Mehadrin: Is the Agricultural Recovery a New Base or Just a Rebound Off a Weak Year
Mehadrin returned in 2025 to agricultural gross profit of about NIS 38.7 million after a gross loss of about NIS 38.3 million in 2024, but the improvement still leans on avocado and dates, on a sharp reduction in the citrus drag, and on an efficiency program that has not yet proven its full run rate. The 2026 test is whether the savings, the packing-line deal and the better fruit quality really build a new base, or only repair an unusually weak war-distorted season.
The main article argued that in 2025 Mehadrin got back part of the agricultural capacity it lost in 2024, but that the group story no longer sits only on fruit. This follow-up isolates the narrower question, and the more important one: did agriculture itself return to a durable profit base, or did it mostly benefit from a technical rebound after a year crushed by the war.
The headline number looks strong. Agricultural activity moved from a gross loss of about NIS 38.3 million in 2024 to gross profit of about NIS 38.7 million in 2025. But the right read needs to be sharper. This was not a broad recovery across all engines. It was mainly a mix of three things: avocado and dates staying solidly positive, citrus no longer burning tens of millions of shekels, and an efficiency program that started to cut acreage, labor and fixed costs.
What makes this easy to misread is that the recovery did not come from a full return in physical activity. Packing and marketing revenue rose 12.1% to about NIS 1.03 billion, but total tonnage sold fell 3.9% to about 152.7 thousand tons. In other words, 2025 did not deliver a clean volume recovery. It mostly delivered better fruit quality, better channel mix, and less fruit being pushed into the low-value industrial channel.
That is why the key question is not whether 2025 was better than 2024. That is already clear. The real question is whether 2025 proves that Mehadrin's agricultural economics are back on their feet without leaning on a weak comparison base, without leaning on savings that are still being implemented, and without moving too quickly to capitalize a packing-line deal whose contribution is still entirely forward-looking.
The improvement is real, but it is not broad
This chart is the core of the story. Reported value improved, but the physical base did not fully recover. Export revenue rose 13.0% to about NIS 806.8 million, alongside a 12.3% increase in export tonnage to about 92.7 thousand tons. Local-market revenue rose 17.8% to about NIS 207.5 million, while local tonnage rose only 3.6% to about 37.8 thousand tons. On the other side, industrial sales fell 45.2% to about NIS 15.9 million and industrial tonnage dropped 44.4% to about 22.2 thousand tons.
The implication is clear: a large part of the repair came from less fruit being downgraded into the cheap industrial channel, and more fruit being sold through better channels. That is a real quality recovery, but it is not the same as saying yields are back and the problem is solved. In fact, the report itself says 2025/2026 fruit quantities are currently expected to be about 7% lower on average because of reduced cultivated area and weather damage. So even after the 2025 rebound, the base question is still open.
| Agricultural sub-segment | 2025 revenue | Change vs. 2024 | 2025 gross profit | 2024 gross profit | 2025 gross margin | The right reading |
|---|---|---|---|---|---|---|
| Avocado | NIS 445.7 million | 11.1% | NIS 16.8 million | NIS 13.1 million | 3.8% | A growth engine, but still not a high-margin one |
| Citrus | NIS 228.8 million | 0.1% | Loss of NIS 7.4 million | Loss of NIS 69.8 million | Minus 3.2% | A sharp repair, but not a return to profitability |
| Dates | NIS 289.3 million | 24.4% | NIS 24.7 million | NIS 18.2 million | 8.5% | The cleanest profit engine inside agriculture |
| Other varieties | NIS 66.4 million | 15.9% | NIS 4.6 million | NIS 0.2 million | 6.9% | A good recovery, but off a small base |
The table and the chart make it hard to declare a new base. In 2025 the four agricultural sub-segments generated about NIS 46.1 million of positive gross profit before citrus, but citrus still took away NIS 7.4 million of that. So even after the improvement, Mehadrin's agriculture is still not balanced from within. It still relies on dates, avocado and other varieties to cover a citrus business that has not truly come back.
Citrus: Less bad is still not good
Citrus is the main reason 2025 looks much better, and it is also the main reason to stay careful with that conclusion. Revenue barely moved, to about NIS 228.8 million from about NIS 228.5 million in 2024. But the gross loss collapsed from about NIS 69.8 million to about NIS 7.4 million. That is a huge change, and the report attributes it mainly to better fruit quality, especially the Or variety, together with efficiency measures.
That is good news, but it is not proof of restored profitability. Even after more than NIS 62 million of improvement, citrus still loses money. More importantly, the three-year view shows that this is not a one-year issue: gross loss of about NIS 74.4 million in 2023, about NIS 69.8 million in 2024, and about NIS 7.4 million in 2025. In other words, 2025 improved the picture dramatically, but it still did not break the negative run.
The problem is not only in the orchards. It is also in the market. In the 2024/2025 season, the group's share of Israeli citrus exports fell to about 26.5%, from about 34.7% in the prior season. At the same time, Europe remains crowded with competitors such as Spain, Morocco, Egypt and Turkey, and the company itself says rising competition in key products, especially red grapefruit and Or, is hurting selling prices. So the 2025 improvement still does not prove that citrus is back as a stable leg. It mostly shows that the hole created in 2024 is no longer nearly as deep.
There is also an agronomic signal here. The company has almost stopped planting new citrus orchards and is planting mainly avocado, against a background of continuing profitability erosion and shekel strength in recent years. That is an important clue. When management itself is redirecting planting from one of its oldest engines toward another one, it is effectively saying that the citrus question is not how to get back to a peak, but how to reduce the weight of a structurally weaker business inside the crop mix.
Labor and logistics: the efficiency program is real, but it did not close the gap
The efficiency plan is not cosmetic. It is already visible in the numbers. The company stopped cultivating about 6,201 dunams of loss-making orchards, transferred Avocado HaEmek packing activity to the Upper Galilee facility with investment of about NIS 6.5 million, ended the employment of 45 workers because of that move, ran a voluntary retirement program under which 50 workers left the group, and ended the employment of another 23 workers who had reached retirement age. The broader program generated about NIS 12 million of one-off other expenses, and management estimates about NIS 17 million of annual savings. Within that, the Avocado HaEmek transfer alone is expected to save about NIS 4.7 million per year.
| Item | Scale | What it does solve | What it still does not solve |
|---|---|---|---|
| Stopping loss-making orchard cultivation | About 6,201 dunams | Cuts structurally weak acreage | Less acreage can also mean a smaller revenue base if replacements do not mature in time |
| Transfer of Avocado HaEmek to Upper Galilee | About NIS 6.5 million of investment | Removes one layer of operational duplication | Packing still depends on sites that operated intermittently under war conditions |
| Estimated annual savings from the transfer | About NIS 4.7 million | Improves packing-house economics | Still an estimate, not a fully proven run rate |
| Broader efficiency plan | About NIS 12 million of one-off cost against about NIS 17 million of estimated annual savings | A real cut to recurring costs | The savings are still exposed to demand, wage and logistics pressure |
| Workforce reset | 45 layoffs, 50 voluntary retirements, 23 retirement-age exits | A deep move, not a symbolic trim | Heavy dependence on seasonal labor and manpower contractors remains |
The problem is that the operating pressure did not disappear. In 2025 the group employed about 249 seasonal workers, including about 130 in Israel and about 119 in Peru, equal to about 175 annualized employees. In addition, the group employed about 787 manpower-contractor workers during the period. Even after the restructuring, agriculture remains labor-intensive, seasonal and operationally dispersed, and the report explicitly says that higher input costs, especially minimum wage, may erode gross profitability. Water alone represents about 40% of orchard-cultivation cost per dunam.
The employee map also tells a more complicated story than the headline. In agriculture in Israel, permanent employees fell to 105 from 157, and at headquarters to 56 from 63. But total permanent employees in the group actually rose to 336 from 326, mainly because 75 permanent employees were added in Don Fermin in Peru. In other words, part of the improvement came from tightening the domestic system, but another part came from moving the center of gravity rather than eliminating the burden.
On top of all this, the war burden still sits inside the business. The company estimates that the effect of the war on 2025 alone was about NIS 16 million before tax, and that the cumulative effect since the war began is about NIS 78 million before tax. In addition, the group's share of the war effect in its agricultural partnership was estimated at about NIS 3.5 million. The group received about NIS 5.8 million, but did not recognize the remaining compensation claims as receivables. That matters because it means 2025 profitability was still built under abnormal operating friction, not under a normalized year.
The packing-line deal is a good option, not proof
This chart pulls the discussion back to the core point: most of the 2025 jump came from citrus becoming far less bad, not from a broad-based operating revolution. That is exactly the context in which the packing-line deal should be read.
In November 2025 Mehadrin completed the purchase of a sorting and packing line plus packaging inventory from a third party, for about NIS 5 million plus payment for the inventory. Beyond that, the agreement includes contingent consideration of up to NIS 20 million, depending on the quantities and types of fruit actually transferred to the company's facilities for sorting and packing over ten years. The agreement also includes agreed compensation if the seller does not meet minimum volumes in the initial period.
| Deal component | What is already known | The right reading |
|---|---|---|
| Line purchase | About NIS 5 million plus inventory | A real investment, not just an MOU |
| Contingent consideration | Up to NIS 20 million | The true economic cost depends on actual volume transfer |
| Fruit-transfer period | 10 years | A long horizon, but also a long dependence on the counterparty |
| Company forecast | About NIS 90 million to NIS 130 million of annual revenue uplift | Very large upside, but fully forward-looking |
| Implementation status at report date | The line was moved to Ashkelon and installation was still in progress | The 2025 numbers do not yet prove any of this revenue |
It is an interesting agreement because it can change the role of Mehadrin's packing houses. Instead of depending only on the group's own fruit, packing can become a wider service layer with higher throughput and better absorption of fixed costs. But it is important to keep the deal in the right place: this is still an option on 2026 and beyond, not a proven part of the 2025 base.
There is also a subtler point. The company itself says realization depends on the seller meeting its obligations, on market conditions, on demand levels and on logistics conditions. That wording takes the deal out of the world of certainty and back into the world of execution. When both main packing facilities, in Ashkelon and the Upper Galilee, operated intermittently during the war-affected season, and when that same season ended with citrus volume reaching the packing houses down 36% and avocado volume down 19%, it is hard to call this a proven base. It is still an additional upside layer, not recurring economics.
So is this a new base or just a rebound
The fair reading is that 2025 was more than a technical rebound, but still less than a proven new base. More than a rebound, because Mehadrin really did cut loss-making acreage, remove packing-house duplication, sharply reduce the citrus drag, and keep dates and avocado as positive profit engines. Less than a proven base, because total tonnage still fell, citrus still lost money, the war still cost the group about NIS 16 million before tax in 2025, and the packing-line agreement is still untested in actual throughput.
That is why 2026 is a proof year, not the end of the debate. For 2025 to become a real new base, three things need to happen together: the estimated NIS 17 million of savings has to appear in the cost line without being reabsorbed by wages and logistics; the packing-line deal has to turn from a NIS 90 million to NIS 130 million annual revenue forecast into actual volume flowing through the facilities; and citrus has to move from "near break-even" to no longer being a recurring drag on the agricultural business.
If that happens, it will be possible to say Mehadrin did not just rebound from a weak year, but actually rebuilt its agricultural economics around healthier engines. If it does not, then 2025 will look in hindsight like a year in which weather, fruit quality and aggressive cost cutting repaired the headline, but did not fully change the quality of the base.
Disclosure: Deep TASE analyses are general informational, research, and commentary content only. They do not constitute investment advice, investment marketing, a recommendation, or an offer to buy, sell, or hold any security, and are not tailored to any reader's personal circumstances.
The author, site owner, or related parties may hold, buy, sell, or otherwise trade securities or financial instruments related to the companies discussed, before or after publication, without prior notice and without any obligation to update the analysis. Publication of an analysis should not be read as a statement that any position does or does not exist.
The analysis may contain errors, omissions, or information that changes after publication. Readers should review official filings and primary sources before making decisions.