Avrot Follow-Up: Why the Investees Still Erase the Core Recovery
The main article showed that Avrot's core recovered in 2025. This follow-up isolates the layer that kept that improvement from reaching shareholders: a ILS 5.2 million loss at BOT Environmental Quality, a ILS 4.3 million write-down inside the equity-accounted layer, and a European platform that still does not offset the drag.
The main article argued that Avrot's operating core finally started breathing again. This follow-up isolates the layer that still blocks that recovery from turning into shareholder earnings. In 2025 Avrot posted ILS 11.4 million of operating profit and ILS 9.3 million of profit before tax and before the share of investee results. That is where the friction started: equity-accounted losses reached ILS 5.1 million, taxes added another ILS 2.9 million, and net profit was left at just ILS 1.2 million.
This is not a technical footnote. It is an economic mechanism. As long as this layer produces mainly losses, write-downs, and options that have not yet matured, it can erase a good year in the core without directly weakening the steel-coating or project businesses.
Where the bridge to shareholder earnings actually breaks
The fastest way to read 2025 is not through net profit, but through the bridge between the operating core and common shareholders. The underlying business clearly improved. Profit from ordinary operations rose to ILS 11.4 million from ILS 7.3 million in 2024, and profit before tax and before the share of investee results reached ILS 9.3 million. In other words, before the equity-accounted layer, this was a much stronger year.
Then the holdings layer hit. Avrot's share of losses from investees came to ILS 5.144 million, versus only ILS 39 thousand in 2024. That is almost the entire explanation for the gap between a sharp operating recovery and a thin net-profit outcome. Put simply, without that jump in equity-accounted losses, 2025 would have looked very different.
That chart puts the discussion in the right place. The 2025 problem was not a collapse in the core. The problem was that the profit generated there could not pass through the holdings layer without being cut on the way up.
Which entities actually pulled the layer down
The most important name here is BOT Environmental Quality. Avrot's share of that company's 2025 loss reached ILS 5.206 million. By contrast, Paladeri contributed only ILS 87 thousand of profit, and Peldex Technologies lost ILS 25 thousand. In other words, the offset from the rest of the investee portfolio was negligible relative to the hole created by BOT Environmental Quality.
The filing also explains why this loss does not look like a one-off accounting accident that has already been resolved. In the Haruvit project, most of the construction work is already in advanced stages, but the facility is still only in the early stages of evaluating its electricity-generation capability, and the company is reviewing alternatives for the continuation of the project. That wording says the asset has not yet crossed from promise into proof.
| Entity | Structure | 2025 result | Carrying value at 31.12.2025 | What it means |
|---|---|---|---|---|
| BOT Environmental Quality | Joint venture, 50% indirectly | Loss of ILS 5.206 million | ILS 1.129 million | This is the main source of the damage in the equity-accounted line |
| Paladeri | Joint venture, 50% | Profit of ILS 87 thousand | ILS 1.987 million | Still far too small a contribution to offset the hole |
| Peldex Technologies | Joint venture, 50% | Loss of ILS 25 thousand | ILS 1.194 million | The Italian land still looks more like an option than visible value |
| Ormidan | Associate, 49% | Activity was discontinued | 0 | This layer has already been fully erased |
The most important number in that chart is the total. The carrying value of Avrot's equity-accounted investments fell from ILS 9.251 million to ILS 4.310 million, a decline of roughly 53%. This is not only a hit to one year's earnings. It is also a material contraction in the accounting value left in that layer.
The note shows the mechanics clearly. During 2025 Avrot recorded a ILS 4.298 million impairment on a joint venture, and in addition recognized ILS 846 thousand of equity-accounted losses. Even after providing ILS 176 thousand of loans and a further ILS 39 thousand investment in Peldex Technologies, the closing balance was only ILS 4.310 million.
Europe still looks more like a platform than a profit pool
This is where Palad France and Paladeri matter. The company still presents Europe as part of the Paladex growth story. That appears both in the group structure and in the strategic section: the French subsidiary is meant to market Paladex products in France and other markets, while Paladeri in Italy is supposed to become a direct production and sales base for Europe.
But 2025 still does not show a real counterweight to the BOT Environmental Quality drag. Paladeri earned only ILS 87 thousand. At the same time, Palad France lost ILS 380 thousand. So even the European side of the story is not yet generating enough earnings to offset the losses elsewhere in this layer.
The Italian case matters most because it links strategy to accessible value. Avrot and its partner agreed to acquire a new site in Italy and build a new machine for Paladex products. As of the report date, Paladeri had already invested about EUR 1.1 million in the machine and the land had been purchased, but work to adapt the site for activity had still not started. The money is already in. The operating return is not.
That does not mean there is no option here. It does mean that, for now, this looks more like an investment still waiting for proof than a profit engine capable of offsetting the damage in the investee line.
Why this is still not accessible value for common shareholders
This is the point easiest to miss. Even when this layer does contain real assets, not every asset is accessible value. In equity-accounted holdings, shareholders first experience volatility in reported earnings and in carrying values. Cash becomes accessible only if the investee starts producing stable profit that can be distributed, or if there is another way to monetize the holding.
That simply did not happen in 2025. The appendix states that none of the subsidiaries or investees distributed a dividend to Avrot during the year. So the holdings layer contributed mostly accounting volatility, not cash moving upward. That is especially true for BOT Environmental Quality, but Paladeri and Palad France also do not yet show that the European platform can already convert investment and setup into value that actually moves up the chain.
That chart explains why the story is still not accessible. One entity erased more than ILS 5 million. Italy contributed a tiny profit. France still lost money. And Peldex Technologies still looks more like an option on Italian land than a visible earnings contributor.
That is also the gap between a better core and a better outcome for shareholders. Avrot's operating core can improve, and it did in 2025. But as long as the holdings layer remains in a place where accounting value erodes faster than operating value is being proven, shareholders will keep seeing a company whose operating profit looks much better than the earnings that actually reach them.
What has to change next
The first trigger is BOT Environmental Quality. Until there is a clear proof that the Haruvit facility can move from completion into economically stable power generation, it is hard to see how this company stops being a source of write-downs.
The second trigger is Italy. Paladeri does not need to become a major profit engine overnight, but it does need to show that the investment in land and machinery is turning into active production and sales, not just a project that keeps being extended.
The third trigger is France. As long as Palad France remains loss-making, the European platform remains a strategy statement larger than its financial contribution.
And finally, the market should watch not only profits but also the route by which they move up the structure. As long as there are no distributions from subsidiaries and investees, this layer remains a place where shareholders mostly encounter equity-accounted earnings, write-downs, and options. For the story to change in a meaningful way, Avrot needs to prove that this layer can generate both stable accounting value and cash that becomes accessible.
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