Mendelson Infrastructures: How Dependent the Distribution Model Really Is on Receivables, Inventory and Credit Insurance
Mendelson reported NIS 109.9 million of operating cash flow in 2025, but NIS 24.1 million of that came from working-capital release, mainly lower inventory, lower receivables and higher supplier payables. The One Stop Shop model still rests on NIS 420.5 million of receivables, NIS 267.6 million of inventory and credit insurance that covers only about 60% of open balances.
What This Follow-up Is Isolating
The main article already set the broader business frame. This follow-up isolates the balance-sheet engine behind Mendelson's One Stop Shop model. This is not primarily a story about an immediate collections problem. It is a story about a large distributor that has to keep broad inventory available, extend relatively long customer credit, and bridge those timing gaps through supplier credit, bank funding, equity and, in part, credit insurance.
The cash framing here is all-in cash flexibility, meaning how much cash is left after the period's real cash uses. That is the right frame because the question is not only whether the company earns a profit, but how much capital has to be committed in order to keep the shelf, the customer and the timing gap between them funded.
- First finding: At the end of 2025 the group carried NIS 420.5 million of receivables and NIS 267.6 million of inventory against NIS 202.1 million of supplier credit. Even after a release year, net operating working capital still stood at about NIS 486.0 million.
- Second finding: NIS 24.1 million out of NIS 109.9 million of 2025 operating cash flow came from working-capital movements. Most of that came from lower inventory, lower receivables and higher supplier payables.
- Third finding: Credit insurance supports stability, but it does not replace capital. At year-end it covered about 60% of open balances, which means roughly 40% of the book remained outside that umbrella.
Where The Model Really Needs Capital
Mendelson keeps inventory across its branches in order to supply quickly. That is central to the commercial offer, but it is also why the balance sheet has to work hard. Imported inventory is typically held for about 2 to 6 months, while inventory sourced locally is usually held for about one to two months. On the customer side, the average credit period on goods sales is about 120 days, and the working-capital table presents 121 days.
The year-end numbers make the funding structure clear. Net receivables stood at NIS 420.5 million, inventory at NIS 267.6 million and supplier credit at only NIS 202.1 million. That means suppliers finance an important part of the model, but far from all of it. Supplier credit covers less than half of the receivables book and less than one third of receivables plus inventory together.
The asymmetry in credit terms matters as much as the balances. Customers receive 121 days on average. Domestic suppliers provide 151 days on average, but foreign suppliers provide only 58 days. So local suppliers do create breathing room, while the imported part of the model closes much faster and requires earlier funding. That is not a technical footnote. It is the core reason why a high-availability distribution model is not balance-sheet light even when revenue looks healthy.
Management also describes the financing mix directly: bank credit, supplier credit and equity sources. That matters because distribution models are often described as if suppliers fund the whole structure. Here they clearly do not. Suppliers are one leg of the structure, not the structure itself.
2025 Benefited From Working-capital Release, Not From a Lighter Model
Operating cash flow reached NIS 109.9 million in 2025. On first read that looks strong against net income of NIS 46.8 million. But once the bridge is opened, NIS 24.1 million of that cash flow came from working-capital movements. That is about 22% of operating cash flow and more than half of net income for the year.
The composition of that NIS 24.1 million matters more than the headline:
| Component | 2025 cash-flow effect | What it means |
|---|---|---|
| Lower receivables | NIS 3.5 million | Slightly less cash left open at customers at year-end |
| Lower other receivables | NIS 6.2 million | Additional release from the operating asset layer |
| Lower inventory | NIS 11.9 million | The main source of the release |
| Higher suppliers and service providers | NIS 6.5 million | More funding from suppliers |
| Lower other payables | -NIS 3.8 million | Offset part of the support |
Almost 90% of the working-capital support in 2025 came from lower inventory, lower receivables and higher supplier payables. That is the key point. 2025 does not prove that the model stopped consuming capital. It shows that in this specific year the model released some capital back.
That is also why it would be wrong to read 2025 as a structural easing year. At year-end, even after that release, net operating working capital still stood at about NIS 486 million. So the cash-flow tailwind was real, but the capital base sitting underneath the model remained very heavy.
In all-in cash terms, that operating cash flow also did not pile up into a large cash cushion. Cash and cash equivalents ended 2025 at NIS 16.7 million, down from NIS 19.9 million a year earlier. At the same time, investing cash outflow was NIS 8.6 million and financing cash outflow was NIS 104.5 million. In the directors' report, management explains that these uses included short-term debt repayment, dividends, and a combined bundle of interest payments, loan repayments and lease-liability repayments of about NIS 55 million. The report does not split the lease component separately here, but it does make clear that the cash generated during the year was already committed to real uses.
Credit Insurance Supports Stability, But It Does Not Replace Capital
The book itself does not currently look like it is deteriorating sharply. About NIS 402.0 million of receivables were not yet due, which means roughly 95.6% of the net balance. Receivables overdue by more than 120 days fell to NIS 3.6 million from NIS 7.1 million a year earlier, and the allowance for credit losses declined to NIS 17.2 million from NIS 23.3 million.
So the issue is not that the receivables book currently looks broken. The issue is that the book is very large and has to be actively managed all the time. The company reviews customers, requires collateral, sets credit limits and insures part of the exposure. Credit insurance is part of that control system, but it does not cover the entire book. With coverage at about 60%, roughly 40% of open balances remain outside insurance.
There is another nuance here. A low current-year expense ratio does not mean zero credit friction. The company says doubtful and bad debt expense was about 0.09% of sales in 2025, down from 0.23% in 2024 and 0.45% in 2023. But the allowance movement also shows that NIS 7.1 million of bad debts were written off during 2025, while the provision recorded during the year was only NIS 0.9 million. The right reading is not that the company is facing a collections crisis. It is that credit management remains a live process, with write-offs, insurance, collateral and monitoring, precisely because the balance is this large.
What To Watch From Here
The next phase depends less on whether Mendelson can sell and more on whether it can grow without rebuilding the same working-capital wall. Three tests will decide that in the next reports.
- First test: whether inventory stays under control if activity strengthens. 2025 benefited from an NIS 11.9 million inventory release. If that line reverses, part of the cash-flow support disappears with it.
- Second test: whether receivables start growing faster than revenue. A NIS 420.5 million book with 121-day customer credit can look stable, but even a modest deterioration in collections discipline moves cash flow quickly.
- Third test: whether supplier terms and credit-insurance coverage remain supportive. Any shortening in supplier terms, especially on imports, or any decline in coverage would hit the model's funding flexibility directly.
Bottom Line
This continuation changes the center of gravity of the discussion. The key risk here is not an immediate collapse in collections quality. It is the fact that Mendelson's distribution model rests on a very large receivables book, heavy inventory and a control system that is only partly funded by suppliers and only partly protected by credit insurance. Supplier credit helps, but it does not fund the whole structure. Credit insurance protects, but not all of it. That is why 2025 looks like a year in which working capital helped cash flow, not a year in which working capital stopped being the core bottleneck.
If over the next 2 to 4 quarters the company can keep inventory discipline, customer days stable and insurance coverage broadly similar, even without another working-capital release, the read on the model improves. If inventory and receivables start expanding faster than the support coming from suppliers and insurance, the balance sheet becomes the story again before the income statement does.
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