Sugat 2025: The Core Improved, but the Big Profit Came From the RMI Settlement and 2026 Is Already Crowded

Getting To Know The Company

Sugat is no longer just a sugar, rice, and legumes brand sitting on the shelf. It is a broad food platform with two real engines, retail and industry, six plants, a nationwide logistics system, and very strong positions in staple kitchen categories in Israel. What clearly worked in 2025 was the operating core: retail revenue rose to NIS 650.9 million, retail contribution jumped to NIS 198.9 million, gross profit rose to NIS 184.6 million, and operating cash flow climbed to NIS 109.5 million.

But this is exactly where a superficial read can go wrong. Anyone looking only at operating profit of NIS 165.7 million and net profit of NIS 107.2 million could conclude that Sugat simply moved to a higher earnings level. That is only partly true. Most of the jump in reported operating profit came from the RMI land settlement, which created a one-off NIS 91.1 million lease-modification gain, together with NIS 50 million of cash already received and a discounted future compensation asset booked on the balance sheet. This is a real event with real value, but it is not the same as recurring operating improvement.

The active bottleneck has changed. Before the IPO, the main question was balance-sheet pressure and financial flexibility. After the IPO, which brought in NIS 349.3 million net and enabled aggressive debt repayment, the bottleneck moved to execution and capital allocation. In 2026 Sugat has to manage the Dvir logistics move, the Filtuna acquisition, a possible additional food deal, and an investment in salt-flake technology at the same time. This is no longer just a stable food company. It is a newly public food platform that has to prove its new optionality does not turn into overload.

That matters now because of the kind of business Sugat actually is. It does not have the kind of backlog that protects a project company, and the model is built around availability, inventory, distribution, and shelf control. In retail, delivery times range from hours to a few days. In industry, most business is based on rolling orders. So the 2026 test will not run through a “strong backlog.” It will run through the company’s ability to preserve availability, contribution, and cash while many strategic moves are running in parallel.

There is one more layer the market could miss: actionability. Sugat may have a full float, but on April 3, 2026, daily trading turnover was just NIS 19.6 thousand. That is not a side point. Even if the thesis improves, the translation of value into market price can still be slow and uneven because actual trading liquidity is very weak.

The Economic Map In Brief

The right way to read Sugat starts with understanding that this is a very local, multi-category food business with an important gap between reported segments and the real economic engine. Formally, there are two segments, retail and industry. In practice, there are three engines that matter: the core branded staple products in retail, the industrial and institutional sales platform, and the salt value chain, which is both a product business and a real operating infrastructure asset.

What is holding the business up right now is the combination of brand strength, logistics reach, and category leadership. Based on StoreNext data, Sugat held 55.4% share in sugar, 51.6% in rice, 37.8% in legumes, 79.6% in salt, 24.3% in cooking oils, and 26.2% in premium tuna in 2025. In salt the picture is even stronger, because the company explicitly says it is the declared monopoly in edible salt.

The three clearest advantages are these:

• Brand power and staple-category leadership, 4.5 out of 5: In categories like sugar, rice, and salt, Sugat still sits in positions that are hard to attack on price alone.
• Logistics and national reach, 4.0 out of 5: The model depends on fast, broad distribution, and that is a real moat when business runs on rolling orders rather than backlog.
• Salt value chain economics, 4.0 out of 5: Industrial and retail salt benefit from self-production, lower exposure to FX and shipping, and structurally better contribution than sugar.

Against that, the three main risks are already visible inside the year:

• Earnings-quality distortion, severity 4 out of 5: 2025 looks cleaner in the P&L than the underlying business really is.
• Execution and capital-allocation crowding, severity 4 out of 5: Dvir, Filtuna, a possible additional deal, and new salt technology all arrive within the same window.
• Weak trading liquidity, severity 3 out of 5: Even a better story can still get stuck in the market when daily turnover is negligible.

Events And Triggers

The first trigger: the RMI settlement is the accounting core of the 2025 story. The company signed a final, binding agreement in November 2025, and it received court approval the next day. Under the agreement, salt-production activity in Eilat will gradually move to Ein Evrona over seven years and in two stages. In return, Salt Haaretz Eilat will receive NIS 240 million from RMI according to milestones and will pay RMI NIS 60 million for the replacement land and usage rights. In 2025 alone, NIS 50 million was already received in cash, and the company recognized a discounted present value of NIS 161.8 million for the remaining compensation. The practical meaning is double-sided: real economic value was created to help fund the relocation, but a NIS 91.1 million gain was recognized immediately even though the cash and the operational execution are spread over years.

The second trigger: the IPO changed the capital structure faster than any operating move. The company raised NIS 349.3 million net, repaid NIS 180.6 million of long-term bank debt, eliminated NIS 69.6 million of shareholder bonds, and reduced short-term bank credit by NIS 140.9 million net. By year-end 2025 total bank debt had fallen to NIS 67.3 million from NIS 322.4 million a year earlier. That is real improvement. But it does not erase the whole liability layer, because the company still had NIS 113.3 million of lease liabilities, NIS 41.1 million of acquisition obligations, and NIS 11.3 million of minority-holder loans.

The third trigger: Dvir still sounds like a positive future catalyst, but for now it is mainly a transition-period trigger. The new site is meant to sit on roughly 42 dunams, with about 25 thousand square meters built, and to increase pallet capacity from 7,900 to 17,800. The company presents about NIS 20 million of annual savings, a total project cost of NIS 270 million to NIS 300 million, and Sugat’s share of roughly NIS 136 million. The problem is timing. The original delivery date was March 2025, and in March 2026 the company was told that delivery was now expected in September 2027. That means Sugat will continue for quite a while with the rented Kiryat Gat site, rising lease costs, and a logistics center the company itself describes as capacity-constrained.

The fourth trigger: right after the balance-sheet date, Sugat accelerated capital allocation. On January 4, 2026, it signed a binding agreement to acquire 100% of Filtuna for NIS 55 million, with most of the consideration paid in cash and the rest through a pre-closing dividend from Filtuna. On January 29, 2026, it signed a non-binding principles document regarding a potential control acquisition in another local food company, with estimated revenue of NIS 250 million to NIS 300 million, EBITDA of NIS 30 million to NIS 40 million, and a valuation of NIS 200 million to NIS 300 million. On February 17, 2026, it also added a deal with Landa Labs to acquire industrial equipment for salt flakes, together with an option to receive shares in the producer upon an exit event. These are not the same type of move. Filtuna is binding and relatively near-term. The second deal is still conditional and uncertain. Landa is a technology option. But together they send a clear message: management is not content to merely polish the balance sheet. It wants to build a broader platform.

Efficiency, Profitability, And Competition

The central insight is that Sugat did improve operationally in 2025, but the real improvement is much smaller than the headline jump. Gross profit rose 10.6% to NIS 184.6 million, contribution rose 10.8% to NIS 275.6 million, and the investor presentation shows profit from operations before one-offs at NIS 73.2 million versus NIS 57.9 million in 2024. That is a good step up. It is simply not the same thing as NIS 165.7 million of reported operating profit.

Retail Is The Engine That Is Working Now

Retail is where Sugat looks the cleanest. Revenue rose 2.1% to NIS 650.9 million, while contribution jumped 14.7% to NIS 198.9 million. In other words, this was not just more volume. It was better segment economics. The fourth quarter showed the same pattern, with contribution of NIS 69.1 million versus NIS 60.3 million in the comparable quarter.

That connects directly to brand strength. In the key categories, Sugat still commands shelf positions that are difficult to rebuild. In the Israeli kitchen it remains a name that travels across sugar, rice, legumes, salt, oils, and specialty flour. The fact that the business is mainly local is not a weakness here. It is part of the advantage. This is a system that knows the customer, the chains, the peak seasons, and the delivery logic very well.

But there is also a cost to that strength. The Israeli food market grew in 2025 mainly through pricing rather than real demand, and the company itself notes that the real-volume change in the market was negative 0.3%. So not every improvement in retail should be read as if Sugat is running through a powerful consumer-demand cycle. Part of the story is brand, part is availability, and part is a price environment that still helps nominal revenue more than underlying volume.

Industry Fell In Revenue, But Not In Contribution

The industrial segment tells a very different story. Revenue fell 6.9% to NIS 288.6 million, but contribution still edged up to NIS 76.7 million. In plain terms, Sugat sold less in that segment, but did not earn less from it. That suggests the decline did not come from operating deterioration, but mainly from pricing and product mix.

The number that explains this is sugar. Sugar sales in the industrial segment fell from NIS 132.2 million to NIS 102.4 million, while salt sales were roughly stable at NIS 94.0 million versus NIS 91.4 million. The company explicitly says industrial salt products benefit from self-production, non-material exposure to shipping and FX, and structurally better contribution than industrial sugar. That is the difference between revenue and economics.

Another important point is customer structure. The industrial segment has 907 customers, and most of the business is in Israel and the Palestinian Authority. There is no single anchor customer carrying the story. What carries it is the value proposition of availability, tailored packaging, bulk sugar, different salt applications, and fast logistics. So here too the moat is not a patent or a backlog. It is the operating system.

Profitability Improved, But The One-Off Item Paid For The Headline

The most important gap in the report sits between gross profit and operating profit. Gross profit improved by NIS 17.7 million. Selling and marketing expenses rose by NIS 3.0 million, and G&A actually declined by about NIS 0.6 million. That is a decent operating improvement, but it does not explain an operating-profit jump of more than NIS 112 million. The real explanation is the “other income, net” line, which swung from an expense of NIS 5.0 million to income of NIS 92.4 million.

This is the core of the story. The company is better, but the report looks better than the company. That is why the right way to read 2025 is through the combination of pre-one-off operating profit, contribution, gross profit, and cash flow, not through the bottom line alone.

Cash Flow, Debt, And Capital Structure

The cash-flow story is better than before, but less clean than it first appears. The company posted NIS 109.5 million of operating cash flow in 2025 versus NIS 61.8 million in 2024, and year-end cash rose to NIS 103.1 million. Anyone looking only for direction will see a sharp improvement. Anyone looking for quality has to go further inside.

The All-In Cash Picture

Here I am using the all-in cash picture, not a normalized one. In other words, how much cash was left after the main cash uses that actually took place. On that basis, 2025 looks far narrower than operating cash flow alone suggests.

Customer credit rose to NIS 185.6 million from NIS 179.7 million, and the board report explains this mainly through changes in trade terms with several customers. At the same time, supplier days increased to 66 from 57, and 33.4% of the supplier balance at year-end was linked to supplier-financing arrangements. So part of the cash-flow improvement also came through working-capital management, not only through cleaner earnings.

This chart matters because it sharpens the gap between “cash flow was strong” and “a lot of cash was left over.” In the all-in cash picture, after lease principal, CAPEX, the associate investment, the Popstar acquisition, and the minority dividend, almost nothing was left before financing moves. That does not make the year weak. It makes it a rebuilding year rather than an easy free-cash year.

On the other hand, if the numbers are read through the normalized frame management presents, the picture is more positive: adjusted EBITDA of NIS 115.2 million, adjusted net profit of NIS 65.7 million, and net operating cash flow of NIS 95.3 million. Those numbers are useful, but they come with three caveats. First, they are not IFRS. Second, they neutralize, among other things, the RMI gain, lease-accounting effects, and IPO-related costs. Third, they still do not change the fact that in actual cash uses, 2025 was a very busy year.

Debt, Leases, And Covenants

The good news in the capital structure is clear. Short-term bank credit fell from NIS 238.3 million to NIS 56.8 million, long-term bank loans fell from NIS 84.1 million to NIS 10.6 million, and shareholder bonds were fully repaid. The company explicitly says the move was part of a policy to improve the capital structure and reduce financing costs.

But anyone stopping there will miss two things. First, lease liabilities are still large at NIS 113.3 million, against right-of-use assets of NIS 210.8 million. Second, the covenant picture may be calmer than before, but the company is still negotiating with its banks to update covenants and collateral after becoming public. In other words, the balance sheet is cleaner, but not finished.

There is also an FX layer that should not be ignored. At the end of 2025, the company still had a EUR 10 million on-call loan at Euribor plus 2.15%, taken to fund an investment in a foreign associate, with EUR 7 million of that designated as a hedge of the net investment. This is not a major balance-sheet risk anymore, but it is a reminder that alongside sugar, rice, oils, and shipping, Sugat still lives inside an FX world, not only inside a domestic shekel story.

Forecast And Outlook

Before getting into the numbers, here are four less obvious points that matter for 2026:

• The 2026 budget was not built on today’s commodity backdrop. The company explicitly says sugar exchange prices kept falling after the 2026 budget was set.
• The 2026 financing-expense budget was set before IPO proceeds were received. That means the financing line may prove easier than the budget suggests, even if product-price conditions are harder.
• The Dvir upside is not included in the 2026 budget. The company explicitly says the expected EBITDA improvement from the move was not built into the budget.
• 2026 is not a clean harvest year. It is a year that has to prove the core, absorb an acquisition, decide whether to pursue another one, and manage a large logistics project that has already been delayed.

This Looks More Like A Transition Year Than A Breakout Year

According to the investor presentation, the 2026 budget calls for NIS 977.0 million of revenue, NIS 129.3 million of adjusted EBITDA, NIS 72.3 million of adjusted net profit, and NIS 104.4 million of net operating cash flow. On paper, that is a decent continuation, especially in adjusted profitability.

But that direction sits on two opposing forces. On the one hand, the balance sheet is much lighter, so financing costs may come in better than the budget implies. On the other hand, sugar prices kept falling after the budget date, and the company itself says revenue is materially affected by global sugar prices. It does hedge sugar through futures, so there is no simple one-for-one hit to profit. But there is a real risk to the top line and to how the market reads it.

The Big Question Is Not Whether There Is Growth, But Where It Will Show Up

If Filtuna closes, Sugat will add a tuna and spreads business with 2024 sales of NIS 117.8 million and EBITDA of NIS 14.0 million, based on seller data. That fits the stated strategy of broadening categories and extracting more from the existing sales and distribution platform, but it also raises the execution burden. At the same time, the non-binding principles document already points to a larger target, with NIS 30 million to NIS 40 million of EBITDA and a valuation of NIS 200 million to NIS 300 million. If that move matures, Sugat will shift very quickly from a story of one focused integration to a story of capital allocation at a new scale.

That means 2026 is not a year in which “keep doing well” will be enough. It is a year of choices. Whether the cash goes mainly toward Dvir, mainly toward acquisitions, or toward a difficult combination of both. Whether management uses the cleaner balance sheet to grow aggressively, or first uses it to prove the core as a public company. That is the real gap between created value and captured value.

What Has To Happen Over The Next 2 To 4 Quarters

First, the market needs cleaner quarters, where pre-one-off profit, gross profit, and cash flow all move in the same direction. As long as the gap between the operating core and the bottom line remains too large, it will be difficult to build a stable read.

Second, retail has to keep improving contribution, not just preserve revenue. Sugat proved in 2025 that it still has brand power and shelf power. The next step is to show that this strength also holds in a softer pricing environment.

Third, the company needs to keep Dvir on a clear execution path. One delay has already happened. If further delays show up, the whole logistics-efficiency story gets pushed out again while Kiryat Gat rent keeps running.

Fourth, management has to show discipline in deals. Filtuna can still fit quite neatly into the platform. A second, larger deal would already require a much fuller explanation around funding, returns, integration pace, and balance-sheet consequences.

Risks

The first risk is confusing accounting profit with repeatable profit. As long as the RMI settlement still sits above the numbers, it is too easy to assign 2025 a higher earnings quality than the business actually produced.

The second risk is working capital supported by unusually favorable terms. When customer credit rises because of trade-term changes, while supplier days rise together with heavier supplier-financing use, the question becomes whether 2025 was simply a good year, or also a year in which more working capital was used to preserve momentum.

The third risk is real execution crowding. Dvir, Filtuna, a possible additional deal, salt flakes, and the continuing Eilat-to-Ein Evrona transition. Each of these moves makes sense on its own. All of them together create managerial congestion.

The fourth risk is the gap between value created and value accessible to shareholders. The RMI settlement created both accounting and economic value, but the compensation is milestone-based and the company also has to pay NIS 60 million and rebuild infrastructure. This is not cash that simply sits free in the bank on day one.

The fifth risk is the practical constraint in the stock itself. Even if the company improves, very low trading volumes can keep the stock less efficient in price discovery. That is not a business risk, but it is clearly a market-reading risk.

Conclusions

Sugat ends 2025 as a better food company than it was a year earlier. Retail is stronger, contribution is higher, the balance sheet is cleaner, and the platform is broader. That is the side supporting the thesis. The main blocker is elsewhere: reported earnings are inflated by the RMI settlement, and the company enters 2026 with too many simultaneous moves that all require cash, management time, and execution discipline. What will shape the market’s near- to medium-term reading is not whether Sugat knows how to sell food. That is already fairly clear. The question is whether it can translate the stronger operating platform into cleaner earnings, credible cash flow, and capital allocation that does not re-crowd the balance sheet.

Current thesis: Sugat enters 2026 with a better operating core and a lighter balance sheet, but the coming year is mainly a test of earnings quality, Dvir, and capital allocation.

What changed versus the earlier read: the center of risk moved from leverage and debt toward execution, capital work, and transactions.

Counter-thesis: the cautious read may be understating a real improvement, because the retail core did get better, debt fell sharply, and the RMI settlement together with Dvir could create a materially more efficient platform within a few years.

What could change the market’s reading in the short to medium term: cleaner quarters without one-off distortions, closing Filtuna without funding strain, or, on the other side, a large additional deal that drags the story back toward leverage and return-on-investment questions.

Why this matters: Sugat is moving from a food company judged mainly on leverage and brand ownership into a public company with many options. The key question is no longer whether it has brands and distribution. It is whether all of that also converges into clear common-shareholder economics.

What has to happen over the next 2 to 4 quarters: show that core earnings and core cash move together, close Filtuna without losing discipline, keep Dvir on track, and prove that the new cash is not dispersed too quickly across too many initiatives.