Angel Shlomo: Is the Israeli Bread Core Leaning More on Supplier Credit Than on Real Profitability
Even after lower flour prices, a price increase and a large-customer return, Angel Shlomo's Israeli bread core still did not cover its attributed costs in 2025. That leaves the year looking heavily supported by supplier credit, payment spreads and commercial terms, not just by clean local profitability.
The main article already showed that Angel Shlomo's consolidated profit recovery in 2025 came mainly through the U.S., not through bread in Israel. This follow-up isolates a narrower question: what actually carried the local core in a year that looked relatively favorable on flour and pricing.
The test here is not a formal standalone net-profit line for Israel, because the filing does not provide one. The more useful test is simpler: is the Israeli bread activity already funding itself through profit and cash generation, or is it still relying heavily on supplier credit, payment spreads and commercial terms that keep revenue moving even while the underlying economics remain tight. The more cautious reading is the second one.
2025 Looks Better, But The Local Core Still Did Not Cover Itself
At Israel level, 2025 should have been easier to carry. Local revenue rose to NIS 533.1 million, helped in part by the July 2024 price increase and by the December 2024 return of one of the company's larger customers. Cost of sales in Israel rose more slowly, and the company explicitly says that alongside the continued decline in flour prices, wage expense and depreciation increased. Even so, in the segment table, attributed costs in Israel reached NIS 535.0 million, above revenue.
That is the number that matters most here. 2025 was not a hostile year for the company. It had a better pricing backdrop, easier flour and a returned customer. If Israel still could not move clearly to the positive side under those conditions, the issue is not just one weak quarter or one delayed price update. The local bread model is still struggling to generate enough margin after all the commercial friction.
| What helped in 2025 | Why it still was not enough |
|---|---|
| The July 2024 price increase | Part of the basket is still regulated |
| The December 2024 return of a large customer | Framework agreements do not lock in minimum volumes |
| Continued decline in flour prices | Retail pressure still comes through promotions and discounts |
| Higher local revenue | Part of the local revenue base is later eroded through stale-goods returns |
In other words, even in a better year, Israel still does not read like a core that is comfortably self-funding. It reads more like an activity that is breathing through commercial terms and working capital.
This Is A Business With No Real Backlog, Price Pressure And Returns
The weakness is not only sitting in one profit line. It sits in the economics of the sale itself. Bread is a very short shelf-life product, between one and five days, and the company states explicitly that it does not build bread inventory, except for specific items. As a result, most supply is driven by orders received only a short time before delivery.
That matters because the filing immediately makes clear that there is very little contract structure protecting the revenue base. There are occasionally framework agreements lasting more than a year, but they mainly regulate payment terms, discounts and bonuses, and they do not include minimum quantities. Even those agreements are not material to the activity. This is a business with no backlog cushion. Orders placed today determine tomorrow morning's volume.
The picture becomes sharper once pricing terms are layered on top. About 25% of the basket sold into organized retail and about 29% of the basket sold into the private market were regulated bread products in 2025. At group level, regulated products were about 20% of sales. At the same time, the company writes explicitly that consumer-price competition in organized retail heavily affects the private market as well, and that retailer pressure to cut prices, together with private customers trying to match large-chain pricing, leads to more promotions and discounts.
| Item | What is disclosed for 2025 | Why it matters |
|---|---|---|
| Shelf life | One to five days in bread | The company cannot build inventory and wait for better pricing |
| Contracts | No material long-term contracts and no minimum quantities | Revenue is not contractually locked ahead |
| Regulated mix | About 25% in organized retail, about 29% in the private market, and about 20% of group sales | Not every cost increase can be passed through immediately |
| Returns | About 10% of local-market sales | Part of revenue gets economically eroded after the sale |
Returns may be the most important line item in this thread. The company explains that competition in the sector dictates a policy of taking goods back from retailers, so goods that were not sold and lost freshness are returned to the company. The return rate reached about 10% of local-market sales in 2025, and the proceeds from reselling those goods as animal feed are not material. So part of local revenue appears first as a sale and only later settles at its real economic value through returns. This is not a one-off issue. It is part of the mechanism.
Supplier Credit Is Part Of The Model, Not A Footnote
Once the analysis moves from commercial terms to working capital, it becomes clear who is giving the system time. In Israel, the company granted customers average credit of about 83 days in 2025, with an average exposure of about NIS 122 million. On the other side, it received average supplier credit of about 144 days, with an average exposure of about NIS 114 million. That does not mean suppliers are funding the entire business. It does mean the local core is being given materially more time than it gives away.
At group level, which is the only way the filing allows a clean year-over-year comparison, that gap widened further: supplier-credit days rose to 144 on average in 2025 from 137 in 2024, while customer-credit days stood at 77 versus 78. The day-gap widened to 67 from 59.
That disclosure carries more weight because of the supplier identity. Stibel supplied about 81% of the flour volume the company bought in 2025, and the company itself states that it has some dependence on Stibel. At the same time, the relationship with Stibel is conducted on an ongoing basis, without a written agreement, on market pricing and terms. In other words, the most important supplier of the most important input is also part of a commercial relationship that has to remain open for the model to keep working.
There is an important nuance here. The first two Stibel debt spreads, about NIS 10.9 million over 36 installments and about NIS 4.5 million over 31 installments, came out of overdue Oranim debt that entered the group as part of the transaction. That is not the same as saying every 2025 flour invoice was simply pushed out. But it is still not a minor detail, because it shows the group entered 2025 with balance-sheet cleanup that still had to run through the flour supplier. The third layer, from July 2025, is sharper: a payment of about NIS 5.7 million was spread into 10 monthly installments from August 2025, at a 6.5% interest rate. Stibel appears here not only as a flour line, but also as a financing line.
That is why the supplier-credit question is not just technical. When the local core still does not cover attributed costs, when returns are high, and when the business operates with almost no backlog and no minimum volumes, long supplier credit and payment spreads with the main supplier shift from being normal sector plumbing to becoming part of the support layer behind the thesis.
The Cash Flow Statement Shows Who Gave The Year Breathing Room
The cash flow statement is group-level, not Israel-only, so it has to be read with care. It does not prove that every shekel of improvement came from or went into local bread. What it does test is an important question: was 2025 already funded by comfortable surplus cash generation, or did the system still need financing bridges.
The numbers are clear. Cash flow from operations was NIS 31.2 million. Against that stood NIS 28.6 million of capex, NIS 12.5 million of lease-principal repayment, NIS 5.8 million of long-term debt repayment and NIS 11.3 million of dividends paid to a non-controlling interest in a subsidiary. Without bridge sources, that is a negative all-in picture.
That does not mean the company faced immediate stress. It does mean the NIS 23.6 million increase in cash in 2025 also depended on a NIS 31.7 million release of short-term deposits and a NIS 12.3 million net increase in short-term borrowing. That fits well with the earlier picture: commercial credit and short-term borrowing are still giving the system time.
The balance-sheet view matches that reading. At the end of 2025 the group had NIS 51.1 million of cash and cash equivalents, but it no longer had short-term deposits, versus NIS 32.7 million a year earlier. At the same time, short-term bank credit rose to NIS 22.6 million from NIS 10.1 million, and average short-term credit usage rose to NIS 20.7 million from NIS 16.9 million. So the real question here is not whether cash exists on the balance sheet. It is what actually built it.
The company does say that, at least for covering ongoing operations, it does not expect to need additional sources in the coming year. That may be true. But the 2025 filing also shows that this assessment still rests on banks, suppliers and commercial terms continuing to provide breathing room. It does not yet rest on a local bread core that has cleanly moved to self-funding.
Conclusion
This continuation does not argue that supplier credit is unusual by itself in fresh bread. In a business of daily distribution, short shelf life and returns, working capital is part of the model. The narrower argument is that in 2025, precisely in a year that looked relatively favorable, Angel Shlomo's local core still looked more supported by commercial and financing breathing room than by clean local profitability.
The reason is straightforward. Israel still did not cover its attributed costs even after better pricing and easier flour. The business runs with almost no backlog, with framework agreements that carry no minimum quantities, with a return rate of about 10% of local sales, and with 144 days of supplier credit against 83 days of customer credit in the Israeli activity. Layered on top of that sits one key flour supplier, Stibel, that not only provides most of the flour but also appears in the filing as a provider of time through payment spreads.
This is still a bridge year, not a fully proven year. What would change the reading is not another rise in cash backed by released deposits and short-term borrowing, but quarters in which Israel covers its own cost base without additional supplier spreads, without a wider credit gap, and with less revenue erosion through returns and discounts.
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