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The top row looks beautiful. The company reports a 25% increase in the quarter in pro forma terms to NIS 165 million (including the acquisition of Norial activities), compared to NIS 132 million in the corresponding quarter last year. Growth is definitely good in the top tier, year-on-year an increase of 16.7% to NIS 548 million compared to NIS 470 million in the corresponding quarter in 2020, compared to NIS 387.7 million in 2019. The company also reports future orders of NIS 381 million, an increase of 21% compared to 2020.
But the problem is that the handsome revenue so far is not rolling into the next lines, and when it comes to an industrial company, one that has been around for many years and is supposed to generate profitability – yes, that’s a problem. True, the price of raw materials can be blamed, and this is true of course, but a company like Rav Briach should also show investors profits as well and not just revenue growth.
And what happened in the fourth quarter? Although EBITDA increased to NIS 21.1 million, compared with NIS 19 million in the corresponding quarter, operating profit decreased to NIS 9.53 million, compared to NIS 10 million. And on the bottom line, the company recorded a net profit of NIS 1.2 million, compared to NIS 6.59 million in the corresponding quarter in 2020 – meaning that the data does not seep into the bottom line in the meantime.
And what about the whole year 2021? The company recorded a fall in operating profit to NIS 5.5 million, compared with NIS 22.3 million in 2020. True, half of the decrease is due to the issue expenses (NIS 9.6 million), but the rest is a 35% increase in sales and marketing expenses and a 46% increase in administrative and general expenses.
Adjusted net profit (excluding issue costs) amounted to NIS 670,000, a decrease compared to NIS 9 million profit in 2020 and a profit of NIS 6.1 million in 2019.
Why does it matter what happened in the profit line? Because you know what – do not listen to us, but only to what the company’s CEO Shmuel Donnerstein himself told us in an interview six months ago: “From a certain stage in the cycle everything goes down and you will see it in the coming quarters. The overheads remain the same and the wages the same – and everything will go down to the bottom line. We will not tell investors how to value companies, but with us it is wrong to look at quarters. September is going to be harder because of the holidays, but October will be good. We already know for sure that at the end of the year the net profit will be higher in high percentages … there are cycles, so one and two quarters were weak. Fourth quarter is historically the best. So wait until the end of the year and measure us then“.
So here came the end of the year and the problem is that his things did not come true. He talked about a significant increase in profits but in practice they amounted to almost zero.
Another point that the company now wants to emphasize is the significant increase in the costs of raw materials and shipping. Again – this is true, but Donnerstein claimed half a year ago that the shipping costs are seen immediately while the increase in revenue is seen only later. So here now comes the increases in revenue and that is of course excellent but as we have warned in the meantime in the meantime the increase in freight and shipping expenses are not “one time expenses” and continue to have an impact.
The improvement in the gap between revenues and the cost of sales will come if and when the company succeeds in sustaining an increase in revenues at the same time as world transport prices and raw material prices fall. when will it happen? No one yet knows how to predict but in the world there are those who talk about the coming year and there are those who estimate that it will only happen in about two years.
The company is working for growth in other directions – and investors will want to see it affect the results
The company is setting up a new plant in Ashkelon, covering an area of 40,000 square meters on 55 dunams of land. The plant will include 3 warehouses as well as robots and autonomous forklifts, which should increase production capacity and improve productivity – the company hopes to double production and productivity.
In addition, in order to reduce costs, the company is transferring the heavy frame activity to the industrial area in the city of Ariel in Samaria, in a plant that will be spread over 9,000 square meters.
The company has also established a company that will deal with the logistics and distribution of solar equipment, and has also established the multi-bolt energy that will develop and establish solar systems. Rav Briach edited in the previous quarter that the sales turnover of the renewable energy sector in the next 3 years will be about NIS 200-250 million, which is definitely significant for Rav Briach.
Rav Bariach also acquired at the end of 2020 Norieli in the field of production, sale and rental of construction equipment made of metal and plastic, and in 2021 the Locker Ambin company in the field of lockers, a company that has tens of thousands of lockers in educational institutions in Israel, and in early March 2022 To purchase Galfer Industries, a company that manufactures, sells and installs garbage dumps in residential buildings, institutions and industry.
There is no doubt that Rab-Briach, which already has 7 factories, is doing a lot of operations to grow, it is acquiring companies and expanding activity and expects a significant increase in profitability as a result – investors at least, will hope that this will actually be the case.
Shmuel Donnerstein, chairman of Rav Briach, said against the background of the reports: “In 2008, when I bought the company, we sold a basket value to a contractor for NIS 1,300 per apartment. Today, we sell thousands of products with an average basket value of NIS 28,000 per apartment per contractor. “And a rise in raw material prices. We will continue to work to create more growth engines by entering new segments.”
Idan Zoarz, CEO of Rav Briach: “The dramatic improvement in the EBIDTA rate compared to Q3 came due to price adjustments in the construction and locking sectors, realization of contractors’ contracts at higher prices and operational efficiency, in addition the transfer of heavy frame plant activity from Ashkelon to Ariel began to increase output and lower labor costs.
“In 2021, the company significantly increased future orders in the contractors, residential and institutional sectors by 21% compared to the previous year, mainly by expanding its market share and implementing the contractor’s product basket strategy.”
The company was issued six months ago at a value of NIS 625 million after the money, since then it has lost 30% to a value of NIS 440 million and since the beginning of the year it has risen by 20% to a value of NIS 525 million.