Globrands Group in the First Quarter: Lifestyle Profit and Inventory Release Cut Short-Term Credit
Globrands opened 2026 with higher net profit, a sharp move into segment profit in lifestyle products, and inventory release that reduced short-term bank credit. The progress does not solve the JTI dependency, where renewal talks remain open and the company expects a lower profit rate from 2027 if a new agreement is signed.
Globrands Group opened 2026 with a partial and improved answer to the three checkpoints left from 2025: whether non-tobacco activity is starting to earn real profit, whether working capital is releasing cash, and what happens to the JTI risk. The lifestyle products segment reached a segment result of NIS 4.4 million, compared with only NIS 0.3 million in the parallel quarter. A NIS 78.0 million inventory reduction versus year-end 2025 helped reduce short-term bank credit by NIS 29.1 million and lift cash to NIS 31.8 million. The less comfortable part sits elsewhere: customers and receivables rose, suppliers and service providers fell sharply, and the candy and snacks segment moved into a loss, leading the company to decide on a gradual exit by the fourth quarter. Above all of this sits JTI: the auditors emphasized the issue, the company has not agreed the renewal terms, and it already expects a lower profit rate from 2027 if a new agreement is signed. The quarter gives the company more financing room and a better non-tobacco proof point, while the largest risk to future profit remains unresolved. The next reports need to show that lifestyle products keep earning, that the snacks exit stops losses without erasing useful activity, and that the working-capital release does not quickly return to inventory or customers.
Lifestyle Products Now Contribute, Snacks Are Being Phased Out
The headline numbers are comfortable: net sales were NIS 201.2 million, up 9.4% year over year, operating profit rose to NIS 28.2 million, and net profit was NIS 17.9 million, up 15.1%. EBITDA rose 15.0% to NIS 33.8 million. The segment layer explains the quality of the improvement: smoking products increased net sales to NIS 153.2 million, up 4.8%, while segment result was almost unchanged at NIS 35.8 million, compared with NIS 35.9 million. That is a stable core. Lifestyle products delivered the meaningful improvement: sales of NIS 26.6 million, up 77.7%, and segment profit of NIS 4.4 million compared with only NIS 0.3 million in the parallel quarter.
The problem moved to candy and snacks. Sales in that segment fell to NIS 21.4 million, down 5.9%, and the segment result turned from a NIS 0.8 million profit into a NIS 1.8 million loss. The decision to phase out the activity by the fourth quarter of 2026 and focus on the in-house WIN and SalySol brands is not a technical detail. It is an economic admission that non-tobacco growth is not enough when it comes through activity that weighs on distribution and profitability.
The company also reversed its planned transfer of protein products and pharma products from lifestyle products into candy and snacks. After the exit decision, those products remain in lifestyle products. That changes the 2026 comparison base: lifestyle products are supposed to become the non-tobacco activity that keeps running, while candy and snacks become an activity leaving the system. Sustained segment profit of a few million shekels per quarter would make the company's diversification look less cosmetic. A fade after Calir and the reorganization would return the core to an almost entirely tobacco-driven structure.
Inventory Release Cut Short-Term Credit Without Ending Working-Capital Dependency
This quarter requires a clear separation between two cash frames. Operating cash flow was NIS 28.6 million. That is a good starting point, but it is not normalized free cash flow that can be read without the balance sheet. All-in cash flexibility after the quarter's actual cash uses was built as follows: operating cash flow of NIS 28.6 million, net investment use of NIS 0.4 million, and then NIS 8.6 million of financing activity, mainly debt-structure movements and lease repayments. After all of that, cash increased by NIS 19.6 million.
The important point is not only the cash increase, but what funded it. Versus the end of 2025, inventory fell by NIS 78.0 million and short-term bank credit fell by NIS 29.1 million. At the same time, customers rose by NIS 33.2 million and suppliers fell by NIS 54.4 million. In other words, a large part of the inventory release was absorbed by lower supplier credit and higher customer balances. This is still an improvement versus year end, but not proof that the business has stopped being working-capital heavy.
The financing structure also improved at the margin. The company received NIS 32.0 million of long-term loans, repaid NIS 4.2 million of long-term loans, and made NIS 2.3 million of lease repayments. At the same time, it reduced short-term bank credit by NIS 34.1 million in the cash-flow statement. For a distributor, this is the right direction, because short-term credit used to finance inventory and customers is natural in the sector, but it is also the sensitive layer when suppliers or customers move quickly.
Covenants also show more room this quarter. The tangible equity-to-balance-sheet ratio was 12.1%, above the 10% threshold tested in March and September, and tangible equity was NIS 74 million. The financial debt-to-working-capital ratios were 76.0% for bank A and 74.3% for bank B, compared with a 95% ceiling. This does not mean financing risk is gone. It means the first quarter moved the company further away from the point where a small working-capital swing immediately becomes a covenant event.
JTI Still Defines the 2027 Risk
First-quarter profit is still anchored in smoking products. That is not inherently negative: tobacco distribution is stable, the company's quantitative cigarette market share rose by 0.2 percentage points, and smoking-products net sales rose by 4.8%. The problem is that the future profitability of part of that core depends on an agreement that has not been renewed.
The auditors' emphasis of matter around the JTI distribution agreement is an important external signal. The current agreement expires in February 2027, the company is negotiating its renewal, and to the best of its knowledge JTI is negotiating in parallel with several other parties interested in distributing its products in Israel. Terms have not been agreed, renewal is not certain, and even if a new agreement is signed, the company expects its annual profit rate from JTI products to decline from 2027 compared with 2025 and 2024. It cannot yet estimate the size of the decline.
That is why the first quarter cannot be read only through net profit. Lifestyle products started to give a better answer to the diversification question, but they are still far from the profit scale of smoking products. Exiting snacks may remove a loss and simplify the operating structure, but it also narrows the non-tobacco story to one activity that still has to prove repeatability. If JTI is renewed at much weaker economics, a few million shekels of lifestyle segment profit will not by itself be enough to shift the company's center of gravity.
Conclusions
The first quarter improves the company's position, mainly through portfolio filtering and working-capital management, not through a full change in the business model. Lifestyle products have already shown meaningful segment profit relative to their starting point, and the company is shrinking the snacks activity that generates a loss. On cash, inventory release and lower short-term credit expand room for maneuver, and the covenants now look more comfortable than the market might have feared after year end. The main blocker remains clear: JTI may continue with the company, but under terms that reduce the profit rate from 2027.
The next reports therefore carry more weight than usual. The market may first react to the roughly 15% increase in net profit and EBITDA, but the medium-term interpretation will come from three other items: whether lifestyle products keep their segment profit after a strong quarter, whether the snacks exit stops losses without dragging costs or losing useful activity, and whether inventory and customers allow the company to keep reducing short-term credit. JTI news will matter more than normal sales volatility, because it sets the economics of the core from 2027. The quarter gives the company more time and a better point of proof, but it still does not fully answer how much of its profit will remain with the company after the key agreement is repriced.
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