Shnapp in the First Quarter: Profit Improved, but Adi and the Dividend Still Pressure Cash Flow
Shnapp's first quarter looks better at the profit line: battery margins recovered and Kislov sent another NIS 5.5 million upstream. But Adi moved into a deep loss, Kislov built inventory before cash, and the quarter-end cash balance still excludes dividends approved after 2025 and in May 2026.
Shnapp had a better first quarter than the weak year that preceded it, but the quarter is still not clear enough to close the questions opened in 2025. The battery business grew revenue by 12.7% and lifted gross margin to 28.1%, Kislov held revenue steady and improved profitability, and the group ended March with NIS 9.9 million in cash compared with NIS 4.7 million at the end of 2025. Still, all three numbers need a careful read: Adi fell to NIS 19.5 million of revenue and a NIS 5.0 million comprehensive loss, Kislov posted higher profit but only NIS 0.8 million of operating cash flow because it built inventory, and the March cash balance did not yet reflect the NIS 10 million dividend paid in April or the additional NIS 2 million dividend approved in May. The current conclusion is mixed, with real improvement in the core: the main activity is again producing profit and cash, but investment quality and cash quality still need proof over the next few quarters. The market may like the profit jump, but the economic read depends on whether Adi recovers after Operation Roaring Lion, whether Kislov turns inventory into sales and collection, and whether distributions remain aligned with cash after all real cash uses.
Company Map
Shnapp is no longer only a battery importer and distributor. The public company consolidates the battery activity, while also holding material equity-method investments: Kislov in tires, Adi in vehicle accessories, and Shnapp EV in electric-vehicle charging. The battery activity flows through revenue and operating profit, but Kislov and Adi affect the company through equity income, dividends, book investment value, guarantees, and their own credit position.
That framework matters after 2025. The prior annual review highlighted three open tests: whether the battery margin recovery could hold, whether Adi could stabilize after the impairment, and whether the dividend would remain comfortable against the cash that actually remains in the company. The first quarter gives a relatively positive answer to the first question, a negative answer to the second, and still no full answer to the third.
The company's economic machine combines import and distribution, working capital, and cash return. In this kind of business, inventory, customer credit, supplier credit, exchange rates, and inventory levels at equity-method companies can quickly change the gap between accounting profit and accessible cash. In this quarter, that gap matters more than the revenue growth line.
Profit Improved, but Adi Still Pulled Down
The financial headline looks strong: battery revenue rose to NIS 57.2 million, gross profit rose to NIS 16.0 million, and company net profit increased to NIS 7.0 million from NIS 4.7 million in the parallel quarter. Operating profit also jumped to NIS 7.6 million, more than twice the parallel quarter. The move is supported by higher volumes, used-battery sales to Hakurnas, and lower product purchase costs because the dollar and euro weakened against the shekel.
But this is not an even improvement across the group. The battery activity posted segment profit before tax of NIS 7.5 million, compared with NIS 2.6 million in the parallel quarter. Kislov, presented as the tire segment, improved segment profit before tax to NIS 11.1 million even though revenue was almost unchanged. Adi, by contrast, moved from a near break-even segment loss to an NIS 8.1 million loss before tax. Adi was exactly the holding that needed to prove that 2025 was a cleanup year rather than the start of a longer decline.
Adi was the most important checkpoint after the follow-up analysis on the holding. Revenue fell 26% to NIS 19.5 million, and comprehensive loss totaled NIS 5.0 million compared with a NIS 1.6 million profit in the parallel quarter. The company's share in Adi's net loss was NIS 2.5 million, and together with NIS 0.7 million of excess-cost amortization it offset a large part of the profit contributed by Kislov.
The immediate explanation is Operation Roaring Lion, which started on February 28, 2026 and hurt new-car deliveries and broader economic activity. Adi put some employees on unpaid leave, all employees gradually returned from mid-March to mid-April, and sales began to stabilize as the economy returned to routine. That is a reasonable explanation for a weak quarter, and it prevents an overly strong conclusion that all the pressure is structural. Still, the hit landed exactly where the company was already sensitive. The holding was impaired by NIS 12.4 million at Shnapp level in 2025, and the current report still does not show a recovery that removes the concern.
The strongest note-level signal is in Adi's financial covenants. The quarter's figures reflect non-compliance with debt coverage parameters set in Adi's financing agreements, a ratio derived from four-quarter EBITDA (earnings before interest, tax, depreciation, and amortization) against current maturities of long-term debt plus four-quarter finance costs. The formal test is annual, and the company emphasizes that it has no tangible indication that Adi will fail the annual ratio. Still, this is an important yellow flag: even if March was unusual, the holding has not yet produced enough operating cushion for the quarterly weakness to remain only noise.
Cash Looks Strong, Kislov Still Has to Turn Inventory Into Cash
The right frame here is cash flexibility after all actual cash uses in the period: operating cash flow, investments, bank-credit repayment, lease principal, and interest. Within the quarter itself, the picture looks strong. Operating cash flow totaled NIS 37.5 million, compared with NIS 19.8 million in the parallel quarter, and the company repaid NIS 35.8 million of short-term bank credit net while still increasing cash to NIS 9.9 million.
But this is not normalized cash generation from the existing business. Of the operating cash flow, NIS 30.7 million came from improvement in operating assets and liabilities: a NIS 14.0 million decline in customers, a NIS 12.4 million decline in inventory, and a NIS 3.2 million increase in suppliers. Part of this is tied to seasonality in the battery activity, where the second half of the year is usually stronger. The quarter improves liquidity, but it does not prove that this pace will repeat every quarter.
| First-quarter checkpoint | Main number | Meaning |
|---|---|---|
| Group operating cash flow | NIS 37.5m | Strong, but mainly based on working-capital release |
| Net repayment of short-term credit | NIS 35.8m | Cash flow reduced credit, not only built cash |
| Cash at the end of March | NIS 9.9m | Before the NIS 10m dividend paid in April |
| Kislov operating cash flow | NIS 0.8m | High profit did not turn into cash at the same pace |
| Kislov inventory increase | NIS 37.4m | The next proof point is sales and collection from inventory |
This is where the dividend timing matters. The quarter's cash-flow statement includes no cash dividend payment, but the board had already declared NIS 10 million on March 24, paid on April 14. On the same date the first-quarter report was approved, the board approved an additional NIS 2 million dividend to be paid in June. The end of March therefore shows a better cash position, but a meaningful part of it had already been committed to distributions after the balance-sheet date.
There is also a positive change in tone. The dividend for the first quarter itself is much lower than the unusual distribution for the fourth quarter of 2025: NIS 2 million, equal to 36% of company-attributable net profit before equity income for the quarter, compared with NIS 10 million that represented 360% of the comparable fourth-quarter profit measure. That does not remove the cash question, but it softens the concern that the company is determined to distribute at almost any cost.
Kislov is the strong asset in the quarter, but it also requires a separation between profit and cash. Revenue was almost unchanged at NIS 54.2 million, gross margin jumped to 31.1%, and net profit rose to NIS 9.4 million from NIS 6.2 million in the parallel quarter. At the same time, operating cash flow fell to only NIS 0.8 million, mainly because inventory increased by NIS 37.4 million. Against that, suppliers rose by NIS 31.3 million and short-term bank credit increased by NIS 10.8 million.
This is a subtle point. Kislov's dividend is exactly what gives the parent access to cash from a non-consolidated holding. In the first quarter, Shnapp received NIS 5.5 million from Kislov, more than in the parallel quarter. But if Kislov continues distributing while building inventory and increasing short-term credit, investors need to see that the inventory actually rolls into sales and collection. Otherwise, Kislov's profit will remain strong in the statements, but its cash contribution to the parent will be less comfortable than the dividend line suggests.
Conclusion
The first quarter improves Shnapp's starting point for 2026, but it does not finish the work. The battery activity looks stronger, mainly through a combination of volume, used-battery sales, and lower purchase costs. Kislov remains the important profit and dividend source, but its inventory build and short-term credit increase require close monitoring. Adi is the main constraint: if the recovery from mid-March onward appears in the next report, the quarter can be read as an unusual security-driven setback. If not, 2025 will look less like a cleanup year and more like the beginning of a deeper decline in the holding.
The point that will change the market read over the next few quarters is not only another high net-profit number. The company needs to show that the battery margin holds without unusual currency support, that Kislov converts inventory into sales and cash, that Adi returns at least to operating break-even, and that distributions remain connected to cash after investments, leases, credit repayment, and cash received from equity-method companies. Until that happens, the first quarter is a real improvement, but not a full turning point.
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