Orian in the first quarter: storage is improving, but forwarding and distribution still weigh

In the first quarter of 2026, Orian delivered only part of the proof investors needed after 2025: the Kiryat Malakhi logistics center and the broader storage platform are beginning to absorb fixed costs better, but the rest of the business still prevents that improvement from becoming a clean turnaround. Storage revenue rose 14%, the segment gross loss narrowed from NIS 3.0 million to NIS 0.7 million, and average occupancy reached about 79.9% close to the report date. That matters because storage is an occupancy and fixed-cost business, so every additional layer of utilization can change the site economics. Still, the group result weakened: total revenue fell 11.6%, gross profit declined 27.7%, and operating profit was cut to NIS 5.4 million. Forwarding remains pressured by the security situation, the end of DBSCHENKER, air-capacity disruption and the dollar, while distribution is growing volumes but keeping much less profit per parcel. The Series C bond improved liquidity and pushed out part of the debt burden, but the all-in cash picture still depends on operating cash flow after leases and repayments. The current read is therefore mixed rather than negative: Orian showed that storage can improve, and now has to prove that forwarding and distribution stop consuming that improvement.

The quarter split Orian in two directions

Orian provides logistics services: import and export forwarding, customs brokerage, distribution and transportation, storage, and bridge financing for import customers. This quarter makes clear that the company can no longer be assessed only by activity volume. Import and export still produce a large part of revenue, but they are exposed to freight prices, the dollar, air and sea capacity, and the international agent network. Storage has a heavier fixed-cost base, so occupancy and pricing matter more than one quarter of revenue growth. Distribution can grow volume quickly, but when growth comes from B2C parcels and PUDO lockers with lower profitability, the top line can look better while profit deteriorates.

The continuity with prior Deep TASE coverage is direct. The 2025 analysis asked whether Hellmann, Kiryat Malakhi and distribution growth would start producing profit rather than only activity. The Kiryat Malakhi follow-up focused on when the new site would stop weighing on storage profitability. The first quarter partly answers that second question, but not the whole company question. It says storage is moving in the right direction, while the consolidated business still depends on two weaker engines: forwarding that needs a return to volumes and margins, and distribution where growth remains too expensive.

The market screen does not provide a shortcut either. With market value around NIS 380 million, the company is being measured against weak quarterly earnings, but after the issuance the cash balance is stronger and bank debt declined. Short interest is negligible, so there is no meaningful short signal shaping the thesis. The near-term market read will be determined by a simpler test: whether gross profit starts rising before leases, finance costs and working capital absorb most of the cash again.

Kiryat Malakhi is starting to close the gap

Storage is the real positive finding in the quarter. Segment revenue rose to NIS 54.6 million from NIS 47.7 million in the parallel quarter, and the gross loss narrowed to NIS 0.7 million from NIS 3.0 million. This is not only revenue growth. Segment costs rose 9% while revenue rose 14%, so part of the additional activity is finally staying inside the segment rather than being swallowed by costs.

The more important number is occupancy. As of March 31, 2026, average occupancy in the logistics centers was about 74.6%, and close to the report date it had risen to about 79.9%. Excluding the new Kiryat Malakhi site, occupancy was about 86.9% at the balance-sheet date and about 90.3% near the report date. The gap between those two pictures matters: the legacy network is already in high-occupancy territory, while the main burden still sits in Kiryat Malakhi, which added roughly 42 thousand square meters and started operating in the first quarter of 2024.

This is where the quarter moves beyond a headline. If Kiryat Malakhi continues to improve occupancy and pricing, storage can move from a small gross loss to positive gross profit without another dramatic revenue jump. But as long as the segment still loses money, the issue is not fully solved. The impairment review did not lead to a material loss even after a higher WACC, but that is only an accounting support layer. The business proof is segment profitability, not only the absence of impairment.

Forwarding and distribution still consume the improvement

Forwarding is what prevents the quarter from reading like a recovery. Import revenue fell to NIS 82.7 million, down 28%, and gross profit fell to NIS 7.3 million, down 35%. Export was weaker: revenue fell to NIS 27.6 million, down 36%, and gross profit fell to NIS 3.3 million, down 58%. Export gross margin fell from 19% to 12%, which is no longer only a volume issue.

The company attributes the decline to a combination of the air-space closure and security situation following Operation Shaagat HaAri, lower air and sea activity, lower sea-export prices, the end of DBSCHENKER, and the dollar. The lower dollar alone reduced import revenue by about NIS 3 million and export revenue by about NIS 1 million. The fact that the end of DBSCHENKER still appears as part of the explanation in the first quarter of 2026 means the Hellmann transition has not yet been tested through clean results. Hellmann preserves the international network, but has not yet proven a full replacement of the customer flow and gross profit that disappeared.

Distribution and transportation show the opposite problem, and it is just as important. Revenue rose 14% to NIS 78.5 million, mainly from a higher number of parcels and pallets. But gross profit fell 61% to only NIS 1.1 million, and gross margin declined from 4.1% to 1.4%. Growth exists, but the economic payer is the margin: more parcels to private recipients, more PUDO and locker activity, and higher wage and subcontractor costs.

That prevents an easy read of the quarter. If distribution had kept last year's margin, the volume increase would have looked like a real growth engine. In practice, the business grew exactly where profitability is weaker. The next proof point is therefore not only how many parcels the company distributes, but whether it can change pricing, customer mix or execution costs so that distribution is not only a high-volume, low-margin engine.

The issuance bought time, leases still decide cash

The all-in cash picture, meaning cash after operating activity, investing activity, lease principal, loan repayment, dividends and the quarter's capital raise, improved materially because of Series C. Cash rose from NIS 28.9 million at the end of 2025 to NIS 84.6 million at the end of March 2026. Working capital was positive by about NIS 44.1 million. Short-term credit lines totaled NIS 152.2 million, of which NIS 54.7 million were committed facilities, and utilization was almost zero at the end of March and about NIS 20.4 million close to the report date.

But the issuance does not change the cash economics of the business itself. Operating cash flow was NIS 21.8 million, down from NIS 26.9 million in the parallel quarter. During the same quarter, the company paid NIS 20.6 million of lease liabilities, purchased property, plant, equipment and intangible assets for about NIS 9.4 million, and repaid NIS 33.5 million of long-term loans. Without the net proceeds from Series C and the warrants, about NIS 89.8 million, the cash picture after all uses would have looked very different.

The bond still matters. Series C is unlinked, carries a fixed 3.8% interest rate, and pushes the main principal repayments to 2028 through 2032. The company also complies with its financial covenants, and Maalot reaffirmed an ilA- stable rating. Still, leases remain the number that brings the discussion back to operating reality: current lease liabilities were NIS 80.7 million, and non-current lease liabilities were NIS 695.4 million. A better debt structure is not the same as free cash surplus if operations do not improve gross profit.

One legal note should stay on the screen, even though it does not drive the current thesis. In January, the company received a payment demand from a customer's insurer for about $3.8 million over an air-export shipment from August 2025 that fell into the hands of fraudsters impersonating the inland carrier. The company rejected the demand, its advisers estimate the financial risk at about $150 thousand, and it notes insurance coverage with a deductible of 5% of the damage and no less than $25 thousand. This is not a quarter-defining event, but it is a reminder that forwarding carries execution risks that do not always appear in the revenue line.

Conclusion

The first quarter of 2026 gives Orian one good answer and two open questions. The good answer is storage: Kiryat Malakhi no longer looks like an asset that only adds revenue while burning the same amount of profit, but like a site approaching segment breakeven. The open questions are forwarding and distribution. In forwarding, the company needs to show that renewed air activity, a stabilized dollar and Hellmann can restore volumes and gross profit. In distribution, it needs to show that growth can shift from low-margin parcels to better pricing, mix and execution cost.

The strongest counter-thesis is that the quarter was hit by an exceptional security event and a less favorable currency backdrop, so it may not represent the full year. That is a reasonable objection, especially because storage is already showing real improvement. But it is not enough on its own. For 2026 to read as a recovery year rather than another transition year, the next two to four quarters need to show three things together: storage moving into positive gross profit, forwarding returning to stable margins, and distribution growing volumes without compressing profitability further. Until then, Series C buys time, but the real test remains operational.