Danya Cebus in the First Quarter: Infrastructure Returned to Profit, but Cash Still Funds the Proof
Danya Cebus opened 2026 with backlog up to NIS 24.8 billion and a sharp repair in infrastructure, but much of the new backlog still sits in early-stage or zero-margin projects. The quarter improves the execution read, while cash flow, dividends and the Blue Line funding keep the cash test open.
Danya Cebus gave only a partial answer in the first quarter to the question left open at the end of 2025: whether a large backlog is really starting to become profit and cash, or mostly extending the list of projects that need funding and execution. The positive answer comes from infrastructure and concessions, which moved from gross loss in the comparable quarter to NIS 9.1 million of gross profit, and from consolidated backlog that rose to NIS 24.8 billion. But the answer is still not clean, because a large part of the backlog sits in projects where profit is not yet recognized, while operating cash flow remained negative in the quarter. The Jerusalem Blue Line is no longer only a future strategic story: in this quarter the company invested about NIS 118 million as part of the equity required for the project, and funded most of the move through short-term credit. At the same time, the quarterly NIS 40 million dividend continued, another dividend was approved after the balance-sheet date, and the buyback program has still not been used. The quarter therefore strengthens the case that 2026 can become an execution repair year, but it does not yet prove that backlog is converting into cash at a pace that supports a cleaner read of the whole company.
Infrastructure Returned to Positive Territory, Housing Took the Pressure
The company is a construction and infrastructure contractor with four activity engines: residential construction, non-residential construction, infrastructure and concessions, and residential development and construction. Its economics are not measured only by revenue, but by the pace at which long-cycle projects move from signing and construction into revenue, margin, collection and liquidity. That makes it a backlog and working-capital machine: it can show very high forward visibility and still consume cash when projects expand or enter early execution.
The previous annual analysis set a simple test: not backlog size by itself, but its conversion into profit, cash flow and capital flexibility. The first quarter closes part of that test. Consolidated revenue was almost unchanged, NIS 1.62 billion versus NIS 1.63 billion in the comparable quarter, while gross profit rose to NIS 66.4 million and operating profit rose to NIS 48.1 million. Net profit fell to NIS 40.5 million, mainly because net finance income declined to NIS 3.1 million from NIS 7.2 million.
The more important number is inside the segments. Infrastructure moved from a NIS 13.4 million gross loss in the first quarter of 2025 to NIS 9.1 million of gross profit in the current quarter. That is a real repair point, because the same segment was the central yellow flag in 2025. But the pressure did not disappear from the group, it moved to residential construction: revenue fell to NIS 573.4 million, and segment gross profit dropped to only NIS 7.0 million, from NIS 26.9 million in the comparable quarter. The operating explanation is a combination of war-related effects and an increase in projects that have not yet reached the profit-recognition threshold.
This does not mean the company weakened operationally across the board. Non-residential construction remains the profit anchor, with NIS 704.7 million of revenue and NIS 44.3 million of gross profit. Residential development grew faster, but it is still relatively small. The quarter tells a more focused story: infrastructure stopped, at least this quarter, eroding gross profit, while housing exposes the cost of early-stage projects and a difficult execution environment.
The Backlog Looks Strong, but Much of It Still Has Not Proven Margin
Consolidated backlog rose to NIS 24.8 billion at the end of March 2026, compared with NIS 22.0 billion at the end of 2025 and NIS 13.7 billion a year earlier. This is a large number even against a market capitalization around NIS 5 billion, so it is easy to see why a quick read of the quarter would start there. Still, backlog at a construction contractor is not the same as profit. The question is how much of it has already moved into a stage where results can be estimated, and how much still sits in a status where revenue is recognized only up to recoverable costs.
That is the quarter’s key insight. In residential construction, out of NIS 12.26 billion of expected remaining revenue in projects under execution, about NIS 10.73 billion is in zero-margin projects. In infrastructure and concessions the picture is similar: out of NIS 7.66 billion of expected remaining revenue, about NIS 6.74 billion is in zero-margin projects. Non-residential construction looks better, but even there about NIS 2.66 billion out of NIS 4.41 billion of expected remaining revenue is in projects that have not yet reached profit recognition.
| Segment | Expected remaining revenue in projects under execution | Of which in zero-margin projects | What it means |
|---|---|---|---|
| Residential construction | NIS 12.26 billion | NIS 10.73 billion | Most of the backlog is still early, and profit depends on estimates stabilizing |
| Non-residential construction | NIS 4.41 billion | NIS 2.66 billion | The profit anchor is still strong, but a new early-stage layer is entering it too |
| Infrastructure and concessions | NIS 7.66 billion | NIS 6.74 billion | The quarter is positive, but most of the horizon is still before margin proof |
This table changes the interpretation of the backlog. It does not say the backlog is weak. On the contrary, the company has a very large book of work, with long-term projects that can support several years of activity. But it also explains why one quarter of infrastructure repair is not enough. For the market to assign more weight to the backlog, investors need to see a consistent migration of projects from zero-margin status into recognized gross profit, without a parallel jump in working capital and short-term credit.
The MDA campus win in Ramla is a good example of both the quality of the horizon and its bottleneck. The project is estimated at about NIS 455 million plus VAT, linked to the commercial and office construction input index, and the work is expected to take about 3 years from the work commencement order. This win strengthens non-residential construction, the segment that continues to carry most of the group’s gross profit. But here too, value is not immediate: it requires a work order, long execution, cost control and collection.
The Cash Picture Is Still Less Comfortable Than Profit
Total cash flexibility in the quarter checks what remains after actual cash uses: operating cash flow, investments, funding of associates, dividends, repayment of long-term loans and lease liabilities, and interest. In that framing, the quarter still does not create capital freedom. Operating cash flow was negative NIS 41.7 million, much better than negative NIS 217.9 million in the comparable quarter, but still negative. Investing cash flow was negative NIS 147.6 million, mainly because of an investment of about NIS 118 million as part of the equity required for the Jerusalem Blue Line project.
The gap was funded through the balance sheet. Financing cash flow was positive NIS 120.5 million, mainly because of a NIS 181.0 million increase in short-term credit from banks and other lenders. In the same period, the company paid a NIS 40 million dividend, while repayment of long-term loans and lease liabilities totaled NIS 18.7 million. Cash fell from NIS 384.3 million at the beginning of the year to NIS 316.8 million at the end of March. Including restricted deposits and marketable securities, the broader liquidity layer stood at about NIS 526 million.
This is not an immediate stress picture. Equity is NIS 902.9 million, working capital is positive, and the current ratio is 1.16. But the quarterly direction matters: working capital declined from NIS 482.8 million at the end of 2025 to NIS 340.5 million, and the current ratio declined from 1.24. The decline mainly reflected short-term credit taken to fund an investment in an associate. At the same time, the company says it is preparing to fund required investments in PPP projects by expanding short-term credit facilities to about NIS 400 million, while reviewing dedicated long-term credit for specific projects.
Capital allocation remains a checkpoint. On March 1, 2026, the board renewed a buyback program of up to NIS 50 million, but no shares had been bought by the report date. On the same day, a NIS 40 million dividend was approved and paid in May, and on May 19 another NIS 40 million dividend was approved. Regular distributions can signal confidence, but in a quarter of negative operating cash flow and capital consumption by the Blue Line, they also raise the proof bar: distributions need to rest on cash-flow improvement, not only existing liquidity and short-term credit.
Conclusion
The first quarter improves the company’s position relative to the starting point of 2026, but it still does not settle the case. Infrastructure returned to gross profit, backlog grew, and non-residential construction continues to carry most of the profit. These are real positives. The bottleneck is conversion quality: a large part of the backlog still has not proven margin, and cash flow remains negative after investments, project funding and distributions.
The current conclusion is that 2026 opened as a proof year, not a breakout year. What can improve the market read is two to four quarters in which infrastructure stays profitable, housing stops eroding, and zero-margin projects start moving into profit recognition without increasing cash consumption. What would weaken the picture is continued backlog growth that comes with more short-term credit, more PPP project funding and more distributions before operating cash flow returns to positive territory. For a construction contractor of this scale, the difference between high-quality backlog and burdensome backlog is ultimately measured by cash left after execution, not only by the number in the backlog table.
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