Novolog: What Actually Happened in Logistics After the SAP Go-Live
Novolog presents the SAP rollout as an issue that was stabilized by April 2025, but the logistics damage did not stop there. Even after ILS 14.9 million of one-off SAP costs and an ILS 6.2 million legal provision, the year still ended with lower managed activity, a fourth-quarter operating loss in logistics, and a sharp collapse in cash conversion.
What This Follow-up Is Isolating
The main article made a simple argument: as long as logistics does not return to generating stable service, volume, and cash, the improvement in health and digital does not change the thesis. This follow-up isolates one narrower question, whether the SAP transition was mainly a temporary go-live disruption, or whether it left deeper damage inside the logistics engine.
The company itself gives the two endpoints. On the one hand, system stabilization was completed in April 2025 and supply gaps to the market were bridged. On the other hand, 2025 still ended with an 11.7% decline in managed activity volume to ILS 6.35 billion, a 12.7% decline in logistics revenue to ILS 1.56 billion, an 88.6% collapse in logistics operating profit to ILS 6.1 million, and a fourth-quarter operating loss of ILS 3.6 million. In other words, the operational outage may have closed in April, but the business damage did not.
That is the key distinction. The go-live event was temporary. The damage to service credibility, customer relationships, legal cost, and cash conversion clearly lasted longer.
What Closed in April, and What Did Not
| Layer | What looks temporary | What remained after stabilization |
|---|---|---|
| Operations and service | January 6 go-live, process failures, external experts, and temporary use of other distributors | Information requests, complaints, and demands from customers and certain distribution partners |
| Commercial continuity | Pre-stocking before the go-live and April supply-gap recovery | Some products were shifted to competing distributors, and some agreements were changed or ended |
| Profit and loss | ILS 14.9 million of one-off SAP costs | Higher depreciation, lower ongoing revenue, and weak profitability even in the fourth quarter |
| Legal layer | The disruption itself began as an operating event | A class action followed, an ILS 6.2 million provision was booked, and the process remained open |
| Cash layer | No separate logistics cash flow is disclosed, so there is no clean segment cash statement | At group level, cash conversion deteriorated sharply and required more working-capital financing |
This table matters because it splits the word “SAP” into two very different problems. The first is a costly but finite operating disruption. The second is a slower-burn erosion, in which customers already react, legal cost already shows up, and cash already behaves as if the distribution engine lost reliability.
More Than Half the Damage No Longer Sits in “One-Off”
The sharpest number in the whole story is the operating-profit bridge for logistics. In 2024, the division produced ILS 53.6 million of operating profit. In 2025, that fell to just ILS 6.1 million. The company itself flags two items that are relatively easy to treat as exceptional, ILS 14.9 million of one-off SAP cost and the ILS 6.2 million class-action provision. Even after both of those items, about ILS 26.4 million of deterioration still remains.
That is the easiest point to miss. If more than half of the profit collapse remains even after stripping out the one-off cost and the legal provision, then 2025 cannot be dismissed as simple rollout noise. The report itself ties the broader deterioration mainly to lower ongoing revenue, higher depreciation after the SAP launch, and roughly ILS 4 million of pressure from dollar erosion.
The company adds even stronger language in the notes. Most of the remaining damage is attributed to lower ongoing revenue in 2025 because several customers shifted part of their product distribution to competing distributors as part of their own business-continuity actions. The directors’ report goes broader still, saying the decline in managed activity volume reflects not only temporary diversion during the rollout period, but also the termination or change of agreements with a small number of pharma companies. Once the problem moves from systems to products, and from products to contracts, this is no longer just an IT incident.
The company also makes clear that managed activity volume is its internal operating lens for reading logistics, even though the number itself is unreviewed and unaudited. That matters because it tells the same story as reported revenue, not a cleaner one: ILS 7.19 billion in 2024 fell to ILS 6.35 billion in 2025.
Year-End Still Does Not Look Like a Clean Recovery
Anyone who wants to read SAP as a first-quarter-only problem still has to explain the fourth quarter. Logistics revenue in Q4 fell 36.6% to ILS 308.2 million, operating profit swung from an ILS 13.1 million profit to an ILS 3.6 million loss, and EBITDA fell 26.3% to ILS 15.3 million. Even the gross-margin rate, while affected by gross-versus-net mix, declined from 6.8% to 6.2%.
This does not mean the system was still failing in technical terms. It does mean the economic damage from the SAP transition was not closed by year-end. If the April stabilization had quickly restored the business to normal, the fourth quarter should have looked cleaner than this. Instead, year-end still looks like an engine that is running, but on a narrower base and at much lower profitability.
When the Disruption Spills Into Customers, Litigation, and Cash
The report explicitly says the supply delays led to information requests, complaints, and demands from customers and certain distribution partners. That matters because it shows how quickly the problem moved out of the IT layer and became a service event in the market.
The legal line is no longer theoretical either. On May 11, 2025, a class action and certification motion were filed against the company and several multinational pharma companies, arguing that SAP-related supply disruptions harmed patients. The applicants estimated group damages at more than ILS 50 million, and the company recorded an ILS 6.2 million provision. By the report date, the sides had already reached an in-principle framework for a settlement. Even if the final amount stays close to the provision, this is already a real monetary cost of service failure, not just accounting noise.
This is also where the right cash bridge is all-in cash flexibility, meaning how much real flexibility remained after actual cash uses. The company does not disclose a stand-alone cash-flow statement for logistics, so this layer has to be read at group level. The link back to logistics is still explicit: the directors attribute the collapse in operating cash flow mainly to working-capital changes and the hit to ongoing activity during the SAP implementation and stabilization period.
| Group-level metric | 2024 | 2025 | Why it matters |
|---|---|---|---|
| Operating cash flow | ILS 158.5 million | ILS (0.7) million | The logistics problem moved from service into cash conversion |
| Average short-term bank credit | ILS 0.2 million | ILS 5.8 million | The company relied much more heavily on short-term working-capital funding during the year |
| Net finance expense | ILS 4.2 million | ILS 18.5 million | Working-capital strain had already become a P&L expense as well |
Put more directly, 2025 was already a year in which logistics consumed more financial oxygen. That is the difference between a go-live event that stays inside operations and a go-live event that keeps dragging commercial and financial consequences behind it.
Bottom Line
What actually happened in logistics after the SAP go-live was not just a January-to-April disruption. The technical disruption itself was temporary, but it lasted long enough to damage service, push part of the product flow to competing distributors, change or end some contracts, create a legal provision, and crush cash conversion.
The more accurate read of 2025, then, is not “the system went live and the story is over,” but a reset year for logistics. The platform stabilized, but the activity base, profitability, and cash flexibility did not return with it. To prove that the damage was truly temporary, Novolog needs to show three things together over the next 2 to 4 quarters: stabilization in managed activity volume, a clear return to positive quarterly operating profit in logistics, and no further leakage into the legal or funding layers.
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