Albaad 2025: Europe Still Carries Revenue, but the 2026 Test Sits in Dimona and Cash

Getting To Know The Company

At first glance, Albaad looks like a straightforward global wipes story: reported sales rose 2.4% to NIS 1.762 billion, EBITDA from continuing operations rose 5.4% to NIS 216.6 million, and net profit from continuing operations jumped 51% to NIS 68.1 million. That is only a partial read. In 2025 Europe still carried most of the revenue line, but the real profit improvement moved upstream into fabrics, the layer where the group manufactures a large share of its own core input.

What is working now is the combination of three things: 5% organic growth in original currency, better manufacturing throughput, and leverage down to 2.02 times net debt to EBITDA. What is still not clean is the next step. The fabrics and Hydrofine lines in Israel already ran at full capacity, the new green-fabrics line in Dimona was still not in commercial operation, and the cash profile shows that growth investment is still heavy relative to what actually remains inside the company.

That is Albaad's active bottleneck going into 2026. The key issue is not pure end-demand and it is not whether the company knows how to manufacture. It is whether the Dimona expansion arrives on time and turns regulatory change in Europe into profitable demand. At the same time, the wipes business remains exposed to the euro, fabric costs and customer concentration, while the tampon business in the US enters 2026 with tariffs, a weaker dollar and a stressed viscose supplier.

There is also a practical actionability constraint. The stock is extremely illiquid: on the last trading day shown in the market data, turnover was only NIS 5,590, and short interest remained negligible. So even if the business read improves, this is not a name the market can reprice quickly through active trading. That matters because in a story like this, the path from operating improvement to market recognition may be slow.

The fast economic map for Albaad looks like this:

In practice, Albaad is three businesses sitting on one value chain. The first is wet wipes, produced in Israel, Germany, Poland and Spain and still responsible for most of the revenue line. The second is nonwoven fabrics and Hydrofine paper, produced in Mishuot Yitzhak and Dimona and used mainly as internal input. The third is tampons, produced in Caesarea and packed in Jordan, with the US as the main end-market. In that structure, the consolidated number does not always show where the real pressure sits. In 2025, pressure clearly shifted toward fabrics and capacity.

The operating footprint is wide. The group had 655 employees in Germany, 283 in Poland, 230 in Spain, 210 in Israeli wipes, 76 in fabrics at Mishuot Yitzhak, 52 in Dimona, 221 in Caesarea, 23 at headquarters and 16 in the US tampon activity. With 307 temporary employees on top, employment cost reached about NIS 349 million. Based on permanent headcount alone, revenue per permanent employee was just under NIS 1 million. That makes clear this is not a light commercial brand story. It is a global industrial system.

Events And Triggers

The key read around the report is that Albaad does not enter 2026 from a place of crisis. It enters 2026 from a place of partial improvement that still needs proof. That is exactly the kind of story the market may misread if it stops at the profit line.

The fourth quarter was stronger than the full-year headline

In the fourth quarter, sales rose only 1.3% to NIS 417.5 million, but operating profit before other income rose 35.3% to NIS 25.6 million, continuing EBITDA rose 20.9% to NIS 51.3 million, and net profit from continuing operations jumped 180% to NIS 18.3 million. Europe improved quarterly operating profit to NIS 20.1 million from NIS 16.7 million, and fabrics rose to NIS 6.2 million from NIS 2.0 million.

That matters for two reasons. First, it shows operating momentum entering 2026 is better than the full-year view alone suggests. Second, it explains why the market could read 2025 too quickly as if the margin issue were already solved, when the bigger tests are still open: what happens once the improved throughput meets the new line, and whether profit improvement stays in place without help from other income.

Dimona is no longer a side project

By December 2025 the company says it had invested NIS 187 million in the hybrid green line in Dimona, while the annual report describes about NIS 169 million of investment after roughly NIS 18 million were derecognized through the sale-and-leaseback structure. That gap matters because it shows the Dimona expansion is large enough to be both an operating move and a financing move.

At the same time, management explicitly listed completion and activation of the additional green-fabrics line in Dimona during 2026 as a group objective. Both the business description and the war-impact note say the project was materially delayed, first by the Swords of Iron war and then again by the Operation Rising Lion military campaign. This is not a technical delay. It is the central project that is meant to remove the bottleneck in plastic-free fabrics for Europe.

Europe is expanding, but also raising the execution bar

In Europe, the company completed an additional 2,500 square meter logistics site in Poland, completed installation of another wipes line that started operating in early 2026, and plans another wipes line during 2026. These moves improve service capacity and flexibility, but they also raise the proof burden. If the extra capacity translates only into volume and not into cleaner margins, the thesis stays stuck.

The dividend and the tariff program say two different things

In August 2025 the company declared a cash dividend of NIS 20 million, paid in October. That signals relative confidence and a desire to show stability. At the same time, the US tampon business moved into a less comfortable setting: from August 7, 2025, imports from Israel into the US faced a 15% tariff, and the company had to use pricing adjustments to mitigate the effect. In February 2026 those tariffs were cancelled under one legal route, only to be replaced immediately by alternative 15% tariffs for 150 days.

The combination of a dividend and a less friendly US market does not create a crisis. But it does sharpen the question of whether Albaad is presenting financial stability before the cash layer is fully cleaned up.

Efficiency, Profitability And Competition

The main story of 2025 is not simply "sales up, profit up." The story is that profit migrated inside the group. Anyone looking only at the consolidated line will miss that wipes, the largest business, actually saw weaker profitability, while fabrics, the supporting business, carried most of the improvement.

Wipes still drive revenue, but not the improvement

Wipes sales rose 2.7% to NIS 1.550 billion and 5.2% in original currency. That sounds healthy, except operating profit in the segment fell to NIS 98.1 million from NIS 109.1 million, and the margin dropped to 6.3% from 7.2%. Three things hit at once: higher wages, higher fabric costs charged from the group's own fabrics plants, and a weaker euro.

That is exactly the point a superficial reading can miss. Albaad is vertically integrated, so part of the pressure did not disappear. It moved between layers. When fabrics charge higher internal prices, the fabrics segment looks better and the wipes segment looks worse. For the shareholder, the key question is not which segment looks better in a presentation. It is whether the group as a whole is creating cleaner external value. In 2025 the answer is "to some extent, but not fully."

Competition is not light either. In Europe the company faces players such as Nölken, Dr. Schumacher, Nice Pak, Eco Wipes, Codi and Sapro. Albaad's advantage rests on multi-site manufacturing, in-house fabrics, logistics sites and backup between plants. That is a real moat, but it requires ongoing capital spending and strong execution. It is not a free advantage.

Fabrics were the 2025 profit engine, but also the 2026 dependency

Operating profit in fabrics jumped to NIS 45.5 million from NIS 10.3 million, and the margin rose to 13.1% from 3.2%. The company attributes that to better throughput in Mishuot Yitzhak and higher selling prices of fabrics to the group's wipes plants. In other words, the improvement in fabrics did not come only from a stronger outside market. It also came from a change in internal economics.

That does not make the improvement less real, but it does change how it should be read. On one side, it shows manufacturing investment and efficiency work are paying off. On the other, it means there is still no full proof that the group has created a new external profit engine, because part of the improvement reflects profit shifting inside the chain.

The more important datapoint is capacity. The Hydrofine line in Dimona and the Spunlace lines in Mishuot Yitzhak operated at full capacity in 2025. So the 2026 question is no longer whether there is use for plastic-free fabrics. The question is whether the new line can start on time, at the required quality, and without another round of schedule or capital slippage. If that happens, Albaad will be better positioned to serve European demand for plastic-free wipes. If not, the bottleneck stays in place.

Tampons grew in volume, but the quality of growth is more complex

Tampon revenue was almost flat at NIS 201.3 million versus NIS 201.8 million in 2024, but original-currency sales rose 6.5%. Operating profit fell to NIS 6.6 million from NIS 8.4 million, and the operating margin dropped to 3.2% from 4.2%. The main reasons were the weaker dollar and the US tariff impact.

Here the distinction between volume and quality matters. The company did adjust prices for US private-label customers to reduce the tariff effect, but that does not mean all of the burden was fully passed on. At the same time, one of the key suppliers of specialty viscose fibers fell into financial distress and announced it would cease operations during 2026. The company is already working with an alternate supplier and a second potential backup, but that adds friction exactly where the business was already under pressure from the market backdrop.

Customer stickiness is high, but contractual visibility is weaker

In wipes, 89% of sales come from customers that have worked with the company for more than five years. In tampons, the share is 84%. That points to high commercial stickiness. But at the same time, most agreements are short or order-based, quarterly forecasts are non-binding, and the company explicitly says the concept of formal order backlog is not meaningful for the business.

That is why concentration matters so much. The top three wipes customers already account for 59% of segment sales. In tampons, the top four customers account for 52% of segment sales. The relationships are long-term, but the contractual visibility is weaker than a simple "customer tenure" story may suggest.

Cash Flow, Debt And Capital Structure

Anyone reading 2025 only through the leverage slide could come away thinking the pressure phase is already over. Anyone reading the year through the cash bridge will see a less clean picture. The right lens here is all-in cash flexibility, not a narrow FCF bridge.

The right bridge includes all real cash uses

The company presents FCF of NIS 54.2 million, but that is a relatively narrow bridge: operating cash flow of NIS 127.5 million, minus lease-liability repayment of NIS 31.7 million, minus CAPEX of NIS 71.1 million, and plus NIS 29.5 million of interest paid. That is a useful way to show recurring cash generation before some uses, but it is not the same as showing how much cash was really left.

Under a stricter bridge, which is the more relevant one in a leveraged expansion year, the company has to absorb CAPEX, lease payments, the dividend and the final Optimal Care payment. On that basis, 2025 remains negative before outside financing sources.

That is exactly why lower leverage should not be confused with surplus cash. Operating cash flow fell from NIS 152.5 million in 2024 to NIS 127.5 million in 2025, partly because of roughly NIS 22 million of working-capital drag. Inventory rose to NIS 331.4 million from NIS 316.8 million, mainly because finished-goods inventory in wipes increased. The company itself explains that this reflected better throughput and the need to support sales growth. In other words, growth consumed capital rather than releasing it.

Leverage improved, but the funding layer is heavier than the headline slide suggests

At first glance, the debt side looks better. Total bank debt stood at NIS 449.3 million at year-end, cash was NIS 10.8 million, and the presentation shows net debt of NIS 438 million with net debt to EBITDA of 2.02 times versus 2.04 at the end of 2024 and 6.01 at the end of 2022. That is real progress.

But it is not the whole picture. The balance sheet also carries lease liabilities of NIS 252.9 million, of which NIS 33.2 million are current and NIS 219.7 million are long-term. So anyone trying to understand Albaad's true financing flexibility cannot stop at the bank leverage chart. The company did improve bank leverage, but it still carries a broad obligation layer across plants, warehouses and operating sites.

The reassuring part of the story is covenant headroom. Tangible equity stood at 35.1% of tangible balance sheet versus a minimum requirement of 23%, and the debt coverage ratio stood at 1.15 versus a maximum of 3.6. So as of year-end 2025, this is not a covenant-edge story. The less comfortable part is that the company still used refinancing to get through the year: it repaid about NIS 140 million of long-term loans, raised about NIS 117 million of new long-term loans, and increased short-term bank credit by about NIS 35 million net.

FX hedging reduces friction, it does not eliminate it

The company hedges part of the Israeli activity's exposure to the euro and the dollar. At year-end 2025, open hedges totaled about EUR 16.5 million at an average NIS rate of about 4.09, plus about EUR 15 million against the dollar at an average EUR/USD rate of about 1.17. In addition, about EUR 32 million of Israeli-company loans were designated as a hedge of the net investment in European subsidiaries.

That matters, but it is still not enough to offset the economic hit from currency. The average euro weakened 2.7% against the shekel and the average dollar weakened 6.7%. In wipes, the company attributes about a 2.5% revenue reduction to FX changes. In tampons, FX reduced reported revenue by about 6.5%. So even after hedging, Albaad's core engines remain meaningfully exposed to currency.

Outlook And Forward View

Four non-obvious points should shape the 2026 read:

• 2025 did not prove a breakout in wipes. It proved a profitability improvement through the fabrics layer.
• The company now shows a cleaner leverage ratio, but the cash cushion remains thin and the full cash bridge is still not clean.
• The new Dimona line is the center of the thesis, not a side project.
• Customer relationships are long, but visibility is still weaker than it looks because there is no binding backlog and concentration remains high.

2026 looks like a proof year, not a breakout year

The group objectives are clear: focus on wipes in Europe and feminine hygiene in the US, keep expanding through higher throughput, add to the European sales team, complete the additional green-fabrics line in Dimona, and strengthen financial resilience. That is a management framing that knows exactly where it wants to grow.

But it is still not a breakout-year setup. For 2026 to become a cleaner year, the company has to prove four things at once: real commercial start-up in Dimona, stable or better wipes margins in Europe, the ability to absorb tariffs and the viscose-supplier transition in tampons without deeper profitability damage, and better cash left after all real uses. Each one is plausible on its own. The problem is that they all have to happen together.

Dimona is meant to solve a real problem

The new Dimona line is meant to produce plastic-free fabrics and meet European environmental regulation. This is not only an expansion of capacity. It is the move that is supposed to connect market demand with Albaad's ability to remain vertically integrated in the next wipes category. If it starts on time and at the required quality level, 2026 could begin to look like the start of a structural improvement. If delays continue, 2026 remains an extended bridge year instead.

Europe has to prove profitable volume, not just volume

Europe remains the heart of the story. Across wipes and fabrics together, Germany generates NIS 610.9 million of sales, Spain NIS 203.9 million, France NIS 202.3 million, and other Europe another NIS 382.9 million. That geographic picture makes clear why the euro, regulation and capacity matter so much.

The issue is that the market will not pay for volume alone. The extra wipes line in Europe, the Polish logistics site and the larger sales effort are all sensible moves, but they have to translate into sales at better margins, not just higher availability. If the improvement comes through concessions, heavier working capital or permanent full-capacity strain with little operating slack, the positive read will start to wear down.

Tampons face a double test

In the US, Albaad remains a large private-label tampon supplier, but the market backdrop is less comfortable now. In 2025 the US share of tampon sales fell to 76% from 82% in 2024, brands regained strength, and the company had to adjust pricing to respond to tariffs. During 2026, a supplier transition in specialty viscose may add another layer. So even if volume holds, the real question will be how much profit remains after pricing and supply adjustments.

Risks

Concentration without a strong contractual shield

This is the clearest risk, and it is still easy to understate. In wipes, the top three customers are 59% of sales. In tampons, the top four are 52%. Relationships are long-term, but there is no binding backlog. That means Albaad benefits from customer stickiness without enjoying truly hard visibility.

FX, tariffs and suppliers

The euro and the dollar already hurt 2025 results. Part of the exposure is hedged, but not all of it. In the US, a 15% tariff layer was added on Israeli imports, and in 2026 the company also faces a real supplier-switch question in viscose.

Dimona is both the engine and the risk center

The new Dimona line is supposed to solve the green-fabrics bottleneck, but it has already been materially delayed. The larger the project becomes, the larger the cost of being wrong. Any further delay, cost overrun or quality issue could hit both the growth story and the cash-flexibility read.

Thin tradability

Low liquidity does not change the business, but it does change how the market reads it. With daily turnover measured in just a few thousand shekels and negligible short interest, market feedback is thin. So any reading of "market signalling" here has to stay more conservative.

Conclusions

Albaad ends 2025 in better shape than it was in two years ago, but still not in a clean state. What supports the thesis is better throughput, higher EBITDA, lower leverage and a clear strategic line around green fabrics and European capacity. What blocks a cleaner thesis is the cautious transition from operating improvement to accessible cash, together with the fact that Dimona still has not proved itself commercially.

In market terms, this is the kind of report that can be read too quickly as a full return to form. That would be a mistake. 2026 is the year Albaad has to show that profit improvement is not resting only on a temporary fabrics uplift and refinancing support, but on a value chain that can generate cleaner profitable growth even after the investment layer.

The main thesis right now is that Albaad is less leveraged and more efficient, but has not yet proved that the improvement has moved from operating optics into truly accessible cash. What changed versus the surface-level read is that the 2025 improvement came from fabrics, not from wipes. The strongest counter-thesis is that this caution is excessive, because the company already improved leverage, expanded European capacity, invested heavily in Dimona, and operates exactly where European regulation is pushing demand. That is a serious argument, but it still needs execution proof.

What could change the market reading over the short to medium term is a combination of three things: a clear statement that Dimona is in commercial operation, evidence that European wipes margins are no longer drifting down, and signs that cash left after CAPEX, leases and distributions is becoming genuinely positive. If that happens, the read improves quickly. If not, 2025 will look in hindsight like a successful bridge year, but still not a full proof year.

Why does this matter? Because at Albaad, value is not determined by revenue alone. It is determined by the ability to convert a vertically integrated industrial advantage into stable profit and cash that can actually reach shareholders. Over the next two to four quarters, Dimona has to start, European margins have to hold, the US tampon activity has to stabilize, and the post-use cash profile has to improve. What would weaken the thesis is another delay in Dimona, more erosion in wipes, or a situation where leverage optics continue to look better than the cash that is actually left in the business.