Eckerstein Group in the first quarter: profit held, but cash is still stuck in working capital
Eckerstein opened 2026 with positive earnings despite weaker revenue, but operating cash flow was negative by NIS 31.6 million and short-term bank credit kept rising. The quarter does not close the question left by 2025, it sharpens it: can the company fund growth through customers and operations again, or will banks keep funding the gap?
The first quarter of Eckerstein Group did not close the 2026 test left by the prior year. It made it sharper. Group revenue fell 9%, and operating profit excluding investment-property revaluation fell to NIS 21.7 million, but that is not the most important read: the company is still profitable, and the US business even reduced its loss. The problem is that profit again did not reach cash, with negative operating cash flow of NIS 31.6 million, a NIS 43.4 million increase in trade receivables since year-end, and short-term bank credit rising to NIS 168.8 million. The security operation explains part of the revenue and margin hit, but it does not by itself explain why the balance sheet is still absorbing the operating cycle through short-term bank funding. Real estate and the US business send mixed signals: there is an accounting uplift and a smaller loss, but also weaker office occupancy and negative EBITDA in the US. The next quarters are therefore not only a revenue recovery test. They are a funding test: customer collection, lower short-term credit, margin recovery after project sites return to activity, and whether the possible acquisition really fits this point in the cash cycle.
Company Profile
Eckerstein Group is an industrial, engineering, and real-estate group, not only a concrete-products manufacturer. Its economics sit on four layers: industrial products in Israel, engineering and infrastructure projects, environmental-design products in the US, and an income-producing real-estate layer in Herzliya and industrial land. This quarter, working capital is the central economic test. The business can produce accounting profit, but the key question is who finances the path between production, delivery, installation, and collection.
The company entered this quarter after the prior annual analysis framed three tests: whether Israeli operations could keep producing EBITDA without exceptional projects, whether working capital would stop consuming cash, and whether the US and real-estate layers would stop requiring patience. The first quarter gives a mixed answer. It does not look like a business break, but it also does not look like a quarter that clears the doubts. Engineering remained the largest engine, with NIS 113.2 million of revenue and NIS 13.3 million of segment profit. Industrial products added NIS 78.5 million of revenue and NIS 5.6 million of profit, the US still lost NIS 4.0 million, and real estate contributed NIS 10.8 million of segment profit mainly through a positive revaluation.
The latest market capitalization was around NIS 2.6 billion, and short interest stood at 0.87% of the float. This is not a profile of a stock under aggressive short pressure. It is a company where the market test is confidence in cash quality. If cash conversion comes back, the balance sheet is still relatively broad. If short-term credit remains a permanent funding layer, the discussion will move quickly from operating profitability to capital-allocation discipline.
Working Capital Absorbed The Profit Again
The important number in the quarter is not net profit of NIS 17.5 million, but how it became negative cash flow. Accounting adjustments added NIS 19.6 million, but changes in operating assets and liabilities consumed NIS 59.9 million. The main pressure came from a NIS 43.4 million increase in trade receivables and a NIS 14.7 million increase in other receivables, while inventory released only NIS 2.7 million. This is exactly the issue isolated in the working-capital continuation analysis: as long as customers do not fund more of the cycle, the bank funds it.
The all-in cash picture here means cash after operating activity, property and equipment purchases, investment-property spending, loan repayments, and lease principal, before the dividend that actually left after the balance-sheet date. On that basis, the group did not fund the quarter from operations. It reported negative operating cash flow of NIS 31.6 million, bought property and equipment for NIS 6.9 million, invested NIS 1.2 million in investment property, and at the same time received net short-term bank credit of NIS 56.3 million and sold NIS 11.9 million of short-term investments. That is how cash rose to NIS 59.1 million at the end of March, but the NIS 50 million dividend was still a payable and was paid only on April 6.
This is not an immediate liquidity problem. Equity stood at NIS 1.213 billion, 61.7% of the balance sheet, and bank debt is still not extreme relative to the size of the balance sheet. But short-term credit has already risen to NIS 168.8 million from NIS 112.6 million at the end of 2025, and net bank debt rose to NIS 151.5 million from NIS 108.5 million. In a quarter where a possible NIS 50 million to NIS 100 million acquisition in finishing-products for construction is still alive, even if the memorandum is non-binding, this is a real point of friction.
The Security Operation Hurt Pace, But The Gap Is Not Only Temporary
Management attributes the revenue decline to restricted customer-site activity during Operation Roaring Lion, partly offset by higher demand for protective products. That is a reasonable explanation for the quarterly revenue hit, because a material portion of civil and defense infrastructure project sites was closed or operated at very low intensity. The problem is that the plants continued operating as essential suppliers, so the company could not cut expenses at the same pace as customer-site activity slowed.
That gap is visible by segment. In industrial products, revenue fell only 3%, but the operating margin was cut to 7.2% from 13% in the comparable quarter, and the EBITDA margin fell to 18.3% from 23.2%. In engineering, revenue fell 13.2% and operating profit declined to NIS 13.3 million, with an operating margin of 11.7% versus 15.1%. This is not only lower volume. It is operating pressure that appears when production and expenses do not fall immediately with stopped sites.
The US business is improving, but not enough to change the read. Dollar revenue rose 11.6%, yet exchange-rate movement turned that into a 3.6% decline in shekel terms. The operating loss fell to NIS 4.0 million and negative EBITDA narrowed to NIS 2.5 million. That supports the direction described in the US business analysis: the loss is less heavy, but the business has not yet proven the volume needed to reach breakeven.
Real estate also gives a double signal. On one hand, the segment reported operating profit of NIS 10.8 million due to a NIS 3.0 million positive investment-property revaluation. On the other hand, third-party rental revenue fell 9.4%, NOI fell 7.4% to NIS 5.7 million, and office occupancy declined to around 75%, with 6,778 square meters of offices and another 388 square meters of retail space available for marketing. The positive revaluation in the quarter therefore does not close the question raised in the real-estate analysis: how much of the value is already accessible through rent and cash flow, and how much still depends on occupancy, planning, and future monetization.
Conclusions
The first quarter is not weak in the simple sense. Eckerstein remains profitable, keeps a broad equity base, reduces the US loss, and holds a real-estate layer that still provides accounting support. But the quality test has moved elsewhere: whether operating profit can again become cash, or whether working capital and short-term credit keep funding operations, the dividend, and the option to make another acquisition.
The current read is cautious. Operation Roaring Lion created operating disruption that may be partly temporary, but negative cash flow, the increase in receivables, and higher short-term credit are not noise. They are the next clear proof point. A real improvement will require project sites returning to activity, receivables coming down, operating cash flow turning positive, and short-term credit declining, without giving up the margins in engineering and industrial products. The weaker read would be another quarter in which profit stays positive but cash keeps leaving, or progress in the acquisition without a funding structure that shows the company is not adding more pressure to the short end of the balance sheet.
The counter-thesis is clear: the first quarter may simply have been caught in bad timing, with an unusual security operation, closed project sites, and a dividend declared before the cash left the company. If collection recovers quickly, Israeli operations return to 2025-level margins, and the US keeps reducing its loss, this quarter will look in hindsight like a transition quarter. Until that happens, the market is likely to assess the company less through net profit and more through four numbers: operating cash flow, trade receivables, short-term credit, and office NOI.
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.