Inter Industries in the First Quarter: Customer Collections Cut Bank Credit Before Projects Returned to Profit
Inter Industries opened 2026 with positive operating cash flow of NIS 25.3 million and lower short term bank credit, mainly through customer collection and controlling shareholder option exercise. The project segment grew revenue and deepened its loss, so the NTA tender adds execution volume before it proves project margin.
Inter Industries gave a partial answer in the first quarter to the question left open after 2025: cash started coming back through customer collection, short term bank credit declined, and the controlling shareholders injected NIS 9.5 million by exercising options. That is the improving side of the report. The unresolved side is in the project segment: revenue rose to NIS 104.7 million, but the segment loss widened to NIS 3.1 million, mainly because of project prolongation, execution costs, and the impact of renewed fighting. The trade and services segment remains the profit layer holding the group together, with segment profit of NIS 4.9 million on almost unchanged revenue. The quarter therefore does not prove a full turnaround. It shows a balance sheet repair before a repair in project economics. The NTA tender win, with estimated consideration of NIS 84.6 million, strengthens future work visibility, but milestone based payments and an execution period of up to 56 months leave the same sector question in place: how quickly work becomes invoices, collection, and profit. In the next quarters, the market is likely to focus less on revenue growth itself and more on three simple lines: customer receivables, bank credit, and the project loss.
The Business Still Moves Through Two Different Engines
The prior annual analysis focused on Inter’s central gap: services and maintenance created most of the profit, while projects remained heavy in terms of execution, cash, and banks. The first quarter does not change that structure. The company still operates through two economic worlds: electricity, energy, and electromechanical projects, where revenue depends on execution pace, milestones, and field costs, alongside trade and services, which produce more stable profitability through service contracts, maintenance, and product sales.
The numbers map the business better than a broad activity description. Of NIS 187.2 million in external revenue in the quarter, NIS 104.7 million came from projects and NIS 82.5 million from trade and services. Projects are still the larger revenue engine, but not the profit engine. Services generated segment profit of NIS 4.9 million, and projects erased much of that with a NIS 3.1 million loss. That is the early screen for the stock: a reader who looks only at revenue growth misses where the profit actually comes from.
The company’s market value, about NIS 145 million at the end of May 2026, puts the quarter in a practical frame. Even a few million shekels of improvement in cash flow or project losses can affect market interpretation, while the company’s size and liquidity make each quarterly data point especially sensitive. Short interest does not add a meaningful warning signal here, because short interest as a percentage of float fell to zero at the end of May and was negligible through most of the period.
Profitability Weakened Where Revenue Grew
At the consolidated level, the quarter looks reasonable only if the analysis stops at revenue. Revenue rose 6.6% to NIS 187.2 million, but gross profit declined to NIS 13.8 million and gross margin fell to 7.4%, from 8.4% in the comparable quarter. Selling, general, and administrative expenses declined to NIS 12.0 million following efficiency measures, but the cost saving was not enough to protect operating profit, which fell to NIS 1.7 million.
The segment split explains why. Project revenue rose by about 12.1%, while the segment loss widened from about NIS 1.8 million to NIS 3.1 million. That is not a small issue in a project company. When more work generates a larger loss, execution, pricing, cost timing, or field conditions are eating the benefit of the backlog. Management attributes the loss to the continued prolongation of some projects, higher execution costs, and renewed fighting. The security related explanation matters, especially because the company notes lower activity in March and April, fixed overhead costs, and longer execution duration. It does not erase the base issue: even before this quarter, projects were the group’s weakest profit layer.
Trade and services tell a different story. External revenue in the segment was almost unchanged, NIS 82.5 million compared with NIS 82.1 million, while segment profit rose to NIS 4.9 million. That supports the continuity of the services engine, but it also sets a boundary. If services hold the profit while projects grow and lose money, revenue alone is not a good measure of the quarter’s quality.
Finance expenses sharpen the issue. Net finance expenses rose to NIS 2.7 million, from NIS 1.9 million in the comparable quarter, turning a small operating profit into a pre tax loss of NIS 1.0 million. After tax, the loss attributable to shareholders reached NIS 2.8 million. Even when the company remains operating profitable, the buffer between operating profit and financing is still narrow.
Cash Came From Collection and Option Exercise
The important part of the quarter is in cash flow. Operating cash flow was NIS 25.3 million, compared with NIS 2.1 million in the comparable quarter and negative operating cash flow for all of 2025. The improvement did not come from profit, because the quarter ended in a loss. It came mainly from a NIS 19.7 million decline in customers and contract assets, meaning collection and release of cash that had been tied up in the balance sheet.
This is a real improvement, but it has to be framed correctly. All in cash flexibility after the quarter’s actual cash uses included NIS 25.3 million of operating cash flow, NIS 5.1 million of lease repayments, about NIS 6.4 million of short and long term bank debt repayment, only about NIS 0.2 million of property, equipment, and intangible asset purchases, NIS 1.9 million of released deposits, and NIS 9.5 million from controlling shareholder option exercise. In other words, the cash position improved through collection and through new equity from the controlling shareholders.
The balance sheet outcome is better: cash, cash equivalents, and short term deposits rose to NIS 64.2 million, from NIS 41.2 million at the end of 2025. Short term bank credit fell to NIS 53.6 million, from NIS 60.0 million at year end. Equity rose to NIS 110.4 million, about 24% of the balance sheet, compared with 22.3% at the end of 2025.
The remaining gap sits in the operating funding that the company still extends to customers. Average customer credit and contract assets in the quarter were about NIS 269 million, compared with average supplier credit of about NIS 174 million. Management states that this gap is not unusual for its activity areas, which are characterized by longer customer credit periods than supplier credit periods. From the shareholders’ perspective, that is exactly why the customer line remains important. If the quarterly decline is a one time collection after a heavy year end balance, the next quarter may bring back some pressure. If it repeats, it will become stronger evidence that growth is not being built mainly through customer credit.
NTA Adds Execution Work, Not Margin Proof
The new event that matters is the win by a wholly owned subsidiary in an NTA tender to design, build, commission, and maintain a transformer station at the Mesubim depot for the M3 line of the Tel Aviv metro network. Estimated consideration is about NIS 84.6 million, expected execution is up to 56 months, and payments are based on execution progress milestones.
The win matters because it increases future work load and shows that the company can still win large projects. It also brings us back to the issue flagged in the earlier analysis of project economics after the annual report: in a company like this, winning is not enough. Value is created if milestones become invoices and collection, and if execution costs, subcontractors, delays, and compensation claims do not consume the margin by project completion.
Operation “Roaring Lion” adds a relevant risk layer at exactly that point. Work stoppages, slower activity, and reserve duty call ups hurt the quarter through fixed overhead costs and longer execution duration. Management estimates that if the ceasefire continues and no further restrictions are imposed, it does not expect a material impact on the annual execution pace of projects. Investors still need to see that in the numbers: the project loss needs to shrink, and customer collection needs to keep improving without renewed growth in bank credit.
The legal process around the Kiryat Gat project is another reminder that project risk is not only future execution. A performance guarantee of about NIS 2 million in a partnership in which the company has a 50% share was called by the project customer. After the balance sheet date, the parties agreed that the partnership would provide the customer with a payment in lieu of the guarantee. The partnership management’s assessment of the claim did not change, but the case shows how a project dispute can quickly become a cash use or a guarantee that is actually drawn.
Conclusions
Inter’s first quarter improves liquidity more than it improves earnings quality. Customer collection, released deposits, and option exercise reduced balance sheet pressure and allowed the company to repay bank credit, which is progress relative to the main question left after 2025. At the same time, the project segment still has not proven that each new shekel of revenue comes with a healthy margin. Revenue there grew, the loss widened, and the NTA win increases future execution volume before it proves profitability.
The current conclusion is that the company has moved from a quarter of balance sheet pressure to a quarter of execution proof. The read improves if, in the coming quarters, customer receivables remain controlled, bank credit does not rise again, and the project loss starts closing while new work advances. It weakens if positive operating cash flow turns out to be one off collection, if new projects enter with low margins, or if execution events and disputes keep turning backlog into costs, guarantees, and customer credit. Why it matters: at Inter, value is not created by winning projects or reporting revenue growth alone. It is created by turning long duration work into collection, operating profit, and a balance sheet that no longer needs ongoing support from banks or controlling shareholders.
Disclosure: Deep TASE analyses are general informational, research, and commentary content only. They do not constitute investment advice, investment marketing, a recommendation, or an offer to buy, sell, or hold any security, and are not tailored to any reader's personal circumstances.
The author, site owner, or related parties may hold, buy, sell, or otherwise trade securities or financial instruments related to the companies discussed, before or after publication, without prior notice and without any obligation to update the analysis. Publication of an analysis should not be read as a statement that any position does or does not exist.
The analysis may contain errors, omissions, or information that changes after publication. Readers should review official filings and primary sources before making decisions.