Raval: Operating Cash Flow Looked Strong, So Why Did Cash Fall?
Raval generated EUR 32.1 million of operating cash flow in 2025, but after investment, lease-principal repayments, dividends, and bank-debt reduction, cash still fell to EUR 27.7 million. This is not a balance-sheet distress story. It is an all-in cash-flexibility story showing that the real cushion is tighter than the operating-cash-flow line suggests.
Why The EUR 32.1 Million Line Does Not Tell The Whole Story
The main article on Raval focused on the operating question: can Arkal turn backlog into profit. This follow-up isolates the capital-allocation layer. If operating cash flow reached EUR 32.1 million, why did the cash line still fall to EUR 27.7 million?
The answer starts with the measurement frame. This is not a normalized pre-allocation cash-generation read. It is an all-in cash-flexibility read: how much cash was actually left after the year's real uses. Once investment, lease-principal repayments, dividends, and bank-debt reduction enter the picture, the gap disappears. Raval generated cash, then deployed it almost immediately.
That matters now for a simple reason. On March 19, 2026, the board approved another ILS 25 million dividend, about EUR 6.675 million. So the argument is no longer whether 2025 was a year of solid operating cash flow. The real question is how much capital room remained after all uses, and what that leaves for 2026.
The Real Cash Picture
The bridge below starts from reported operating cash flow, so it does not subtract interest and tax a second time. It does, however, include the cash uses that actually moved through the year.
| 2025 cash picture | EUR million | Why it matters |
|---|---|---|
| Operating cash flow | 32.1 | A strong operating line |
| Investing cash flow | (9.7) | Spending on property, plant, equipment, and intangibles |
| Lease-principal repayment | (3.9) | A real cash use, not just an accounting note |
| Dividend paid | (3.7) | The May 2025 cash distribution |
| Cash left before bank-debt reduction | 14.8 | The first real layer of flexibility |
| Bank-debt reduction | (18.3) | EUR 9.2 million of long-term debt paydown plus EUR 9.1 million lower short-term credit |
| Change in cash | (3.5) | That is why cash fell to EUR 27.7 million |
The mistake is to treat EUR 32.1 million as free cash. After investment, leases, and the paid dividend, Raval had only about EUR 14.8 million left before management's decision to push bank debt lower. Once that last step is included, the cash decline stops looking surprising.
There is also a subtler point here. Working-capital movements added a net EUR 4.888 million to operating cash flow. That does not make the cash flow less real, but it does mean part of the strong number came from balance-sheet support, not only from the operating line itself. Anyone extrapolating the full EUR 32.1 million as a repeatable free-cash run-rate for 2026 may be overstating the picture.
Bank Debt Fell Fast, But Lease Burden Moved The Other Way
On one level, this is exactly why the cash decline does not read like financing stress. Gross bank debt fell to EUR 48.1 million from EUR 66.9 million at the end of 2024. Even on a net-bank-debt basis, the picture improved to roughly EUR 20.4 million from roughly EUR 34.4 million a year earlier.
But stopping there misses another liability layer. Current lease obligations stood at EUR 3.737 million, and non-current lease liabilities stood at EUR 23.464 million. Together that is about EUR 27.2 million, almost the same size as the cash balance itself. In 2024 the same layer was only about EUR 18.2 million. So Raval reduced bank debt while simultaneously carrying a larger lease stack.
The lease note sharpens the point. During 2025, right-of-use additions totaled EUR 13.785 million, while negative cash flows from leases were EUR 3.878 million and lease-interest expense was EUR 937 thousand. Put differently, Raval did pay about EUR 3.9 million on leases, but the lease base itself grew faster than the cash repayment line would suggest.
This is not distress. It is also not proof of surplus cash. It is the picture of an industrial company allocating capital in three directions at once: investing, deleveraging bank debt, and carrying a lease layer that has rebuilt.
Covenants Are Far From Stress, Which Makes The Dividend A Choice
If there were any doubt about whether the cash decline was driven by lenders, the covenant note gives a fairly clear answer: the headroom is wide.
| Financial covenant | 2025 result | Requirement | Read |
|---|---|---|---|
| Equity to total assets | 54.3% | At least 25% | Far from pressure |
| Tangible equity | EUR 89.0 million | At least EUR 25 million | Wide capital cushion |
| Net financial debt to EBITDA | 0.7 | No more than 5.0 | Very comfortable |
| Ratio of 50% of inventory plus 70% of receivables to short-term credit | 5.75 | At least 1.0 | Well above the floor |
| Framework agreements | EUR 1,245 million | At least EUR 500 million | Activity cushion, not a bottleneck |
That is why the post-balance-sheet dividend matters so much. The company paid a dividend of ILS 15 million, about EUR 3.726 million, in May 2025. Then on March 19, 2026 the board approved another ILS 25 million, about EUR 6.675 million. That new dividend is larger than 2025 net profit of EUR 4.558 million, and it is roughly a quarter of the year-end cash balance.
This does not mean the company is distributing beyond its capacity. If anything, it suggests the board sees enough balance-sheet room to support it. But that is exactly where the gap opens between "strong operating cash flow" and "wide cash flexibility." Once the company chooses to reduce debt, carry a larger lease load, and authorize a larger dividend, the 2026 cushion becomes tighter than the operating-cash-flow line alone implies.
What Has To Happen Now
The report itself does not point to immediate liquidity pressure. Covenants are wide, bank debt is lower, and the company clearly showed it can produce cash. But the next question is no longer whether Raval can generate EUR 32 million of operating cash flow in a good year. It is whether in 2026 it can generate enough cash to support investment, carry leases, honor a larger distribution, and still avoid a renewed rise in short-term debt.
That is why the 2026 focus has to stay double-layered. First, does operating cash flow remain strong without another similar working-capital assist. Second, does Arkal's backlog start converting into cash, not only accounting revenue. If both answers are positive, the 2025 cash decline will look like a reasonable capital-allocation choice. If not, the larger dividend will look more aggressive.
Bottom Line
Raval did not lose cash because the business broke. It lost cash because in 2025 management spread operating cash flow across investment, leases, dividends, and debt reduction. That is a material difference.
The thesis here is simple: operating cash flow was good, but true cash flexibility was much smaller. That means 2026 will be judged not only on whether Raval can generate cash, but on whether it can keep enough of it inside the business after all commitments and capital-allocation choices.
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