Wilifood International: The Economics of the New Logistics Center and Whether NIS 120 Million Will Pay Off

The main article argued that Wilifood’s operating business improved, but the capital tied up in the new logistics center still shapes a big part of the 2025 read. This follow-up isolates only that question: does an investment of roughly NIS 120 million to NIS 125 million genuinely change the company’s distribution economics, or does it mainly replace an external operating cost with a heavy asset that will take years to justify.

What is already working is not the issue. Wilifood ended 2025 with NIS 124.2 million of cash, NIS 124.6 million of financial assets at fair value, and NIS 58.8 million of cash flow from operations. This is not a near-term funding-stress story. The bottleneck is different. The disclosed return case is still thin: opening is targeted only for the fourth quarter of 2026, the stated annual operating-expense saving is about NIS 10 million, and there is still no quantified bridge from the new capacity to revenue, margin, or utilization.

Three points matter most here:

• The direct payback based on what has been disclosed looks long. A project budget of roughly NIS 125 million against annual operating savings of about NIS 10 million implies a simple payback of around 12.5 years, even before the cost of capital and the waiting period until opening.
• Most of the stated saving is already largely explained by an existing expense line. External warehouse expense rose to NIS 8.477 million in 2025 from NIS 5.012 million in 2024. That means a large part of the story is replacing a growing outsourced storage burden, not necessarily creating a new profit engine.
• This is mainly a bet on the cold chain. Dry-storage capacity rises from 6,500 pallet spaces to 8,500, but chilled and frozen capacity each jump from 1,000 to 5,500. This is much less about adding another dry warehouse and much more about reshaping category mix.

What is actually being built

Wilifood already owns a logistics center in Yavne with 8,526 square meters. Alongside the current site, the company also uses what it calls free warehouses, where it is charged per container or pallet. That detail matters because the current model is partly variable: when activity rises, the expense rises with it, and when activity slows, the cost should ease. The new logistics center does the opposite. It converts part of that flexibility into fixed capital, so it needs strong utilization to generate a superior return.

Construction began in May 2023. In the investor presentation, management points to a fourth-quarter 2026 opening. The annual report says total project cost is estimated at about NIS 125 million, and the property, plant and equipment note shows NIS 98.33 million capitalized under the new logistics center as of December 31, 2025, after NIS 28.172 million of additions during 2025. If the budget holds, that implies roughly NIS 26.7 million still left to spend.

The presentation makes clear what the company is buying with that capital. Total capacity is expected to rise from 8,500 to 19,500 pallet spaces, an increase of about 129%. But most of the step-up comes from chilled and frozen storage, which together rise from 2,000 to 11,000 pallet spaces. This is not a modest operating upgrade. It is infrastructure meant to support a much larger temperature-controlled business, while management still provides strategy language rather than quantified economic targets.

The return test: where the case works and where it is still open

At the operating level, the rationale is easy to understand. External warehouse expense rose by about 69% in 2025 versus 2024, and the company also points to higher transportation and other logistics costs inside selling expenses. In other words, the new center is not solving a theoretical problem. It is a response to a real logistics burden.

But there is still a gap between operational logic and a high return on capital. The core disclosed numbers are these:

That chart explains why the compressed reading of "only a little is left to spend, and the savings will cover it quickly" is misleading. Yes, it is easy to build a shorter story against the roughly NIS 26.7 million still left to fund. But that is not how returns should be measured. Shareholders do not care only about the last check from here. They care whether the full capital already committed to the project will earn an attractive return. The right lens is the full NIS 125 million, not only the remaining outlay.

That leads to a two-part test:

• The replacement test: does the new center materially reduce external warehouse expense and also ease the transportation and logistics cost pressure that showed up in 2025.
• The expansion test: does the new capacity, especially in chilled and frozen products, fill up through categories that are profitable enough to justify turning a variable cost base into fixed capital.

Without the second test, the company mostly gets a defensive project: less dependence on outsourced storage and better operating control. That may still be sensible management. It does not automatically make it a high-return project.

What is still missing from the thesis

The presentation does provide strategic direction. It ties the center to improving the dry and chilled logistics system, entering new categories, and supporting expansion plans, especially in chilled and frozen products. That matters because it explains why management is willing to commit this kind of capital.

The problem is that the strategic step-up has not yet been translated into measurable economic targets. There is no revenue target attached to the new center. There is no utilization target. There is no bridge showing how much of the benefit should come from ending external warehouse usage, how much from distribution efficiency, and how much from expanding into more profitable categories. So on the numbers disclosed so far, the project is justified much more by operating logic and growth optionality than by a closed, measurable return case.

There is another subtle point here. Today the outsourced warehouses are billed per container or pallet. That is a cost that moves with activity. The new logistics center, by contrast, turns part of that cost into a fixed burden: capital already sitting on the balance sheet and, once operating, a more rigid internal cost structure that will include depreciation. The center therefore does not prove itself merely by making external storage expense disappear. It proves itself only if throughput is high enough and if the mix flowing through it is economically better.

Why 2026 will not settle the debate

Even if the company keeps to its timeline, opening is only targeted for the fourth quarter of 2026. That means a full-year savings run rate, if it materializes, cannot really be seen before 2027. At the same time, 2025 already showed two things: Wilifood can produce stronger operating profit, but the logistics chain is still expensive enough to support NIS 8.477 million of outsourced warehouse expense alongside higher transport and logistics costs.

That makes 2026 a classic bridge year. Most of the capital is already tied up, but the operating proof will still not be visible in full. In that setup, the market is unlikely to accept a simple "the investment is behind us" narrative. Any delay, any budget creep, or any sign that the move does not reduce costs as promised could carry more weight than usual.

There is also an obvious positive side. Wilifood is not entering this stage with a weak balance sheet. Alongside cash, its financial assets at fair value stood at NIS 124.6 million at the end of 2025, and the company also says it has unutilized bank credit lines. So the story here is not whether the company can fund the center. It is whether this allocation of capital will ultimately prove better than the alternative uses of that money.

That gap matters even more because 2025 financing cash flow was driven mainly by dividend distribution, and the company’s policy calls for an annual cumulative payout of at least 40% of net income. This is not a financing red flag. It is a hurdle-rate issue. The more cash a company keeps distributing while also funding a long-duration project, the faster shareholders will want proof that the project’s return is real rather than simply strategically appealing.

Bottom line

The new logistics center makes a lot of sense operationally. Wilifood is showing that the business is already relying in practice on outsourced storage alongside the existing site, that this outsourced storage has become materially more expensive, and that the company’s next expansion leg is far more about chilled and frozen products than about adding more dry space. That is the project’s strongest point.

But on the numbers disclosed through the end of 2025, this is still not a closed return case. It is a capital-allocation bet that still needs proof. NIS 125 million against a stated annual saving of roughly NIS 10 million is too thin a base to justify the project on cost savings alone. For the center to truly pay off, Wilifood will need to show three things almost together: that opening happens without a meaningful budget miss, that outsourced storage and related logistics costs really fall, and that the new capacity, especially in chilled and frozen products, translates into better sales and margins.

If those three things happen, the center can prove to be a step-change in Wilifood’s distribution infrastructure. If not, it may remain an expensive asset that looks strategically right but earns too slow a return for the amount of capital tied to it.