Veridis 2025: Carton Is Finally Working, but the Real Test Still Sits in Regulation and Cash Conversion

Getting to Know the Company

Veridis looks from the outside like one green-infrastructure company, but economically it is a mix of three very different businesses: a regulated environmental platform, infrastructure assets that surface value through held companies, and an industrial carton-and-paper chain through Infinia. That distinction matters because the consolidated income statement only tells part of the story. A meaningful part of value comes through equity-accounted earnings and upstream dividends, and a meaningful part of 2025 profit came from investment-property revaluation.

What is working right now is clear. Carton finally moved from a strategic promise to a segment that delivers numbers: revenue of NIS 1.199 billion, segment profit of NIS 67.3 million versus just NIS 4.0 million in 2024, and EBITDA of NIS 259.0 million. Water also crossed an important line, with full repayment of Ashkelon project debt in October 2025 and NIS 43 million of dividends from VID versus NIS 31.5 million a year earlier. Energy improved as well, mainly through a stronger contribution from OPC Israel.

What remains unclean is also clear. Consolidated operating profit jumped to NIS 425.5 million, but NIS 261.0 million of that came from investment-property fair value gains. In the same year the company booked a NIS 61.0 million revenue reduction related to the cancellation of 2023 support recognition, and the white-paper segment still posted an NIS 85.6 million segment loss, including about NIS 20 million of one-off costs tied to shutting production. There is real business improvement here, but not yet enough clean improvement to carry the headline on its own.

At a share price of NIS 38.92 on April 3, 2026, and with 153.5 million listed shares, Veridis was trading around a NIS 6 billion market cap. At that scale, the market is no longer dealing with a small story it can excuse for complexity. Investors have to decide whether this is becoming a genuinely stronger multi-leg operating platform, or whether it is still a collection of good assets that are being held back by regulation, capital structure, and accounting noise.

The active bottleneck today is not demand. It is value conversion. The key questions are whether carton profitability can hold as capacity ramps, whether the environmental business can grow without new support-related or Meshua-related friction, and whether the cash now coming up from Ashkelon and OPC continues to reduce leverage at the parent layer.

That first chart captures the entire contradiction. Revenue fell 4.5%, EBITDA rose only 6.5%, but operating profit more than doubled. This is not the profile of a company whose engines all accelerated together. It is the profile of a company where real operating improvement was layered on top of a very large real-estate revaluation gain.

Events and Triggers

Regulation and support: the issue that keeps the environmental business from looking clean

The first trigger: the company booked a NIS 61 million revenue reduction in 2025 tied to 2023 support, after already booking a NIS 23 million charge in 2024 tied to 2022 support. That means the environmental segment did keep improving operationally, but its reported results are still running under a regulatory cloud.

The important split is between the past and the present. On the one hand, the group received the full 2024 support amounts during May 2025, with the group’s share at about NIS 55 million. On the other hand, the administrative petition over the cancellation of 2022 and 2023 support is still open, while 2025 and January 2026 also included quarterly advance payments of about NIS 46 million for 2025. In other words, the system is still paying, but it has not truly closed the dispute.

It also goes well beyond support. The Meshua investigation is still not open to the company’s review. Its legal advisers say they cannot yet assess whether the company or officers will be invited to a criminal hearing or whether an indictment will be filed. There is also a separate process around the renewal of the site’s business license. That is exactly why the environmental numbers still do not earn full market credit.

Infinia: the move from white paper to carton has already happened, but is not yet fully proven economically

The second trigger: machine 4 was completed in 2025 as part of the conversion from white paper to recycled paper rolls for carton. During 2025 the machine produced about 62 thousand tons. Its potential annual capacity now stands at about 140 thousand tons. According to management’s forecast, output is expected to be about 90 thousand tons in 2026, rise to about 120 thousand tons in 2027, and reach full utilization from 2028.

That is a real change because 2025 is the year in which the company stopped trying to defend a weak white-paper manufacturing business and instead turned the Hadera asset base toward carton. Cumulative conversion investment reached about NIS 170 million, of which about NIS 22 million was invested in 2025. After the balance-sheet date, on January 12, 2026, Infinia also received approval for a support grant of about NIS 41 million under the “Yerushalem” program, which was not yet recognized in the 2025 numbers.

That means 2025 should not be read as an end-state year. It is a bridge year. The 2026 question is no longer whether the conversion was completed, but whether the company can fill the new capacity without giving back the profit improvement on price.

Ashkelon, OPC and Hadera 2: more value has been created, but not all of it is liquid

The third trigger: VID fully repaid its remaining project debt in October 2025. That changes how the water segment should be read. Instead of an infrastructure asset that first serves leverage, Ashkelon is becoming an asset that starts to upstream cash.

At the same time, in September 2025 the new tender documents were published for the refurbishment, expansion and operation of the Ashkelon desalination plant to 220 million cubic meters per year for another 25 years. The consortium that includes Veridis passed the pre-qualification stage. Strategically, that matters a lot. If the company stays inside Ashkelon for the next cycle, water can remain a cash engine. If not, it still has a strong asset through May 2027, but without certainty beyond that date.

In energy, the August 2025 government approval for Hadera 2 and the February 2026 equipment-supply agreement for a project with estimated cost of NIS 4.8 billion to NIS 5.2 billion also changed the value of the Hadera land. Here the distinction between created value and accessible value matters. The revaluation is real in accounting terms, but it is not cash. In 2025 the company booked a total NIS 261 million gain on investment property, including about NIS 220 million tied to the Hadera land linked to the future OPC lease arrangement. That is value creation. It is not yet cash available to common shareholders.

Efficiency, Profitability and Competition

Carton is the real 2025 change

In the carton chain, the company finally linked the industrial thesis to the reported numbers. Segment revenue rose to NIS 1.199 billion from NIS 1.118 billion in 2024. Segment profit rose to NIS 67.3 million from only NIS 4.0 million, and EBITDA rose to NIS 259.0 million from NIS 186.7 million. This is not a marginal improvement. It is a real step-up.

What drove it was the same mix the company highlights: efficiency, better sales mix, higher volumes, and higher carton selling prices. But the broader filing adds another layer. Infinia is the only domestic producer of paper rolls for carton, and its local quantitative share reached about 62%. In collection and recycling of carton and paper waste, its share stands around 60%. That is real chain power, not just a narrative.

Still, the reader who rushes to call the story settled will miss the fourth quarter. In that quarter, carton revenue barely moved, NIS 301.9 million versus NIS 300.1 million, but segment profit slipped to a small loss of NIS 0.9 million from a NIS 3.6 million profit a year earlier. The reason was lower prices for carton paper rolls. That is the reminder: the Infinia improvement is real, but it is still sensitive to global pricing and import competition.

That chart shows clearly that the improvement was not broad-based. Carton and energy improved a lot. Environment and water weakened at the reported segment-profit level. White paper deteriorated sharply. “Other” jumped because of real-estate revaluation.

The mix chart matters because the improvement did not come from only one piece of the chain. All three links expanded. That strengthens the claim that Infinia’s integration is starting to work as designed. The caution is that 29% of paper-roll sales still went to export in 2025, so profitability remains exposed to logistics and world pricing. The company itself makes it clear that the domestic market is structurally preferable.

The environmental business is already growing, but reported profit quality still runs through regulatory decisions

The right way to read the environmental segment in 2025 is through two sets of numbers, not one. Before the support cancellation charge, segment revenue rose to NIS 1.030 billion from NIS 941.4 million in 2024, and segment profit before the charge rose to NIS 158.7 million from NIS 129.1 million. That is strong operating progress.

After the charge, the picture flips. Reported revenue was NIS 969.7 million, and segment profit fell to NIS 98.1 million from NIS 106.0 million in 2024. Put differently, the business itself is moving forward, but the reporting layer is still not letting it look that way.

This may be the single most important insight in Veridis 2025. If you isolate the regulatory layer, the environmental business looks like a growth engine. If you stay with the reported numbers, it looks stuck. The market will choose what to emphasize, but it cannot ignore the gap.

There is another quality point here. At the consolidated level there is no customer above 10% of group revenue, but at the plant level there is clear point concentration. The RDF plant in Hiriya depends on Nesher and the Dan Cities Association, while Ecosol depends on ESC, which channels hazardous waste to it. That is not the kind of concentration that breaks the whole group, but it is enough to explain why the environmental business should not yet receive a full stability premium while Meshua and support remain open.

Energy and water: profit that is created above the revenue line

The energy segment is a clean example of the gap between consolidated revenue and actual economics. Revenue fell to NIS 66.9 million from NIS 74.3 million because management deliberately reduced lower-margin contracts. But segment profit jumped to NIS 50.0 million from NIS 18.0 million, and EBITDA rose to NIS 134.8 million from NIS 87.5 million. The driver was not ordinary revenue growth. It was the company’s share in OPC Israel results and the rise in dividends and shareholder-loan repayments received from OPC Rotem and OPC Israel, NIS 121 million versus NIS 76 million in 2024.

Water tells a similar but cleaner story. Revenue barely changed, NIS 124.8 million versus NIS 123.5 million. Segment profit fell to NIS 32.6 million due to FX effects, but EBITDA rose to NIS 106.8 million thanks to NIS 43 million of dividends from VID after project debt was fully repaid. The Ashkelon plant supplied 124 million cubic meters in 2025, and for 2026 WDA first notified a 120 million cubic meter annual plan and later requested an increase from that base.

For investors, the implication is straightforward: water and energy matter to Veridis less as consolidated revenue engines and more as upstream cash engines. That is a positive. It is also a limitation. This is value that still has to travel through dividend policy, covenants and partner structures before it truly reaches the parent layer.

Cash Flow, Debt and Capital Structure

Reported profit looks strong, but cash gives the more useful reading

Cash flow from operations rose to NIS 448.6 million from NIS 246.7 million in 2024. That is a real improvement, and it is materially above net income of NIS 206.6 million. The gap mainly reflects NIS 340.1 million of depreciation and amortization, the reversal of NIS 261.0 million of property revaluation gains, and the fact that equity-accounted earnings hit the income statement before the cash is actually received from held companies.

So if 2025 is read through an all-in cash flexibility frame, two thoughts have to stay on the page together. First, this is a business that did generate cash: NIS 448.6 million from operations, alongside a rise in dividends and partner withdrawals received to NIS 144.6 million. Second, that is not “free” cash in the simple sense. The year also included NIS 184.3 million of reported CAPEX, NIS 68.6 million of lease-principal repayments, and NIS 1.398 billion of long-term debt repayments, partly offset by NIS 1.198 billion of new long-term borrowing. In other words, the company did improve its cash generation, but it still spent 2025 inside a refinancing year, not inside a surplus year.

That chart points to the right 2025 conclusion: not a huge excess-cash year, but a NIS 293.2 million reduction in net financial debt, a rise in cash to NIS 150.3 million, and an improvement in the equity-to-assets ratio to 37.3% from 33.2%. That is a real strengthening of the financial structure.

Debt came down, but it is still central to the reading

Group net financial debt fell to NIS 1.914 billion from NIS 2.207 billion. That is a 13.3% reduction, but it is still a level that requires discipline. The debt split matters: NIS 633.2 million in Infinia, NIS 379.9 million in environment, NIS 338.9 million in energy, and about NIS 581.3 million at the corporate layer.

The positive point is that there is no visible covenant stress today. In environment, the main covenant is net financial debt to EBITDA below 4.5. Infinia has three core tests, including equity of at least NIS 400 million and net financial debt to EBITDA below 4.5. At the solo-company level, the debt taken for the Infinia acquisition carries a max debt-to-EBITDA test of 4.5 and a minimum coverage ratio of 1.2, and the company met its thresholds.

The same is true at Veridis Power, which holds the OPC Israel investment and met its leverage and LTV tests. That matters because energy is exactly where it is easy to confuse paper value with accessible value. As long as financing stays orderly and dividends keep moving upstream, the model works. If either weakens, the entire reading of OPC’s contribution changes.

There is another layer in the parent loan. At year-end, the balance-sheet line for the parent loan stood at about NIS 149.3 million, and the company itself says it currently expects consolidated net financial debt to fall below NIS 1.2 billion by the end of 2027, which would trigger early repayment of the remaining balance. That is not immediate pressure, but it is a reminder that deleveraging is not a cosmetic target. It is part of a capital-structure path with explicit checkpoints.

The group also ended 2025 with about NIS 643 million of unused credit facilities, of which NIS 252 million were committed. That gives room to operate, but it does not change the fact that Veridis still lives on financial discipline rather than on excess capital.

Outlook

First finding: the real 2025 improvement sits in carton, not in consolidated operating profit. Strip out the NIS 261.0 million property revaluation gain, and operating profit falls back to about NIS 164.5 million, which is much closer to the 2024 run-rate than the headline suggests.

Second finding: the environmental business looks better economically than it looks in reported accounting. Before the support charge it grew well in both revenue and profit. After the charge it looks weaker.

Third finding: Ashkelon and OPC have shifted from investment-heavy assets to cash-upstreaming assets. That is probably the single most important development for the parent-layer reading in 2026.

Fourth finding: Hadera 2 and the Hadera land created clear accounting value, but that value is not yet cash until execution, financing and contractual visibility advance further.

What does that say about 2026? It looks like a proof year, not a breakout year. Not because there are no engines, but because every engine still has a different test to pass. Infinia has to prove that machine 4 can be filled without margin giveback. The environmental segment has to deliver at least one period without a new charge, a new regulatory headline, or a fresh support problem. Ashkelon has to progress inside the new tender while continuing to upstream cash through the current BOT term. OPC has to turn Hadera 2 from a value-creating headline into something with genuine visibility.

The quarterly chart is the cleanest way to avoid a bad annualized read. The third quarter leaned heavily on real-estate revaluation, while the fourth quarter is a much better picture of the true year-end state: carton is better than before but not immune, white paper is still dragging, and the environmental business is improving but not yet free of noise.

Over the next 2 to 4 quarters, the market is likely to focus on four checkpoints. First, whether carton profitability holds even if world pricing softens. Second, whether the support and regulatory file stabilizes rather than producing another charge. Third, whether Ashkelon advances inside the new tender while continuing to upstream cash until the current concession ends. Fourth, whether leverage keeps falling at a pace that starts to make the value in OPC and Hadera more accessible to shareholders.

Risks

Regulation is not a footnote here, it is part of the thesis

The Meshua investigation is still not open to the company’s review, and the file has moved from the police to the prosecution for review and decision. That means the market still does not know whether this will remain a legal overhang or escalate further. The petition over the cancellation of 2022 and 2023 support is also still open, and there is a separate process around the site’s business-license renewal.

That is not the whole regulatory picture. A draft price-control order for hazardous-waste treatment was also published in May 2025. Management currently says it does not expect a material effect, but it is another sign that the environmental business operates under a dynamic regulatory regime rather than inside a simple free-market setting.

Carton improved, but it is not insulated from global pricing and imports

Infinia is a strong local operator, but it is not an island. Prices for carton paper rolls in Israel are shaped by the import alternative. By the end of 2025, world OCC prices stood at about EUR 104 per ton, slightly below the historical average, and the filing directly links that decline to lower global paper-roll pricing. That is exactly why fourth-quarter profitability already softened.

In addition, while Infinia is the sole Israeli producer of carton paper rolls, it still operates in a structure where a local producer sells into a small number of domestic corrugator customers. The company is careful to note that none of them is material at the group level, but any industry built around one local producer and a small customer set will always feel changes in volume and pricing quickly.

Water and energy are good assets, but both still depend on the layer above them

The water segment relies on one asset, with a BOT term that ends in May 2027. The energy segment relies materially on OPC Israel and on the ability to move value upstream from it. Veridis itself identifies dependence on dividends from held companies as one of its special company-level risks. That is an important admission: even if the assets are good, the path from asset value to shareholder value is not automatic.

There is no covenant pressure today, but balance-sheet discipline still matters

The group met all its financial covenants at year-end 2025, which is clearly positive. But a company with NIS 1.914 billion of net financial debt cannot afford several quarters of strong reported earnings without matching cash quality. In Veridis, because of the multi-leg structure, that kind of gap can come from revaluation, consolidation mechanics, or regulatory reversal. So even when the numbers look better, the balance sheet remains part of the thesis.

Conclusions

Veridis is entering 2026 from a better place than it was a year ago. Carton has finally become a real improvement engine, Ashkelon has begun to upstream cash, and OPC is contributing more than before. But the thesis is still not clean, because reported 2025 profit still leaned materially on revaluation, while the environmental segment continues to carry an open regulatory thread that has not truly closed.

Current thesis in one line: Veridis is moving toward a stronger infrastructure-and-industry platform, but it is not there yet as long as environmental regulation stays unresolved and the value created in Hadera and OPC has not been fully converted into accessible cash.

What changed versus the previous way of reading the company is mostly Infinia. In 2024 it was easy to see it mainly as an integration burden and a white-paper drag. In 2025 it became an improvement engine, and the question shifted from whether Infinia can be stabilized to whether the improvement can be sustained as capacity ramps and pricing becomes less friendly.

Counter-thesis: 2025 may not be the start of a new earnings plateau at all. It may simply be a year in which property revaluation, upstream dividends from held companies, and the white-paper exit masked a still-leveraged group with too many open fronts at once.

What could change the market reading over the near to medium term is not another one-off number, but a sequence. One cleaner period in environment, continued debt reduction, visible Ashkelon progress, and a decent carton quarter without pricing help would give the thesis much stronger footing. On the other side, another regulatory setback, more Meshua noise, or a faster-than-expected squeeze in carton margins would quickly bring the skepticism back.

Why this matters: Veridis is no longer being judged mainly on whether it owns good assets. It is being judged on whether it can turn operating improvement, upstream distributions and accounting value into stable, accessible cash at the parent level.

Over the next 2 to 4 quarters, the thesis strengthens if three things happen together: Infinia keeps its profitability while filling more capacity, the environmental segment delivers numbers without fresh regulatory surprises, and net financial debt continues to fall in a way that strengthens the parent layer. It weakens if one of those three slips, and especially if 2025 turns out to have been more accounting-driven than cash-driven.