGS BLUE SQUARE - ISRAEL LTD.

FOR THE THREE AND SIX MONTH PERIOD ENDED JUNE 30, 2012

(UNAUDITED)

Note 1 - Segment reporting (continued)

                                         Three months ended June 30, 2012
                 -------------------------------------------------------------------------
                 Commercial
                    and                                                             
                  fueling                           Real                          Total
                   sites    Supermarkets Non-food estate  Others  Adjustments consolidated
                                                                                 
                 ---------- ------------ --------  ------  ------ ------------ -----------
                                                 NIS in thousands
                 -------------------------------------------------------------------------
    Net segment
    sales         1,575,819    1,653,510   96,392   8,985    382           -    3,335,088
    Inter
    segment
    sales             8,558            -    5,090       -      -     (13,648)           -
    Gross profit
    (loss)          234,393      445,815   35,622   8,985 (4,026)          -      720,789
    Depreciation
    and
    amortization     23,828       40,260    2,775       -      -       1,629       68,492
    Operating
    profit
    (loss)
    before other
    gains and
    losses net
    and changes
    in fair
    value of
    investment
    property         54,547       32,410   (6,965) (1,783) (7,037)   (9,066)      62,106
    Segment
    profit           54,544       31,391   (7,742) 99,487  (7,037)   (9,066)     161,577
    Unallocated
    corporate
    expenses                                                                      (5,781)
    Financial
    expenses,
    net                                                                          (95,716)
    Share in
    gains of
    associates,
    net                                                                            1,201
                                                                                 -------
    Income
    before taxes
    on income                                                                     61,281
                                                                                 -------                                                                                 -------
 



ALON HOLDINGS BLUE SQUARE - ISRAEL LTD.

FOR THE THREE AND SIX MONTH PERIOD ENDED JUNE 30, 2012

(UNAUDITED)

Note 1 - Segment reporting (continued)

                                    Three months ended June 30, 2011
                 -----------------------------------------------------------------------
                 Commercial
                    and
                  fueling                          Real                        Total
                   sites    Supermarkets Non-food estate Others Adjustments consolidated
                 ---------- ------------ -------- ------ ------ ----------- ------------
                                            NIS in thousands
                 -----------------------------------------------------------------------
 
    Net segment
    sales         1,328,257 1,766,464     105,302  8,441      -            -   3,208,464
    Inter
    segment
    sales             7,125         -      10,551      -      -     (17,676)           -
    Gross profit    222,979   480,366      40,207  8,441      -            -      51,993
    Depreciation
    and
    amortization     23,576    40,432       3,364      -      -          562      67,934
    Operating
    profit
    (loss)
    before other
    gains and
    losses net
    and changes
    in fair
    value of
    investment
    property        50,644     68,029      (4,361)  3,790  (461)     (5,891)    111,750
    Segment
    profit          50,579     66,716      (7,374) 20,180  (461)     (5,875)    123,765
    Unallocated
    corporate
    expenses                                                                     (5,716)
    Financial
    expenses,
    net                                                                         (15,210)
    Share in
    gains of
    associates,
    net                                                                             104
                                                                                -------
    Income
    before taxes
    on income                                                                   102,943
                                                                                -------
                                                                                -------
 


                                       Six months ended June 30, 2012
                 --------------------------------------------------------------------------
                 Commercial
                    and
                  fueling                          Real                           Total
                   sites    Supermarkets Non-food estate   Others  Adjustments consolidated
                 ---------- ------------ -------- ------   ------  ----------- ------------
                                              NIS in thousands
                 --------------------------------------------------------------------------

 
    Net segment
    sales        3,006,107  3,279,529    210,554  17,041       382          -    6,513,613
    Inter
    segment
    sales           17,235          -     17,217       -        -     (34,452)           -
    Gross profit
    (loss)         439,638    882,393     84,368  17,041   (4,027)          -    1,419,413
    Depreciation
    and
    amortization    47,470     82,207      5,427      -         -        3,258      138,362
    Operating
    profit
    (loss)
    before other
    gains and
    losses net
    and changes
    in fair
    value of
    investment
    property       87,745     49,614      (2,308)    393   (10,719)   (20,203)     104,522
    Segment
    profit         87,968     48,323      (3,212)  104,349 (10,719)   (20,203)     206,506
    Unallocated
    corporate
    expenses                                                                      (12,623)
    Financial
    expenses,
    net                                                                          (138,947)
    Share in
    gains of
    associates,
    net                                                                             4,804
                                                                                   -------

    Income before
    taxes on
    income                                                                         59,740
                                                                                   -------
                                                                                   -------

 



ALON HOLDINGS BLUE SQUARE - ISRAEL LTD.

FOR THE THREE AND SIX MONTH PERIOD ENDED JUNE 30, 2012

(UNAUDITED)

Note 1 - Segment reporting (continued)

                                      Six months ended June 30, 2011
                 ------------------------------------------------------------------------
                 Commercial
                    and
                  fueling                          Real                         Total
                   sites    Supermarkets Non-food estate Others  Adjustments consolidated
                 ---------- ------------ -------- ------ ------  ----------- ------------

                                             U.S in thousands
                 ------------------------------------------------------------------------

 
    Net segment
    sales        2,576,497  3,402,999    221,374  14,713       -           -    6,215,583
    Inter
    segment
    sales          14,608          -      20,367       -       -     (34,975)           -
    Gross profit  441,387    938,432      86,939  14,713       -       -        1,481,471
    Depreciation
    and
    amortization   45,818     80,181       6,871       -       -       3,002      135,872
    Operating
    profit
    (loss)
    before other
    gains and
    losses net
    and changes
    in fair
    value of
    investment
    property     100,973    117,601      (1,622)   6,303  (1,136)   (12,682)     209,437
    Segment
    profit       100,908    116,288      (6,527)  25,749  (1,136)   (12,682)     222,600
    Unallocated
    corporate
    expenses                                                                     (11,658)
    Financial
    expenses,
    net                                                                          (55,951)
    Share in
    gains of
    associates,
    net                                                                            1,317
                                                                                 -------

    Income
    before taxes
    on income                                                                    156,308
                                                                                 -------
                                                                                 -------
 


                                       Year ended December 31, 2011
                 ------------------------------------------------------------------------
                 Commercial
                    and
                  fueling                          Real                         Total
                   sites    Supermarkets Non-food estate Others  Adjustments consolidated
                 ---------- ------------ -------- ------ ------  ----------- ------------
                                             NIS in thousands
                 ------------------------------------------------------------------------
 
    Net segment
    sales        5,301,865  6,723,845    425,853  31,021     -           -     12,482,584
    Inter
    segment
    sales           36,087          -     31,810       -     -     (67,897)             -
    Gross profit   876,040  1,850,764    157,883  31,021     -           -      2,915,708
    Depreciation
    and
    amortization    96,130    159,601     12,011       -     -       6,004        273,746
    Operating
    profit
    (loss)
    before other
    gains and
    losses net
    and changes
    in fair
    value of
    investment
    property       173,681   177,346    (34,915)  15,395 (5,698)  (26,235)       299,574
    Segment
    profit         173,578   169,697    (45,382)  57,307 (5,698)  (26,235)       323,267
    Unallocated
    corporate
    expenses                                                                    (22,710)
    Financial
    expenses,
    net                                                                        (176,002)
    Share in
    gains of
    associates,
    net                                                                           5,746
                                                                                -------
    Income
    before taxes
    on income                                                                   130,301
                                                                                -------
                                                                                -------


                                       Six months ended June 30, 2012
                 ------------------------------------------------------------------------
                 Commercial
                    and
                  fueling                          Real                         Total
                   sites    Supermarkets Non-food estate Others  Adjustments consolidated
                 ---------- ------------ -------- ------ ------  ----------- ------------
                                             NIS in thousands
                 ------------------------------------------------------------------------
 
    Net segment
    sales          766,278      835,974  53,672   4,344     97            -   1,660,365
    Inter
    segment
    sales           4,393           -    4,389       -      -       (8,782)          -
    Gross profit   112,067     224,928   21,506   4,344 (1,027)           -     361,818
    Depreciation
    and
    amortization    12,100      20,955    1,383       -      -          831      35,269
    Operating
    profit
    (loss)
    before other
    gains and
    losses net
    and changes
    in fair
    value of
    investment
    property       22,366      12,647    (588)     100 (2,732)       (5,150)   26,643
    Segment
    profit          22,423      12,318    (819)  26,599 (2,732)       (5,150)   52,639
    Unallocated
    corporate
    expenses                                                                    (3,218)
    Financial
    expenses,
    net                                                                        (35,419)
    Share in
    gains of
    associates,
    net                                                                          1,225
                                                                               -------
    Income
    before taxes
    on income                                                                   15,227
                                                                               -------
                                                                               -------


1. The Company operates in four segments: Supermarkets, Commercial and fueling sites, Non Food retail and wholesale and Real Estate. Segmental information is included in this report below.

2. Use of financial measures that are not in accordance with Generally Accepted Accounting Principles

EBITDA is a measure that is not in accordance with Generally Accepted Accounting Principles (Non-GAAP) and is defined as income before financial income (expenses) net, other gains (losses) net, changes in fair value of investment property, taxes, depreciation and amortization. It is an accepted ratio in the retail industry. It is presented as an additional performance measure, since it enables comparisons of operating performances between periods and companies while neutralizing potential differences resulting from changes in capital structures, taxes, age of property and equipment and its related depreciation expenses. EBITDA, however, should not be related to as a single measure or as an alternative to operating income, another performance indicator and to cash flow information, which are prepared using Generally Accepted Accounting Principles (GAAP) as indicators of profit or liquidity. EBITDA does not take the costs of servicing debt and other liabilities into account, including capital expenditures and therefore it does not necessarily indicate the amounts that may be available to the use of the company and in addition EBITDA should not be compared to other indicators with similar names reported by other companies because of differences in the calculation of these indicators. See the reconciliation between our net income and EBITDA which is presented in this press release.

Contact:

Alon Holdings Blue Square-Israel Ltd.
Dror Moran, CFO
Toll-free telephone from U.S. and Canada:  888-572-4698
Telephone from rest of world: +972-3-928-2220
Fax: +972-3-928-2299
Email: cfo@bsi.co.il

SOURCE Alon Holdings Blue Square-Israel Ltd




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