Krur: What really happened at Green Pet, and what it says about capital discipline

What actually happened here

The main article argued that Krur’s center of gravity has shifted back to Yafora and to capital allocation. This follow-up isolates Green Pet, because that is where we can see whether the group knew when to stop funding an adjacent activity that no longer worked on its own economics.

The key read is that Green Pet did not collapse in a single step. In 2025 it went through a two-stage retreat: first a sharp narrowing of the model, then a full shutdown. That distinction matters. It shows management tried to preserve a smaller core of the activity, and only after reviewing the order backlog and the 2026 forecast concluded that even that narrower version no longer held up.

That is also the difference between an operating story and a capital-discipline story. An operating story would end with “Europe weakened.” The actual story has four layers breaking at once: losses that exceeded expectations, customer concentration, regulation that failed to close the price gap between virgin PET and RPET, and a growing pile of internal capital left stuck in the activity.

The retreat happened in two stages

In the first stage, on November 25, 2025, Yafora Tabori’s board decided to stop the PET sorting, separation, washing, and treatment lines, while keeping only the RPET line and relying on washed and sorted material from third parties. That was not a total shutdown. It was an attempt to compress the model into a narrower and less operationally heavy version.

In the second stage, on December 28, 2025, after another board discussion that reviewed the order backlog, Green Pet management’s 2026 forecast, and RPET market trends, the advanced recycled PET line was also shut. From that point onward, Green Pet was classified as a discontinued operation.

That sequence matters because the final decision did not rest only on weak nine-month numbers. It also rested on a forward look at viability. In other words, the board did not just acknowledge a troubled past. It also lost confidence in the year ahead.

This was not just a weak market

Management lists several reasons, and the significance lies in how they stack together. In the first nine months of 2025, Green Pet posted cumulative losses of NIS 15.89 million from operating activity. Those losses intensified in the third quarter, mainly because of price changes and softer demand in the European market where the business operated. At the same time, the main customer, Retal Group, which accounted for 65.5% of 2024 sales, cut purchases and added another layer of pressure to revenue.

But customer concentration was not the whole problem. The broader issue is that the Green Pet investment was built on a double assumption: that it would serve Yafora as a strategic regulatory complement, and that it could also stand on its own as a recycling business. In 2025 both assumptions weakened at the same time. The European directive mandating recycled content did not close the price gap between virgin PET and recycled PET, and in Israel regulatory uncertainty remained high even after the June 2025 deposit-law memorandum and the October draft arrangements bill.

That is the heart of the story. Regulation did not disappear, but it also did not arrive quickly enough or forcefully enough to justify continued investment. Once the economics depended both on a weakening anchor customer and on regulation that still had not crystallized, the activity stopped being strategic and became an expensive option.

The full-year 2025 numbers sharpen that point. Green Pet’s revenue actually rose to NIS 30.1 million from NIS 25.0 million in 2024, but gross loss widened to NIS 13.4 million from NIS 8.0 million, and operating loss jumped to NIS 53.9 million from NIS 17.1 million. In other words, the mere existence of sales was no longer telling us anything useful about the economic viability of the business.

The accounting shows the option had already broken

The crucial note is not the shutdown decision itself but how it was translated into the accounts. After the November 25 decision, the company ran an impairment test for the recycling cash-generating unit. Management concluded that, given the uncertainty, it could no longer rely on a sufficiently dependable forward forecast, and moved to a recoverable-value test based on fair value less costs to sell.

That is where it becomes clear that this was not just “a machinery write-down.” The third-quarter hit was a layered package, and that package shows how deep the retreat already was:

The heaviest component was property, plant and equipment. The machinery and equipment under review had a carrying value of NIS 25.9 million, but fair value less costs to sell was assessed at just NIS 8.6 million. Even that figure rested on an assumption that there was a local or international used-equipment market and demand under prevailing market conditions. In other words, even under the assumption that a secondary market existed, the number was cut sharply.

The more revealing item is the lease. Green Pet had a lease for about 5,350 square meters of land and buildings in the Kadmat Galil industrial park, with the current term running through the end of 2029 and an exit option on 60 days’ notice. After the shutdown decision, management reassessed the lease term and concluded it could no longer say with reasonable certainty that the company would not exercise the exit option within the coming year. It therefore derecognized the remaining right-of-use asset and the lease liability.

That matters because it means leaving the site stopped being a side scenario and became an accounting base case. Once a company changes the lease-term estimate in that way, it is effectively saying that staying put is no longer a strong enough assumption to keep on the books.

And the story did not stop there. By the report date, no relevant buyer had been found for the main equipment. That triggered an additional fourth-quarter impairment of about NIS 7.6 million, bringing total 2025 impairment to about NIS 33.9 million, with the main equipment written down in full. This is no longer accounting smoothing on the way out. It is an admission that the residual exit value after shutdown was far below what the original thesis once implied.

Capital discipline only becomes clear on the balance sheet

If you stop at the income statement, Green Pet can still be told as a localized operating mistake. The balance sheet tells a different story. By the end of 2025, Green Pet had just NIS 7.2 million of current assets and NIS 0.7 million of non-current assets left, against NIS 4.4 million of current liabilities and NIS 116.0 million of non-current liabilities. The result was an equity deficit of NIS 112.5 million, almost double the NIS 57.1 million deficit at the end of 2024.

This is where capital discipline enters the picture. In June 2024, Yafora Tabori extended a shareholder loan of about NIS 16 million to Green Pet to fund ongoing operations and repay bank loans that had been taken for the PET recycling line. All of Green Pet’s fixed assets were pledged in Yafora Tabori’s favor, and by the end of 2025 the outstanding balance on that loan still stood at about NIS 13.7 million. At the same time, since inception Green Pet had received cumulative owner funding of about NIS 74 million through capital notes, and as part of the purchase of a third party’s shares, another roughly NIS 20 million of capital notes were transferred to the Yafora group.

The meaning is that Green Pet was no longer a small venture that could simply be “given time.” It already rested on several layers of internal capital, internal debt, and internal security. Once the board moved from trying to preserve a complementary activity to protecting residual asset value, it was effectively admitting that the question was no longer how to build a recycling business, but how to stop the capital leak.

The last operating detail is also telling. Green Pet still had 25 employees at the end of 2025, down from 61 a year earlier. By the report date, only one employee remained. This was not a temporary freeze pending a better market. It was a postmortem.

What this says about Krur

The lesson from Green Pet matters less because of the NIS 33.9 million impairment itself, and more because of when management was finally willing to recognize it. Krur and Yafora did not shut the activity just because it was losing money. They shut it after it became clear that the narrower model did not work, that regulation did not provide an economic anchor, that the main customer no longer supported volume, and that even equipment exit value was weak.

That is the capital-discipline read. One could interpret the shutdown positively, as proof that the group ultimately knew how to stop allocating attention and capital to an activity that no longer cleared the return threshold. But it can also be read the other way: discipline arrived late, only after a heavy layer of internal financing had already been built and after the activity had already left behind a deep equity hole.

The right thesis probably sits in the middle. Green Pet began as a strategic move with industrial and regulatory logic. By 2025 it had stopped being an option and turned into a capital trap. The November and December decisions show the group did eventually cut it off. The numbers show that the cut came only after a meaningful amount of capital had already been injected, secured, and impaired.

Bottom line

Green Pet began as a potential complement to Yafora in a world where plastic recycling was supposed to become a natural part of the value chain. It ends 2025 as evidence that a strategy can make sense on paper and still fail once the real economics depend on one customer, unsettled regulation, and equipment whose realizable value gets slashed in real time.

What matters for reading Krur from here is not only the size of the write-down, but the new tolerance threshold it implies. If Green Pet’s exit truly marks a tougher capital-allocation posture, the market will read Krur as a group that knows how to return to its core after a failed adjacent bet. If more tail-end funding, write-downs, or unusual cash uses still emerge around the closure, the question of capital discipline will stay open even after the plant itself is gone.