zk1008224.htm


 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
_________________
 
FORM 6-K
 
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16
of the Securities Exchange Act of 1934
 
For the Month of May 2010
 
_________________
 
HADERA PAPER LTD.
(Translation of Registrant’s Name into English)
 
P.O. Box 142, Hadera, Israel
(Address of Principal Corporate Offices)
 
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:
 
x Form 20-F    o Form 40-F
 
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):  o
 
Note: Regulation S-T Rule 101(b)(1) only permits the submission in paper of a Form 6-K if submitted solely to provide an attached annual report to security holders.
 
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):  o
 
Note: Regulation S-T Rule 101(b)(7) only permits the submission in paper of a Form 6-K submitted to furnish a report or other document that the registrant foreign private issuer must furnish and make public under the laws of the jurisdiction in which the registrant is incorporated, domiciled or legally organized (the registrant’s “home country”), or under the rules of the home country exchange on which the registrant’s securities are traded, as long as the report or other document is not a press release, is not required to be and has not been distributed to the registrant’s security holders, and, if discussing a material event, has already been the subject of a Form 6-K submission or other Commission filing on EDGAR.
 
Indicate by check mark whether the registrant by furnishing the information contained in this form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934:
 
o Yes    x No
 
If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82-______________
 
 
 

 
 
        Attached hereto as Exhibit 1 and incorporated herein by reference is the Registrant’s press release dated May 10, 2010 with respect to the Registrant’s results of operations for the quarter ended March 31, 2010.
 
        Attached hereto as Exhibit 2 and incorporated herein by reference is the Registrant’s Management Discussion with respect to the Registrant’s results of operations for the quarter ended March 31, 2010.
 
        Attached hereto as Exhibit 3 and incorporated herein by reference are the Registrant’s unaudited condensed interim consolidated financial statements for the quarter ended March 31, 2010.
 
        Attached hereto as Exhibit 4 and incorporated herein by reference are the unaudited condensed interim consolidated financial statements of Mondi Paper Hadera Ltd. and subsidiaries with respect to the quarter ended March 31, 2010.
 
        Attached hereto as Exhibit 5 and incorporated herein by reference are the unaudited condensed interim consolidated financial statements of Hogla-Kimberly Ltd. and subsidiaries with respect to the quarter ended March 31, 2010.
 
SIGNATURE
 
        Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
 
HADERA  PAPER LTD.
(Registrant)
 
 
By: /s/ Lea Katz                      
Name: Lea Katz
Title: Corporate Secretary
 
Dated: May 10, 2010.
 
 
 

 
 
EXHIBIT INDEX
 
Exhibit No.
Description
   
1.
Press release dated May 10, 2010.
   
2.
Registrant's management discussion.
   
3.
Registrant's unaudited condensed interim consolidated financial statements.
   
4
Unaudited condensed interim consolidated financial statements of Mondi Paper Hadera Ltd. and subsidiaries.
 
 
5
Unaudited condensed interim consolidated financial statements of Hogla- Kimberly Ltd. and subsidiaries.
 
 
 

 
 
Exhibit 1
 
  NEWS
  For Release:         IMMEDIATE
 
Hadera Paper Ltd.
Reports Financial Results For First Quarter Ended March 31, 2010
And Intention for Public Placement of Debentures
And Credit Rating

Hadera, Israel, May 10, 2010 - Hadera Paper Ltd. (AMEX:AIP) (the “Company” or “Hadera Paper”) today reported financial results for the first quarter ended March 31, 2010. The Company, its subsidiaries and associated companies are referred to hereinafter as the "Group".

The Consolidated Data set forth below excluding the results of operation of the associated companies: Mondi Hadera Paper Ltd. ("Mondi Hadera") and Hogla-Kimberly Ltd. ("H-K").

Consolidated sales in the reported period amounted to NIS 240.0 million, as compared with NIS 229.9 million in the corresponding period last year, representing an 4.4% increase, which is primarily due to the growth in sales of the packaging paper and recycling sector, in view of the higher prices, coupled with the growth in the sales of the office supplies marketing sector, as compared with the corresponding period last year and as compared with the sales in the fourth quarter of the year, in the amount of NIS 237.6 million, representing an increase of approximately 1.0%.

The operating profit totaled NIS 7.4 million during the reported period, 3.1% of sales, as compared with NIS 18.5 million, 8.0% of sales last year. Excluding nonrecurring revenues in the amount of NIS 16.4 million last year, on account of unilateral dividend, the operating profits in the corresponding period last year amounted to approximately NIS 2.1 million. The increase in operating profit during the reported period is primarily attributed to the increase in gross profit as a result of the increase in sales, as mentioned above.

The net profit attributed to the Company's shareholders in the reported period amounted to NIS 24.3 million, as compared with net profit of NIS 19.1 million in the corresponding period last year, an increase of approximately 27.2%.

The net profit attributed to the company's shareholders during the reported period was affected by the improvement in the operating margin at most group companies in Israel and in Turkey as a result of the increase in operations brought about an improvement in the operating profit as mentioned above, coupled with the reduction in financial expenses amounting to NIS 3.6 million.

Basic earnings per share amounted to NIS 4.80 per share ($1.29 per share) in the reported period, as compared with basic earnings per share of NIS 3.77 per share ($0.90 per share) in the corresponding period last year.

The negative inflation rate during the reported period amounted to 0.9%, as compared with a negative inflation rate of 0.1% in the corresponding period last year.
 
 
 

 
 
The USD exchange rate was revalued in the first quarter of this year by approximately 1.6%, as compared with approximately 10.1% devaluation in the corresponding period last year.

The global paper industry saw a continuation of the trend of rising prices in the first quarter of 2010, across various product types, a trend that began in 2009. An additional rise in the prices of packaging paper in Europe was recorded since January, amounting to a rate of 15% during the first quarter.

The rising price of pulp worldwide, that led to an increase in the prices of virgin packaging paper, led to an increase in demand for recycled packaging paper that is produced by the Packaging Paper Division, as an alternative. The continuation of this trend, in addition to the sharp increase in prices that was recorded in the second half of 2009, may support the continued growth and increase in the volume of operations that are expected in 2010, in the packaging paper sector.

The Group manages a wide and diverse portfolio of companies and businesses focused on consumer goods and basic commodities. As part of the global trend of increasing private consumption in light of the emergence from the crisis, this trend led to an increase in demand at most Group companies for a wide range of products, while continuing to place an emphasis on the implementation of efficiency and cost-cutting measures across all sectors of operation.

The Group companies raised their prices in the course of the first quarter. In terms of raw materials, the NIS was reevaluated vis-à-vis the dollar by an average of approximately 8% as compared with the corresponding period last year. This led to savings in terms of the inputs and imported products in the company's principal sectors of operation, whose prices tend to follow import prices denominated in dollars. As a result of the said revaluation, the price of natural gas decreased by approximately 12%, as compared with the corresponding period last year, thereby leading to additional savings. These savings were partially offset by the rising prices of water during the reported period, by an average rate of 34%, along with the rising price of fibers by approximately 18%, as compared with the corresponding period last year.
 
Financial expenses during the reported period amounted to NIS 0.9 million, as compared with NIS 4.6 million in the corresponding period.

The company’s share in the earnings of associated companies totaled NIS 19.5 million during the reported period, as compared with NIS 15.0 million in the corresponding period last year.
 
The following principal changes were recorded in the Company’s share in the earnings of associated companies, in relation to the corresponding period last year:

-  
The Company's share in the net profit of Mondi Hadera (49.9%) rose by approximately NIS 1.7 million. The increase in the profit originated primarily from an increase in the operating profits of Mondi Hadera, that grew from NIS 5.4 million last year to NIS 8.6 million this year, despite the erosion in prices as compared with the corresponding period last year, thanks to efficiency measures in the manufacture of paper in the course of the first quarter, coupled with an improvement in the gross margin of part of the products range. The increase in net profit was moderated somewhat as a result of the increase in tax expenses in the amount of approximately NIS 0.6 million during the reported period, in relation to last year, primarily as a result of the increase in pretax earnings.
 
2
 

 
 
-  
The company’s share in the net profit of H-K Israel (49.9%) increased approximately by NIS 2.2 million. H-K operating profit increased from NIS 47.9 million to NIS 50.4 million this year. The improvement in the operating profit, despite the erosion in the selling prices of the part of the sectors of operation, originated primarily as a result of a decrease in the prices of some of the company's inputs, in light of the erosion of global commodity prices, coupled with significant efficiency measures across the entire company, increased savings in purchasing and the continuing empowerment of the company's brands, that generated a significant improvement in earnings during the reported period.

-  
The Company's share in the losses of KCTR Turkey (49.9%) was reduced by NIS 1.2 million. This reduction is primarily attributed the slight increase in the volume of operations, coupled with the sale of the PEDO brand to a local chain, which generated nonrecurring revenues of NIS 3.1 million, that brought about the continuing reduction in the operating loss from NIS 7.9 million during the corresponding period last year to approximately NIS 3.2 million during the reported period.

In the course of April 2010, 95,460 options were exercised, previously granted as part of the officers stock option plan. As a result of this exercise 21,868 shares of the company were issued.

The Company also announced that the Company's Board of Directors resulted yesterday, to authorize the Company's management to carry out a raise of up to a total amount of approximately NIS 75 million by way of a public placement of new series of debentures. There may be a possibility that the scope of the issuance will change, according to market conditions. The interest rates that the new series of debentures shall bear will be determined at a tender.
 
The issuance of debentures shall be executed according to a shelf offering report, detailing the conditions of the issuance, to be approved by the Company's Board of Directors according to the shelf prospectus that was published by the Company on May 26, 2008 and subordinate to the Tel Aviv Stock Exchange's approval for listing the debentures for trade.
 
It should be noted, that there is no certainty as to the actual execution of the raise, its extent and its timing.

The Company also announced that Maalot (Israeli Securities Rating Company Ltd., affiliation of Standard and Poor’s) decided to rate the Company's new series of debentures as (ilA+)/Negative.

This report contains various forward-looking statements based upon the Board of Directors’ present expectations and estimates regarding the operations and plans of the Group and its business environment. The Company does not guarantee that the future results of operations will coincide with the forward-looking statements and these may in fact differ considerably from the present forecasts as a result of factors that may change in the future, such as changes in costs and market conditions, failure to achieve projected goals, failure to achieve anticipated efficiencies and other factors which lie outside the control of the Company as well as certain other risks detailed from time to time in the Company's filings with the Securities and Exchange Commission. The Company undertakes no obligation for publicly updating the said forward-looking statements, regardless of whether these updates originate from new information, future events or any other reason.

3
 

 

HADERA PAPER LTD.
SUMMARY OF RESULTS
(UNAUDITED)
except per share amounts
Three months ended March 31,
NIS IN THOUSANDS (1)
   
2010
   
2009
 
             
Net sales
    239,985       229,881  
                 
Net earnings attributed to the Company's shareholders
    24,290       19,079  
                 
Basic net earnings per share attributed to the Company's shareholders
    4.80       3.77  
                 
Fully diluted earnings per share attributed to the Company's shareholders
    4.75       3.77  
 
(1)  
The representative exchange rate at March 31, 2010 was NIS 3.713=$1.00.
 
Contact:
Lea Katz, Adv.
Corporate Secretary and Chief of Legal Department
Hadera Paper Ltd. Group
Tel:+972-4-6349408
Leak@hadera-paper.co.il
 
 
4

 
 
Exhibit 2
 
Hadera Paper Ltd.
 
Update to PART A (Corporate Business Description) of the Information
Presented in the Company's Periodical Report
As at March 31, 2010

Details in accordance with Regulation 39a of the Securities Regulations (Periodic and Immediate Reports), 1970.
 
1.
Update to chapter A, section 5: "Equity investments in the Company and transactions in its shares"
 
 
In the course of April 2010, 95,460 options were exercised, previously granted as part of the senior officers stock option plan. As a result of this exercise 21,868 shares of the company were issued.
 
2.
Update to chapter D, section 13.4: "Agreements with senior officers"
 
 
On March 23, 2010 the Board of Directors and Audit Committee approved granting a special bonus to the retiring CEO. For more information see the press release published on March 23, 2010.
 
 
1

 



            May 9, 2010
 
MANAGEMENT  DISCUSSION

The Board of Directors of Hadera Paper Ltd. ("The Company") is hereby honored to present the Management Discussion as at March 31, 2010, reviewing the principal changes in the operations of the company for the months January through March 2010 ("The Reported Period"). The report was formulated in accordance with the Securities Regulations (Periodic and Immediate Reports), 1970, based on the assumption that the reader is also in possession of full Periodic Report of the company as at December 31, 2009 ("Annual Financial Statements"). The results of the company that are presented in the management discussion relates to the share of the shareholders of the company in the results, unless stated otherwise.
 
A.
Description of the Corporation’s Business

 
1.
Company Description

Hadera Paper Group deals in the manufacture and sale of packaging paper, corrugated board packaging, consumer product packaging and unique packaging for industry, recycling of paper and plastic waste and in the marketing of office supplies – through subsidiaries. The Company also holds associated companies that deal in the manufacture and marketing of fine paper, in the manufacture and marketing of household paper products, hygiene products, disposable diapers and complementary kitchen products.

The Company’s securities are traded on the Tel Aviv Stock Exchange and on the American  Stock Exchange (NYSE).

 
2.
General

Principal Current Operations

 
1.
Business Environment
 
 
 
The global financial crisis and the slowdown in real-term economic activity, that began in 2008 and grew more severe in early 2009, which led to a recession in numerous countries in the West, moderated throughout 2009, as the financial and real markets gradually returned to stability. A gradual global trend of recovery in real economic activity started in the second half of 2009, as different economies, including that of the United States, stabilized and even resumed growth. The global recovery is attributed to a great degree to a combination of fiscal expansionary programs, coupled with continuing expansionary monetary policy that was led by the US administration, and contributed, inter alia, to positive sentiments in capital markets and an improvement in the stability of international financial institutions.
 
This trend of economic recovery continued in the first quarter of 2010 in most financial and real markets. Nevertheless, the financial crisis and its implications continue to have an impact, primarily on the eurobloc, which is still characterized by economic instability. The indications of the crisis and its implications are causing significant fluctuations in financial markets, including the prices of securities, bonds and currency exchange rates, coupled with a continuing credit shortage among certain firms and certain countries, and to a great uncertainty in the economic activity.

 
2

 
 
 
 
The Israeli economy and the Israeli capital market were characterized by trends that were similar to the global trends during the said period, although it would appear that the signs of recovery in the Israeli economy are more distinct. Starting in the second quarter of 2009, the trend of recovery that was observed in most segments of the Israeli economy gathered speed, as the Israeli capital market recorded a significant bullish run in the prices of marketable securities, while the corporate debt market also began to recover, as the business sector began once again to raise funds.
 
The global paper industry saw a continuation of the trend of rising prices in the first quarter of 2010, across various product types, a trend that began in 2009. An additional rise in the prices of packaging paper in Europe was recorded since January, amounting to a rate of 15% during the first quarter.
 
The rising price of pulp worldwide, that led to an increase in the prices of virgin packaging paper, led to an increase in demand for recycled packaging paper that is produced by the Packaging Paper Division, as an alternative. The continuation of this trend, in addition to the sharp increase in prices that was recorded in the second half of 2009, may support the continued growth and increase in the volume of operations that are expected in 2010, in the packaging paper sector.

 
 
The above information pertaining to trends in the paper market and input prices constitutes forward-looking information as defined in the Securities Law, based on the company's estimates at the date of this report. These estimates may not materialize - in whole or in part - or may materialize in a different manner, inter alia on account of factors that lie outside the control of the company, such as changes in global raw material prices and changes in the supply and demand of global paper products.

 
2.
Impact of the Business Environment on Company Operations

 
 
General
 
 
The Hadera Paper Group manages a wide and diverse portfolio of companies and businesses focused on consumer goods and basic commodities. As part of the global trend of increasing private consumption in light of the emergence from the crisis, this trend led to an increase in demand at most Group companies for a wide range of products, while continuing to place an emphasis on the implementation of efficiency and cost-cutting measures across all sectors of operation.
 
 
 
The group's operations in the household and absorbent paper products sector (through the associated company Hogla Kimberly), in view of the fierce competition that exists in some of the sectors of operation, continued to be characterized by measures intended to preserve market shares and quantitative volumes of operation, stemming from the acquired consumption habits of customers and consumers in Israel. During the first quarter of the year, a slight decrease was recorded in certain market shares in some sectors of operation. These were compensated for by far-reaching efficiency measures and increased volumes of output. These measures led to an improvement of the profit, despite the challenging business environment in this area.

 
 
Sectors Activity
 
 
In the packaging paper and recycling sector, the increase in demand along with the continuing rise in prices that is anticipated worldwide, are expected to positively impact the operations in this sector. The completion of the running-in period of the new packaging paper manufacturing array - Machine 8 - that is expected to occur in May and is expected to bring about an increase of approximately 70% in the output capacity, will effectively meet the rising demand on both local and export markets, in perfect timing with the needs of the packaging paper sector. In light of the above, these factors are expected to lead to improved profitability and results in this sector. It should be noted that in the course of the running-in period, the manufactured products were sold on both local and export markets, at prevailing market prices. Regarding the capitalization of the net costs of the running-in period, see Note 5 of the financial statements as of 31, March, 2010.
 
 
3

 
 
 
 
Due to the company's estimates regarding the existence of imports of packaging paper to Israel at dumping prices since 2008, primarily from Europe, the company has filed a complaint with the Dumping Commissioner at the Ministry of Employment Industry and Trade, who has decided to impose temporary guarantees on the import of packaging paper from European nations. . Following appeals that were filed by some of the producers and importers, an agreement was reached between the parties in early December 2009, that the decision of the Commissioner would remain in effect for a period of four months between December 2009 and March 2010. The guarantees that were posted by the appealing parties in October and November 2009 will be refunded to them. This decision received of the validity of a court ruling. The validity of said temporary guarantee, expired on March 31, 2010.
 
 
 
On January 21, 2010, the Supervisor informed the Dumping Committee of his recommendation to impose a dumping levy of €31-44 per ton, on most different producers from the European Union. The recommendation of the Dumping Supervisor is subject to the approval of the Dumping Committee and the signature of the Minister of Employment Industry and Trade and the Minister of Finance. As of the date of this report, the recommendation of the committee has yet to be received and the company cannot estimate at this stage, the impact of the approval of the complaint on its results.

 
 
In the fine paper sector, following the trend of rising pulp prices in the second half of 2009 and as a result of the emergence from the global crisis, pulp prices rose sharply during the first quarter of the year as compared with the corresponding quarter last year. This originated from damage caused by the earthquake in Chile to three plants of three different and large pulp producers, that have led to delays in the provision of pulp to the global market. As a result of these rising prices, the prices in this sector rose by an average of approximately 13% starting in March. This rise in prices will be fully expressed during the coming months, until such time when the fine paper market returns to equilibrium between global paper demand and supply.

 
 
The reduced demand that was felt in Europe and worldwide led to surplus supply and the company estimates that fine paper is being imported to Israel at dumping prices since 2008. In this respect, the company is also working with the Dumping Supervisor in order to control imports at these prices. On February 26, 2009, the company announced that Mondi Hadera Paper, an associated company had filed a complaint to the Supervisor, regarding the dumping imports of fine paper from several European nations to Israel. Upon review of the complaint, the Supervisor decided to launch an investigation of this issue. According to the Company announcement, there is no certainty that the above complaints would be accepted, and the Company is currently unable to estimate the impact of such acceptance on its business results.

 
 
Raw Materials
 
 
As mentioned above, the Group companies raised their prices in the course of the first quarter. In addition, in terms of raw materials, the NIS was reevaluated vis-à-vis the dollar by an average of approximately 8%  as compared with the corresponding period last year. This led to savings in terms of the inputs and imported products in the company's principal sectors of operation, whose prices tend to follow import prices denominated in dollars. As a result of the said revaluation, the price of natural gas decreased by approximately 12%  as compared with the corresponding period last year, thereby leading to additional savings. These savings were partially offset by the rising prices of water during the reported period, by an average rate of 34%, along with the rising price of fibers by approximately 18%  as compared with the corresponding period last year.

 
4

 
 
 
 
Crisis In The Financial Markets
 
 
As at the date of the report, it is impossible to estimate whether the said crisis in the financial markets has indeed run its course, what are its direct and indirect economic implications globally and in Israel, and how long such implications will last, if at all.

 
 
The signs of the said crisis and the recovery therefrom - coupled with the fiscal crisis in the Eurozone - have affected and may continue to affect the business results of the Company and its investee companies, including an effect on their liquidity, the value of their assets, their ability to realize assets, the state of their business, their financial indicators and covenants, their credit rating, their ability to distribute dividends, ability to raise financing for their current operations and long-term plans, as well as on their financing terms.

 
 
All of the above, in relation to trends in the global market, in the paper market and in the prices of inputs and their impact on the company, the influence of the completion of the running-in period of the new production site and the approval of the company's complaints regarding importing at dumping prices - all constitute forward-looking information as defined in the securities law, based on the company's estimates at the date of this report. These estimates may not materialize - in whole or in part - or may materialize in a different manner, inter alia on account of factors that lie outside the control of the company, such as the crisis in global banking and credit markets changes in global raw material prices and changes in the supply and demand of global paper products and the decisions of the Dumping Committee and relevant ministers in this respect.

 
 
As at the date of publication of these financial statements, no material changes have occurred to the Company's risk management policy.

 
 
The US dollar exchange rate was revaluated by approximately 1.6% during the reporting period, as compared with a devaluation of approximately 10.1% during the corresponding period last year.
 
 
 
The company's business portfolio, including its associated companies, is balanced in terms of foreign currency and the level of the company's exposure to sharp fluctuations in currency rates is therefore low.

 
 
The negative inflation rate during the reported period amounted to -0.9%, as compared with a negative inflation rate of- 0.1% in the corresponding period last year.
 
B.
An Explanation of the Results of Operation

 
1.
Analysis of Operations and Profitability

 
 
Commencing January 1, 2009, the company applies International Financial Reporting Standard (IFRS) No. 8, Operating Segments, and has accordingly recognized the packaging and cardboard products segment, which includes the operations of Carmel Container Systems and Frenkel C.D., as a separate segment. The associated companies Hogla Kimberly and Mondi Hadera Paper were also recognized as independent segments (for further details, see Note 19 to the financial statements dated December 31, 2009). Please note that the following analysis of financial results relates to the companies that are consolidated in the results of Hadera Paper and is affected by the adoption of the Standard mentioned above.
 
 
5

 
 
 
1.1
Sales

 
 
The consolidated sales in the reported period amounted to NIS 240.0 million, as compared with NIS 229.9 million last year, an increase of approximately 4.4%, that originates primarily from the growth in sales of the packaging paper and recycling sector in view of the higher prices as mentioned above, coupled with the growth in the sales of the office supplies marketing sector, as compared with the corresponding quarter last year and as compared with the sales in the fourth quarter of the year, in the amount of NIS 237.6 million, representing an increase of approximately 1.0%.
 
 
 
Sales of the packaging paper and recycling sector amounted to NIS 86.0 million and less of sales among Group companies amounted to NIS 73.5 million  as compared with NIS 80.5 million less of sales among Group companies, NIS 62.7 million in the reported period.

 
 
The increase in the sales turnover in the packaging paper and recycling sector is attributed to quantitative increase in the sales of packaging and recycling as a result of the increased exports to Europe, and an increase in demand from the local market, that were offset as a result of the impact of NIS-denominated sales prices that were eroded as compared with the corresponding quarter last year (sales in this sector are affected by the dollar-denominated prices of competing imports).

 
 
The sales of the packaging and cardboard products sector during the reported period amounted to NIS 127.4 million and less of sales among Group companies amounted to NIS 125.4 million, as compared with NIS 132.5 million and less of sales among Group companies amounted to NIS 130.8 million during the corresponding period last year, a decrease of approximately 4.1% that originated primarily as a result of a competition in the sector and efforts initiated by the sector to retain customers.

 
 
Sales in the office supplies marketing sector during the reported period amounted to NIS 41.4 million and less of sales among Group companies amounted to NIS 41.1 million, as compared with NIS 36.7 million last year, and less of sales among Group companies amounted to NIS 36.4 million, an increase of 12.9% originating from a quantitative increase in sales, as a result of having secured institutional tenders that served to expand the range of customers in this sector.

 
1.2
Cost of Sales

 
 
The cost of sales amounted to NIS 196.6 million, 81.9% of sales, during the reported period, as compared with NIS 192.5 million, 83.7% of sales, last year.  The improvement in the ratio of cost of sales to sales originated from greater manufacturing efficiency and the utilization of the board and newsprint waste inventories in view of the rise in the demand for packaging paper, coupled with the rise in purchasing of office supplies as a result of preparations for securing tenders in this area.

 
 
The gross profit totaled NIS 43.4 million during the reported period approximately 18.1% of sales, as compared with NIS 37.4 million, 16.3% of sales, in the corresponding period last year, representing growth of approximately 16.0% in relation to the corresponding period last year.
 
 
6

 
 
 
 
The growth in gross profit in relation to the corresponding period last year originated primarily as a result of the quantitative growth in sales in light of the above mentioned recovery in the markets, coupled with the lowering of electricity prices by a rate of approximately 7% and the lowering of natural gas prices by approximately 12% as a result of the aforementioned revaluation of the local currency, that were offset by a 34% increase in the price of water and an 18% increase in the purchasing of raw materials - primarily pulp.
 
  Labor Wages

 
 
The labor wages within the cost of sales amounted to NIS 48.4 million during the reported period, approximately 20.2% of sales, as compared with NIS 54.1 million last year approximately 23.6% of sales. The decrease in labor expenses in relation to the corresponding period last year originates primarily as a result of the capitalization of labor costs amounting to NIS 3.1 million associated with the running-in process of Machine 8. (See Note 5 to the financial statements dated March 31, 2010).
 
 
 
The labor wages within the Selling, General and Administrative expenses amounted to NIS 26.2 million during the reported period, approximately 10.9% of sales, as compared with the sum of NIS 22.2 million last year, approximately 9.7% of sales.

 
 
The growth in the cost of labor in relation to the corresponding period last year is primarily attributed to the recording of labor expenses on account of the special bonus paid to the retiring CEO in accordance with the decision of the Board of Directors dated March 23, 2010, in the sum of NIS 5.0 million on account of promoting strategic projects of the company.

 
1.3
Selling, General , Administrative and other Expenses

 
 
The growth in Selling, General, Administrative and other Expenses originated primarily from the bonus paid to the retiring CEO, as mentioned above, that was offset by the recording of revenues from the sale of an asset in the amount of NIS 1.4 million. The general and administrative expenses also included an amortization of excess cost in the sum of NIS 0.7 million, on account of excess cost recorded during the acquisition of Carmel and Frenkel CD in 2008. Less of the nonrecurring labor expenses and excluding nonrecurring revenues, the Selling General and Administrative expenses decreased by approximately NIS 3.1 million, as compared with the corresponding period last year.
 
 
 
The Selling, General and Administrative (including wages) Expenses and Other revenues amounted to NIS 35.9 million in the reported period – representing 15.0% of sales – as compared with NIS 18.9 million,8.2% of sales,in the corresponding period last year. When neutralizing nonrecurring revenues last year, as a result of the distribution of a unilateral dividend on account of a preferred share that was allocated by an associated company in the sum of NIS 16.4 million, the selling general, administrative and other expenses amounted in the corresponding period last year, to NIS 35.3 million, approximately 9.4% of sales.

 
1.4
Operating Profit

 
 
The operating profit totaled NIS 7.4 million during the reported period, 3.1% of sales, as compared with NIS 18.5 million, 8.0% of sales last year. Excluding nonrecurring revenues in the amount of approximately NIS 16.4 million last year, on account of unilateral dividend, the operating profits in the corresponding period last year amounted to approximately NIS 2.1 million. The increase in operating profit during the reported period is primarily attributed to the increase in gross profit as a result of the increase in sales, as mentioned above.
 
 
7

 
 
 
 
The operating profit of the paper and recycling sector totaled approximately NIS 3.9 million during the reported period, as compared with operating profit of approximately NIS 0.2 million in the corresponding period last year, primarily as a result of the quantitative increase in sales, as mentioned above.

 
 
The operating profit of the entire paper and recycling sector (including headquarters) amounted to NIS 2.7 million, as compared with NIS 13.9 million in the corresponding period last year, that included nonrecurring earnings, as mentioned above. It should be noted that the expenses allocated during the period to the packaging sector included nonrecurring labor expenses of NIS 5.0 million, as detailed in Section 1.2, above.

 
 
The operating profit of the packaging and cardboard products segment amounted to NIS 3.6 million in the reported period, as compared with an operating profit of NIS 3.8 million in the corresponding period last year. The decrease in the operating profit for the sector originates primarily as a result of the decrease in selling prices, despite the quantitative increase in sales as compared with to the first quarter last year.
 
 
 
The operating profit of the office supplies sector amounted to NIS 1.5 million during the reported period, as compared with approximately NIS 0.9 million in the corresponding period last year.

 
1.5
Financial Expenses

 
 
Financial expenses amounted to NIS 0.9 million during the reported period, as compared with NIS 4.6 million.
 
 
 
The interest expenses in respect of CPI-linked long-term liabilities (debentures) decreased by NIS 0.9 million as compared with the corresponding period last year, as a result of both the decrease in the balance of debentures following redemptions made to the holders of the debentures, coupled with approximately 0.9% decrease in the CPI during the reported period, as compared with hedging transactions on the CPI-linked debentures whose costs amounted to 0.3% per annum in the corresponding period last year, and as a result of the valuation of the hedging transactions to their fair value, in accordance with international standards.

 
1.6
Taxes on Income
 
 
 
Expenses for taxes on income amounted to NIS 1.2 million in the reported period, as compared with tax expenses of NIS 10.0 million in the corresponding period last year. excluding  the tax expenses as a result of the recording of a provision for taxes on account of events that were included in the corresponding period last year, the tax expenses retained their level during the corresponding period last year.

 
1.7
Company’s Share in Earnings of Associated Companies
 
 
 
The companies whose earnings are reported under this item (according to Hadera Paper’s holdings therein), include primarily: Mondi Hadera Paper, Hogla-Kimberly.
 
 
 
The company’s share in the profits of associated companies totaled NIS 19.5 million during the reported period, as compared with NIS 15.0 million in the corresponding period last year.
 
 
8

 
 
 
 
The following principal changes were recorded in the Company’s share in the earnings of associated companies, in relation to the corresponding period last year:

 
-
The Company's share in the net profit of Mondi Hadera Paper (49.9%) rose by approximately NIS 1.7 million. The increase in the profit originated primarily from an increase in the operating profits of Mondi, that grew from NIS 5.4 million last year to NIS 8.6 million this year, despite the erosion in prices as compared with the corresponding period last year, thanks to efficiency measures in the manufacture of paper in the course of the first quarter, coupled with an improvement in the gross margin of part of the products range. The increase in net profit was moderated somewhat as a result of the increase in tax expenses in the amount of approximately NIS0.6 million during the reported period, in relation to last year, primarily as a result of the increase in pretax earnings.

 
-
The company’s share in the net earnings of Hogla-Kimberly Israel (49.9%) increased by approximately NIS 2.2 million. Hogla's operating profit grew from NIS 47.9 million to NIS 50.4 million this year. The improvement in the operating profit, despite the erosion in the selling prices of the part of the sectors of operation, originated primarily as a result of a decrease in the prices of some of the company's inputs, in light of the erosion of global commodity prices, coupled with significant efficiency measures across the entire company, increased savings in purchasing and the continuing empowerment of the company's brands, that generated a significant improvement in earnings during the reported period.

 
-
The Company's share in the losses of KCTR Turkey (49.9%) was reduced by NIS 1.2 million. This reduction is primarily attributed the slight increase in the volume of operations, coupled with the sale of the PEDO brand to a local chain, which generated nonrecurring revenues of NIS 3.1 million, that brought about the continuing reduction in the operating loss from NIS 7.9 million during the corresponding period last year to approximately NIS 3.2 million during the reported period.
 
It should be noted that the operating loss during the reported period includes a provision on account of lawyer fees and tax consultants fees related to the handling of tax assessments. See Section D1, below.
 
 
1.8
The net income and the earnings per share attributed to the Company's shareholders

 
 
The net profit attributed to the Company's shareholders amounted to NIS 24.3 million in the reported period, as compared with net profit of NIS 19.1 million in the corresponding period last year, representing an increase of approximately 27.2%.

 
 
The net profit attributed to the company's shareholders during the reported period was affected by the improvement in the operating margin at most group companies in Israel and in Turkey as a result of the increase in operations brought about an improvement in the operating profit as mentioned above, coupled with the reduction in financial expenses amounting to NIS 3.6 million.

 
 
Basic earnings per share amounted to NIS 4.80 per share ($1.29 per share) in the reported period, as compared with basic earnings per share of NIS 3.77 per share ($0.90 per share) in the corresponding period last year.
 
 
 
Diluted earnings per share amounted to NIS 4.75 per share ($1.28 per share) in the reported period, as compared with NIS 3.77 per share ($0.90 per share) in the corresponding period last year.

 
9

 
 
 
2.
Analysis of the Company’s Financial Situation

 
·
The cash and cash equivalents item rose from NIS 9.4 million on March 31, 2009, to NIS  24.1 million on March 31, 2010.

 
·
Designated deposits increased from NIS 81.8 million as at March 31, 2009, to NIS 86.9 million as at March 31, 2010. The increase in deposits stems from the company’s preparation for the final payments for the equipment and fixed assets for the Machine 8 Project.

 
·
Trade receivables relating to the packaging paper and recycling segment increased from NIS 80.3 million as at March 31, 2009, to NIS 90.2 million as at March 31, 2010. This increase is attributed to a quantitative growth in operations in both local market and export markets. In the packaging and cardboard products sector, a decrease was recorded in trade receivables from NIS 195.9 million on March 31, 2009, to NIS 193.1 million on March 31, 2010 and, as a result of a quantitative decrease in sales in the sector. Trade receivables for the office supplies marketing sector rose from NIS 47.7 million as at March 31, 2009, to NIS 55.4 million, as at March 31, 2010, as a result of growth in the volume of operations.

 
·
Other receivables relating to the packaging paper and recycling segment decreased from NIS 125.9 million as at March 31, 2009, to NIS 85. million as at March 31, 2010. This decrease originates primarily from the decrease in the debts of government institutions that were generated last year as a result of the construction of Machine 8, in the amount of approximately NIS 17.1 million, coupled with a decrease in the balance associated companies as a result of a decrease in the dividend to receive in the amount of NIS approximately 10.8 million following the actual payment of dividends. Other receivables relating to the packaging and cardboard products sector decreased from NIS 5.3 million as at March 31, 2009, to approximately NIS 3.1 million as at March 31, 2010. Other receivables relating to the marketing of office supplies segment decreased from NIS 4.8 million as at March 31, 2009 to NIS 4.3 million as at March 31, 2010.

 
·
Inventories in the packaging paper and recycling sector increased from NIS 78.0 million as of March 31, 2009, to NIS 92.3 million as of March 31, 2010. This increase is primarily attributed to the continuing increase in the inventories of wastepaper as part of Amnir’s preparation for the full-scale operation of the new packaging paper machine, following the termination of the running-in period and the continuing development of export markets and the securing of paper availability for overseas shipment. Inventories of the packaging and cardboard products sector decreased from NIS 77.0 million as at March 31, 2009, to NIS 71.8 million as at March 31, 2010. This decrease is primarily attributed to a decrease in paper prices, coupled with the opening of local warehouses by an international supplier. An increase was recorded in the inventories item of the office supplies marketing sector from NIS 22.2 million on March 31, 2009, to NIS 23.5 million on March 31, 2010, primarily as a result of the wider deployment of inventory entrances imported from the Far East.
 
 
10

 
 
 
·
The investment in associated companies increased from NIS 296.4 million as at March 31, 2009, to NIS 347.2 million as at March 31, 2010. The principal components of the said increase consist primarily of the company's share in the earnings of associated companies in the amount of NIS 91.9 million between the reported periods, offset by the company's share in distributed dividend in the sum of NIS 29.4 million from an associated company and the company's share in the declared dividend of NIS 10.0 million by an associated company, which led to a increase in the total investment between the reported periods.

 
·
Short-term credit increased from NIS 37.7 million as at March 31, 2009 to NIS 88.3 million as at March 31, 2010. The increase in short-term credit is primarily attributed to the credit in the amount of NIS 40 million raised from institutional investors between the reported periods and the assuming of short-term bank credit.

 
·
In the other accounts payable item in the packaging paper and recycling sector, an increase was recorded from NIS 96.0 million on March 31, 2009, to NIS 107.2 million on March 31, 2010. This increase is primarily attributed to an increase in the wage provisions coupled with an increase in interest to be paid as a result of additional long-term loans that were assumed by the sector between the reported periods for the purpose of financing Machine 8. Inventories of the packaging and cardboard products sector decreased from NIS 15.2 million as at March 31, 2009, to NIS 14.9 million as at March 31, 2010. In the office supplies marketing segment, the Other Accounts Payable item increased from NIS 4.6 million on March 31, 2009, to NIS 5.1 million on March 31, 2010.

 
·
The company’s shareholders' equity increased from NIS 783.4 million as at March 31, 2009, to NIS 883.0 as at March 31, 2010. This change originated primarily from the net profit attributed to the company's shareholders between the periods, in the sum of NIS 96.4 million.

 
3.
Investments in Fixed Assets

 
 
Investments in fixed assets amounted to NIS 78.2 million in the reported period, as compared with NIS 118.5 million in the corresponding period last year. The investments this year consisted primarily of payments on account of purchasing from equipment vendors for the new packaging paper manufacturing network (Machine 8), in the sum of approximately NIS 70.6 million (including a decrease of NIS 35 million in supplier credit). The outstanding investment in Machine 8, true to March 31, 2010, amounts to NIS 649.8 million. Additional investments included were related to environmental protection (wastewater treatment) and current investments in equipment renewal, means of transportation and building maintenance at the Hadera site.

 
 
Regarding the impairment of the fair value of  fixed assets, see Note 5b to the financial statements as of March 31, 2010 and Note 4c(5) to the financial statements as of December 31, 2009 and assessment report, enclosed.

 
4.
Financial Liabilities

 
 
The long-term liabilities (including current maturities) amounted to NIS 900.7 million as at March 31, 2010, as compared with NIS 740.0 million as at March 31, 2009. The long-term liabilities increased in relation to last year, primarily as a result of long-term loans that were designated for the financing of payments on account of Machine 8. This increase was offset as a result of the repayment of the older debenture series, coupled with the cash flows from operating activities.
 
 
11

 
 
 
 
The long-term liabilities include primarily three series of debentures and long-term loans from banks and institutional investors as follows:
 
 
Series 2 – NIS 130.4 million, for repayment until 2013.
 
 
Series 3 – NIS 195.9 million, for repayment until 2018.
 
 
Series 4 – NIS 235.6 million, for repayment until 2015.
 
 
Long-term loans – NIS 337.9 million.
 
 
The balance of short-term credit, as at March 31, 2010, amounted to NIS 88.3 million, as compared with NIS 37.7 million at March 31, 2009.

 
5.
Financial liabilities at fair value through the statement of income

 
 
Put Option to a Shareholder at an Associated Company

 
 
For information pertaining to the Put option see Note 5b(3) to the annual financial statements dated December 31, 2009.

 
 
The liability on account of the Put option to the shareholder at the associated company as at March 31, 2010, March 31, 2009, and as at December 31, 2009, amounts to NIS 11.3 million, NIS 16.9 million and NIS 12.0 million, respectively.

 
 
On account of the Put option, other expenses of NIS 0.7 million were recorded during the reported period, as compared with other expenses of NIS 3.0 million in the corresponding period last year.

 
 
The principal factors behind the change in the fair value during the reported period include the change in the risk-free interest rate and the change in the standard deviation of the Hadera paper share that serve for the calculation of the value of the option.
 
C.
Liquidity

 
 
Cash Flows

 
 
The cash flows from operating activities totaled NIS 38.8 million during the reported period, as compared with NIS 28.6 million in the corresponding period last year. The increase in the cash flows from operating activities during the reported period, as compared with the corresponding period last year, is attributed to the increase in profitability, the distribution of dividend from associated companies and the reduction in shareholders' equity during the reported period as compared with last year, that amounted to NIS 5.0 million, as compared with an increase of NIS 32.4 million last year. The increase in shareholders' equity during the reported period is primarily attributed to the reduction in inventories and the growth in accounts receivable.
 
 
12

 
 
D.
Details of the Various Operations

 
1.
Hogla-Kimberly (Household Products)

 
 
The sales turnover of Hogla-Kimberly Israel amounted to approximately NIS 312.2 million in the reported period, as compared with approximately NIS 323.9 million in the corresponding period last year, representing a decrease of 3.6%.
 
 
 
The decrease in sales in relation to the corresponding period last year is attributed both to the erosion of prices in some of the categories as a result of escalating competition in the market, coupled with the rise in prices of raw materials that was offset as a result of the increase in sales in some of the categories due to the timing of the Passover holiday.

 
 
The operating profit of Hogla-Kimberly Israel amounted to approximately NIS 50.4 million in the reported period, as compared with approximately NIS 47.9 million in the corresponding period last year.
 
 
 
The improvement in the operating profit in relation to last year, despite the decrease in the sales turnover, originates from an improvement in costs, primarily as a result of an average revaluation of approximately 8% in the dollar exchange rate and approximately 2% in the euro exchange rate, in relation to the corresponding period last year, coupled with efficiency measures initiated by Hogla in view of the escalating competition.

 
 
The sales turnover of KCTR, Hogla-Kimberly’s subsidiary operating in Turkey, amounted to approximately NIS 131.3 million (approximately $35.4 million) in the reported period, as compared with approximately NIS 127.8 million (approximately $31.5 million) in the corresponding period last year.
 
 
 
KCTR’s strategic cooperation agreement with Unilever, under which Unilever carries out the selling, distribution and collection activities nationwide, with the exception of retail chains to which KCTR continues to sell independently, continues to expand the customer base and to bring about the resulting increase in sales, a rising market share and the enhancement of the Huggies brand in the diaper sector and Kotex brand in the feminine hygiene sector. In parallel, the company is continuing to expand the marketing of its products to BIM, the largest supermarket chain in Turkey. In parallel, the volume of exports to Kimberly-Clark in various other countries in Europe and Africa also increased.

 
 
KCTR recorded an operating loss of approximately NIS 3.2 million (approximately $0.9 million) in the reported period, as compared with NIS 7.9 million (approximately $2.0 million) in the corresponding period last year.

 
 
In addition, it should be noted that toward the end of 2009, the Turkish tax authorities addressed KCTR as part of the examination of its financial statements for the years 2004-2008, conducted at KCTR on account of the taxation of the influx of capital from Hogla Kimberly Ltd. to KCTR. KCTR estimates, on the basis of the opinion of its legal and tax consultants, that the probability that it will be eligible for an additional tax payment is low. Consequently, it has not created a provision in its financial statements on the account of such tax request . To cover the anticipated legal fees in accordance with the progress in the handling of the tax authorities' request, KCTR has created a provision in its March 31, 2010 financial statements of € 0.3 million.  (See  also Note 13L to the financial statements dated December 31, 2009).

 
 
The necessary funds for financing the strategic program in Turkey and for financing the current operations and investments, originates primarily from internal resources of Hogla Kimberly. (No investment was made in KCTR during the reported period). In early 2008, KCTR repaid the balance of outstanding loans that it still had with the banks, amounting to $25 million. Consequently, KCTR incurred no financial expenses during the reported period, leading to an additional reduction of the net loss. This financing was made by way of a shareholder investment in the shareholders' equity of KCTR, as part of the operations for expanding the equity base in KCTR.

 
13

 
 
 
2.
Mondi Hadera Paper (Mondi Hadera – Fine Paper)

 
 
The sale of fine paper amounted to 45.4 thousand tons during the reported period, as compared with 48.5 thousand tons during the corresponding period last year and as compared with 43.0 thousand tons in the fourth quarter last year.

 
 
The sales turnover of fine paper amounted to NIS 172.7 million in the reported period, as compared with NIS 182.0 million in the corresponding period last year and as compared with NIS 157.3 million in the fourth quarter last year.

 
 
The decrease in sales originates primarily from the quantitative decrease in sales to export markets in the Middle East, as compared with an increase in the domestic market and the establishment of an export market to the United States. This decrease was offset as a result of an increase in selling prices that began during the reported period. The prices in the local market and the export markets rose in  NIS terms, as compared with the fourth quarter last year.

 
 
The operating profit of Mondi Hadera amounted to NIS 8.6 million during the reported period, as compared with operating profit of NIS 5.4 million the corresponding period last year and as compared with operating profit of NIS 11.6 million in the fourth quarter last year.

 
 
The trend of rising pulp prices continued in the first quarter of 2010. See Section A2(2) above.

 
 
The increase in operating profit in relation to the corresponding quarter last year, despite the aforementioned rise in pulp prices, is primarily attributed to the high efficiency in paper manufacturing during the reported period and the improvement in the gross margin of the sale of purchased paper.
 
 
 
The decrease in the operating profit in relation to the fourth quarter last year is primarily attributed to the rise in pulp prices as mentioned above, that was partially compensated by the 4% rise in selling prices, as mentioned above.
 
 
3.
Carmel Container Systems - Packaging and Board Products

 
 
The aggregate sales turnover of Carmel, including the sales of Frenkel CD, amounted to NIS 127.0 million during the reported period, as compared with NIS 132.6 million, representing a decrease of 4.2%.

 
 
During the reported period, the consolidated sales turnover of Carmel Container Systems Ltd. amounted to NIS 100.5 million, as compared with NIS 107.5 million in the corresponding period last year, representing a decrease of 6.5%.

 
 
This decrease in the sales turnover, despite the quantitative increase in sales in relation to the corresponding period last year, originates primarily as a result of the decrease in selling prices in relation to the corresponding quarter last year by a rate of approximately 8%, as a result of the fierce competition in the sector. This trend began to reverse itself in the second quarter of 2010, as selling prices are expected to rise, as well as raw materials.
 
 
14

 
 
 
 
The consolidated operating profit of Carmel amounted to NIS 2.7 million in the reported period, as compared with an operating profit of NIS 3.2 million in the corresponding period last year.

 
 
The aggregate operating profit of Carmel (including Frenkel CD) amounted to NIS 3.5 million in the reported period, as compared with an operating profit of NIS 3.8 million in the corresponding period last year.
 
 
4.
Packaging Paper and Recycling

 
 
The sales turnover of the Packaging Paper and Recycling Division amounted to NIS 86.0 million in the reported period, as compared with NIS 80.5 million in the corresponding period last year, representing an increase of approximately 6.8%.

 
 
The quantitative sales of packaging paper amounted to 50.5 thousand tons during the reported period, as compared with 32.1 thousand tons in the corresponding period last year. 19.2 thousand tons out of the sales during the reported period, were capitalized as part of the running-in of Machine 8.
 
 
 
The sales of paper and cardboard waste by Amnir amounted to 77.9 thousand tons during the reported period, as compared with 43.5 thousand tons in the corresponding period last year.

 
 
This increase in the sales turnover originated primarily from the quantitative increase in sales, of both packaging paper and at Amnir, coupled with the rise in the selling prices over the past several months. It should nevertheless be noted that the quantitative increase in sales was recorded primarily in export markets where a rise in prices was recorded that was mostly offset as a result of the revaluation of the NIS vis-à-vis the  average dollar exchange rate, between the reported periods, that served to impact part of the export sales, at a level of 8%. The increase in prices is expected to positively affect the results of the division in 2010.

 
 
The operating profit totaled NIS 3.9 million during the reported period, as compared with operating profit of NIS 0.2 million in the corresponding period last year. The cost of operating Machine 8 were capitlized as part of the running-in expenses during the current quarter.

 
 
The improvement in the operating profit during the reported period, as compared with corresponding period last year, originated primarily from the quantitative increase in sales, primarily to export markets as mentioned above. Moreover, a decrease was recorded in part of the manufacturing costs, on account of improved efficiency and the lower exchange rate.

 
 
The above information pertaining to the expected the selling prices constitutes forward-looking information as defined in the Securities Law, based on the company's estimates at the date of this report. These estimates may not materialize - in whole or in part - or may materialize in a different manner, inter alia on account of factors that lie outside the control of the company, such as changes in global markets as well as changes in the supply and demand for paper products worldwide.

 
15

 

 
5.
Graffiti - Office Supplies Marketing

 
 
Graffiti's sales turnover during the reported period amounted to NIS 41.4 million as compared with NIS 36.7 million in the corresponding period last year, representing an increase of 12.8%.

 
 
During the reported period, Graffiti recorded an operating profit of NIS 1.5 million, as compared with an operating profit of NIS 0.9 million in the corresponding period last year, representing an increase of 66%. The increase in the operating profit during the reported period originated primarily from the increase in sales due to an increase in secured tenders from institutional bodies, coupled with an expansion of the range of company products and due to a decrease in General and Administrative Expenses, along with efficiency measures and savings in purchasing.

 
 
Graffiti continues to implement its plan for growth in the marketing of office supplies to businesses market and is taking several courses of action in order to establish its position as a leader in this market:

 
 
Graffiti is constantly working to improve the procurement network, with an emphasis on imports from the Far-East that will serve to significantly reduce purchasing costs, aiming to improve the gross and operating profitability.

 
 
In 2010, Graffiti, together with other companies in the group, is scheduled to relocate to a modern and efficient distribution center in Modiin, that would allow to cut operating costs, while enabling continued growth in sales and profit.

 
 
In the reported period, Graffiti continued the development of the IT platform that will enable the acceleration of growth and profit alongside the improvement of customer service, in complement to the modern arrangement at the new distribution site.

E.
Exposure and Management of Market Risks

 
1.
General

The Company conducts periodical discussions regarding market risks and exposure to exchange rate and interest rate fluctuations, with the participation of the relevant elements, so as to reach decisions in this matter. The individual responsible for the implementation of market risk management policy at the Company is Shaul Glicksberg, the Group's VP of Finance and Business Development.

 
2.
Market Risks to which the Company is Exposed

Description of Market Risks

The market risks reflect the risk of changes in the value of financial instruments affected by changes in the interest rate, in the Consumer Price Index and in foreign currency exchange rates.

Exchange Rate Risks

Approximately half of the Company’s sales are denominated in US dollars, whereas a significant share of its expenses and liabilities are in NIS. The Company is therefore exposed to fluctuations in the exchange rate of the NIS vis-à-vis the US dollar. This exposure includes economic exposure (on account of surplus proceeds on payments in foreign currency or linked thereto) and accounting exposure (on account of a surplus of dollar-linked assets over foreign-currency-denominated liabilities).
 
 
16

 
 
The Company periodically reexamines the need for hedging on account of these exposures. True to March 31, 2010, the Company entered into hedging transactions in the sum of 6.8 million euro, in order to hedge the cash flows for the acquisition of fixed assets from equipment vendors for Machine 8.
 
It should be noted that on the aggregate level that includes associated companies, the currency exposure is limited.

Consumer Price Index Risks

The Company is exposed to changes in the Consumer Price Index, pertaining to the debentures issued by the Company and to long-term loans, in the total sum of NIS 313.3 million.
 
In early 2010, the Company entered into hedging transactions for a period of one year, to protect itself against a rise in the CPI, in the amount of NIS 30 million, pursuant to previous transactions that were made in early 2009 and terminated at the end of 2009.
 
The company continues to regularly monitor quoted prices for hedging its exposure and in the event that these will be reasonable, the company will enter into the relevant hedging transactions.
 
The company also enjoys natural hedging due to the current debt of an associated company that is linked to the consumer price index.

Credit Risks

Most of the Group’s sales are made in Israel to a large number of customers and the exposure to customer-related credit risks is consequently generally limited. The Group regularly analyzes – through credit committees that operate within the various companies – the quality of the customers, their credit limits and the relevant collateral required, as the case may be. The Group also makes use of credits insurance services at some of the Group companies, as needed.
 
The financial statements include provisions for doubtful debts, based on the existing risks on the date of the statements.
 
 
17

 
 
Sensitivity Analysis Tables for Sensitive Instruments, According to Changes in Market Elements as at March 31, 2010:
 
Sensitivity to Interest Rates
 
Sensitive Instruments
 
Profit (loss) from changes
   
Fair value as at
Mar-31-10
   
Profit (loss) from changes
 
   
Interest rise
10%
   
Interest rise
5%
   
Interest decrease
5%
   
Interest decrease
10%
 
In NIS thousands
 
Series 2 Debentures
    1,117       561       (136,750 )     (565 )     (1,133 )
Series 3 Debentures
    2,967       1,493       (207,291 )     (1,512 )     (3,042 )
Series 4 Debentures
    2,510       1,261       (260,390 )     (1,272 )     (2,556 )
Loan A - fixed interest
    128       64       (21,515 )     (64 )     (129 )
Loan B - fixed interest
    1,416       712       (104,702 )     (720 )     (1,448 )
Loan C
    176       89       (24,221 )     (89 )     (179 )
Long-term loans and capital notes - granted
    (199 )     (100 )     51,865       100       200  

The fair value of the loans is based on a calculation of the present value of the cash flows, according to the generally-accepted interest rate on loans with similar characteristics (4% in 2010).
 
Regarding the terms of the debentures and other liabilities – See Note 9 to the annual financial statements dated December 31, 2009.
 
Regarding long-term loans and capital notes granted - See Note 5 to the annual financial statements dated December 31, 2009.
 
Sensitivity of euro-linked instruments to changes in the Euro Exchange Rate
 
Sensitive Instruments
 
Profit (loss) from changes
   
Fair value as at
Mar-31-10
   
Profit (loss) from changes
 
   
Rise in €
10%
   
Rise in €
5%
   
Decrease in €
5%
   
Decrease in €
10%
 
In NIS thousands
 
Cash and cash equivalents
    754       377       7,535       (377 )     (753 )
Designated deposits
    1,171       585       11,708       (585 )     (1,171 )
Other Accounts Receivable
    529       264       5,286       (264 )     (529 )
Other Accounts Payable
    (3,723 )     (1,861 )     (37,277 )     1,861       3,723  
NIS-€ forward transaction
    2,698       1,013       (648 )     (2,355 )     (4,039 )

 
18

 
 
Sensitivity to the US Dollar Exchange Rate
 
Sensitive Instruments
 
Profit (loss) from changes
   
Fair value as at
Mar-31-10
   
Profit (loss) from changes
 
   
Revaluation of $
10%
   
Revaluation of $
5%
   
Devaluation of $
5%
   
Devaluation of $
10%
 
In NIS thousands
 
Cash and cash equivalents
    781       390       7,808       (390 )     (781 )
Other Accounts Receivable
    1,528       764       15,277       (764 )     (1,528 )
Other Accounts Payable
    (3,893 )     (1,947 )     (38,932 )     1,947       3,893  
Liabilities at fair value through the statement of income
    (1,133 )     (567 )     (11,332 )     567       1,133  

Other accounts receivable reflect primarily short-term customer debts
 
Sensitivity Analysis Tables for Sensitive Instruments, According to Changes in Market Elements as at March 31, 2010:
 
Sensitivity to the Consumer Price Index
 
Sensitive Instruments
 
Profit (loss) from changes
   
Fair value as at
Mar-31-10
   
Profit (loss) from changes
 
   
Rise in CPI
2%
   
Rise in CPI
1%
   
Decrease in CPI
1%
   
Decrease in CPI
2%
 
In NIS thousands
 
NIS-CPI forward transactions
    600       300       (726 )     (300 )     (600 )
Bonds 2
    (4,146 )     (2,073 )     (207,291 )     2,073       4,146  
Bonds 3
    (2,735 )     (1,367 )     (136,750 )     1,367       2,735  
 
See Note 17c to the financial statements dated December 31, 2009.
 
 
Sensitivity to the exchange rate of the yen
 
Sensitive Instruments
 
Profit (loss) from changes
   
Fair value as at
Mar-31-10
   
Profit (loss) from changes
 
   
Rise in the yen
10%
   
Rise in the yen
5%
   
Decrease in the yen
5%
   
Decrease in the yen
10%
 
In NIS thousands
 
 Accounts Payable
    (345 )     (173 )     (3,452 )     173       345  

 
19

 

 
Linkage Base Report
 
Below are the balance sheet items, according to linkage bases, as at Mar-31-2010:
 
In NIS millions
 
Unlinked
   
CPI-linked
   
In foreign currency, or linked thereto (primarily US$)
   
€-linked
   
Non-Monetary Items
   
Total
 
Assets
                                   
Cash and cash equivalents
    8.8             7.8       7.5             24.1  
Short-term deposits and investments
    75.2                     11.7             86.9  
Other Accounts Receivable
    404.6       1.2       15.9       5.3       4.9       431.9  
Inventories
                                    187.5       187.5  
Investments in Associated Companies
    18.7       36.7                       291.8       347.2  
Deferred taxes on income
                                    28.7       28.7  
Investment property
                                    24.3       24.3  
Fixed assets, net
                                    1,153.6       1,153.6  
Intangible Assets
                                    26.1       26.1  
Land under lease
                                    25.2       25.2  
Other assets
                                    2.4       2.4  
Assets on account of employee benefits
    0.7                                       0.7  
Total Assets
    508.0       37.9       23.7       24.5       1,744.5       2,338.6  
                                                 
Liabilities
                                               
Short-term credit from banks
    88.3                                       88.3  
Other Accounts Payable
    275.6               42.4       37.2               355.2  
Current tax liabilities
    6.0                                       6.0  
Deferred taxes on income
                                    56.8       56.8  
Long-Term Loans
    311.7       26.2                               337.9  
Notes (debentures) – including current maturities
    237.8       325.0                               562.8  
Liabilities on account of employee benefits
    37.3                                       37.3  
Liabilities at fair value through the statement of income
                    11.3                       11.3  
Shareholders’ equity, reserves and retained earnings
                                    883.0       883.0  
Total liabilities and equity
    956.7       351.2       53.7       37.2       939.8       2,338.6  
Surplus financial assets (liabilities) as at Mar-31-2010
    (448.7 )     (313.3 )     (30.0 )     (12.7 )     804.7       0.0  
Surplus financial assets (liabilities) as at Dec-31-2009
    (375.5 )     (318.4 )     (37.1 )     (41.6 )     772.6       0.0  
 
* As to hedging transactions associated with surplus CPI-linked liabilities, see Section E(2), above.

Associated Companies
 
Hadera Paper is exposed to various risks associated with operations in Turkey, where Hogla-Kimberly is active through its subsidiary, KCTR. These risks originate from concerns regarding economic and political instability, high devaluation and elevated inflation rates that have characterized the Turkish economy in the past and that despite the relative stability may recur and harm the KCTR operations.
 
 
20

 
 
Hadera Paper is also exposed to tax related issues at KCTR, as detailed in Note 13L to the financial statements dated December 31, 2009.

F.
Forward-Looking Statements

 
 
This report contains various forecasts that constitute forward-looking statements, as defined in the Securities Law, based upon the Board of Directors’ present expectations and estimates regarding the operations of the Group and its business environment. The Company does not guarantee that the future results of operations will coincide with the forward-looking statements and these may in fact differ considerably from the present forecasts as a result of factors that may change in the future, such as changes in costs and market conditions, failure to achieve projected goals, failure to achieve anticipated efficiencies and other factors which lie outside the control of the Company. The Company undertakes no obligation to publicly update such forward-looking statements, regardless of whether these updates originate from new information, future events or any other reason.

G.
Corporate Governance Issues

 
1.
Internal Auditing - SOX
 
 
 
 
By virtue of being a company whose shares are publicly traded in the United States, the company is subject to "Sarbanes Oxley" (SOX) in its entirety, including Section 302 (proper disclosure and evaluation of controls in the organization), Section 404 (Management Assessment of Internal Controls) and Section 906 (Criminal responsibility for breach of this section). The main points of the law have to do with increasing reporting and disclosure, the authorities and duties of the Audit Committee, manager responsibilities, enforcement, sanctions and penalties and increasing the independence from external accountants. The controls instigated by the company for the implementation of the law are regularly inspected by the company's auditing team and by the external accountant. Since 2007, with the introduction of the directives of the said law in the United States, the company is complying with the demands of the law.
 
 
 
We note that on February 16, 2010, the Securities and Exchange Commission (SEC) authorized the company's requests that its reports regarding the effectiveness of internal control be made in the format prescribed by law, by virtue of its being listed for trade on AMEX, i.e.- the SOX regulations in the United States that apply to the company as mentioned above, subject to the company having undertaken to examine, once every quarter, its compliance with the terms described in its application to the SEC, including any change in the directives of the law in Israel and in the United States, in the status of the company as it relates to these laws, changes in the implementation of the SOX regulations and any other change that may affect the disclosure provided by the company.
 
 
21

 
 
 
2.
Detailed processes undertaken by the company's supreme supervisors, prior to the approval of the financial statements
 
 
 
The Company's Board of Directors has appointed the Company's Audit Committee to serve as a Balance Sheet Committee and to supervise the completeness of the financial statements and the work of the CPAs and to offer recommendations regarding the approval of the financial statements and the discussion thereof prior to said approval. The Committee consists of three directors, of which two possess accounting and financial expertise. The meetings of the Balance Sheet Committee, as well as the board meetings during which the financial statements are discussed and approved, are attended by the company's auditing CPAs, who are instructed to present the principal findings - if there are any - that surfaced during the audit or review process, as well as by the Internal Auditor.
 
 
 
The Committee conducts its examination via detailed presentations from company executives and others, including: General Manager - Ofer Bloch, and CFO - Shaul Glicksberg. The material issues in the financial reports, including any extraordinary transactions - if any, the material assessments and critical estimates implemented in the financial statements, the reasonability of the data, the financial policy implemented and the changes therein, as well as the implementation of proper disclosure in the financial statements and the accompanying information. The Committee examines various aspects of risk assessment and control, as reflected in the financial statements (such as reporting of financial risks), as well as those affecting the reliability of the financial statements. In case necessary, the Committee demands to receive comprehensive reviews of matters with especially relevant impact, such as the implementation of international standards.
 
 
 
The approval of the financial statements involves several meetings, as necessary: The first is held by the Audit Committee to discuss the material reporting issues in depth and at great length, whereas the second is held by the Board of Directors to discuss the actual results. Both meetings are held in proximity to the approval date of the financial statements.

H.
Disclosure Directives Related to the Financial Reporting of the Corporation
 
 
1.
Events Subsequent to the Balance Sheet Date

 
 
For details regarding events that occurred subsequent to the balance sheet date, see Note 8 to the financial statements dated March 31, 2010.
 
 
22

 
 
I.
Dedicated Disclosure to Debenture Holders
 
For details regarding the rating of debentures, see Note 15 to the periodical report for the year 2009.
 
 
a.
Sources of Finance
 
See Section B4 - Financial Liabilities and further details in the table below.
 
 
b.
Debentures for institutional investors and the public
 
Series
 
Issue Date
 
Name of Rating Company
 
Rating at time of issue and at report date
   
Total stated value at issue date
 
Interest type
 
Stated Interest
 
Registered for trade on stock exchange (Yes/No)
 
Interest payment dates
 
Nominal par value as at Mar-31-10
   
Book value of debenture balances as at Mar-31-10
   
Book value of interest to be paid as at
Mar-31-10
   
Market value as at
Dec-31-09
 
In NIS millions
 
Series 2
    12.2003  
Maalot
    A+       200,000,000  
Fixed
    5.65 %
No
 
Annual interest
On December 21
In the years 2004-2013
    114.3       130.4       2.0       136.8  
Series 3
    7.2008  
Maalot
    A+       187,500,000  
Fixed
    4.65 %
Yes
 
Annual interest
On July 10
In the years 2009-2018
    187.5       195.9       6.6       207.3  
Series 4
    7-8.2008  
Maalot
    A+       235,557,000  
Fixed
    7.45 %
Yes
 
Semi-annual interest
On January 10 and July 10 in the years 2009-2015
    235.6       235.6       3.8       260.4  
 
Comments:
 
1.
Series 2 - Linked to the Consumer Price Index (CPI). Principal repaid in 7 annual installments, between Dec-21-2007 and Dec-21-2013.
 
2.
Series 3 - Linked to the Consumer Price Index (CPI). Principal repaid in 9 annual installments, between July 2010 and July 2018.
 
3.
Series 4 - Principal repaid in 6 annual installments, between July 2010 and July 2015.
 
 
23

 
 
 
4.
The trustee of the debentures (Series 2) is Bank Leumi Le-Israel Trust Corporation Ltd. The responsible contact person on behalf of Bank Leumi Le-Israel Trust Corporation Ltd. is Ms. Idit Teuzer (telephone: 03-5170777).
 
5.
The trustee of the public debentures (Series 3, 4) is Hermetic Trust Corporation (1975) Ltd. The responsible contact people on behalf of Hermetic Trust Corporation (1975) Ltd. are Mr. Dan Avnon and/or Ms. Merav Ofer-Oren (telephone: 03-5272272).
 
6.
As at the date of the report, the Company has met all of the terms and undertakings of the trust notes and there exist no terms that constitute just cause for demanding the immediate repayment of the debentures.

 
         
 
Zvika Livnat, Chairman of the Board of Directors
 
Ofer Bloch, CEO
 

 
24

 
 
Exhibit 3
 
HADERA PAPER LTD
UNAUDITED CONDENSED INTERIM CONSOLIDATED
FINANCIAL STATEMENTS
AS OF MARCH 31, 2010

 
 

 
 
HADERA PAPER LTD
 
UNAUDITED CONDENSED INTERIM CONSOLIDATED
FINANCIAL STATEMENTS
AS OF MARCH 31, 2010
 
TABLE OF CONTENTS
 
 
Page
   
Condensed Consolidated Financial Statements (unaudited)
 
F-2 - F-3
F-4
F-5
F-6 - F-7
F-8 - F-9
F-10 - F-18

 
 

 
 
HADERA PAPER LTD
 
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(NIS in thousands)
 
     
March 31
   
December 31
 
 
Note
 
2010
   
2009
   
2009
 
     
(Unaudited)
       
Assets
                   
Current Assets
                   
Cash and cash equivalents
      24,136       9,435       26,261  
Designated deposits
      86,948       81,769       127,600  
Accounts receivable:
                         
Trade receivables
      338,706       323,869       323,882  
Other receivables
      92,975       136,019       98,897  
Inventory
      187,548       177,160       175,944  
Total Current Assets
      730,313       728,252       752,584  
                           
Non-Current Assets
                         
Fixed assets, net
5
    1,153,568        * 868,824       * 1,134,234  
Investments in associated companies
      347,192       296,399       340,975  
Deferred tax assets
      28,684       31,110       29,745  
Prepaid expenses in respect of an operating lease
      25,219       * 30,460       * 29,756  
Other intangible assets
      26,149       30,061       27,084  
Investment property
2C
    24,349       -       -  
Other assets
      2,450       2,549       1,298  
Employee benefit assets
      690       675       649  
Total Non-Current Assets
      1,608,301       1,260,078       1,563,741  
                           
Total Assets
      2,338,614       1,988,330       2,316,325  
 
* Retroactively adjusted in respect of implementation of amendment to IAS 17, see note 3a.
 
The accompanying notes are an integral part of the condensed interim consolidated financial statements.

 
F - 2

 
 
HADERA PAPER LTD
 
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(NIS in thousands)
 
   
March 31
   
December 31
 
   
2010
   
2009
   
2009
 
   
(Unaudited)
       
Liabilities and Equity
                 
Current Liabilities
                 
Credit from banks and others
    88,303       37,735       131,572  
Current maturities of long-term bonds and long term loans
    155,631       76,381       149,940  
Trade payables
    227,950       174,834       255,895  
Account payables and accrued expenses
    127,210       115,841       112,745  
Short term employee benefit liabilities
    21,577       20,595       22,421  
Financial liabilities at fair value through profit and loss
    11,332       16,903       11,982  
Current tax liabilities
    6,037       4,325       2,760  
Total Current Liabilities
    638,040       446,614       687,315  
                         
Non-Current Liabilities
                       
Loans from banks and others
    275,958       111,779       225,802  
Bonds
    469,111       551,791       471,815  
Deferred tax liabilities
    56,812       78,316       58,053  
Employee benefit liabilities
    15,733       16,470       14,911  
Total Non-Current Liabilities
    817,614       758,356       770,581  
                         
Capital and reserves
                       
Issued capital
    125,267       125,267       125,267  
Reserves
    303,192       306,383       307,432  
Retained earnings
    427,680       325,812       399,346  
Capital and reserves attributed to shareholders
    856,139       757,462       832,045  
                         
Minority Interests
    26,821       25,898       26,384  
Total capital and reserves
    882,960       783,360       858,429  
Total Liabilities and Equity
    2,338,614       1,988,330       2,316,325  
 
         
Z. Livnat
 
O. Bloch
 
S. Gliksberg
Chairman of the Board of Directors
 
Chief Executive Officer
 
Chief Financial and Business
Development Officer
 
Approval date of the interim financial statements: May 9, 2010.
 
The accompanying notes are an integral part of the condensed interim consolidated financial statements.
 
 
F - 3

 
 
HADERA PAPER LTD
 
CONDENSED CONSOLIDATED INCOME STATEMENTS
(NIS in thousands)

     
Three months ended
   
Year ended
 
 
Note
 
March 31
   
December 31
 
     
2010
   
2009
   
2009
 
     
(Unaudited)
       
                     
Revenue
      239,985       229,881       891,995  
Cost of sales
      196,625       192,510       765,677  
Gross profit
      43,360       37,371       126,318  
                           
Selling and marketing expenses
      20,719       18,016       71,998  
General and administrative expenses
      17,432       14,231       58,967  
Other income, net
      (2,214 )     (13,388 )     (20,234 )
Total expenses
      35,937       18,859       110,731  
                           
Profit from ordinary operations
      7,423       18,512       15,587  
                           
Finance income
      2,041       3,031       4,727  
Finance expenses
      2,967       7,581       22,992  
                           
Finance expenses, net
      926       4,550       18,265  
Profit (loss) after financial expenses
      6,497       13,962       (2,678 )
                           
Share in profit of associated companies, net
      19,461       15,048       87,359  
Profit before taxes on income
      25,958       29,010       84,681  
                           
Taxes on income
6
    1,231       9,954       (7,067 )
Profit for the period
      24,727       19,056       91,748  
                           
Attributed to:                          
Company shareholders
      24,290       19,079       91,230  
Minority interests
      437       (23 )     518  
        24,727       19,056       91,748  
                           
     
NIS
 
Earning for share:
                         
                           
Primary attributed to Company shareholders
      4.80       3.77       18.03  
                           
Fully diluted attributed to company shareholders
      4.75       3.77       18.03  
                           
Number of share used to compute the primary earnings per share
      5,060,872       5,060,774       5,060,788  
                           
Number of share used to compute the fully diluted earnings per share
      5,116,494       5,060,774       5,060,788  
 
The accompanying notes are an integral part of the condensed interim consolidated financial statements.

 
F - 4

 
 
HADERA PAPER LTD
 
CONDENSED CONSOLIDATED STATEMENT
OF COMPREHENSIVE INCOME
(NIS in thousands)
 
   
Three months ended
   
Year ended
 
   
March 31
   
December 31
 
   
2010
   
2009
   
2009
 
   
(Unaudited)
       
                         
Comprehensive Income
    24,727       19,056       91,748  
                         
Other Comprehensive Income
                       
Profit (loss) on cash flow hedges, net
    (442 )     5,426       5,191  
Allocation to the income statement on account of cash flow hedging transactions, net
    -       -       (1,128 )
Actuarial profit and defined benefit plans, net
    18       225       477  
Share in Other Comprehensive Income of associated companies, net
    (4,140 )     (188 )     (507 )
Share in Other Comprehensive Income of associated companies, which allocated to the income statements, net
    (70 )     -       1,163  
Total Other Comprehensive Income for the period, net
    (4,634 )     5,463       5,196  
Total Comprehensive Income for the period
    20,093       24,519       96,944  
                         
Attributed to:
                       
Company shareholders
    19,656       24,489       96,428  
Minority interests
    437       30       516  
      20,093       24,519       96,944  
 
The accompanying notes are an integral part of the condensed interim consolidated financial statements.

 
F - 5

 
 
HADERA PAPER LTD

CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(NIS in thousands)
 
   
Share capital
   
Capital reserves
   
Share based payments reserves
   
Capital reserves resulting from tax benefit on exercise of employee options
   
Capital reserve from revaluation from step acquisition
   
Cash Flows Hedging reserves
   
Foreign currency translation reserves
   
Retained earnings
   
Total for Company shareholders
   
Minority Interests
   
Total
 
   
(Unaudited)
 
Balance - December 31, 2009 (Audited)
    125,267       301,695       10,531       3,397       14,164       517       (22,872 )     399,346       832,045       26,384       858,429  
Adjustment of retained earnings in respect of implementation of amendment to IAS 17 (see note 3a)
    -       -       -       -       -       -       -       3,590       3,590       -       3,590  
Balance - January 1, 2010
    125,267       301,695       10,531       3,397       14,164       517       (22,872 )     402,936       835,635       26,384       862,019  
For the Three months ended
March 31, 2010:
                                                                                       
Total Comprehensive Income for the period
    -       -       -       -       -       (1,007 )     (3,645 )     24,308       19,656       437       20,093  
Depreciation of capital from revaluation from step acquisition to retained earnings
    -       -       -       -       (436 )     -       -       436       -       -       -  
Share based payment
    -       -       848       -       -       -       -       -       848       -       848  
Balance – March 31, 2010
    125,267       301,695       11,379       3,397       13,728       (490 )     (26,517 )     427,680       856,139       26,821       882,960  
                                                                                         
Balance - January 1, 2009
    125,267       301,695       6,227       3,397       15,908       (5,092 )     (22,186 )     306,097       731,313       26,316       757,629  
For the Three months ended
March 31, 2009:
                                                                                       
Total Comprehensive Income for the period
    -       -       -       -       -       5,953       (744 )     19,280       24,489       30       24,519  
Purchasing shares of subsidiary company
    -       -       -       -       -       -       -       -       -       (448 )     (448 )
Depreciation of capital from revaluation from step acquisition to retained earnings
    -       -       -       -       (435 )     -       -       435       -       -       -  
Share based payment
    -       -       1,660       -       -       -       -       -       1,660       -       1,660  
Balance – March 31, 2009
    125,267       301,695       7,887       3,397       15,473       861       (22,930 )     325,812       757,462       25,898       783,360  

The accompanying notes are an integral part of the condensed interim consolidated financial statements.

 
F - 6

 

HADERA PAPER LTD

CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(NIS in thousands)
 
   
Share capital
   
Capital reserves
   
Share based payments reserves
   
Capital reserves resulting from tax benefit on exercise of employee options
   
Capital reserve from revaluation from step acquisition
   
Cash Flows Hedging reserves
   
Foreign currency translation reserves
   
Retained earnings
   
Total for Company shareholders
   
Minority Interests
   
Total
 
   
Balance - January 1, 2009
    125,267       301,695       6,227       3,397       15,908       (5,092 )     (22,186 )     306,097       731,313       26,316       757,629  
   
For the Year ended
December 31, 2009:
                                                                                       
Total Comprehensive Income for the Year
    -       -       -       -       -       5,609       (686 )     91,505       96,428       516       96,944  
Purchasing shares of subsidiary company
    -       -       -       -       -       -       -       -       -       (448 )     (448 )
Depreciation of capital from revaluation from step acquisition to retained earnings
    -       -       -       -       (1,744 )     -       -       1,744       -       -       -  
Share based payment
    -       -       4,304       -       -       -       -       -       4,304       -       4,304  
Balance – December 31, 2009
    125,267       301,695       10,531