Hamama 2025: Profit improved, but cash got stuck in inventory as the company heads into a different business

Getting to Know the Company

Hamama is an importer, distributor and marketer of dry food. It has about 45 product families, roughly 400 customers, 35 employees, a large logistics center in Kiryat Gat, and a supplier network of about 100 parties across the world and in Israel. Operationally, this is still a familiar trading business: it buys commodities, holds inventory, supplies quickly, and lives on its ability to bridge global suppliers and local customers.

But anyone reading the 2025 report as if Hamama were just another public food importer misses the main point. On December 28, 2025, the company signed a merger agreement with Ultra Finances, and under that deal the current food activity and the inventory are meant to be sold to a third party. So the 2025 report is both a report on a business that improved and a report on a business that may already be on its way out.

What is working now is the operating core. Revenue rose to NIS 249.8 million, gross profit increased to NIS 26.0 million, gross margin improved to 10.4%, operating profit jumped to NIS 14.8 million, and net profit reached NIS 14.9 million. The current ratio improved to 2.34, and the company says it has no dependence on any single supplier. This was not a weak year.

What is not clean is the path from profit to cash. Operating cash flow fell from positive NIS 27.6 million in 2024 to negative NIS 7.5 million in 2025. Receivables rose by NIS 5.2 million, inventory jumped by NIS 17.8 million to NIS 101.9 million, and short term bank debt almost doubled to NIS 29.0 million. That means the earnings improvement did not become greater funding flexibility.

The capital structure is not telling a simple story either. Based on the last price of 553.5 agorot and 14.37 million shares outstanding, market value is around NIS 79.5 million, versus equity of NIS 106.9 million. That is not a clean cash discount. Actual cash on hand is only NIS 5.3 million. Most of the equity sits in receivables, inventory, and an operating asset base that still has to fund itself and may also need to be sold as part of the transaction.

There is also a practical actionability constraint. On the last trading day, turnover was only about NIS 12.9 thousand. So even if the transaction starts to look attractive on paper, the trading liquidity itself does not give shareholders much room to move.

Four non-obvious findings right at the start:

• Operating profit improved, but not only because trading got better. A meaningful part of the improvement came from lower G&A, lower director compensation, and lower doubtful-debt expense.
• Net profit looks strong, but the financing layer helped a lot. The company moved from net finance expense of NIS 4.2 million to net finance income of NIS 1.0 million, mainly because of FX and lower dollar interest.
• On an all-in cash flexibility view, there was no spare cash left. After operating cash flow, capex, leases and loan repayment, the company needed more short term bank debt just to end the year with cash roughly unchanged.
• The 2025 report is already a transition report. If the Ultra deal closes, Hamama's only activity will be Ultra's non-bank credit business, not food trading.

Hamama's economic map looks like this:

This chart matters because it shows two things at once. First, 2025 really was a better year in profitability terms. Second, revenue growth alone does not explain the jump in earnings. The gap between top-line growth and the rise in profit tells you that 2025 also depended on procurement conditions, FX, financing, and tighter overhead.

Events and Triggers

The first trigger: the Ultra transaction turned Hamama into a transition vehicle. Hamama is meant to acquire all of Ultra in exchange for issuing shares and options that would give Ultra holders 55.26% of the company on a fully diluted basis. If the tender offer is fully answered, that figure rises to 76.85%. At the same time, Hamama is supposed to publish a contingent tender process to sell the food business and its inventory, and close a self tender of at least NIS 50 million while leaving at least NIS 30 million of net cash in the company. This is not cosmetic. It is a change of identity.

The second trigger: the route to closing is still not finished. The mutual due diligence period was extended by another 15 days through March 28, 2026. Ultra is supposed to deliver by April 15, 2026 a prospectus-style outline, board report and financial statements, and Hamama then has up to 14 days to publish a meeting notice with all of the actions required for the deal. If the conditions precedent are not satisfied by September 30, 2026, unless jointly extended, the agreement expires.

The third trigger: the interim period is not neutral. Until closing or termination, the company agreed not to issue new securities, not to approve new compensation terms for officers, not to hire new employees, and not to enter new loans or new credit lines unless both sides agree otherwise. For a business that carries large inventory and relies on financing flexibility, that is not minor legal language. It is an active bottleneck.

The fourth trigger: the operating business itself is still sending mixed signals. Order backlog stood at NIS 27.4 million at year-end 2025, and by the time of the report it had already risen to NIS 36.0 million, with a heavy concentration in the second and third quarters of 2026. That is a positive signal for the food business, but the company also says that most orders are placed on short notice, so backlog is not a full proxy for future sales.

What matters here is not just the size but the shape. If the current activity is indeed on a path to sale, 2026 still needs to deliver operating continuity, not just wait for the transaction. A backlog concentrated in mid-year gives some breathing room, but it does not solve the funding question or the monetization question.

The fifth trigger: the logistics base itself is also in a transition zone. The lease agreement for the logistics center with a related party expired on December 31, 2025, and no new agreement had been signed by the date of the report. In practice, the company continues to use the warehouses at the same rent. In February 2026 it had already vacated a 656 square meter warehouse. The business is still running, but on a temporary contractual footing.

Efficiency, Profitability and Competition

The core takeaway is that the 2025 improvement was real, but not as clean as the net-profit headline may suggest. Revenue grew by only 2.5%, but gross profit rose by 16.0% and operating profit jumped by 78%. That is a much sharper move than the top line, so it needs to be broken down.

What really drove gross profit

The revenue increase came mainly from replenishing inventory shortages that existed at the end of 2024 and the start of 2025, along with better market conditions. At the gross-profit level the company benefited from three drivers: a weaker dollar, better direct gross margin, and lower sea-freight expense. Those are real drivers, but some of them are external and not evidence of deep competitive advantage.

The offsetting items also grew. Inventory write-down expense rose to NIS 4.451 million from NIS 3.163 million a year earlier. The year-end allowance stood at NIS 3.903 million. On top of that, container detention costs rose by NIS 1.455 million. So even in a stronger year, inventory was still charging rent.

Why operating profit rose faster than gross profit

Part of the operating-profit jump did not come from better commercial execution but from a leaner overhead base. Selling and marketing expense rose by only NIS 293 thousand, mainly because of replacing salespeople and higher credit insurance. But G&A fell by NIS 2.856 million. The company attributes that to the departure of the previous CEO at the end of 2024, lower director compensation after the active chairman's term ended, and a NIS 714 thousand reduction in doubtful-debt expense.

That matters. Not all of the 2025 improvement is deep operating improvement. Part of it is cleanup in the overhead layer and the normalization of prior costs.

This is still an industry with low barriers

The company itself describes a market in which customers import directly to save costs, customer loyalty is low, and competition is driven mainly by price, availability, and delivery speed. Many customers work on a just-in-time basis, holding low inventory themselves and pushing that burden onto the supplier. That is exactly why inventory is both Hamama's commercial edge and its funding burden.

Hamama does have some real advantages: a broad product basket, quality-control capabilities, a diversified supplier base, and the ability to hold stock and respond quickly. But these are execution advantages, not a deep moat. The company itself says entry barriers are relatively low, and that customers importing directly pressure industry margins.

The product picture sharpens the point. No single product carries the whole company, but large commodity categories do. Rice is 15.2% of sales, pistachio is already 11.2%, chickpeas are 10.5%, and everything else together is 56.1%. That is decent spread, but it also reminds you that margin is built across the basket rather than around one protected product.

The customer side is also clear. 97.1% of 2025 revenue came from the commercial market and only 2.9% from the Palestinian market. In credit-risk terms that is better than one might fear, but in bargaining-power terms it means Hamama lives almost entirely on local commercial demand, including organized retail that pushes pricing down.

Cash Flow, Debt and Capital Structure

This is the section where the story actually breaks. Hamama needs to be read through an all-in cash flexibility frame, not only through operating cash flow. The key question is not whether net profit improved, but how much cash was actually left after all of the business's real cash uses.

The real cash picture

In 2025 the company ended with negative operating cash flow of NIS 7.518 million. Reported capex was only NIS 149 thousand. Total negative lease-related cash flow was NIS 6.930 million, of which NIS 6.200 million was lease principal and NIS 730 thousand was lease interest. The company also repaid NIS 649 thousand of long-term bank debt.

In other words, before new short-term bank borrowing and before releasing the pledged deposit, the company's full cash picture was negative by roughly NIS 14.5 million. Only a NIS 13.736 million increase in short-term bank debt and a NIS 360 thousand release of the pledged deposit closed most of that hole, leaving year-end cash down by only NIS 420 thousand.

This chart is the heart of the thesis. Profit jumped, but the cash did not stay inside the business. The bank funded the year in practice, not customers and not operating surplus.

Where the cash got stuck

The NIS 5.197 million increase in receivables was fairly reasonable relative to revenue growth. The main problem was inventory, which increased by NIS 17.817 million to NIS 101.890 million. The company explains that as replenishing shortages that existed at the end of 2024 and the beginning of 2025, and that is plausible, but it does not change the cash meaning: more capital got trapped on shelves or on the way.

Average inventory days rose to 185 from 154 in 2024. Customer credit days were 95, almost unchanged, but supplier credit days fell to 36 from 62 in 2024. That is exactly the kind of dynamic that makes the business more cash-intensive even in a year of better earnings.

This chart adds an important layer. Not only did inventory grow, its structure changed. Inventory at the port, in cold storage and in bonded warehouses jumped from NIS 3.5 million to NIS 31.7 million, while inventory in transit fell from NIS 35.5 million to NIS 20.4 million. That means a larger portion of the stock had already landed in Israel and was now carrying storage, detention and funding cost.

What you see here is that the structural gap between customer credit and supplier credit never went away. It simply changed shape. Customers still get far more time than suppliers give the company, and the business still requires heavy working capital.

The debt structure is not numerically tight, but it is bank-dependent

Hamama has NIS 45 million of credit lines. At the end of 2025, NIS 29.3 million was used, and near the report date that had already fallen to NIS 25.2 million. On one hand, that means the year-end peak did not stay permanently stuck in the balance sheet. On the other hand, it confirms that day-to-day funding depends on flexible bank lines rather than excess cash.

The good news is that the company is not subject to financial covenants. The less comfortable news is that the credit agreements include Cross Default, dividend restrictions, and fixed and floating charges on the company's assets and insurance rights. That means Hamama's funding margin depends mainly on the banks' willingness to keep funding an inventory-heavy model, not on a covenant ratio that is nearing a threshold.

FX exposure also remains meaningful. At the end of 2025 the company had net dollar liabilities of roughly NIS 32 million. A 1% interest-rate move affects pre-tax profit by NIS 262 thousand. That is not an existential risk, but it is large enough to alter the comfort of the funding profile.

The logistics asset and the lease behind it are both in transition

Right-of-use assets fell from NIS 12.9 million to NIS 7.6 million, and lease liabilities fell from NIS 14.3 million to NIS 8.9 million. At first glance that looks like balance-sheet relief. In practice, the Kiryat Gat logistics center, which is a critical operating asset, sits on a lease that already expired, and the company continues to use it without a newly signed agreement. So the accounting relief does not remove the operating dependence.

Outlook

Four points should frame 2026 right now:

• This looks like a transactional bridge year, not a normal steady-state year for a food trader.
• What the market needs to see is working-capital release, not just the preservation of profit.
• The Ultra deal requires real monetization of the current business, not only strategic agreement on paper.
• If the deal slips, Hamama is still left with a competitive trading business, heavy inventory, and high bank dependence.

From a timetable perspective, the next milestone is the completion of due diligence and the delivery of Ultra's materials. From an economic perspective, the more important milestone is different: the current business has to show that it can release cash, or at least stop absorbing more working capital, while the public company is locked in a transitional transaction period.

That is the interesting contradiction in Hamama. If you only look at the 2025 annual report, you can argue the business improved and reaches the transaction from a stronger base. If you look at the deal structure, you realize that the same improved business now has to do two things at once: keep operating and make room for a completely different future company.

The requirement for a self tender of at least NIS 50 million while leaving at least NIS 30 million of net cash in the company means the deal depends on generating substantial liquidity out of the current business. At the end of 2025 there was only NIS 5.3 million of cash on the balance sheet. So the challenge is not only legal or regulatory. It is also operational and cash-based.

What has to happen over the next two to four quarters for the thesis to improve? First, inventory days need to come down and bank usage needs to stop rising. Second, the company needs either to regularize the logistics-center framework or to show a clear path for reducing dependence on it. Third, the Ultra deal has to move from extensions to execution, including documents, shareholder approval, and a process to sell the current business. Fourth, the legacy business cannot be forced to seek new credit precisely while the agreement limits that option.

What would weaken the thesis? Another due-diligence delay, difficulty selling the food business and inventory on reasonable terms, or another year in which profit looks better but cash does not get released.

Risks

The first risk is heavy inventory in an industry with low barriers to entry. Hamama itself says availability is part of its commercial edge, but that availability costs money. When prices fall or the market is oversupplied, inventory not only weighs on cash, it also demands write-downs.

The second risk is bank-funded operating dependence without much strategic slack. True, there are no financial covenants. But there is Cross Default, there are asset charges, and the economics of the business depend on short-term bank lines. That is less a ratio risk and more a lender-willingness risk.

The third risk is receivables exposure that is not fully covered. About 74% of receivables are insured by credit insurance, but credit extended to customers in the Palestinian territories is not insured and is not backed by collateral. On top of that, the company is pursuing debt claims and collection proceedings against former customers totaling roughly NIS 15 million, even if it says appropriate provisions have been recorded.

The fourth risk is operational and related-party dependence in the same place. The critical logistics center in Kiryat Gat is leased from a related party, the agreement expired, and the company continues to use the site without a newly signed contract. That does not have to explode, but it is also not a clean setup.

The fifth risk is transaction uncertainty and deep dilution. Even if the current operating business keeps running, shareholder value now depends on tax approvals, TASE approval, court approval, possible Capital Market Authority approval, a self tender, the sale of the current business, and no material adverse change through closing. That is a long conditions-precedent list.

The sixth risk is governance that is not entirely frictionless. In 2025 shareholders did not approve the controlling shareholder's CEO employment terms and did not approve renewals for relatives of the controlling shareholder, and later monthly pay of NIS 14,058 for each of two relatives of the controlling shareholder was approved under the companies regulations, at a level described as matching the average wage in the economy. That is not necessarily a stand-alone material event, but it does remind investors that the management story is not free of friction.

Conclusions

Hamama ends 2025 with a more profitable food business and a real earnings improvement. That is the positive side. Gross profit rose, operating profit jumped, finance expense turned favorable, and equity increased to NIS 106.9 million.

But the report also makes clear that the main bottleneck is no longer accounting profitability. The bottleneck is the ability to turn inventory, receivables and working capital into cash while the public company has already committed itself to a transaction that would change its identity. So the market will not measure only whether Hamama earns more. It will measure whether Hamama can actually release itself.

Current thesis in one line: Hamama proved in 2025 that it can earn better money in food trading, but it has not yet proved that it can turn that profit into cash and use it to execute an orderly transition into the Ultra transaction.

What really changed is that the question around Hamama is no longer whether the food business can produce profit. The question is whether it can self-fund, release working capital, and stay stable enough to be sold without erasing its own economic value.

The strongest counter-thesis is that this read is too conservative: Hamama still has high equity, a comfortable 2.34 current ratio, no financial covenants, and a backlog that rose after year-end, so if the Ultra deal advances and the food activity is sold on good terms, shareholder value could end up looking better than it does today. That is a serious argument. But to win, it now needs execution rather than structure.

What could change the market's interpretation in the short to medium term? A completed due-diligence process and clear progress toward the deal, a decline in inventory days, easing usage of bank lines, or on the other side another deal delay and another year in which working capital remains stuck.

Why this matters is simple: at Hamama, the gap between value on paper and value that is actually reachable by shareholders is the whole story. The equity exists, but the route to extracting it from inventory, receivables, and the transaction structure is what will determine whether 2025 was a real improvement year or only a temporary station.

The next two to four quarters need to answer three straightforward questions: does working capital get released, does the Ultra transaction really move forward, and is the current business sold from a position of strength rather than necessity?