Hamat 2025: Retail Rebounded, but Kitchens and Cash Still Need to Prove Themselves

Company Overview

Hamat is no longer just a faucet and sanitary-ware manufacturer. It is now a layered building-finishings and home-design group, with a large retail arm through Hezibank and Aloni, a wholesale and distribution arm, a plastics and plumbing activity, a kitchens platform built around Mitbachi Ziv, Formex and Leicht, and smaller operations in Turkey and the US. That is the right starting point, because a superficial read can still make the company look like one industrial story. In practice, the 2025 profit recovery came mainly from the market-facing retail and wholesale businesses, while kitchens still have not returned to clean economics.

What is working now is clear enough. Revenue rose to NIS 954.2 million in 2025, gross profit recovered to NIS 410.6 million, gross margin moved back to 43.0% from 41.2% in 2024, and operating profit climbed to NIS 73.6 million from NIS 37.6 million. But what is still unresolved is just as clear: kitchens ended the year with an operating loss of NIS 8.9 million, bank debt still stood at NIS 247.6 million, lease liabilities stood at NIS 267.5 million, and year-end cash was only NIS 25.6 million. That is why the right read today is not “a finished recovery story,” but “a real operating improvement with two bottlenecks that still need proof.”

This matters now because of the market layer as well. Market value is around NIS 597 million, so any operating improvement looks meaningful. At the same time, fourth-quarter net profit was only NIS 1.3 million, and the company entered 2026 with reduced activity in Israel because of the post-balance-sheet security escalation. Put differently, 2025 improved profit quality, but 2026 opens as a proof year, not a breakout year.

The short economic map looks like this:

Events and Triggers

First trigger: the retail engine came back. Retail revenue rose 15.6% to NIS 483.1 million and segment operating profit jumped to NIS 34.6 million from a loss of NIS 8.1 million in 2024. That is not just a demand rebound. Part of the swing also reflects the fact that the prior year included a class-action related expense, so the entire delta should not be read as clean organic improvement. Even so, it is still evidence that the group can recover volume and profit when the domestic market breathes a bit better.

Second trigger: Hamat is trying to upgrade its premium product stack. In the third quarter of 2025 the group signed a three-year exclusive agreement to market and distribute Duravit in Israel, and actual import and sales activity started in the first quarter of 2026. This is not an event that changes the numbers overnight, but it does broaden the toilet offering in wholesale and could improve positioning with showrooms and project customers if execution is successful.

Third trigger: the group is rebuilding its showroom layer. In January 2026 it signed an agreement to acquire a 1,800 square meter commercial property in the Gigi’s complex in Rishon LeZion for roughly NIS 30 million. The property is intended to become a unified showroom hub for group brands, including Mitbachi Ziv and Aloni. That can sharpen real commercial synergy between retail and kitchens, but it also consumes capital and now needs to prove that it creates selling power rather than just a nicer display space.

Fourth trigger: kitchens entered 2026 with an open wound. Formex lost KLÖSS as a significant customer. That customer represented about 14.4% of kitchens sales in 2024 and about 8.3% in 2025. A new strategic customer started ramping in the fourth quarter of 2025, but the current volume is still below the level of the outgoing customer. This is exactly the kind of event an annual report can hide: full-year kitchens revenue was slightly up, but the economic base of the segment changed materially.

Fifth trigger: 2026 opened under external pressure. As of the approval date of the financial statements, the manufacturing sites, logistics centers and showrooms in Israel were operating in a reduced format, and the company said revenue in Israel had declined to varying degrees. At the same time, Turkish export restrictions to Israel continued through 2025 and up to the report date. The group built alternative logistics solutions, but for now they are still hurting MCP’s volume and preventing an easy read of the recovery.

Efficiency, Profitability and Competition

Retail and wholesale were the businesses that brought the year back

The core story of 2025 is not a broad-based recovery across every engine. It is a sharp repair in the two largest businesses that face the Israeli market directly. Retail rose from NIS 417.8 million to NIS 483.1 million. Wholesale rose from NIS 216.9 million to NIS 221.5 million. Together, those two segments delivered NIS 75.6 million of operating profit in 2025, versus only NIS 31.3 million in 2024.

That swing looks especially dramatic in retail, but the quality read requires a breakdown. The segment carried a meaningful legal expense in 2024, so part of the 2025 jump is simply the reversal of a weak comparison base. That does not negate the improvement, but it does mean 2026 has to show the business can hold profitability without that tailwind.

Wholesale looks cleaner. Revenue there rose only 2.1%, but operating profit improved to NIS 41.0 million. This is not a demand spike story. It is a story of a business that was already profitable and managed to preserve reasonable operating quality even in a year where financing costs, wages, and raw materials were still not particularly easy.

In kitchens the issue is not just profitability, but a sharp reset in revenue quality

Kitchens is where the reader has to stop. Segment revenue rose 4.7% to NIS 172.8 million, but operating profit moved from a positive NIS 4.9 million to a loss of NIS 8.9 million. On the surface that looks like a sharp deterioration. Underneath the surface the picture is more nuanced: before other income and expenses, the segment loss was NIS 5.0 million, close to the NIS 6.1 million loss in 2024, and before PPA amortization and other items the segment was almost at break-even, with a loss of NIS 0.8 million versus NIS 0.5 million the year before.

So the segment did not collapse operationally at every layer. What did happen is a sharp mix shift and an admission that Formex was not worth as much as previously carried. The company booked a NIS 5.2 million goodwill impairment at Formex and, at the same time, lost KLÖSS as a major customer. Revenue from private customers in kitchens jumped to NIS 156.9 million in 2025 from NIS 81.6 million in 2024, while revenue from manufacturers and others fell to NIS 15.6 million from NIS 83.3 million. That is an extreme reset. The implication is that kitchens are now far less exposed to a single industrial customer, but much more dependent on private-customer selling, showrooms, architects, and renovation and housing cycles.

That matters because private-customer sales usually carry the promise of better gross margin, but they also require much heavier selling, planning, installation and service infrastructure. If that shift does not translate into visibly better profitability and cash generation, Hamat will still be left with a segment that looks better in its catalog than in its economics.

Capacity is available, so the bottleneck is commercial, not operational

At Mitbachi Ziv, capacity utilization stood at around 75% close to the report date. At Formex it stood at around 65%. That is important because it means Hamat is not currently constrained by capacity. There is room to grow without a large incremental capital burden. The issue is not the production line. The issue is whether the group can fill that line with quality orders at acceptable margin.

The Turkish ceramics unit also improved on a relative basis, but it remains very small in external sales, only NIS 4.5 million, with an operating loss of NIS 8.7 million and more than NIS 100 million of segment assets. This looks more like a strategic supply-chain and optionality asset than an active profit engine.

Cash Flow, Debt and Capital Structure

This is a case where the all-in cash view matters more than a normalized one

At the center of the Hamat thesis is not whether the company can generate EBITDA, but how much cash is really left after all the heavy uses of cash across the group. That makes the right framing here an all-in cash flexibility read, not a “normalized” free cash flow estimate that is not directly supported by disclosed maintenance capex.

On that basis, Hamat generated NIS 105.5 million of operating cash flow in 2025. That is a good number. But from there, real uses of cash have to be deducted: NIS 11.9 million of capex and intangible investment, NIS 38.2 million of lease principal repayments, NIS 27.2 million of net bank debt reduction, and a NIS 15 million dividend. After all of that, cash increased by only NIS 13.2 million, ending the year at NIS 25.6 million.

The takeaway is not that cash flow is weak. The takeaway is that liquidity remains tight even in a strong year, because the business absorbs a lot of real cash along the way. Anyone looking at NIS 149.1 million of EBITDA and assuming wide financial flexibility is missing the effect of leases, working capital and debt service.

Working capital is still heavy, even if management explains it

Hamat ended 2025 with a working capital deficit of NIS 38.0 million and a current ratio of 0.94. The company explains that this partly reflects an intentional choice to lean more on short-term bank debt because of rate differences, and that the deficit almost disappears if current lease liabilities are excluded. That explanation matters, but it does not remove the economic reading.

Average customer credit stood at roughly NIS 269 million and 90 days in 2025, while supplier credit stood at roughly NIS 112 million and 65 days. The group also benefits from customer advances and deferred revenue of NIS 175.7 million, mainly in retail and kitchens. That helps finance the structure, but it also means the group runs on a delicate balance between order intake, collections, suppliers and banks. If one of those wheels slows, the pressure will show up first in cash, not in reported profit.

Banks are not squeezing, but leases are heavy

The good news is that covenant pressure does not look acute. Net financial debt to adjusted EBITDA stood at about 2.0 versus a ceiling of 5. Tangible equity to tangible balance sheet stood at about 32.2% versus a minimum of 20%. That is comfortable room.

The less comfortable part is the overall financing structure. Bank debt stood at NIS 247.6 million at year-end, all on floating rates, and sat above NIS 30.4 million of net financing expense. In addition, lease liabilities stood at NIS 267.5 million. That burden is not just an accounting line. In 2025 the group paid NIS 38.2 million of lease principal and NIS 9.8 million of lease-interest expense.

That is why leases are not a footnote at the common-shareholder level. They are one of the key reasons why better operating profit does not automatically turn into plenty of free cash.

Real estate supports the balance sheet, but the value is still not liquid

There is also a non-operating layer of value inside Hamat. Investment property in Be’er Sheva was carried at NIS 138.4 million at year-end, versus NIS 130.0 million a year earlier. The increase included a NIS 5 million fair-value gain and a roughly NIS 3.4 million reclassification of another property. That clearly adds balance-sheet support and, against a market value of around NIS 597 million, it is not a trivial piece.

But created value is not the same as accessible value. Only a small part of that property is currently leased, while the rest still depends on planning and long-term monetization. It may be a good asset, but it does not fund 2026 operating needs today. The new Rishon LeZion showroom property may also create real commercial value over time, but right now it is still another use of capital.

Outlook

Four non-obvious findings to keep in mind before looking at 2026:

• Most of the 2025 improvement came from retail and wholesale, not from kitchens.
• Part of the profit swing reflects easier 2024 comparisons, especially in retail.
• Kitchens went through a sharp shift from industrial revenue to private-customer revenue, but have not yet proved that the new mix is more profitable.
• Cash flexibility remains tight after leases, working capital, debt reduction and dividends.

2026 will be tested first in kitchens

If Hamat wants the market to read 2025 as the start of a trend rather than a partial rebound, kitchens have to prove three things over the next two to four quarters. First, the new strategic customer at Formex has to replace a meaningful part of the gap left by KLÖSS. Second, the sharp increase in private-customer sales has to translate into better margin, not just heavier selling and service load. Third, the NIS 95.2 million backlog at year-end, and the NIS 90.2 million backlog close to the report date, has to convert into revenue without another deterioration in earnings quality.

This is the center of the story. Kitchens do not just need sales. They need to show that the new structure works economically.

Retail now has to hold profit without the easy comparison help

Retail was strong in 2025, but segment backlog fell from NIS 279.8 million to NIS 257.1 million and stood at NIS 251.9 million close to the report date. That is not a disaster, but it does mean the strong profitability of the year was not accompanied by better forward visibility. The next test is not whether the group can sell, but whether it can preserve the quality of the sale in a still very competitive domestic market and a still soft housing backdrop.

Wholesale has something to contribute, but it cannot cover every gap on its own

The combined wholesale and plastics backlog stood at NIS 10.4 million at year-end and improved to NIS 13.3 million close to the report date. That gives some support into the new year. Duravit can also help strengthen the sanitary premium offer. But wholesale alone will not carry the entire thesis if kitchens remain loss-making or if domestic activity continues to be hit by the security environment.

This is a proof year, not a breakout year

The correct frame for 2026 is a proof year. Hamat now has a better operating base, better gross margin, stronger retail, reasonable kitchens backlog, and wider premium assortment. On the other hand, the company itself says that as of the report date activity in Israel is running in a reduced format and that it cannot estimate the full effect. That puts a clear cap on certainty.

In the near term the market will mainly watch three signals: whether sales hold up under the security backdrop, whether kitchens stop burning profit, and whether cash starts to accumulate in practice rather than only on paper.

Risks

Weak housing and renovation demand

The Israeli housing market remained weak in 2025, with lower new-apartment sales and wider financing incentives from contractors. That does not mean Hamat cannot grow, but it does mean demand is not giving the group an easy tailwind, especially in categories where private customers and contractors delay decisions or pressure price.

Kitchens, replacement customer execution, and open arbitration

In kitchens the issue is not only commercial. There is also an open arbitration process versus the sellers of Mitbachi Ziv, with a claim by the company of about NIS 23.5 million and a counter-claim by the sellers of about NIS 3.8 million. At this stage the outcome cannot be estimated. This is not the heart of the thesis, but it is another friction point in a business layer that already needs proof.

Turkey and supply-chain friction

Turkish export restrictions to Israel continue, and the company has had to use alternative procurement and shipping routes. It says the extra costs are not material relative to total operating expense, but at the same time says the restrictions are still hurting MCP’s volume and results. This is a good example of a risk that is not only about cost, but also about volume.

Debt, rates and leases

All bank debt is floating-rate debt. So the rate backdrop is still very much part of the story. Covenant headroom is comfortable, but that does not change the fact that the structure depends on rolling short-term bank credit while also carrying a heavy lease burden. If activity weakens, the pressure will move quickly from reported profit to cash.

FX and legal exposure

Hamat has material foreign-currency exposure because of imported inputs. The company uses forward contracts in dollars and euros, but they are not presented as accounting hedges. A 5% move in the euro would change total comprehensive income by roughly NIS 1.845 million, of which about NIS 1.427 million would flow through financing. In addition, a class-action request was filed in 2025 against Aloni and a project developer, and no provision was recorded because the odds and amount still cannot be estimated.

Conclusion

Hamat looks better today than it did a year ago. Gross margin recovered, retail stabilized, wholesale held its quality, and covenant pressure is not the issue. But the thesis is still not clean, because kitchens have not yet shown stable economics and the cash picture remains tight even in a year where operating profit jumps.

Current thesis in one line: Hamat in 2025 is a stronger retail and distribution group than before, but for this to become a genuinely cleaner story it still has to show that kitchens stop dragging results and that cash remains inside the group after real cash uses.

Compared with 2024, the main red flag is no longer demand weakness by itself, but the quality of the recovery. The strongest counter-thesis is that 2025 leaned heavily on easier comparisons, a temporary domestic rebound, and real-estate value that supports the balance sheet but does not release cash. If that view is right, 2026 could look a lot less clean than 2025.

What can change the market reading in the near term is a combination of three things: quarterly results that show retail margins are holding, visible loss reduction in kitchens, and proof that cash is building after leases, working capital and debt service. If that happens, the thesis strengthens. If domestic activity remains soft and kitchens keep wobbling, the conservative read will come back quickly.

What has to happen in the next two to four quarters is fairly clear: kitchens need to move beyond merely smaller losses without accounting help, retail has to hold profitability once the easy 2024 base falls away, and operating cash flow has to start staying inside the business after the real uses of cash. What would weaken the thesis is the opposite combination, renewed demand softness, continued kitchens losses, and a cash position that remains tight.