Almog in the First Quarter: Sales Hold Through Concessions While Financing Absorbs the Improvement
Almog opened 2026 with higher revenue and gross profit, but every sale contract in the quarter carried indexation relief and a large part of sales relied on contractor loans. The negative cash flow from Kfar Saba and the reliance on new financing and Mate Hazeitim make 2026 a cash proof year.
Almog opened 2026 with a quarter that looks better in the income statement, but much less clean once cash flow and sales terms are tested. Revenue rose to NIS 70.7 million and gross profit more than doubled to NIS 20.2 million, mainly because projects advanced and Rent 2 Stay Yavne began contributing more fully. Still, every sale contract signed in the quarter received an exemption from linkage to the construction input index, and most of the sales volume came through contractor-loan arrangements. At the same time, operating cash flow was negative by about NIS 183 million because of the Kfar Saba land purchase, and the company balanced the quarter mainly through new financing. The quarter therefore does not prove that the funding bottleneck has disappeared. It shows that the bottleneck has moved into a different layer: credit lines, the Mate Hazeitim disposal, bank accompaniment for projects and debt service. The current read is that the development business has not lost pace, but 2026 still needs to show that this pace can turn into cash without additional expensive interim layers and without weaker terms for buyers.
Company Setup
Almog is a bond-reporting company active in three fields: residential and commercial development in Israel, income-producing real estate and rental housing. In practice, residential development is still the main economic engine. The company is promoting and building 33 projects with 12,632 housing units, of which 9 projects are in construction and planning stages with 2,298 units. It also promotes a much larger urban-renewal pipeline of 9,482 units and about 113 thousand square meters of commercial space, but those projects are still at early signing stages and remain subject to multiple conditions.
That business map matters because the quarter is not judged only by profit. For this kind of developer, value is created when sales, construction progress and accounting revenue recognition turn into collections, bank accompaniment and released surplus. That is different from a classic income-property company, where stable NOI can carry most of the story. Here, Yavne and Mate Hazeitim are supposed to provide support, but Kfar Saba and the 2026 project starts show that growth still consumes capital before it releases cash.
The practical screen is also different from a regular listed equity. The company became a bond company in June 2025, so the key issue is debt-service capacity and access to financing, not a current equity multiple. Covenants, credit lines, sales quality and Mate Hazeitim's move from expected proceeds to actual cash matter more than revenue growth on its own.
Sales Hold Through Commercial Concessions
The first point a quick reader may miss is sales quality. The company sold 18 units in the quarter, the same as in the comparable quarter, while total consideration rose from NIS 45.7 million to NIS 47.8 million. That looks like reasonable stability in a market where new-apartment sales in Israel fell 13.3% year over year and 6.9% versus the previous quarter. But that stability did not come on normal terms.
Every sale contract in the quarter, totaling NIS 47.8 million including VAT, received an exemption from linkage to the construction input index. In addition, sales through contractor loans totaled NIS 40.8 million excluding VAT, while sales through linear payment schedules totaled NIS 6.9 million excluding VAT. This is not evidence of demand collapse, but there is a cost to sales quality: part of the risk shifts back to the developer through indexation relief, buyer financing support or later cash collection.
| Quarterly Sales Metric | What Happened | Economic Meaning |
|---|---|---|
| Units sold | 18 | The pace held versus the comparable quarter |
| Total consideration | NIS 47.8 million including VAT | A moderate increase from NIS 45.7 million |
| Indexation exemption | 100% of sale contracts | Weaker protection against input-cost movement |
| Contractor loans | NIS 40.8 million excluding VAT | Sales that require financing support for buyers |
This point is especially important because the construction input index rose by only about 0.3% in the quarter, so the concession does not yet look expensive inside current gross profit. If input-cost inflation remains moderate, the hit may stay limited. If costs rise or if these sale terms remain necessary to preserve sales pace, the gross profit of future projects will carry part of the price.
Operating Improvement Is Absorbed by Funding and Overhead
The quarter does show real operating improvement. Revenue rose 20.9% and gross profit rose 108.2%, lifting the gross margin from about 16.5% to about 28.5%. The development segment generated NIS 11.4 million of segment profit, compared with NIS 5.7 million in the comparable quarter, and rental housing contributed NIS 3.5 million of revenue and NIS 3.4 million of NOI thanks to Yavne, which began operating in May 2025.
But the improvement did not flow cleanly to the bottom line. Selling and marketing expenses rose to NIS 4.2 million, general and administrative expenses rose to NIS 12.3 million, and net finance expenses jumped to NIS 9.0 million from NIS 4.4 million in the comparable quarter. The increase in finance expenses included NIS 1.3 million of bond interest, NIS 1.7 million of interest on the Kfar Saba land and a NIS 2.2 million decline in capitalized financing costs.
That creates a clear gap: operations produced NIS 1.2 million of operating profit after an operating loss of NIS 2.3 million in the comparable quarter, but the net loss deepened to NIS 7.1 million. This does not show that the business itself is deteriorating. It shows that part of the operating improvement is already claimed by the financing structure. As long as gross profit grows faster than financing costs, the story improves. If financing costs continue to rise at a similar pace, project progress will not be enough.
Cash Came From Debt, Not From Operations
Cash flow explains why this quarter is not only a profitability story. Operating cash flow was negative by about NIS 183.0 million, mainly because of the completion of the Kfar Saba land purchase for about NIS 169 million. That is a real cash use, even if it is meant to open a future project. Investing activity used another NIS 12.0 million, while financing activity brought in NIS 190.3 million, mainly long-term loans for Kfar Saba and credit from other lenders.
All-in cash flexibility after the quarter's real cash uses was negative: after operating activity, investment and financing, cash declined by NIS 4.7 million to NIS 7.7 million. That is not an immediate liquidity problem by itself, because the company has undrawn credit lines, marketable securities and Mate Hazeitim, which is expected to generate about NIS 72 million of free cash flow. But the small cash balance sharpens the point that the gross-profit improvement has not yet released independent cash.
There are two layers to separate. On covenants, the company is not close to pressure: adjusted equity is NIS 296.3 million versus a NIS 165 million requirement, the adjusted equity-to-adjusted-balance-sheet ratio is 29.56% versus a 15% floor, and the bond debt-to-collateral ratio is 69.3% versus an 80% ceiling. On current liquidity, the picture is tighter: consolidated working capital is positive by only about NIS 9.5 million, the 12-month working-capital deficit is NIS 81.7 million, and the solo report has negative working capital. The key is therefore not just covenant compliance, but the timing of Mate Hazeitim, project bank accompaniment and continued access to credit lines.
Conclusions
The first quarter reinforces the read from the prior 2025 annual analysis: the company is advancing operationally, but it is still judged by its ability to convert projects and disposals into accessible liquidity. Mate Hazeitim has already brought in NIS 25 million on account of the consideration and is expected to generate about NIS 72 million of free cash flow if completed, while Yavne moved to a longer NIS 250 million refinancing that replaces about NIS 245 million of existing debt. These are positive developments, but they do not remove the need to prove that growth in Kfar Saba, MALA and the 2026 projects will not require additional expensive funding layers.
The point that will decide the market read over the next few quarters is not only whether revenue keeps rising, but what happens to its quality. If indexation exemptions and contractor loans remain exceptional and Mate Hazeitim closes on time, the current quarter will look like a financed bridge into a broader year of activity. If those sales terms become routine, if Mate Hazeitim is delayed, or if the 2026 projects require additional equity beyond the disclosed facilities, the net loss and negative cash flow will carry more weight than the improved gross profit.
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