Albaad in the first quarter: profitability improved before Dimona proved itself
Albaad opened 2026 with almost flat reported revenue, but sales rose 4.6% in original currency and operating profit rose 25.1%. The quarter strengthens the margin and cash-flow read, but it does not yet close the Dimona, currency, and U.S. tariff tests.
Albaad opened 2026 with a quarter that strengthens what it needed to prove after 2025: the business can improve profitability even when the shekel revenue line barely moves. Revenue rose only 0.8% to NIS 425.7 million, but in original currency sales rose 4.6%, and operating profit rose 25.1% to NIS 31.5 million. This is not yet a full breakout quarter. It shows that the operational improvement in Europe, Israel, and fabrics is already working before the new Dimona line contributes commercially. The bottleneck remains clear: the U.S. feminine hygiene activity moved from operating profit to operating loss, the dollar and tariffs are weighing on results, and Dimona is still in the completion and commercial start-up path during 2026. Operating cash flow was much stronger than in the comparable quarter, but the real cash picture still has to be measured after CAPEX, lease repayments, and debt service, not only through the presented FCF. The current read is therefore more positive than it was at the end of 2025, but 2026 is still a proof year: the next quarters need to show Dimona moving from industrial promise to contribution, Europe holding margins, and the U.S. absorbing currency and tariff pressure without further deterioration.
Company Snapshot
Albaad is an industrial company selling three different product groups that depend on the same economic mechanism: efficient manufacturing, cost control, and conversion of production capacity into margin. The company manufactures nonwoven fabrics in Israel, manufactures and sells wet wipes in Israel and Europe, and manufactures feminine hygiene products in Israel, mainly for the U.S. market. This is not a clean growth company and not a dividend story. It is a margin and working-capital machine: when utilization, currency, raw materials, and customer terms line up, profit can move faster than sales. When currency or tariffs move against it, the pressure appears quickly.
The first quarter is a direct continuation of the previous annual analysis, where the 2026 test was framed around Dimona, Europe, and cash conversion. This time the quarter gave a partial answer. Margin improvement appeared, net debt to EBITDA fell to 1.82, and operating cash flow strengthened. But the Dimona investment has not yet become revenue, and the U.S. business reminds investors that the company is exposed both to the dollar and to tariff policy outside its control.
The business structure also explains why a headline of less than 1% revenue growth can mislead. About 91% of sales come from outside Israel, most group sales are in euros, and the feminine hygiene segment is mainly exposed to the dollar. When the euro weakens by about 4% and the dollar by about 14% versus the comparable period, nearly flat shekel revenue can hide real volume growth. The question in this quarter is not whether revenue grew, but how much profit remained after currency, tariffs, and investment in capacity.
Profit Improved Through Europe And Fabrics, While Tampons Remained The Weak Link
The first quarter looks better through profitability than through revenue. Gross margin rose to 22.4% from 19.7% in the comparable quarter, and operating margin rose to 7.4% from 6.0%. That is a meaningful improvement for a manufacturing company, especially when selling and marketing expenses rose to NIS 46.7 million and reached 11.0% of sales, partly due to U.S. tariff costs.
| Activity | Q1 2026 Sales | Reported Change | Original-Currency Change | Operating Profit And Margin | What It Means |
|---|---|---|---|---|---|
| Europe wet wipes | NIS 338.9 million | 2.0% | 6.2% | NIS 23.5 million, 6.9% | Europe grew more than the shekel figures show, and margin improved from 5.6% |
| Israel wet wipes | NIS 62.5 million | 4.9% | 6.4% | NIS 4.2 million, 6.8% | The Israeli activity sharply improved profitability from 2.7% |
| Fabrics | NIS 82.9 million | 3.0%- | 2.5% | NIS 11.9 million, 14.3% | Currency hurt reported revenue, but the internal engine became more profitable |
| Feminine hygiene | NIS 42.4 million | 12.0%- | 0.7% | NIS 1.2 million operating loss, 2.7%- | Dollar weakness and tariffs turned a previously profitable activity into the quarter's weak point |
The table captures the quarter's edge: the improvement is not evenly spread. Europe and Israeli wet wipes showed both original-currency growth and margin improvement. Fabrics remains an important profit engine, because about 95% of segment revenue comes from internal sales to the wet wipes segment and is mostly euro-denominated, so better output and costs do not always appear fully in reported revenue.
The clear weak spot is feminine hygiene. Original-currency sales rose only 0.7%, the average dollar fell 14%, and the activity moved from operating profit of about NIS 2.0 million to an operating loss of about NIS 1.2 million. That is not enough to break the group quarter, but it is enough to remind investors that the U.S. activity is not only a growth engine. It is also a risk node involving currency, tariffs, selling expenses, and import structure.
The bottom line also received help from finance. Net finance expenses fell to NIS 4.8 million from NIS 10.0 million in the comparable quarter, with the current quarter including about NIS 3.3 million of finance income from hedging transactions and exchange-rate differences. The increase in net profit from continuing operations to NIS 20.0 million is real improvement, but not all of it came from clean operating progress. Operating profit is the stronger datapoint in the quarter, because it shows the company expanded margin before finance helped the bottom line.
Cash Flow Was Strong, But Flexibility Is Measured After CAPEX, Leases, And Debt
Operating cash flow reached NIS 62.7 million, almost twice the comparable quarter. The improvement rested on net profit of NIS 19.1 million, profit adjustments of about NIS 35.2 million, and a net working-capital release of NIS 22.4 million. The last part matters: in this quarter working capital helped cash flow, mainly through higher trade payables and other payables, instead of absorbing cash as often happens in growing industrial companies.
Still, all-in cash flexibility has to be checked after the actual cash uses. The company presents FCF of NIS 38.3 million, calculated as operating cash flow minus lease liability repayments, plus interest paid, and minus CAPEX. That is useful for assessing pre-financing cash generation, but it does not by itself answer how much cash remained in the treasury after the full period movement.
| Q1 2026 Cash Picture | NIS Million | Economic Meaning |
|---|---|---|
| Operating cash flow | 62.7 | Real operating cash generation, including a working-capital release |
| Purchase of property, plant, equipment, and intangibles | 21.3- | Includes about NIS 11 million invested in the new Dimona line |
| Lease principal repayment | 11.1- | Recurring cash use that is not inside CAPEX |
| Cash after CAPEX and lease principal | 30.3 | Narrow operating cash after investment and leases |
| Net financing activity | 42.8- | Short and long debt repayment, net of a new loan |
| Change in cash and cash equivalents | 0.7- | After all movements, cash barely changed and ended at NIS 10.1 million |
The good news is that the quarter started to answer part of the question left open at the end of 2025: net debt to EBITDA fell to 1.82, net debt fell to NIS 402 million, and the company is comfortably within its financial covenants. Tangible equity was 35.7% of the balance sheet versus a minimum requirement of 23%, and the debt coverage ratio was 1.01 versus a ceiling of 3.6. That is comfortable headroom, not a borderline position.
The yellow flag is the structure of cash uses. Short-term bank credit fell to NIS 270.3 million, but the company still uses short credit, bank loans, leases, and about NIS 97 million of receivables factoring. Short-term credit repayment of NIS 29.3 million and long-term loan repayment of NIS 32.5 million absorbed a large part of the strong operating cash flow, even after receiving a NIS 30 million long-term loan. The quarter improves flexibility, but it does not turn the company into a business without financing pressure. It mainly buys time for Dimona and the margin improvement to appear in the next results.
Conclusion
The first quarter of 2026 strengthens the positive direction at Albaad, but it does not close the story. Profitability improved where it needed to improve: Europe, Israeli wet wipes, and fabrics. Cash flow was stronger, net debt fell, and covenant headroom looks comfortable. The weak point is U.S. feminine hygiene, where tariff costs and dollar weakness already pushed the activity into an operating loss.
Dimona remains the main proof point. Investment in the new line continued during the quarter, with about NIS 11 million out of NIS 21.3 million of CAPEX directed there, and the company expects commercial operation during 2026 after material delays. Management points to renewed work and a remote-control operating plan with the line's manufacturer. That is positive for timing, but it is not yet contribution to profit.
The counter-thesis is reasonable: the operating improvement may be strong enough to carry both Dimona and the U.S. pressure. Gross margin rose, EBITDA increased, cash flow strengthened, and net debt fell. The next read depends on three proof points: Dimona enters commercial operation without another delay, Europe holds operating margins above the early-2025 level, and U.S. tampons return at least to operating breakeven despite currency and tariffs. If one of those breaks, a strong first quarter will look more like a point improvement than a step change.
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