Delta Galil: How Much Cash Really Remains After CAPEX, Leases, Daily Drills, and Dividends
The main article argued that 2026 would be the proof year for margins and cash. This follow-up shows that Delta's $131.8 million of operating cash flow excluding IFRS 16 was almost fully absorbed by CAPEX and dividends, and Daily Drills pushed 2025 into an all-in cash deficit of about $70 million.
What This Follow-Up Isolates
The main article argued that 2026 would be Delta Galil's proof year for margins and cash. This continuation does not revisit tariffs, segment quality, or the broader platform. It isolates only the cash bridge. Not how much EBITDA the company can show, but how much cash is truly left after leases, CAPEX, Daily Drills, and dividends.
The short answer is clear. Much less than the operating-cash headline suggests. In 2025 the company reported $189.1 million of operating cash flow, but $57.3 million of that reflected lease principal that moved out of operating cash flow under IFRS 16. After neutralizing that effect, the relevant operating-cash figure falls to $131.8 million. From there, the bridge still has to absorb heavy capital spending, a $34 million dividend, and the Daily Drills acquisition. At the end of that path, 2025 did not leave Delta with a fresh cash cushion. It left the year with an all-in cash deficit of about $70 million.
That is also why the rise in net debt to $195.9 million and the jump in short-term bank debt to $96.4 million are not inconsistent with a record sales year. They are the other side of it. The business generated cash, but the platform absorbed nearly all of it.
Two Numbers, Two Different Cash Questions
The first discipline here is not to mix two different questions. Operating cash flow excluding IFRS 16 measures the business's recurring cash generation after neutralizing lease principal. That is a useful number, but it does not tell you how much cash was left in the company. For that, the right frame is all-in cash flexibility.
| Number | 2025, USD millions | What it does tell you | What it still does not tell you |
|---|---|---|---|
| Reported operating cash flow | 189.1 | The accounting starting point for the year | It still benefits from the IFRS 16 lease reclassification |
| Lease principal | 57.3- | The cash that has to be added back into the bridge for a cleaner economic view | It is still only one use of cash |
| Operating cash flow excluding IFRS 16 | 131.8 | The business's operating cash generation after neutralizing lease principal | It is still before CAPEX, dividends, and acquisitions |
There is one more nuance here. The presentation shows 2025 CAPEX of $108.6 million, while the director's report links the increase in net debt to about $102 million of cash investments in property and other assets. For the question of cash left after real uses, I prefer the $102 million cash-basis figure, because that is the number the company itself uses in its debt bridge. The gap between the two does not change the direction of the conclusion. It only shows how little cushion existed even before debating every dollar.
That is the core of the story. After lease principal, cash CAPEX, and the dividend, almost nothing was left. On the company's own cash bridge, 2025 was already down to roughly negative $4.2 million before Daily Drills. The acquisition did not create the pressure, but it pushed it from near-neutral to about negative $69.6 million. If one uses the presentation headline of $108.6 million of CAPEX instead, the year turns slightly more negative even earlier.
Leases also require one more clarification. The lease note shows total lease payments of $71.6 million in 2025, while the IFRS 16 bridge uses $57.3 million of lease-liability repayment. The difference is largely lease interest. That is why the bridge above does not subtract the full $71.6 million again. Part of lease cost is already embedded in operating cash flow. The mistake would be to use an inconsistent frame.
Where The Cushion Almost Disappeared
The more interesting number here is not only the negative $69.6 million end point. It is how little was left before the acquisition. Delta finished 2025 with $131.8 million of operating cash flow excluding IFRS 16, but against that stood about $102 million of cash CAPEX and a $34 million dividend. In other words, even without Daily Drills the year no longer looks like a year that built cushion. It looks like a year that barely held itself together after the company's core cash uses.
That chart explains why the $131.8 million headline is not enough. Recurring operating cash generation fell from $153.1 million to $131.8 million. Lease principal rose from $49.9 million to $57.3 million. At the same time short-term bank debt moved from almost nothing at year-end 2024 to $96.4 million at year-end 2025. This is no longer only a CAPEX question. It is a question of how much room is left before the company has to lean back on banks.
The current metrics also weakened. The current ratio fell to 1.34 from 1.50, and the quick ratio fell to 0.67 from 0.79. Those are not distress numbers, but they do say that 2025 did not end with the same liquidity comfort that looked easier to assume from the top line alone.
Liquidity Exists, But It Is Not Wide Flexibility
It matters not to overstate the other side either. Delta Galil does not read like a company pushed to the edge. At year-end 2025 it had about $134 million of cash, cash equivalents, and short-term deposits, alongside roughly $292 million of unused short-term credit lines. That is a meaningful liquidity base, and Midroog's stable rating is not detached from those numbers.
But the quality of that cushion matters. Out of the $292 million of unused lines, about $146 million were non-committed. In addition, part of the short-term framework is renewable for periods of up to one year. So liquidity exists, but part of it is bank flexibility that has to be rolled and renewed, not idle surplus cash.
| Liquidity source, end of 2025 | USD millions | What matters |
|---|---|---|
| Cash, cash equivalents, and short-term deposits | 134 | Real balance-sheet liquidity |
| Unused short-term credit lines | 292 | About $146 million are non-committed |
| Total liquidity and unused credit sources | 426 | Sufficient, but not all hard and not all long-dated |
The covenant picture also does not tell the whole story. The company remains comfortably within all covenant thresholds, and dividends are permitted as long as net debt to EBITDA stays below 3.5 and equity remains above $220 million. Formally, this is not a company close to a distribution constraint. But the same company also shows that net debt to EBITDA stands at 0.9 on an IFRS 16 excluded basis, while including lease liabilities lifts net debt to $521.9 million and the ratio to 1.8. That is not a covenant problem. It is a flexibility problem.
At the parent-company level the picture is already tighter. At the end of 2025 the parent itself held only $0.4 million of cash against $96.3 million of short-term bank debt. The board said there was no liquidity problem because the group still has resources and lines, and that is probably right. But the number is still a reminder that cash flexibility is not sitting inside a large parent-level cash reserve.
Why 2026 Still Looks Like Another Heavy Cash Year
If 2025 had been only a one-off messy transition year, the bridge would be easier to forgive. But the 2026 setup does not offer that clean exit. The company itself guides to $100 million to $110 million of cash CAPEX in 2026, almost the same level as 2025. At the same time, the two automated distribution centers are only expected to become operational from the second half of 2026. That means part of the payback still arrives after the cash has already gone out.
Midroog's surveillance report is even stricter on the cash reading. In its base case, 2026 is still expected to show negative free cash flow of $15 million to $25 million, partly because of negative working-capital movement, a $40 million to $55 million dividend, and about $100 million of capital spending. In other words, the 2025 bridge is not something that disappears by itself just because sales and EBIT are expected to rise.
That is the difference between a profitability thesis and a cash thesis. Private Label can enter 2026 with a strong backlog. Egypt can expand. The new logistics centers can begin to save money. Daily Drills can grow. None of that automatically creates a wider cash cushion if the same engine keeps demanding working capital, CAPEX, and dividends at the same time.
The Bottom Line
This continuation does not contradict the main article. It sharpens it. Delta Galil is not in a liquidity crisis, but it also did not finish 2025 with comfortable cash freedom. $131.8 million of operating cash flow excluding IFRS 16 sounds solid until it is matched against about $102 million of cash CAPEX, a $34 million dividend, and $65.4 million of Daily Drills cash outflow. Then the record year starts to look like a year of cash absorption.
That is why the 2026 test is not only about margins. It is also about whether Delta's investments, acquisition, and production expansion finally begin to return cash before the company needs another round of short-term funding. If that happens, 2025 will look in hindsight like an unusually expensive bridge year. If not, the market will start reading Delta less as a high-flexibility apparel platform and more as a growth model asking too much of the balance sheet.