Nissan in the First Quarter: Volumes Rose, but FX and Tariffs Took the Profit
Nissan opened 2026 with a 10.4% increase in sold volume and better utilization, yet revenue fell to NIS 146.1 million and the business moved to an operating loss. The possible tariff refund of $6 million to $7.5 million is large relative to market cap, but it is one-off, unrecognized, and partly owed back to customers.
Nissan opened 2026 with an uncomfortable answer to the question left open at the end of 2025: the physical business can grow, but the profit still does not stay with the company. Sold volume rose 10.4% and production-line utilization improved to 84.4%, yet revenue fell 7.5% to NIS 146.1 million, gross profit slipped to NIS 15.3 million, and the company moved to a NIS 3.0 million operating loss. The gap is not a demand collapse. It comes from three frictions between the order and the profit line: shekel appreciation, U.S. tariffs on exports from Israel, and a NIS 2.3 million allowance for a customer debt after the balance date. The positive new point is meaningful: a possible tariff refund of $6 million to $7.5 million, from which the company expects to return $1 million to $1.3 million to customers if collected. That can be a large cash addition relative to an equity market cap of about NIS 70 million, but it is not booked as an asset, is not certain, and does not prove recurring industrial margin recovery. The next quarters should be judged less by volume and more by three proof points: whether price updates catch up with raw materials and FX, whether the tariff refund actually reaches cash, and whether cash flow stays positive after capex, leases, interest, and debt service.
Company Map
Nissan is effectively a listed holding layer above Spuntech’s nonwoven-fabric activity, which supplies raw material for the wipes industry. This is a global industrial business, not a local consumer company: about 95% of period sales were outside Israel, mostly in North America and Europe. The report therefore needs to be read through three engines: production-line utilization, the ability to pass raw-material and FX movements to customers, and the conversion of subsidiary profit into cash and profit attributable to the listed company’s shareholders.
The previous annual coverage of Nissan, Nissan in 2025: Cash Flow Recovered, but Shareholders Kept Only Half the Profit, framed a business that had stabilized operationally but still did not look clean at the shareholder layer. The first quarter continues from that same point and adds a new proof layer: it is not enough for production lines to run harder. When FX, tariffs, and one customer debt absorb most of the improvement, volume alone does not change business quality.
The market can misread this in two ways: overreacting to the operating loss, or treating the possible tariff refund as recurring margin recovery. The balanced read is that the business is working, but clean earnings power is still unproven.
Volumes Rose, but Margins Stayed With FX and Tariffs
The important number in the quarter is not the revenue decline by itself, but the gap between that decline and the growth in physical volume. Revenue fell by NIS 11.8 million versus the comparable quarter even though sold volume rose 10.4%. FX alone reduced sales by NIS 21.1 million, after the average dollar rate fell to NIS 3.1217 from NIS 3.6128 in the comparable quarter, a 13.6% shekel appreciation against the dollar.
The sharper issue sits in gross profit. Gross profit fell to NIS 15.3 million from NIS 17.3 million despite better utilization. The shekel reduced gross profit by NIS 8.4 million, including NIS 3.8 million through inventory value erosion and another NIS 4.6 million through margin erosion. Tariffs on exports from Israel to the United States took another NIS 1.6 million. In other words, the volume and utilization improvement did not disappear, but it first paid for external shocks.
| First-quarter item | Data | Economic meaning |
|---|---|---|
| Sold volume | Up 10.4% | Physical demand did not break |
| Production-line utilization | 84.4% versus 81.9% | Operationally better, but still not enough |
| FX impact on sales | NIS 21.1 million lower | Reported revenue is weaker than physical activity |
| FX impact on gross profit | NIS 8.4 million lower | Much of the operating improvement was absorbed before profit |
| Tariff impact on gross profit | NIS 1.6 million lower | The Israeli production line still bears part of the U.S. export cost |
| Bad-debt allowance | NIS 2.3 million | Earnings quality was hit by credit risk, not only by FX |
The company’s pricing mechanism matters here. Most raw-material changes are passed to customers monthly, quarterly, or semi-annually, depending on the agreement. That protects the company over time, but it creates lag in a quarter when raw materials, FX, and tariffs move quickly. The February 2026 war and pressure around the Strait of Hormuz pushed most raw-material prices 10% to 30% above the fourth quarter of 2025, and the company declared force majeure while working to update selling prices. That makes 2026 a proof year for pricing, not only for volume.
The Tariff Refund Can Bring Cash, But Cash Still Left The Balance Sheet
The unusual new item in the quarter is not the loss, but the possible tariff refund. After part of the U.S. tariff program was cancelled and a refund mechanism was established, the company estimates entitlement to a refund of $6 million to $7.5 million for finished-goods exports from Israel to the United States and raw-material imports into the U.S. plant. If the amounts are received, the company expects to return $1 million to $1.3 million to customers. Before tax, costs, and uncertainty, that leaves a possible net amount of roughly $5 million to $6.2 million.
That is potentially material relative to an equity market cap of about NIS 70 million. But it should not be read as margin recovery. The company did not recognize any income or asset in the first quarter for the refund, so at this stage it is an accounting and cash option, not cash in the bank. Even if collected, it would repair part of the tariff damage and may improve liquidity, but it would not prove that the company can maintain a higher gross margin under normal business conditions.
That distinction matters. A tariff refund can change the short-term market reaction, especially in a small company, but it does not answer whether customer prices update quickly enough. Without recurring gross-profit improvement, it is an important cash inflow, not a business-quality change.
Operating Cash Flow Improved, But All-In Cash Still Fell
Operating cash flow turned positive at NIS 9.0 million, compared with negative NIS 8.4 million in the comparable quarter. That is a real improvement, but it depends heavily on working-capital movement: inventory reduction contributed NIS 8.4 million, supplier balances contributed NIS 9.2 million, while customer balances consumed NIS 13.7 million. So the operating cash flow line should not be read as clean recurring free cash. The business released inventory and used supplier credit while customers still pulled cash out.
The all-in cash flexibility after actual cash uses, meaning after investments, interest, leases, debt repayments and new or reduced bank credit, remained tighter than the operating-cash-flow headline. The company invested NIS 8.2 million in fixed assets, paid NIS 2.6 million of interest, repaid NIS 1.3 million of lease principal, and offset long-term loans received with long-term repayments and lower short-term credit. The final result was a NIS 5.4 million decline in cash to NIS 12.3 million.
Debt does not look like an immediate covenant problem. Spuntech and Spuntech Inc. meet their covenants: financial credit to operating surplus was 3.1 against a ceiling of 5, debt-service coverage was 1.77 against a required level above 1.2, and net debt to EBITDA was 0.97 against a ceiling of 4.5. Still, when quarterly EBITDA falls to NIS 3.4 million, down NIS 5.6 million year over year, covenant headroom is not a substitute for operating improvement.
The shareholder layer also remains unresolved. The loss attributable to shareholders was NIS 2.35 million, and the balance sheet still includes NIS 111.1 million of non-controlling interests against NIS 189.7 million of equity attributable to shareholders. That is why the market should not stop at consolidated profit or cash flow. It needs to see how much of any improvement, if it comes, actually remains at the listed-company shareholder layer.
Conclusions
The current evidence points to a company whose product demand has not broken, but not yet to a company that has regained clean earnings power. The first quarter gives one clear positive data point, more volume and better utilization, against three frictions that remain unresolved: FX, tariffs, and customer credit. The possible tariff refund is the most interesting short-term trigger because it is large relative to market cap and not booked in the accounts, but that is exactly why it must be separated from recurring activity. It can improve cash. It cannot replace margin.
Over the next two to four quarters, the evidence that would improve the read is a gross-margin recovery without help from one-off tariff refunds, clear collection or resolution of the troubled customer receivable, and cash flow that remains positive after investments and debt service. A constructive signal would be a quarter in which higher volume reaches operating profit before one-off items. A negative signal would be continued quarters where every strong volume print is absorbed by FX, tariffs, customer credit, or working capital. That is the difference between an industrial activity that works and a stock that gives shareholders real access to the value created inside the business.
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