Kalil in the First Quarter: Profit Jumped, but Working Capital Still Absorbs Cash

Kalil opened 2026 with a report that is much stronger than a routine “sales grew” headline: revenue rose 38.3%, gross margin jumped to 23.8%, and operating profit reached NIS 11.6 million versus only NIS 3.4 million in the comparable quarter. This is no longer just a cyclical recovery story, because even comparison data that assumes the Golan Tzach acquisition had been consolidated from the start of the period shows a sharp profitability improvement. But this quarter does not close the question left open after the previous annual analysis: whether the broader model creates accessible free cash, or mainly a larger revenue base with heavier working capital and more obligations. Receivables rose by NIS 23.2 million and inventory rose by NIS 8.1 million, so operating cash flow of NIS 3.7 million looks modest next to net profit of NIS 7.6 million and EBITDA of NIS 18.6 million. After property and intangible investments, lease payments and the NIS 15 million dividend approved at quarter-end and paid after it, accounting profit is still not enough to declare 2026 a proven cash year. The current read is more positive than it was at the end of 2025, but it still depends on two things: sustained margin improvement despite aluminum prices and import competition, and a release of working capital so the new growth does not remain trapped on the balance sheet.

The Broader Model Is Now in the Numbers

The company is no longer only a local aluminum-profile manufacturer selling to wholesalers, installers and fabricators. After acquiring 51% of Golan Tzach’s activity at the end of 2025, it also owns an import and marketing arm intended to broaden the product range for high-rise construction and renovation. That matters after the previous discussion around the anti-dumping levy: the company did not remain only in the position of a domestic manufacturer asking for protection. It also built a channel that allows it to participate in part of import economics.

The business model of this kind of company usually rests on three simple drivers: volume that absorbs fixed plant costs, the ability to pass raw-material and currency movements to the market, and service quality that protects the brand against cheaper imports. In the first quarter of 2026, all three worked better. The profiles segment, which now includes the Golan Tzach activity after the acquisition closed, increased total revenue to NIS 124.1 million and posted segment profit of NIS 10.0 million. The shutters segment, which was loss-making in 2025, moved to segment profit of NIS 1.6 million.

The unusual point is not growth by itself. In an industrial and distribution company, revenue growth after an acquisition is almost expected. The abnormal part is the pace of margin improvement. The average LME aluminum price rose 21.5% to USD 3,194 per ton, and the quarter-end price reached USD 3,585 per ton. At the same time, the average dollar rate fell to NIS 3.12 versus NIS 3.61 in the comparable quarter, so the stronger shekel softened part of the pressure. The next reports will therefore test not only demand, but whether the company can hold margin when the mix of aluminum, dollar and import competition is less convenient.

Profitability Rose Even on an Acquisition-Adjusted Base

The reported number looks strong, but it would have been too easy to read if all of the improvement came only from consolidating an acquired activity. That is not the case. Reported revenue was NIS 134.3 million, compared with NIS 97.1 million in the comparable quarter. Gross profit almost doubled to NIS 31.9 million, and operating profit rose to NIS 11.6 million. Management attributes the improvement mainly to higher sales volumes and the fact that fixed costs in cost of sales did not change materially.

The cleaner way to read the quarter is through comparison data that assumes the acquired activity was consolidated from the start of the comparison period. On that basis, revenue rose from NIS 112.1 million to NIS 134.3 million, an increase of about 19.8%, and operating profit rose from NIS 5.5 million to NIS 12.2 million. In other words, even after reducing the acquisition noise, operating profit more than doubled.

The segment split supports the same conclusion. In the profiles segment, segment profit rose from NIS 3.6 million to NIS 10.0 million, and on the acquisition-adjusted basis it rose from NIS 5.7 million to NIS 10.7 million. In the shutters segment, revenue rose from NIS 11.6 million to NIS 15.3 million, and a segment loss of NIS 0.2 million turned into profit of NIS 1.6 million. The absolute contribution is smaller, but it matters for earnings quality: an activity that dragged the core business down no longer looks like the same drag in this quarter.

Working Capital Still Absorbs a Large Part of the Profit

This is where the report becomes less clean. Net profit was NIS 7.6 million, but operating cash flow was only NIS 3.7 million. That is still a major improvement from negative operating cash flow of NIS 5.5 million in the comparable quarter, but it was achieved despite a large cash pull into working capital. Receivables rose by NIS 23.2 million and inventory rose by NIS 8.1 million. Suppliers offset part of that with an increase of NIS 11.9 million, but not all of it.

All-in cash flexibility after the period’s actual cash uses tells a more moderate story than profit. Starting from operating cash flow, subtracting property and intangible investments and adding lease repayments, the first quarter was roughly balanced to negative before the dividend. Deposit collection increased actual cash, but that is a conversion of one liquid asset into another, not cash generated by customers.

This is not a liquidity stress signal. Cash, short-term deposits and short-term investments totaled NIS 84.2 million at the end of March, and the company also held NIS 8.9 million in long-term deposits. Still, the NIS 15 million dividend and the non-binding credit framework of up to NIS 20 million signed after the quarter sharpen the new balance: the company remains liquid, but expansion now requires tighter management of receivables, inventory and current funding. The credit framework is not dramatic in size, but its existence together with a maximum ratio of short-term financial debt to operating working capital shows that the operating question now touches the financing structure as well.

Kalil Golan Adds a Liability Layer for Shareholders

Kalil Golan is already part of the broader model, but it also adds an accounting and financing layer that should not be skipped. The business combination cost, for the company’s share, was NIS 40.6 million and included a NIS 40.1 million cash payment and NIS 0.5 million contingent consideration. Against that, customer relationships of NIS 27.0 million, goodwill of NIS 51.1 million and a put liability to the seller of NIS 35.7 million were recognized at the transaction date. By the end of March, that liability was already measured at NIS 37.0 million, and the NIS 1.3 million change went through finance expenses.

The implication for shareholders is straightforward: the expansion can be strategically right and still not reach them fully or quickly. Under the option mechanism, from January 1, 2031, the exercise consideration is based on a 6.75 multiple of the joint company’s average pre-tax profit in the three full calendar years preceding exercise. The more successful Kalil Golan becomes, the higher the operating value, but the economic price of the seller’s rights can also rise. In addition, during the quarter a credit balance of the subsidiary to non-controlling interests was converted into a NIS 20.0 million loan, while the company provided a similar shareholder loan to the subsidiary at 4.9% interest. This is not just a footnote: part of the new growth sits inside a joint layer with minority rights, loans and a future exercise mechanism.

The Next Quarters Decide Whether This Becomes a Cash Proof Year

The first quarter proves that profitability can jump when volume rises and fixed costs are spread over a broader base. It also proves that the shutters activity can stop weighing on the core in a good quarter. But it does not yet prove that the broader model generates free cash after working capital, investments, leases and dividends, and it does not prove that all the new value is accessible to ordinary shareholders without an additional cost through the put.

In the next reports, the market may focus less on the profit jump itself and more on the quality of that jump. If receivables and inventory stabilize, operating cash flow improves without deposit drawdowns, and the profiles segment holds profitability despite expensive aluminum and import competition, the first quarter will look like the start of a real proof year. If growth continues to require more customer credit, more inventory and more balance-sheet uses, the conclusion will be more modest: the company improved profit, but has not yet proven that the new expansion produces enough accessible cash.