Delek Automotive in the First Quarter: Profit Relies on Real Estate and Financing While Imports Weaken

Delek Automotive opened 2026 with much higher net profit than in the comparable quarter, but this is not proof that the vehicle-import core has recovered. Revenue fell 9.6%, gross profit fell 23.8%, and the vehicle import and sales segment dropped to just NIS 39.2 million of profit, compared with NIS 164.4 million in the comparable quarter. The consolidated result was held up by a different mix: a NIS 56.5 million fair-value gain on investment property, financing relief, a positive contribution from Veridis, and a more visible profit contribution from Eurodrive that appears in the internal-control appendix. At the same time, operating cash flow turned negative at NIS 191.1 million, mainly because of working capital, even though inventory continued to decline. The current read is that Delek Automotive now relies on layers around imports to hold the result together, while the core business still has to prove deliveries, margin and cash generation.

Company Background

Delek Automotive is no longer only an importer of Mazda, Ford, BMW, NIO and Dongfeng vehicles. It still sells cars, parts and garage services, but the group also includes Veridis, carton activity, desalination, energy, investment property, leasing through Eurodrive and exposure to Hailo. Reading it only through vehicle deliveries misses both what supports earnings and what strains the balance sheet.

Its economic machine has become a mix of working capital, margin and asset value. Vehicle imports require inventory, supplier credit, FX exposure and short-term funding. Veridis, real estate and Eurodrive can soften a weak quarter, but they also bring regulation, legal proceedings, revaluations and the question of cash access for Delek Automotive shareholders. That is the gap between a company trading at a market value of roughly NIS 1.83 billion and a company from which the market still demands proof of earnings quality.

The previous annual analysis of Delek Automotive, published after the 2025 results, left four checkpoints open: real recovery in imports, an economic contribution from Eurodrive, cleanup of the noise around Veridis, and tight debt and FX management. The first quarter moves forward on some points, but not in the core. Eurodrive is already profitable, the Hadera land assets received a better valuation and timetable, and Veridis raised equity. The import business itself is much weaker than a seasonally strong quarter should be, and cash is still being absorbed by working capital.

Imports Weakened in a Seasonally Strong Quarter

The first quarter is normally seasonally stronger in the Israeli vehicle market because customers prefer a new calendar-year registration. For Delek Automotive, that makes the weakness sharper. Vehicle sales across the group brands fell to 2,775 units from 6,308 units in the comparable quarter. Market share fell to 3%, compared with 6.5% in the comparable quarter and 4.6% for full-year 2025.

The weakness is broad. Mazda fell to 818 units from 3,970, BMW fell to 1,141 from 1,299, Ford fell to 392 from 411, and Dongfeng fell to 387 from 603. NIO rose from 25 to 37 units, but the number is too small to change the group picture. In parallel, Eurodrive sold 1,599 zero-kilometer and used cars. That adds volume, not proof that new-vehicle imports have returned to a healthy profit pace.

Vehicle import and sales segment revenue fell 20.6% to NIS 921.9 million, and segment profit fell 76.2% to NIS 39.2 million. Segment profitability dropped to about 4.3% of revenue, compared with about 14.2% in the comparable quarter. This is no longer only a volume issue. It is a mix of volume, price and product composition that lowers the value of each revenue shekel in what used to be the clear core of the group.

The chart shows who replaced the import segment. The “other” segment jumped to NIS 78.1 million, mainly because of the Hadera real-estate revaluation, the shutdown of white-paper production and a shift to marketing and trading, and leasing results following the Eurodrive acquisition. Veridis returned to NIS 34 million of segment profit, but the comparison is distorted because the comparable quarter included a provision of about NIS 61 million for reversal of operating support recognition. Excluding that provision, the environmental activity looks more like a return to a reasonable base than an exceptional jump.

Profit and Cash Flow Depend on Other Layers

Consolidated net profit rose to NIS 75.6 million from NIS 36.8 million in the comparable quarter. Company shareholders received NIS 43.9 million of that amount, down from NIS 59.1 million in the comparable quarter, while non-controlling interests moved from a NIS 22.3 million loss to a NIS 31.8 million profit. More of the improvement remained at the subsidiary and partner level.

Hadera real estate is the clearest profit layer. Progress on the power-station project, including an agreement for the main equipment supply, reduced the uncertainty component in realizing the lease agreement from 20% to 10% and moved the expected lease realization date forward to July 2026 from June 2027. Together with a nearby land transaction, the revaluation added NIS 56.5 million before tax, or about NIS 43 million after tax. Excluding that effect, consolidated net profit would have been closer to NIS 32.6 million, below the comparable quarter.

That layer is closer to cash than it was, but it is still not cash. Infinya is negotiating to sell the Hadera land rights to OPC Israel for expected consideration of about NIS 450 million, with no certainty regarding completion, terms or final consideration. In parallel, after the balance-sheet date, an owner loan to OPC Israel of about NIS 1.55 billion was approved to fund projects in Israel. The group’s share is about NIS 310 million, to be provided by September 15, 2026 or five business days after full payment of the land consideration, should the sale close. The revaluation creates value, but the capital requirement shows that the value still has to pass through a transaction and funding path.

Eurodrive gives a more positive signal. The internal-control appendix discloses that assets less liabilities attributed to Eurodrive were about NIS 287 million, and profit attributed to company shareholders from Eurodrive in Q1 was about NIS 16 million. This is no longer only volume and balance-sheet size. Still, the company has not yet completed the internal-control effectiveness adaptation for Eurodrive’s consolidation, and the activity sits inside the “other” segment together with real estate and white paper. To change the thesis, Eurodrive needs to show that leasing profit is not absorbed by fleet purchases and residual-value pressure.

Veridis is strengthening its own balance sheet, but the value to Delek Automotive shareholders is less clean. In March 2026, Veridis approved a private allocation of 8.33 million shares for about NIS 300 million, and the group’s holding fell from 50.07% to 47.35%, or 46.78% fully diluted. Effective control remains, and the new equity helps the subsidiary. In parallel, the subordinated owner loan that Delek Automotive provided to Veridis stands at about NIS 161.3 million. Veridis estimates that in May 2027 it will be required to repay the full loan if consolidated net financial debt falls below NIS 1.2 billion by March 31, 2027. That is a route to future cash, not proof in the current quarter.

Hailo adds the less comfortable side of non-core investments. In January 2026, Delek Motors provided Hailo with a USD 9 million loan, with an option for another USD 3 million in June 2026 in the absence of a liquidity event. The loan bears monthly interest of 1.5%, rising to 3% under certain conditions. This is not a group-defining amount, but it turns Hailo from a volatile fair-value asset into a cash consumer as well.

Cash flow makes the same point more firmly. Operating cash flow was negative NIS 191.1 million, compared with positive NIS 339 million in the comparable quarter. Net profit and accounting adjustments contributed about NIS 156.1 million before working-capital movements, but working capital consumed NIS 347.2 million.

The all-in cash flexibility, meaning cash left after operating cash flow, investments, property and equipment purchases, lease payments and actual financing movements, was negative. The company ended the quarter with a NIS 53 million decline in cash and cash equivalents, despite positive financing cash flow of NIS 189.7 million that relied mainly on the private allocation at Veridis. The group also has a consolidated working-capital deficit of about NIS 688 million, partly because some loans used to finance long-term assets are presented in current liabilities. This is not an immediate distress signal, but profit alone is not enough to lower the risk level.

Proof Points for the Coming Quarters

Delek Automotive is entering 2026 as a proof year. The coming quarters need to show a recovery in import deliveries and margin, not only Eurodrive sales or another inventory decline. Vehicle activity was hit during fighting periods, when showrooms operated in reduced format and were closed part of the time, but losing market share in a seasonally strong quarter still requires a quick correction.

The second point is Eurodrive’s earnings quality. A NIS 16 million quarterly profit is a good sign, but public investors still receive too little detail on the source of profit, residual values, the pace of fleet purchases and leasing cash flow after investments. Recurring contribution with better cash flow can change the read on the Eurodrive acquisition. Continued cash absorption in the fleet would leave it as a capital-intensive activity that adds revenue before it improves the group’s quality.

The third point is value accessibility at the asset layer. A sale of the Hadera land to OPC Israel can turn the revaluation into cash and reduce uncertainty around the capital requirement for the projects. At the same time, the expected owner loan to OPC Israel, the Hailo loan, and continuing proceedings around Veridis leave Delek Automotive with one question: how much of the value shown in the financial statements is actually accessible to shareholders, and how much depends on transactions, future repayments or regulatory and legal decisions.

The current conclusion is that the first quarter looks better in net profit than in business quality. Supporting points include Hadera asset value, new equity at Veridis, a potential owner-loan repayment in 2027, and an initial profit signal from Eurodrive. The blockers are weak imports, negative operating cash flow, and continued funding needs around Hailo and OPC Israel. Market interpretation over the coming quarters will be set less by reported net profit and more by three items: import deliveries and margin, cash flow after working capital and fleet purchases, and whether Hadera and Veridis become accessible cash sources.