Zanlakol: Why 2025 Profit Still Does Not Fully Turn Into Cash
Zanlakol ended 2025 with ILS 46.9 million of net profit, but year-end cash fell to roughly ILS 2.0 million. Inventory swelled to ILS 146.5 million, about ILS 40 million of receivables were still factored out, and after CAPEX, lease principal, dividends and buybacks the all-in cash balance moved ILS 26.5 million into the red.
Where The Cash Gets Stuck
The main article already made the broader point: Zanlakol finished 2025 with growth and profit, but not with the same strength in the cash balance. This follow-up isolates only the cash-quality question: how does a company that reports ILS 46.9 million of net profit end the year with just ILS 2.0 million of cash and only about ILS 3.1 million of net liquid assets.
The answer is not bad collections. That reading is too soft. Trade receivables actually fell from ILS 91.9 million to ILS 87.7 million, and average customer credit days shortened from 60 to 51. The pressure sits elsewhere: more inventory on the balance sheet, less supplier funding underneath that inventory, and continued distributions while the operating cycle still needs financing.
That is also why Zanlakol's positive working capital, ILS 112.3 million, should not be read as excess liquidity. The company itself describes working capital as being driven mainly by inventory, receivables and payables. In other words, this is a funded operating cycle, not spare cash waiting to be distributed.
The Real Cash Bridge
To read 2025 properly, the right frame here is all-in cash flexibility. Stopping at operating cash flow is not enough, because the real question is how much cash remains after the period's actual uses. Once the bridge is framed that way, the gap between profit and cash no longer looks like a one-off distortion. It looks structural.
The first leg of that bridge is not even disastrous on its own. Operating cash flow came in at ILS 42.6 million against ILS 46.9 million of net profit. That is weaker than the prior year, but still not a collapse. The sharper reading emerges only when the same bridge is taken all the way down: ILS 29.5 million of property and equipment investment, ILS 4.9 million of lease-principal cash, ILS 20.0 million of dividends, ILS 5.9 million of buybacks, and ILS 8.8 million of net bank-debt repayment. The year therefore ended with a cash decline of ILS 26.5 million.
What matters even more is that the company did not stop there. After the balance-sheet date, the board approved another ILS 14 million dividend, and the company still maintains a policy of distributing at least 60% of annual net profit, subject to liquidity and board approval. So cash conversion is no longer a technical cash-flow-statement question. It already feeds directly into how hard the company keeps pushing distributions.
Where Working Capital Drags
Working-capital changes absorbed ILS 26.6 million in 2025. This is where the easy reading breaks down. The problem was not receivables. As noted, customer credit actually improved. The drag came from inventory and suppliers.
Inventory rose by ILS 15.8 million to ILS 146.5 million, while trade payables fell by ILS 10.5 million to ILS 110.1 million. The same story shows up in days: supplier credit days fell from 115 to 93. Put simply, Zanlakol carried more finished product while receiving less natural funding support from suppliers to carry it.
The internal composition of inventory makes this more important. Out of the ILS 146.5 million balance, ILS 132.7 million was finished goods and only ILS 13.8 million was raw materials and auxiliaries. That is the core point. The cash is not mainly tied up in raw materials that can be dialed back easily. It is tied up in goods already produced and waiting to be sold through the cycle.
The business-description section also explains why. The company says average finished-goods holding ran at about 132 days in 2025, and explicitly links that figure to the vegetable business, where raw-material supply and production are concentrated in short agricultural seasons while finished-goods stock serves sales until the next season. The dairy business is described very differently: raw milk is held only for current production, and finished goods are generally kept at minimal levels covering only a few days of activity. The most supported reading is therefore that the heavy group inventory number sits mainly in the vegetable business, the segment where the company itself ties inventory days to agricultural seasonality.
Factoring Is A Valve, Not A Fix
This is where the balance sheet starts to look cleaner than the underlying economics. The company continues to factor customer receivables, and at year-end the balance of discounted receivables not yet collected stood at about ILS 40 million. On top of that, trade receivables are presented net of the receivables already discounted. So the receivables line on the face of the balance sheet is not the full picture of how much invoiced activity still needed funding support.
The critical line in the note cuts the other way: the bank has no right of recourse against the company if a customer does not pay. So this should not be framed as ordinary hidden bank debt. But it should not be ignored either. Economically, the factoring line still tells the reader that the cycle needs an invoice-monetization mechanism to keep liquidity comfortable.
Put more directly, factoring is not the disease. It is the symptom. It does not create the inventory build and it does not restore supplier days. It only softens the near-term cash effect. When year-end cash is just ILS 2.0 million and around ILS 40 million of receivables has already been sold out through factoring, it becomes hard to argue that the operating cycle is fully self-funding.
What Has To Change In 2026
The first trigger is inventory. No one should expect vegetable inventory to disappear, because seasonality is part of the model. But the company does need to show that inventory stops growing faster than the rate at which it can be monetized, especially on finished goods.
The second trigger is trade terms. If supplier funding stabilizes or improves, the pressure on cash can ease even without a sharp jump in profit. If supplier days keep tightening, Zanlakol will have to fund more of the cycle on its own.
The third trigger is capital allocation. As long as the company is spending almost ILS 30 million on CAPEX, paying lease principal, distributing dividends, approving another dividend and buying back shares, any discussion of earnings quality has to go through the cash left after all of that. If the payout pace is aligned with actual cash generation, the read on 2026 can improve quickly. If not, Zanlakol may remain profitable on paper but still short on cash in practice.
That is why the key 2026 question is not whether Zanlakol can keep earning money. It probably can. The real question is whether it can do so while releasing inventory, without leaning more heavily on factoring again, and without distributing cash as if the balance-sheet cushion were already strong. Only then does profit start to turn into cash in a convincing way.
Disclosure: Deep TASE analyses are general informational, research, and commentary content only. They do not constitute investment advice, investment marketing, a recommendation, or an offer to buy, sell, or hold any security, and are not tailored to any reader's personal circumstances.
The author, site owner, or related parties may hold, buy, sell, or otherwise trade securities or financial instruments related to the companies discussed, before or after publication, without prior notice and without any obligation to update the analysis. Publication of an analysis should not be read as a statement that any position does or does not exist.
The analysis may contain errors, omissions, or information that changes after publication. Readers should review official filings and primary sources before making decisions.