Neto Melinda: where exactly did 2025 cash get stuck
Neto Melinda lifted net profit to ILS 232 million, but the cash shortfall was not an accident. In 2025 the company funded a 72 day customer-credit cycle against 32 day supplier credit, nearly ILS 300 million of goods in transit and advance payments, and an ILS 124 million dividend.
Where 2025 cash actually got stuck
The main article already made the broad point: 2025 earnings did not flow into cash at the same pace. This continuation isolates the mechanism. The framing here is all-in cash flexibility, not a normalized cash number before distributions or investment. The question is what was left after the year’s real cash uses.
On that basis, 2025 looks strong on the income statement and much tighter in the cash account. Net profit rose to ILS 232.0 million, but cash flow from operations swung to negative ILS 60.7 million. At the same time, the dividend paid climbed to ILS 124.2 million, while short-term bank debt jumped to ILS 234.3 million from ILS 36.0 million a year earlier. That is the core point. Cash did not disappear because profitability weakened. It got absorbed by working capital and was then replaced by bank funding.
That bridge matters because it shows the failure was in conversion, not in the reported earnings base. Before working-capital swings, depreciation and other adjustments, the business still generated a positive cash foundation. What cut through it was a roughly ILS 351 million drag from current assets and liabilities, followed by roughly ILS 76 million of net interest and tax cash outflow. In other words, 2025 profit was not destroyed inside the business. It simply did not make it back to the cash line.
Inventory did not just rise, it moved forward in the chain
The first pressure point was inventory. It rose to ILS 766.5 million from ILS 522.0 million, an increase of ILS 244.4 million in one year. That is a large jump in absolute terms, and even larger relative to what the company managed to convert back into cash.
The more important point is the composition. Out of ILS 766.5 million of inventory, about ILS 174.8 million sat in goods in transit and another ILS 124.4 million sat in advance payments. Together that is about ILS 299.2 million, almost 39% of the inventory balance. This is no longer just a story of fuller shelves. It is cash that left earlier in the chain, before the company could turn it into revenue.
Management also explains why this happens. The board discussion says some suppliers are overseas and require advances at the time of purchase, and that the company also improves trade terms by making earlier payments. That is the key disclosure. It means the 2025 inventory build was not only a more aggressive stocking decision. It was also the result of a commercial setup in which Neto Melinda pays out cash earlier in order to secure supply or terms.
That distinction matters. If inventory had risen only because demand was strong, the drag could be dismissed as a temporary side effect of growth. But when such a large part of the build sits in goods in transit and advance payments, the issue becomes conversion quality. Cash leaves earlier, while the time to recovery stretches out.
The credit gap: 72 customer days versus 32 supplier days
The second pressure point is the trade-credit gap. Neto Melinda gives customers an average of 72 days of credit, but receives only 32 days from suppliers. That is a 40 day gap, and it is exactly where the cash account gets stretched.
The absolute numbers are just as clear. The board discussion cites average customer credit of roughly ILS 1,223 million, supplier credit of roughly ILS 468 million, and bank credit of roughly ILS 173 million. That means average customer credit was about 2.6 times larger than supplier credit. The bank is what closes the gap.
The same picture shows up in the balance sheet. Receivables rose to ILS 1,230.7 million from ILS 1,099.4 million, while inventory moved to ILS 766.5 million. On the other side, suppliers and service providers increased only to ILS 463.6 million from ILS 440.0 million. On a simple calculation, the gap between receivables plus inventory and suppliers widened to ILS 1.534 billion from ILS 1.181 billion, an increase of roughly ILS 352 million. That is almost a one-for-one match with the working-capital drag recorded in the cash-flow statement.
The analytical implication is straightforward. Neto Melinda is not only selling more. It is also self-funding a bigger part of the chain. The combination of long customer credit, shorter supplier credit and earlier payments to part of the supplier base creates growth that consumes cash rather than releases it.
Dividend policy did not give cash a chance to normalize
Up to this point, the story could still be framed as a temporary cash-conversion year. But capital allocation changes the read. In 2025 the company paid ILS 124.2 million of dividends, more than 2.6 times the 2024 payout. At the same time, financing cash flow was positive ILS 59.5 million only because short-term bank debt increased by ILS 198.3 million.
That means the bank did not step in only to finance inventory and customer credit. It also enabled the company to keep a generous payout policy in a year when operating cash did not support it. That does not automatically make the dividend policy wrong in every context, but in 2025 it clearly delayed the point at which cash could reset.
The post-balance-sheet signal did not disappear either. On March 30, 2026, the board approved another ILS 25 million cash dividend. That does not rewrite 2025 retroactively, but it does show that management is still signaling through reported earnings while cash conversion remains something the company needs to prove.
The continuation takeaway
The core of 2025 is not a demand problem and not a gross-margin problem. Revenue grew, and gross margin stayed stable at around 13.5%. The problem is that this year’s operating model demanded more working capital, more bank funding and more patience from the cash account.
That is exactly where a first read can go wrong. It is easy to see ILS 232 million of net profit and conclude that the year was simply stronger. In practice, part of that growth was financed through a larger inventory stack, more goods in transit, more advance payments and a trade-credit gap that still works against the company. Then an ILS 124 million dividend was layered on top. So the real 2026 question is not whether Neto Melinda knows how to earn money. It is whether it can bring those earnings back into cash without leaning on the bank as the balancing item.
The near-term checkpoints are fairly clear. Goods in transit need to come down, advance payments need to shrink, customer-credit days need to stop expanding or supplier terms need to improve, and the dividend pace needs to lean more on actual operating cash and less on reported profit. If that happens, 2025 will look like a cash transition year. If not, it will become clearer that Neto Melinda’s earnings remain respectable on paper, but expensive in cash.
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