Primotec: The Operating Footprint, Plant Utilization, and the Real Cost of Moving Activity

What This Continuation Is Isolating

The main article argued that after 2024 the real question for Primotec was no longer whether it had benefited from an exceptional Ministry of Defense year, but whether the core business could stay profitable under more normal conditions. This follow-up isolates a different layer of the same issue: the operating footprint itself. Not demand, not tenders, but where the lines sit, how much of them is actually being used, and how expensive it is to move that system from one configuration to another.

Why this matters now is straightforward. Primotec's two production plants ended 2025 at only about one-third utilization, Ofeq Klir at 35% and Speedy at 33%. That is a very unusual starting point. When line utilization is that low, the immediate problem is not lack of capacity. And yet in the same year the company paid for a new paper line, moved its paper plant to Be'er Sheva, prepared detergent and cosmetics production areas in the development property that still had not begun operating, and remained exposed to an eviction claim around the leased Speedy plant in Ofakim. So the story is not that Primotec urgently needs more space. The story is that it needs to close a transition.

That also changes how the Be'er Sheva investment should be read. If demand were pressing against the edge of the plants, this would be easy to frame as a clean growth investment. But when utilization is low, the economics are different: part of the move is consolidation, part of it is operational insurance, and part of it is simply the price of leaving an old footprint before the new one is fully settled.

Those numbers matter because they break a misleading intuition. Primotec is not rushing because the plants ran out of room. It is moving because the old footprint is no longer comfortable and the new footprint is still not fully closed.

Be'er Sheva Already Absorbed the Paper Plant, But Not the Full Return Yet

The more advanced leg of this story is the paper plant. During 2025 Ofeq Klir operated under relocation constraints and line-integration work, with part of the leased Ofakim area vacated by the end of January 2025 and the rest vacated by June 2025. At the same time the company integrated a new toilet-paper line whose technical specifications imply roughly double the per-shift production capacity of the refurbished older line, with a higher level of automation. By the reporting date Primotec had paid about ILS 10.5 million for that line.

But this is exactly where the analytical point sits. The Ofeq move did not produce a 2025 picture of a new site already absorbing meaningfully higher volume. It produced the picture of a plant that was transferred, ramped, and upgraded, but still closed the year at 1,321 tons and 35% utilization. The company also says explicitly that during the bridge period, until production resumed, it purchased similar paper products from third parties. So the price of the move was not only capital expenditure. There was also a real operating bridge.

In other words, 2025 still did not prove that the paper move had already created visible utilization gains or cost savings. It proved that the company was able to relocate the plant and integrate a better line without breaking the business. That is an important operating achievement. It is not yet the same thing as a clean economic payoff.

And the story goes beyond the paper line. Next to the main Be'er Sheva property, the group also holds capitalized development rights over an additional 11,810 square meters. Under the development agreement, the permitted construction rights equal 130% of the land area, about 15,350 square meters, and the building permit issued in July 2021 allowed a roughly 9,345 square meter structure for production, storage, and offices. Construction was completed in the third quarter of 2023 and an occupancy permit was received in the fourth quarter of that year.

Balance-sheet-wise, the story is already heavy. By the end of 2023 Klir Marketing had incurred about ILS 50 million of development and construction costs there, and together with financing costs and land cost this asset stood at about ILS 52 million inside property, plant and equipment at the end of 2025 as well. During 2025 the group completed the reorganization of its main storage areas in the development property and prepared areas for detergents and cosmetics production. But on the most important point the filing is explicit: as of the reporting date, production processes for those materials had still not begun there.

That is the essence of the transition economics. Be'er Sheva is already sitting on the balance sheet, but it is not yet producing everything it is supposed to produce.

That is why a more conservative reading still matters. It is easy to see Be'er Sheva as an attractive option. It is harder to remember that by the end of 2025 it was still an option already being funded in the present.

Speedy Is Still the Expensive Junction

If Ofeq is the move that is mostly behind the company, Speedy is where the thesis is still unresolved. That makes sense. Speedy produces five main product groups, runs about eight production lines, and employs about 30 workers. Yet it too ended 2025 far from full capacity, at 7,132 tons of finished products and just 33% utilization.

On the surface, that should reduce pressure. If utilization is low, one could think there is plenty of time and no urgency. But in Speedy's case the footprint is not only a question of capacity. It is also a question of site rights. The plant sits in Ofakim on a leased area of about 4,915 square meters plus yard space, with annual rent of about ILS 1.173 million linked to CPI, and a lease that runs through the end of 2027. At the same time, legal proceedings are now sitting around that site.

Here the company already writes the line a casual reader may miss if they only look at the tables. In November 2025 an eviction claim was filed against Speedy alleging illegal construction related to a shed in the leased area. The company's position is that the structure had existed for many years with the landlord's knowledge and consent. By the reporting date no hearings had yet been set. On its own that sounds like a localized real-estate dispute. But the continuation of the disclosure is far more important: the company says explicitly that vacating and relocating Speedy to an alternative location, whether by the planned end of the lease in 2027 or earlier, could involve material transition costs and requires sufficiently early preparation in order to avoid disruption to production and customer supply.

That sentence is the key one because it translates a legal dispute into real operating economics. It means the alternative site is not only a strategic idea. It is also a contingency plan. The company adds that in such a scenario it may increase production means and volumes in the development property and purchase relevant products until the relocation of Speedy is complete. In other words, Be'er Sheva is not only a future efficiency move. It is also insurance against a faster-than-planned move.

Even around Ofeq, the process is not completely closed at the legal layer. After the old site in Ofakim was vacated, regular proceedings continued around a promissory note of about ILS 756 thousand that the plaintiff argues reflects double rent for failure to vacate. The company objected and the process is continuing. Primotec believes these disputes do not materially affect its plans, but their very existence is a reminder that moving activity does not end on the day a machine changes address. Sometimes it ends much later.

That is also where the core insight of this continuation sits. The price of relocation is not only CAPEX. It is also rent that is still being paid, third-party procurement during bridge periods, management attention diverted into preparation and dispute handling, and the risk of one-off transition costs if Speedy has to move earlier than expected.

And that is why low utilization is not automatically good news. In a normal setup, one-third utilization could be read as operating headroom. In Primotec's current setup, one-third utilization inside a footprint that is still being rearranged means the key question is not whether there is room to produce, but whether the company can centralize that room without paying too much on the way.

Bottom Line

Primotec's operating footprint in 2025 tells a story that is less comfortable and much more interesting than the simple idea that it has plants and room to grow. In practice, both plants are running at low utilization, one has already moved to Be'er Sheva, the other still sits in Ofakim under an eviction dispute, and the future Be'er Sheva site already exists physically and on the balance sheet but is still not producing everything it is meant to produce.

The strongest counter-thesis here is that this is precisely the hidden strength. Because utilization is low, Primotec has enough operating room to execute an orderly transition without choking the business, and the investment already made in Be'er Sheva could eventually turn the footprint into a more efficient one, reduce rent dependence, and lower legal friction. That is a serious argument, and not an implausible one.

But as of the end of 2025, the more careful reading still looks better. The story has not yet moved from "a footprint being built" to "a footprint earning a return." For that to happen, Primotec needs to show three things: that the Ofeq move really starts to translate into better utilization or lower operating cost, that detergents and cosmetics production in Be'er Sheva actually begins, and that the Speedy issue is resolved without supply disruption and without an outsized relocation bill.

Until then, Primotec's operating-footprint story remains a transition story. Not a shortage story, and not yet a proven step-up story, but a system still paying in order to reach its final form.