Bikurey Hasade in 2025: Agriculture Holds, Shuk HaIr Weakens, and the Balance Sheet Funds the Gap

Company Introduction

Bikurey Hasade is not just a fruit-and-vegetable company. It is a group built around three very different engines: wholesale agricultural distribution, a food retail chain under the Shuk HaIr brand, and a rapidly growing non-bank lending arm. At first glance that looks like diversification. At second glance it looks like a company trying to hold together a strong operating core, a weaker retail leg, and a credit engine that adds revenue but also absorbs capital.

What is working now? The agricultural engine. In 2025 consolidated revenue fell to NIS 2.127 billion, yet net profit rose to NIS 71.5 million from NIS 58.8 million. That did not happen because the whole group got cleaner. It happened mainly because the agricultural segment improved profitability despite lower selling prices, while the finance arm kept expanding.

What is still not clean? Two things. First, Shuk HaIr. The chain opened stores, expanded its loyalty base, and reinforced management, but same-store sales fell 5.45% and segment operating profit dropped to NIS 8.1 million from NIS 17.7 million. Second, the balance sheet. Bikurey Hasade is financing more customer credit, especially in non-bank lending, on top of short-term bank credit, supplier credit, and a narrow cash cushion. That is why 2026 looks like a proof year, not a breakout year.

This is also the early screen for investors. As of April 6, 2026, market cap stood at roughly NIS 675 million, but turnover on that day was only about NIS 17 thousand. That does not by itself prove a structural liquidity problem, but it does remind readers that this is not a deeply traded stock day to day. On the other hand, reported short data is negligible, with short float at 0.09% and SIR at 1.42 at the end of March 2026. So this is not a technical short story. It is a much more basic one: can higher profit turn into cleaner cash and a cleaner capital structure.

Four points worth understanding right away:

• Agriculture is still carrying the economics of the group. Under management reporting it generated NIS 75.5 million of pre-tax profit in 2025, up 18.3%, despite a 3.4% revenue decline.
• Shuk HaIr is expanding its footprint, but not yet its profitability. Store count rose to 18 and loyalty members to 171,961, but same-store sales and operating profit both deteriorated.
• Non-bank lending is a real growth engine, but also a real consumer of capital. Net customer credit in that activity rose to NIS 596.4 million from NIS 418.8 million.
• Profit improved, but in an all-in cash-flexibility view almost no real surplus was left. Operating cash flow of NIS 103.4 million ended up producing only about NIS 3.4 million of extra cash after investment, lease principal, dividends, and short-term debt reduction.

A Quick Economic Map

The right way to read Bikurey Hasade in 2025 is through the profit engines, not the legal chart:

One point is easy to miss and matters a lot. Segment numbers are shown in the management accounts on a 100% basis, including Green Ark, even though the company owns 55.86% of it. So NIS 59.1 million of segment revenue in finance and NIS 19.9 million of segment pre-tax profit describe the economic engine, not what lands one-for-one at the level of Bikurey Hasade shareholders. The engine is real, but part of it still sits above the common-shareholder layer.

Events And Triggers

The first trigger: in February 2026 Bikurey Hasade Darom won the renewed Ministry of Defense tender to supply fresh fruit and vegetables to the IDF, with distribution to about 386 delivery points. An estimated NIS 180 million over 18 months gives real visibility, and a unilateral option held by the Ministry could expand the framework to as much as NIS 540 million over 54 months. That matters. But it is not a free gift. Actual volumes are not guaranteed, and to meet the tender terms the company also needs a backup 2,500-square-meter logistics facility for emergency conditions. So this is a commercial trigger, but also an execution and logistics trigger.

The second trigger: in early February 2026 a conditional agreement was signed to buy the remaining 10% of Shuk HaIr from the chain's CEO, who is also the controlling shareholders' brother-in-law. If completed, Bikurey Hasade would hold 100% of Shuk HaIr. Economically, that could improve value capture in retail. Practically, it does not solve the main problem today, because the issue at Shuk HaIr is not ownership structure. It is store economics. In addition, the consideration depends on an external valuation and the transaction still requires approvals, so this remains an open event rather than a completed fact.

The third trigger: in December 2025 the lease of the Timorim logistics center, rented from the controlling shareholders, was extended through December 2030. Rent during the option period was set at about NIS 905 thousand per month, or NIS 31.97 per square meter, a 10% increase versus the prior period, and is linked to CPI. On one side this secures continuity for the group's core operating asset. On the other side it locks in a higher fixed-cost base inside a model that already depends heavily on operating margin and working capital.

The fourth trigger: on December 9, 2025 the agreement with a material customer was extended through February 28, 2027. That is a strength because it preserves volume and continuity. But it also says something about bargaining power: the extension came with a small ongoing per-unit discount, even if management says the amounts are not material. Continuity was preserved, but not for free.

The fifth trigger: in February and April 2025 Shuk HaIr opened new branches in Ramla and Hadera, and the chain expects a new Beit Shemesh branch at the end of 2026 while also working on another branch in Netanya. The point here is not only footprint. It is timing. Expanding the network while same-store sales are weakening can create accounting growth without proving better economics.

Efficiency, Profitability And Competition

Agriculture: lower revenue, better discipline

This is the engine that held the year together. In 2025 segment revenue in agriculture fell 3.4% to NIS 1.638 billion, but the decline was not a simple demand collapse. Volumes rose about 3%, while price levels fell about 6.2%. That distinction matters, because it means the company sold more physical volume at lower prices. Put differently, this was not a traffic problem. It was a price environment problem.

That is exactly where Bikurey Hasade showed operational capacity. Segment operating profit rose to about NIS 73 million from about NIS 65 million, and operating margin improved to 4.4% from 3.8%. Management points to several clear levers: better warehouse-floor management, lower operating spoilage, better work methods, shekel strength, and more efficient distribution. The important point is that the company protected profitability even while market prices moved against it.

The internal mix of the segment also shifted. Revenue from vegetables fell to NIS 1.009 billion from NIS 1.194 billion, while fruit revenue rose to NIS 563.2 million from NIS 471.1 million. That does not explain the whole year by itself, but it does show that 2025 was not a simple linear decline. There was also a mix move inside the business.

The company operates here with meaningful depth that is not easy to replicate quickly: around 1,500 daily delivery points across Israel, about 99 refrigerated trucks through owned vehicles and contractors, and average delivery within about 24 hours. That is a real moat. But there is also a second side. The company depends on two material customers, and customer A and customer B accounted for 12% and 11.9% of company revenue in 2025. At the segment level, the two material customers together represented 32.7% of agricultural revenue. That is high concentration.

The customer-credit layer is not small either. Bikurey Hasade Darom's customer-credit balance stood at about NIS 357 million, of which about NIS 81.5 million was insured under customer-credit insurance. In the credit note, the company also states that as of the report date there was NIS 30 million of insurance covering the balances of the material customers. That does not mean risk is extraordinary or immediate. It does mean the agricultural engine is not just a fast distribution business. It is also a business that carries customers on credit.

Shuk HaIr: more footprint, less profit

This is where 2025 looks weakest. On the surface, Shuk HaIr looks like a chain still moving forward: store count rose to 18 from 16, net selling area rose to 16,478 square meters, loyalty members increased to 171,961 from 149,238, and the company opened two new branches. But on the economics of the store, the year was clearly weaker.

Segment revenue fell 2.1% to NIS 614.4 million. Same-store sales fell 5.45%. Average revenue per square meter in identical stores fell to 40.3 from 42.6, and revenue per employee fell to NIS 889 thousand from NIS 1.062 million. Segment operating profit dropped to NIS 8.1 million from NIS 17.7 million. In other words, the chain expanded its system, its labor base, and its loyalty club, but the economic output of each square meter and each worker deteriorated.

There is also a quality point here. Management attributes the decline in same-store sales mainly to a broad decline in local consumption as the war effect normalized. That may well be true. But even if that explanation is fully correct, it is still a Shuk HaIr problem, because a food retailer should normally prove relative resilience in that kind of environment. If the chain is adding footprint while losing same-store economics, it is hard to read new-store openings as a clean sign of strength.

Online is not changing the picture yet. Its share of segment sales stayed almost flat, 9.5% in 2025 versus 9.6% in 2024. The loyalty club also grew nicely, but that has not yet translated into better revenue per square meter or better operating profit. So it is too early to call this a retail recovery. What can be said is that management clearly understands the issue: in the fourth quarter it reinforced Shuk HaIr's management and operating structure, appointed the group CFO as deputy CEO of the chain, hired a VP of operations and new store managers, and explicitly framed profitability improvement as the task. That is not a solution yet. It is an acknowledgment that the chain needs repair.

Non-bank lending: fast growth, but not for free

The finance segment keeps growing quickly. Net customer credit rose to NIS 596.4 million from NIS 418.8 million, up 42.4%. Customer and check balances reached NIS 615.6 million versus NIS 433.7 million at the end of 2024. That expansion also translated into higher revenue and segment pre-tax profit of NIS 19.9 million versus NIS 14.5 million.

But this is exactly where growth has to be separated from accessible value. Green Ark was funded partly through NIS 252 million of short-term bank credit at year end and NIS 311 million near the report date, plus NIS 50.7 million of loans from the group at year end. Sheva Finansim used NIS 106 million of short-term bank credit at year end and about NIS 159.7 million near the report date, while also receiving about NIS 133 million of group loans at year end. So finance is not only generating profit. It is also sitting on the banks and on the group's own capital base.

The good news is that covenants are not tight at this stage. At Green Ark, tangible equity stood at 28.95% versus a 20% minimum. At Sheva Finansim it stood at 56.1% versus a 25% requirement. That is a healthy cushion. The less comfortable part is that this cushion exists inside an engine growing very quickly, so the real question is not only whether profit exists. It is whether the group wants and can keep allocating capital and credit to it at the same pace.

Cash Flow, Debt, And Capital Structure

The cash view: profit improved, flexibility did not really expand

Precision matters here. I am using an all-in cash-flexibility frame, meaning how much cash is left after the period's actual uses. In that view, 2025 looks less clean than the bottom line.

The group generated NIS 103.4 million of operating cash flow. That is good, especially against NIS 71.5 million of net profit. But after NIS 7.7 million of investing outflow, NIS 27.0 million of lease-principal repayment, NIS 27.0 million of dividends, and NIS 38.4 million of short-term bank-debt reduction, the increase in cash was only about NIS 3.4 million, and year-end cash stood at NIS 8.1 million.

That is the heart of the story. The company is profitable, but at this stage it is still not converting that profit into a broad cash cushion. Part of that is a choice, such as dividends. Part of it is structural, because the business itself needs a lot of working capital.

Working capital: not a crisis, but definitely the bottleneck

At the end of 2025 the company had positive working capital of NIS 138.5 million, or roughly NIS 169 million excluding the IFRS 16 effect. That means there is no classic liquidity event here. But anyone looking only at the surplus misses the structure. Current assets rose to NIS 749.8 million, current liabilities to NIS 611.3 million, and the growth on both sides came largely from the same place: a bigger customer-credit book and a bigger short-term funding need.

The map of day-to-day funding is very clear. Customer credit given by the company rose to about NIS 643.9 million from about NIS 507.2 million. Supplier credit, by contrast, declined to about NIS 226.4 million from about NIS 235.8 million, while short-term bank credit rose to about NIS 287.4 million from about NIS 197.6 million. In other words, the increase in customer credit was not financed this time by stronger supplier funding. It was financed more by banks and less by suppliers.

In agriculture that gap is built into the model. Suppliers grant roughly current plus 20 days on average, while the company gives customers roughly current plus 90. This is a model that can work very well when bank lines are open, customers pay on time, and the logistics chain runs without disruption. It is a model with less tolerance for mistakes.

Debt, leases, and covenants

The good news is that the company itself has no long-term bank debt. The less comfortable part is that this does not make the capital structure light. Lease liabilities stood at about NIS 337.5 million at the end of 2025, while short-term bank debt stood at NIS 287.4 million. So the company lives on a mix of long lease obligations and rolling short bank lines.

At the finance subsidiaries the covenants still look manageable and not too close to the wall. That matters, because it means the problem today is not immediate covenant pressure. It is growth quality and the ability to keep funding it. Put differently, this is still a management-pressure issue, not a survival-pressure issue.

Forward View

First finding: 2026 will not be judged first by the bottom line. It will be judged by two quality tests, Shuk HaIr and cash.

Second finding: the IDF tender can improve visibility and volume quickly, but if it comes with heavier working capital and more logistics complexity it will not automatically improve the economic read.

Third finding: moving to 100% ownership in Shuk HaIr can improve value capture, but it does not replace an operational fix in the chain.

Fourth finding: non-bank lending currently has both momentum and cushion. The market will focus mainly on whether momentum starts eating the cushion.

The 2025 quarter pattern shows that the year did not end in outright weakness. In the fourth quarter revenue was NIS 525.1 million and net profit was NIS 23.7 million, the strongest quarter of the year. But this also requires caution. In Q4 the company recorded NIS 10.9 million of net other income, so not all of the strength was clean operating improvement. Q4 gives some speed into 2026, but it does not close the debate.

What has to happen over the next 2 to 4 quarters for the thesis to strengthen?

First, Shuk HaIr has to stop the same-store slide. It does not need an immediate miracle. It does need to show that new footprint is not coming at the expense of the economics of the existing store base, and that the management actions taken late in 2025 begin to restore operating profitability.

Second, the IDF tender has to prove that it delivers not only volume but reasonable economics. If supply volumes rise but require more inventory, more bank lines, and more operating complexity, the market will not give full credit for the headline.

Third, finance has to grow with discipline. On paper 2025 looks very good, but any further rise in provisions, any need for meaningfully more group loans, or any sign that covenant room is tightening would change the tone quickly.

So 2026 looks like a proof year. Not a rescue year, because the business itself is alive and working. Not a breakout year, because retail and the balance sheet are not there yet. It is a year in which the company has to show that better agricultural profitability can support both a repaired retail operation and credit growth that does not weaken the capital structure.

Risks

Customer concentration and credit

Two material customers account for 32.7% of agricultural revenue, and balances due from material customers stood at NIS 130.3 million. That is a material risk even without a default event. A commercial change, a renewed tender, price pressure, or lower volumes could all pressure both margin and working capital. Existing insurance does not cover the entire layer.

Labor, regulation, and logistics

The group employs 1,447 workers, including foreign workers, and holds permits for 170 foreign workers at Bikurey Hasade Darom and 150 at Shuk HaIr through the end of 2026. That is an operational advantage, but also a regulatory dependency. In addition, a December 2025 inspection at the Timorim logistics center led to a January 2026 investigation concerning foreign workers employed by an external contractor. No decision has been reached yet, but this is a classic external warning signal: not something the company chose to frame as a headline risk, but something investors should watch.

Related-party transactions and dependence on controlling shareholders

The possible purchase of the remaining Shuk HaIr stake is a related-party deal involving the controlling shareholders' relative. The main logistics center is leased from the controlling shareholders. And the company itself defines Ilan and Sasson Sheva as key people on whom the group depends. None of that is automatically a red flag. But it does create a permanent friction layer that requires governance discipline, not only operating trust.

Conclusions

Bikurey Hasade in 2025 looks like a group whose agricultural engine is working better than the revenue headline suggests, while the retail and finance engines are pulling it in opposite directions. What supports the thesis now is real improvement in agricultural profitability, reasonable covenant room in finance, and better commercial visibility after the IDF tender win. What blocks it is weak retail economics, the capital appetite of the credit book, and cash flexibility that remains narrow.

In the short to medium term the market is likely to focus less on whether the company can grow, and more on how it grows and who funds that growth. If the next quarters show stabilization in same-store sales, orderly conversion of the defense tender, and credit growth without friction, the read can improve quickly. If Shuk HaIr keeps weakening and the balance sheet needs still more short-term funding, the 2025 improvement will look temporary and incomplete.

Current thesis: Bikurey Hasade is earning better in 2025, but it is still not turning that improvement into a cleaner and simpler capital structure.

What changed: the distinction among the three engines became much sharper. Agriculture is holding up, Shuk HaIr is weakening, and finance is growing faster than investors can ignore the cost of capital.

Counter-thesis: the cautious read may be too harsh. If Shuk HaIr improves under the reinforced management team, the IDF win starts to convert, and the move to 100% ownership in Shuk HaIr is completed on disciplined terms, 2026 could look much cleaner than it does today.

What may change the market's short-term reading: early signs of better same-store performance, first operating data from the IDF tender, and completion of the Shuk HaIr transaction on terms the market reads as disciplined.

Why this matters: the key question is no longer whether Bikurey Hasade can generate revenue and profit. It is whether it can turn that profit into cash, cleaner value capture, and growth that does not lean too heavily on short credit.

What must happen over the next 2 to 4 quarters: Shuk HaIr has to show a stop in the erosion and some profitability repair, finance has to keep growing without weakening asset quality, and the IDF win has to translate into economics and cash, not only into headline volume.