Raval in 2025: The Backlog Grew, but the Real Test Is Turning It Into Profit and Cash

Getting To Know The Company

At first glance, Raval can look like just another plastic auto-parts supplier. That is only part of the picture. In practice, this is a two-layered group with two very different engines. The first is Raval's automotive-systems segment, which sells fuel-tank venting systems, headlamp washers, and valves for braking systems. The second is Arkal, the structural-parts segment, which produces plastic structural parts for vehicles. All group products are exported, and the footprint is broad: 11 facilities across North America, Europe, China, and Israel, with about 1,220 employees at the end of 2025.

What is working now? The systems segment is still solidly profitable. In 2025 it posted revenue of EUR 108.2 million, segment profit of EUR 15.6 million, and a gross margin of 31.4%. At the group level, EBITDA was almost unchanged at EUR 32.7 million even though revenue fell 9.4% to EUR 200.7 million. In other words, the main profit engine still works, and the balance sheet is nowhere near distress.

But the picture is far from clean. All of the growth in framework backlog came from the structural-parts segment, while the more profitable systems segment actually shrank. At the same time, the structural segment still posted a segment loss of EUR 3.0 million even after improving versus 2024. That is the core of the story. Raval is no longer being tested by backlog size alone. It is being tested by backlog quality and conversion.

That makes the active bottleneck in 2026 something very specific. It is not covenant pressure, immediate liquidity stress, or a lack of capacity. It is the ability to turn Arkal's expanding framework backlog into operating profit and cash, while the systems segment tries to defend margins in a market shifting toward longer platform lives and a more gradual EV transition. The stock screen matters too: the latest daily turnover was only about ILS 21.6 thousand, and short float fell to 0.03%. In a name this illiquid, fundamentals can improve well before trading volume starts reflecting it.

Raval's economic map looks like this:

That third chart matters because it reminds the reader that Raval is not a local Israeli story. It is a global industrial company exposed to currencies, tariffs, and international customers. In this case, exchange rates, tariffs, and production-footprint shifts matter almost as much as demand.

Events And Triggers

The backlog grew, but in a very specific direction

Between January 1, 2025 and close to the report date, the group won new framework agreements and expansions to existing agreements worth a total of EUR 468.0 million. At the same time, exchange-rate changes between the euro, the dollar, and the yuan cut about EUR 70.1 million from the reported total. At the end of 2025 framework agreements stood at EUR 1.246 billion, and close to the report date they were still EUR 1.243 billion.

But the composition is what matters. Automotive systems declined from EUR 443.1 million at the end of 2024 to EUR 417.7 million at the end of 2025. Structural parts rose from EUR 652.8 million to EUR 827.9 million over the same period. So the group did not become uniformly better positioned. It became more exposed to the part of the business where profitability is still unproven.

This becomes sharper once conversion quality is tested. In automotive systems, actual sales as a share of framework agreements were about 96% in 2025 versus about 97% in 2024. In structural parts, that ratio fell to about 83% from about 97% a year earlier. The backlog is real, but its conversion is no longer automatic.

Stellantis showed how a large backlog can still be fragile

During the first quarter of 2025, Stellantis, a material customer of Arkal Canada, notified the company that it was lowering its expected binding orders to only about 50% of the total framework-agreement volume with Arkal Canada. The company received compensation of about EUR 950 thousand. That supported earnings, but it also exposed the central limitation of framework agreements: they provide direction, not certainty.

This is not a side note. It is a live example of how framework backlog can grow while still remaining economically fragile. Anyone building the 2026 thesis only on the total framework number is missing that point.

Tariffs and the production-footprint response

The United States announced a broad tariff program in early April 2025. As described at year-end, the company referred to 25% tariffs on cars and parts, 25% on China, 25% on Canada and Mexico outside USMCA coverage, and 15% on Israel and Europe. After the balance-sheet date, on February 20, 2026, the US Supreme Court ruled that existing law does not permit the broad reciprocal-tariff rollout, but on February 24, 2026 another order temporarily added 10% to most US imports for 150 days.

Raval says it still cannot quantify the impact. But it is already responding operationally. During the year an ICV machine was moved from Raval Europe to Raval USA in order to serve the US market and save import tariffs from Europe, and a manual FLVV/CFLVV line was moved from Raval China to Raval USA to support the same market. That may sound like a small operational detail, but it shows the company is already changing footprint rather than merely listing tariffs as a risk factor.

CFO transition

Einav Eliraz will finish her term as CFO on March 31, 2026, and Regev Biton will assume the role on April 1, 2026. Biton comes with finance leadership experience at General Electric in Israel and across EMEA. This is not a trigger that changes the production line, but it does happen right before a year in which currency management, debt discipline, contract conversion, and capital allocation will all have to stay tight.

Efficiency, Profitability And Competition

One profit engine, one growth engine

The gap between the two segments is the main story of 2025. The systems segment posted EUR 15.6 million of segment profit versus EUR 14.8 million in 2024, despite a 9.3% drop in revenue. Its gross margin improved to 31.4% from 28.7%. The structural-parts segment, by contrast, narrowed its segment loss to EUR 3.0 million from EUR 4.1 million, but it still stayed on the wrong side of break-even. Its gross margin improved to 11.0% from 9.6%, and even that was not enough to make the segment profitable.

The cash-generating side of the business still sits in fuel and braking systems. By contrast, the segment that is supposed to drive the next growth phase sits in structural parts, especially around metal-to-plastic substitution, electrification-related components, and frunk applications in electric vehicles. Right now those two engines are pulling in different directions.

Who paid for the margin improvement

The margin improvement did not come from higher volume. In automotive systems, the company attributes the stronger gross margin to lower raw-material costs, lower wage expenses, lower maintenance costs, a better sales mix, and hedging at higher euro-shekel exchange rates. So 2025 margins benefited both from cost relief and from currency protection.

That matters for two reasons. First, it means the report is better than the top line alone suggests. Second, it also means part of the margin improvement may prove less durable if raw materials or currencies move the other way. Profitability here was not built on demand recovery. It was built on pricing, mix, and operating discipline.

The fourth quarter makes that especially visible. Quarterly revenue fell to EUR 48.8 million from EUR 54.0 million, and EBITDA edged down to EUR 9.1 million from EUR 9.4 million. Yet quarterly gross margin improved to 24.3% from 21.8%. Anyone looking only at EBITDA could miss the gross-margin improvement, while financing costs still pulled part of that benefit back down.

Competition is telling a different story in each segment

In automotive systems, the company points to a market that is moving away from launching new platforms and toward extending the lives of existing ones, while the penetration of BEVs is progressing more slowly than it expected at the end of 2024. That temporarily helps fuel-system products, but it does not remove the long-term direction. The company also says that in China, local OEMs are becoming more dominant and price is the key variable there. That is a clear yellow flag: competition in systems is not getting easier.

In structural parts the picture is different. This is a broad, fragmented, highly competitive market with many global players, and the company says its own market share is very small. Yet this is exactly where it wants to grow, through smarter solutions, metal-to-plastic substitution, and the integration of electrical components into some products. The issue is that this growth still has not translated into a clean margin structure.

Cash Flow, Debt And Capital Structure

This is a case for all-in cash flexibility

In Raval's case, the key question is real financial flexibility. That is why the right frame here is all-in cash flexibility rather than normalized or maintenance cash generation. The company does not disclose maintenance capex, and the relevant issue is not how cash generation looks before uses of cash. It is how much cash actually remains after all real uses.

Cash flow from operating activities reached EUR 32.1 million in 2025 versus EUR 15.7 million in 2024. That is strong, and fairly so. But it also included a release of about EUR 4.9 million from net working capital. Against that, after EUR 9.7 million of investment, EUR 3.9 million of lease-principal repayment, EUR 3.7 million of dividends, and EUR 18.3 million of short and long bank-debt reduction, the year ended with a EUR 3.5 million decline in cash.

This is not a distress story. It is, however, a story about a company that chose to use operating cash flow to reduce debt and pay dividends, so the EUR 32.1 million operating-cash-flow figure cannot be read as freely available cash.

Working capital is telling a different story in each segment

In automotive systems, working capital was strongly positive at EUR 46.1 million. Inventory fell to EUR 21.8 million, and inventory days improved to 100 from 113, but customer days rose to 86 from 76. So the profitable segment is still extending more credit to customers even as inventory became leaner.

In structural parts, the picture is much less comfortable. Arkal ended 2025 with a working-capital deficit of EUR 2.6 million. Customer days actually improved to 68 from 72, but supplier days collapsed to 56 from 104, while inventory days rose to 83 from 65. That is easy to miss. The segment is not only still loss-making at the operating level, it is also running with a weaker working-capital profile.

That is why the Arkal question is not only whether the backlog grows, but also under what terms it is funded.

Bank debt is no longer the main issue, but leases and dividends belong in the picture

Cash and cash equivalents fell to EUR 27.7 million. On the other side, short-term bank credit declined to EUR 35.8 million and long-term bank loans fell to EUR 12.4 million. On a net bank-debt basis, Raval ended up at only about EUR 20.4 million. That also explains why covenants look comfortable: net financial debt to EBITDA stood at 0.7 against a ceiling of 5.0, and equity to total assets stood at 54.3% against a 25% threshold.

But there are two caveats. First, lease liabilities rose materially following EUR 13.8 million of new leases, and lease liabilities at year-end stood at EUR 23.5 million in non-current liabilities plus EUR 3.7 million in current liabilities. Second, after the balance sheet date the board already approved a dividend of ILS 25 million, about EUR 6.675 million. So the right conclusion is not "a clean balance sheet." It is "a balance sheet with real headroom, but also capital-allocation choices that need discipline."

There is also a genuine buffer. At the end of 2025 the company held a financial asset at fair value of EUR 6.231 million, and the derivatives note includes euro-shekel forwards maturing in December 2026 and December 2027 with fair values of EUR 5.55 million and EUR 6.23 million, respectively. That does not eliminate currency exposure, but it does provide a partial bridge for the next transition years.

Outlook

First finding: group backlog is larger, but the systems-segment backlog is smaller. That means the group is shifting away from the more profitable activity and toward the one that still needs proof.

Second finding: the 2025 margin improvement relied materially on raw materials, wages, maintenance, and FX hedging, not on volume recovery.

Third finding: Arkal already sits on a very large framework backlog, but actual conversion weakened, and 2025 gave a clear example of a major customer cutting its expected order flow.

Fourth finding: operating cash flow is strong, but cash fell on an all-in basis. So 2026 will be judged through capital discipline no less than through the income statement.

2026 looks like a proof year

This is not a clean breakout year, and it is not a rescue year either. It is a proof year. In automotive systems, the company needs to show that it can preserve profitability even while framework agreements decline, the Chinese market becomes more price-driven, and competition around ICE and hybrid platforms gets more complex. In structural parts, it needs to show that large framework agreements in Europe and North America are actually starting to convert into serial production with reasonable profitability.

Management is still building in systems around valves for hybrid vehicles, high-pressure valves, and flow-management solutions. In Arkal, 2026 is supposed to be a year of expanding the technological offering, integrating electrical components into some products, and deepening penetration in EV-related structural parts, especially around the frunk. These are real options, but at this point they are still options. They are not yet an earnings line.

What must happen over the next 2 to 4 quarters

The first requirement is operational improvement across Arkal sites. The company itself frames 2026 around continued improvement in operating performance at those sites. Without that, even EUR 827.9 million of framework agreements will not change the economics of the group.

The second requirement is stability in converting framework agreements into actual binding orders. After what happened with Stellantis, the raw framework number is no longer enough. The market will need to see better binding-order flow, especially in Europe and North America.

The third requirement is protecting systems margins. If 2025 profitability was partly supported by lower costs and hedging, investors will need to see how much remains if one or both supports weaken.

The fourth requirement is capital discipline. After the new dividend, the market will need to understand whether the company intends to keep reducing debt at a similar pace or retain more of its cash flow inside the business.

What the market may miss

The market could miss two opposite points. On one hand, it may see lower revenue and miss the genuine improvement in margins and debt. On the other, it may see a EUR 1.25 billion backlog and miss that the part that grew is exactly the part of the business that still has not proven profitability or conversion.

Risks

The first risk is backlog quality. Framework agreements are not binding orders, and firm orders are usually received only 4 to 8 weeks before supply. Even the structural-parts firm-order backlog stood at only EUR 12.0 million at the end of 2025 and EUR 12.9 million in March 2026. The company itself says this firm backlog is not material for the business.

The second risk is customer concentration. In the credit-risk note, the company identifies five customer groups whose relationship is material to the group's activity. In automotive systems, the top three customers accounted for 47% of segment sales in 2025. In structural parts, the company explicitly says there is dependence on two major customers, and 2025 already showed how one customer can move the conversion pace.

The third risk is currency and tariffs. The group is exposed to the dollar, yuan, Canadian dollar, and shekel, and part of profitability is either supported or eroded through that mechanism before the issue even reaches the production line. On top of that, a change in global trade conditions is no longer theoretical. It is already forcing the company to move lines.

The fourth risk is that Arkal's profitability is still too thin relative to accounting sensitivity. At the end of 2025, there were indicators of possible impairment in Arkal Spain, Arkal Germany, and Arkal China. No impairment was recorded, but the valuation cushions are not wide. In Spain, for example, the unit's value was EUR 7.7 million against net operating assets of only EUR 5.7 million.

The fifth risk is the TI appeal process. The company won dismissal in district court, but the appeal hearing is scheduled for June 8, 2026. Its legal advisers believe dismissal remains more likely, yet they still cannot estimate the financial exposure if the appeal were accepted.

---

Conclusions

Raval exits 2025 with a stronger balance sheet, but with a more complicated operating picture than the backlog number alone suggests. What supports the thesis today is a systems segment that still generates attractive profit, lower bank debt, comfortable covenants, and a layer of currency hedging that helps the next few years. What blocks a cleaner thesis is the shift in weight toward backlog inside the structural-parts segment, which still has not proven that it can turn this kind of growth into profit and cash.

Current thesis: 2025 made it clearer that Raval is a mix of one stable profit engine and one growth engine that still needs proof, so 2026 will be judged by backlog conversion rather than by backlog size.

What changed versus the older understanding of the company? It used to be easier to read Raval as an auto supplier with improving margins and a large backlog. After 2025, it is clearer that the group now rests on two different stories: automotive systems defending profit, and structural parts trying to generate the next leg of growth.

Counter-thesis: if Arkal improves operating execution and converts a larger share of framework agreements into production, and if the systems segment keeps its margin even without the same cost tailwinds, then 2025 may later look like a successful transition year rather than a ceiling.

What could change the market's short- to medium-term interpretation? Better evidence of binding-order flow at Arkal, stable margins in systems, and a capital-allocation stance that clarifies how much cash remains inside the company after the dividend.

Why does this matter? Because in Raval's case the key question is no longer whether there is backlog, but whether the backlog sits in the right layer of profitability and cash generation.

Over the next 2 to 4 quarters the thesis will strengthen if Arkal shows operating improvement, better order flow, and controlled working capital, while the systems segment protects its margin. It will weaken if another Stellantis-like event appears, if FX and raw-material support fades sharply, or if capital allocation becomes too aggressive relative to remaining cash.