Tempo Beverages in the First Quarter: Operating Profit Rose, Short-Term Credit Still Funds the Gap

Tempo Beverages opened 2026 with an operating quarter that was better than the net profit line suggests: revenue rose 9% to NIS 658.4 million, gross profit rose faster, and operating profit jumped 26% to NIS 50.9 million. But this was not a quarter that cleared the questions left from the end of 2025. Net finance expenses rose to NIS 19.6 million, cash flow from operations fell to NIS 13.2 million, and the company distributed a NIS 60 million dividend after the balance-sheet date that has not yet passed through the quarter’s cash-flow statement. GBC is no longer only a provisional acquisition in the accounts: the purchase-price allocation was completed, with consideration of about NIS 303 million, a PUT liability of about NIS 101 million, and goodwill of about NIS 133 million. Still, its economic contribution is not transparent enough, because it sits inside the “other” segment together with the food activity. The first quarter therefore strengthens the operating core, but it is not enough to change the conclusion from the previous annual analysis: 2026 needs to show that profit turns into cash after working capital, debt, leases and dividends, mainly in the two warm quarters when the beverage business should run at higher intensity.

Company And Economic Map

The company manufactures, imports and distributes beverages in Israel, with four main activity anchors: beer and light alcoholic beverages, imported alcoholic beverages, non-alcoholic beverages, and Barkan wineries. Alongside those activities, it has a food business and, since 2025, GBC, a beer and beverage company in Georgia that has been consolidated into the group’s results since June 2025.

This is not a normal listed consumer-equity read. The company’s shares do not trade as an ordinary listed equity, while its bonds are the main traded security. The economic filter is therefore not an earnings multiple or a classic growth story, but cash quality, credit access, compliance with the bond deed, and the ability to distribute cash to shareholders without increasing the burden on debtholders.

The business model of a beverage and distribution company is seasonal and built around inventory, customer credit, supplier credit and a stronger sales cycle in the warm season. It is normal for this kind of company to use short-term credit during the year. The edge in this quarter is not the existence of short-term credit by itself, but the fact that operating profit improved while cash still did not remain in the company after the real cash uses, and before the NIS 60 million dividend actually left the treasury.

Operating Profit Improved, But Finance Costs Took The Surplus

The sales line looks healthy: revenue rose to NIS 658.4 million from NIS 604.1 million in the parallel quarter. Gross profit rose to NIS 225.1 million, and the gross margin was about 34%, compared with about 32%. The company did not only sell more. It also kept more money after cost of sales.

The problem is that the improvement did not reach the bottom line. Operating profit rose by NIS 10.4 million, but net finance expenses rose by NIS 14.1 million. The company attributes the increase mainly to the revaluation of hedging transactions following the dollar’s decline, finance expenses arising from GBC, and interest accrued on the PUT option granted to GBC’s other shareholders. The result is net profit of NIS 22.9 million, down about 9% from the parallel quarter, even though the operating business worked better.

The segment breakdown shows that the local core is not weak. Non-alcoholic beverages added NIS 27.4 million of sales and NIS 13.2 million of segment profit. Light alcoholic beverages barely grew in sales, but their segment profit rose by NIS 7.9 million. Imported alcohol, whose sales fell 11%, also increased segment profit, so for now the issue there looks more like volume than margin erosion. Barkan is the negative exception, with lower sales and lower segment profit.

The quick-read trap is that the operating improvement is broad enough to sound like a clean quarter. It is not. Once the balance sheet expanded because of GBC and short-term credit stayed high, finance expenses became a bigger part of the story. In this quarter, they were already larger than the entire operating-profit increase.

First-Quarter Cash Did Not Fund All Uses

Cash flow from operations was only NIS 13.2 million, compared with NIS 47.9 million in the parallel quarter. Before working-capital changes, the picture is more comfortable: NIS 95.7 million, compared with NIS 84.1 million. The gap between those two numbers is exactly where a beverage company should be tested: inventory, customers, suppliers and tax payments.

In the first quarter, the cash-flow statement was pulled down by several moving parts. The change in customers and other receivables consumed NIS 61.3 million, the change in suppliers and other payables consumed NIS 20.6 million, and income tax paid consumed NIS 42.9 million. This does not mean the business is weak. It does mean that operating profit did not leave much free cash at the start of the year.

All-in cash flexibility after all cash uses looks tighter than the operating headline. Before net short-term credit, meaning after operating cash flow, investing activity, bond repayment, leases, interest and other financing uses that are not short-term credit, the quarter created a cash gap of about NIS 64 million. Net short-term credit of NIS 41.2 million narrowed that gap, but cash still fell by about NIS 22.7 million before currency effects.

This is not an immediate liquidity problem. The board notes a consolidated working-capital deficit of about NIS 62 million and a solo working-capital deficit of about NIS 461 million, but estimates that this does not indicate a liquidity problem, among other reasons because of recurring profitability, positive cash flow and unused credit facilities. Still, this is exactly the distinction that matters to debtholders: the company is not tested only by profitability, but by whether profit and the warm season are enough to reduce dependence on short-term credit after the dividend.

The Warm Quarters Need To Prove GBC And Cash Are Working

The prior GBC analysis left open what was bought in Georgia and whether it becomes a cash-producing platform. The purchase-price allocation was completed at about NIS 303 million: NIS 202 million in cash, NIS 101 million as a PUT liability, NIS 143 million of land, buildings, machinery and equipment, NIS 54 million of customer relationships and brand, and NIS 133 million of goodwill.

The report shows the acquired balance sheet better, but not standalone cash proof. GBC is included in the “other” segment together with food, which reported revenue of NIS 78.2 million and segment profit of NIS 4.2 million, so its contribution is still not separate.

After the balance-sheet date, both commercial-paper series were extended until June 2027 with no change in terms, and the NIS 60 million dividend was paid on April 30, 2026. Operation “Sha’agat HaAri” hurt cold-market customers, mainly in alcohol, and the company cannot reliably estimate the effect. Against that, the debt signal remains stable: the company complied with the bond deed, the bonds are rated A1 with a stable outlook, and GBC also complies with its Georgian bank covenants.

The first quarter leaves the company in a good operating position, but still dependent on cash and short-term credit. A weak first cash quarter can be normal for a seasonal beverage company, and the commercial-paper extension reduces immediate risk. Still, after GBC and a NIS 60 million distribution, the next quarters need to show lower dependence on short-term credit. Further operating-profit improvement will not be enough if it continues to be absorbed through finance costs and working capital.