Hamama: How inventory and bank funding absorb the profit

Where The Profit Actually Gets Absorbed

The main article already established that 2025 profit did not turn into cash. This follow-up isolates the mechanism underneath that result: customers operate on a JIT basis and keep low inventory on their side, while Hamama has to carry 3 to 6 months of sales in stock, fund a large part of that stock up front, and then wait 60 to 120 days from month-end to collect.

This is not a one-off accident. It is the economics of the model. In 2025 the company reported NIS 14.9 million of net profit, yet net cash used in operating activity reached NIS 7.5 million. The direct reason was working capital: inventory rose by NIS 17.8 million, receivables rose by NIS 5.2 million, and payables to suppliers and service providers fell by NIS 4.2 million.

That chart is the core of the story. If one looks only at the income statement, 2025 appears much stronger than 2024. If one looks at the cash bridge, a different picture emerges. Profit did not stay in the cash box because it was absorbed first by inventory, then by receivables, and finally by a smaller supplier-funding layer.

The JIT Model Pushes The Warehouse Onto Hamama’s Balance Sheet

The company describes an industry in which most customers operate on a Just In Time basis and expect delivery within 24 to 48 hours. That matters because it explains why Hamama cannot run with lean inventory. Its inventory policy says that, for most products, stock levels should reflect 3 to 6 months of sales at purchase prices. In plain terms, the customer reduces inventory on its own side, and Hamama’s balance sheet carries the buffer.

What stands out in 2025 is not only the size of inventory but also where it sits. Inventory rose to NIS 101.9 million from NIS 84.1 million, and average inventory days stretched to 185 from 154. But inside that balance, the more important move was in location mix: inventory in port, cold storage, and bonded warehouses jumped to NIS 31.7 million from NIS 3.5 million, while inventory in transit fell to NIS 20.4 million from NIS 35.5 million.

That is a material shift. In 2024 only about 4% of inventory sat in port, cold storage, and bonded warehouses. In 2025 that share rose to about 31%. So a large part of the cash is no longer tied only to goods still on the water. It is already tied to goods that reached Israel and are now waiting to be cleared, stored, or sold.

This also connects directly to the distribution model. The company says that about 49% of inventory at year-end 2025 was stored in its own warehouses, and that some customers collect goods directly from the logistics center, the port, or cold-storage facilities. So broad, ready inventory is not a comfort layer. It is the value proposition itself in an industry where the customer is price-sensitive, availability-sensitive, delivery-sensitive, and not especially loyal.

The problem is that this value proposition requires funding. The company explicitly says it finances inventory purchases through bank credit lines and cash flow from operations. When operating cash weakens, the inventory requirement does not disappear. It simply moves onto bank funding.

The Credit Gap Did Not Close, It Reopened

The second link in the model is the mismatch between customer terms and supplier terms. The company states clearly that most purchases from suppliers are made on a cash basis, or close to it, while customer credit typically runs 60 to 120 days from month-end. The business therefore needs capital to bridge the gap. In 2025 that gap did not merely remain in place. It became heavier again.

Average customer credit days stood at 95, almost unchanged from 94 in 2024. Average supplier credit days fell back to 36 from 62 in 2024. In other words, the gap between customer credit and supplier credit widened in one year from 32 days to 59 days.

It is worth being precise here. This is not primarily a receivables-quality collapse. The expected-credit-loss allowance actually fell to NIS 5.25 million from NIS 7.78 million, and the company says it has no dependence on a single customer. In addition, about 74% of customer credit is covered by credit insurance. But insurance does not fund the gap. At most it reduces part of the collection risk. The financing still sits with the company.

So 2025 was less a bad-debt year than a working-capital funding year. Net receivables rose to NIS 68.3 million, suppliers and service providers fell to NIS 31.5 million, and the gap did not close through better trade terms. It closed through the banks.

The Bank Line Is The Real Cash Cushion

The most important step in this continuation is to define what is left after the real cash uses. Here the right frame is all-in cash flexibility. The starting point is cash flow from operations, which already includes interest and taxes paid. So, in order not to count lease costs twice, the bridge should subtract lease principal, reported CAPEX, and repayment of the long-term bank loan. At the same time, it is important to note that total lease-related cash outflow was NIS 6.93 million, of which NIS 6.20 million was lease principal and NIS 0.73 million was lease interest.

On that basis, Hamama’s all-in cash flexibility in 2025 was negative NIS 14.5 million. Only after a net increase of NIS 13.7 million in short-term bank credit and the release of a NIS 0.36 million pledged deposit did the cash decline narrow to NIS 0.42 million.

That is the key point of the continuation. Hamama’s liquidity cushion does not rest on surplus cash. It rests on short-term bank lines. By year-end 2025 short-term bank credit had already reached NIS 29.0 million, up from NIS 15.2 million a year earlier. Total working credit lines were NIS 45 million, with NIS 15.7 million unused at year-end and NIS 19.8 million unused near the report date.

On the one hand, there are no ongoing financial covenants here. On the other hand, this is a less comfortable form of flexibility than it first appears. The lines are uncommitted, the credit agreements include cross-default, and some agreements say that a change in the controlling shareholders’ holdings without bank consent may trigger immediate repayment. Since the company has already signed the merger agreement with Ultra, the practical meaning is that the legacy trading business still leans on the banks while the company is trying to move through structural change.

The lease layer is not really gone either. The logistics-center lease expired on December 31, 2025, but as of the signing date of the financial statements no new agreement had yet been signed, and the company continued to use the warehouses at unchanged rent. After vacating a 656-square-meter warehouse in February 2026, it still leased 10,623 square meters from the Hamama brothers for monthly rent of NIS 323 thousand. So even after year-end there was no sharp release of the logistics burden. It simply kept running.

Conclusion

Hamama’s 2025 issue is not an accounting problem. It is a model in which inventory availability, customer credit terms, and delivery speed all push working capital higher at exactly the point where supplier credit shortens. Net profit improved, but cash was absorbed first by inventory, then by receivables, and finally covered mainly through short-term bank funding.

The implication for the next 2 to 4 quarters is fairly direct. For the read on the company to improve, at least part of three things has to happen: inventory days need to move down from 185, the credit gap between customers and suppliers needs to stop reopening, and dependence on short-term bank borrowing just to carry the operating model needs to fall. Without that, any improvement in profit will still look partial, because the bank, not the business, will remain the layer closing the gap between the income statement and the cash box.