A.Z.M After the Tariff Reset: How Much of the 2025 Improvement Is Truly Repeatable
The main article already showed that A.Z.M became Shagrir's main profit engine. This follow-up shows that the improvement is real, but its repeatable base is closer to adjusted operating profit than to the headline reported jump, because 2025 also included a tariff catch-up, a one-off working-capital settlement, and a lighter excess-cost amortization burden.
What Actually Repeated in 2025
The main article already made the broad point: in 2025 Shagrir's profit mix moved toward A.Z.M and the vehicle-adjustment segment. This follow-up isolates only one question: how much of that improvement rests on operating economics that can carry into 2026, and how much rests on a tariff reset, accounting relief, and non-recurring items.
The picture is more nuanced than the headline. The vehicle-adjustment and bodywork segment grew revenue by 27.1% to NIS 215.9 million, and its reported operating profit jumped 100.4% to NIS 18.8 million. That was enough to overtake the transport-services segment, which fell back to NIS 13.5 million. But once the lens shifts to adjusted operating profit, which excludes amortization of excess cost from acquisitions, the jump looks different: NIS 21.6 million versus NIS 14.4 million in 2024, or 49.6% growth rather than a doubling.
That is not a technical side note. It is the core read. A.Z.M clearly improved, but the repeatable base looks closer to adjusted profit than to the reported headline. Management itself ties the improvement to better vehicle deliveries, repair growth, SteerLinq activity, a settlement with former controlling shareholders over working-capital components, and lower excess-cost amortization. Those are not the same type of profit.
| Metric in the vehicle-adjustment and bodywork segment | 2024 | 2025 | Why it matters |
|---|---|---|---|
| Revenue | NIS 169.9 million | NIS 215.9 million | The growth is real and clear |
| Gross profit | NIS 43.8 million | NIS 54.9 million | Gross profit rose, but not much faster than revenue |
| Gross margin | 25.8% | 25.4% | The tariff reset stopped erosion, but did not create a sharp margin step-up |
| Reported operating profit | NIS 9.4 million | NIS 18.8 million | The big 2025 headline |
| Adjusted operating profit | NIS 14.4 million | NIS 21.6 million | A cleaner base for judging repeatability |
| Gap between adjusted and reported | NIS 5.0 million | NIS 2.7 million | The amortization layer weighed less in 2025 |
This chart frames the debate correctly. If 2025 is read only through the reported figure, it is easy to conclude that A.Z.M fully stepped up in a single year. If it is read through adjusted profit, the conclusion is more precise: the operating business improved materially, but part of the jump came from layers that will not repeat with the same force.
The Tariff Reset Helped, But It Did Not Do the Whole Job
On July 1, 2025, a roughly 6.17% upward update took effect in the tariff list for disabled-vehicle accessories. The company states explicitly that this move stopped the profitability erosion that had characterized the activity. That matters because before the update A.Z.M was operating under a gap between the rise in input costs, purchased mainly in US dollars, and reimbursement tariffs set through the National Insurance system.
But this is exactly where support for the thesis should not be exaggerated. If the tariff reset were the only explanation, a sharp jump would be expected already at the gross-profit layer. That is not what the disclosed segment numbers show. Revenue rose 27.1%, gross profit rose 25.6%, and gross margin actually slipped slightly from 25.8% to 25.4%. Put differently, the tariff reset stopped erosion, but it did not transform the economics overnight.
That has two implications for 2026. First, there is a genuine repeatable support layer here: 2025 included only half a year under the new tariff, so 2026 gets a fuller base. Second, this is still an external reimbursement mechanism rather than free pricing power. The update happens only once a year, on July 1, against an input basket and an efficiency factor. If the dollar, parts, and wage lines move faster between resets, margin pressure can return even after the 2025 catch-up.
A Profit Engine With Heavy Regulatory Concentration
What matters most about A.Z.M is that its profitability rests on a much more concentrated customer base than the consolidated numbers suggest at first glance. At the reporting date, about 85% of A.Z.M revenue came from private customers who are National Insurance beneficiaries. That is both a strength and a constraint.
It is a strength because the collection framework is relatively structured. Once a vehicle enters the accessory process, an advance payment of 65% of National Insurance funding is paid, out of 95% of the approved accessory cost, about 45 days after the advance request is submitted. After delivery and the vehicle-license structural change, the final account is submitted and the balance is paid about 60 days later. This is not a wide-open retail receivables exposure.
It is a constraint because the business remains deeply exposed to the same tariff list, the same update mechanism, and the same regulatory regime. The company also states explicitly that exchange-rate volatility affects A.Z.M primarily because inputs are purchased mainly in US dollars while reimbursement tariffs update only on an annual cycle. So A.Z.M is not a classic pricing-power story. It is closer to good operating execution inside a regulated reimbursement framework.
| Layer | What is disclosed | Why it matters |
|---|---|---|
| Customer concentration | About 85% of A.Z.M revenue comes from National Insurance beneficiaries | The main earnings engine is concentrated in one channel |
| Update mechanism | Roughly 6.17% increase from July 1, 2025 | 2025 benefited from a tariff catch-up, not from open-ended pricing power |
| Update cadence | Once a year on July 1, against an input basket and efficiency factor | There is still an intra-year lag risk versus costs |
| Collections structure | 65% advance out of 95% approved funding, then final account around 60 days later | This helps collections, but does not diversify concentration |
| Input exposure | Inputs are purchased mainly in US dollars | Margin still remains sensitive to timing gaps |
The takeaway is straightforward: 2025 should not be read as if A.Z.M suddenly discovered a free market with tight demand and rising prices. The better reading is that the tariff mechanism finally stopped punishing it at the same intensity, while the tariff mechanism itself still remains the center of gravity.
The Profit Jump Also Contained Pieces That Do Not Repeat
The most important sentence the company gives on this segment sits in the operating-profit explanation. There it links the improvement not only to vehicle deliveries, SteerLinq, and repair growth, but also to a settlement with former controlling shareholders over working-capital components and to lower excess-cost amortization related to A.Z.M.
Those two items are different in nature, but their direction is the same: they make it harder to take 2025 as a clean one-for-one base for 2026.
The working-capital settlement is contractual, not a recurring operating profit engine. It may help explain 2025, but it is not a sound base on which to build 2026. The lower excess-cost amortization is not pure operating improvement either. Numerically this is visible directly in the gap between adjusted and reported segment operating profit: the gap narrowed to NIS 2.7 million from NIS 5.0 million. That means about NIS 2.3 million of the NIS 9.4 million increase in reported segment operating profit came simply from a lighter amortization burden. That is roughly one quarter of the reported improvement.
This chart is not claiming that the remaining NIS 7.1 million was all clean and fully repeatable. Quite the opposite. That remainder includes SteerLinq, better vehicle deliveries, repair growth, and the working-capital settlement. What it does clarify is that the right reading of 2025 starts from adjusted profit and then asks which parts of the operating improvement itself can really carry forward.
That is why the 2026 test should be stricter: not whether A.Z.M can produce another reported doubling, but whether it can hold adjusted operating profit around the new level without support from a one-off working-capital settlement and without another similar accounting tailwind.
SteerLinq Adds Proof of Demand, But Not Yet the Base Case
Within all this there is one element that does improve the quality of the thesis: SteerLinq. By the reporting date, A.Z.M had received cumulative orders of about NIS 20 million in the activity, had supplied and installed systems worth about NIS 13 million, and recognized NIS 7.8 million of revenue from it in 2025. After the balance-sheet date, on March 15, 2026, another order arrived, with A.Z.M's share at about NIS 5.2 million for dozens of vehicles, with supply expected to begin in the coming weeks and continue through the end of the third quarter of 2026. The company also states that the system was approved for use by defense-system authorities and has already entered use for its intended purpose.
That matters because it is a demand layer that does not depend on National Insurance, and because it shows that A.Z.M can extend the platform beyond disabled-vehicle accessories. But scale still matters. SteerLinq revenue in 2025, NIS 7.8 million, was only about 3.6% of total segment revenue. The new NIS 5.2 million order does not by itself change the center of gravity of A.Z.M. This is an interesting industrial option, not the base on which all of 2025 was built.
That is precisely why SteerLinq matters to the quality discussion. If 2026 shows further growth in the activity without an unusual working-capital burden and without a profitability sacrifice, it can begin to improve A.Z.M's activity mix and modestly reduce dependence on National Insurance. If not, it will remain a promising line that is still too small to explain the consolidated result.
Conclusion
A.Z.M ended 2025 stronger. That is the first and most important point. The tariff reset stopped erosion, revenue grew, repairs contributed, and SteerLinq now looks like an activity with real demand rather than only a narrative.
But that is not the whole story. The reported headline, a 100.4% jump in segment operating profit, is sharper than what can be attributed with confidence to the core operating business alone. Part of the improvement came from roughly NIS 2.3 million of relief in the gap between adjusted and reported profit. Another part came from a working-capital settlement that should not be projected forward. And at the same time, the heart of the engine is still concentrated in one channel: National Insurance beneficiaries, under an annual reimbursement mechanism and with exposure to dollar-linked inputs.
So the answer to how much of the 2025 improvement is truly repeatable is not binary. More than a skeptic would argue, and less than the headline suggests. The recurring base looks better in 2025, but it is closer to the NIS 21.6 million of adjusted operating profit than to the drama of the reported figure. The right 2026 reading depends on three tests: whether the National Insurance mechanism keeps up with input costs, whether adjusted profit holds even without the contractual settlement items, and whether SteerLinq grows enough to add another engine that is not tied to the tariff list.
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