Israel Railways. Photo: SHUTTERSTOCK Israel Railways reports a steep decline in operating profit in Q1 2025 - increased revenue, but also a surge in expenses.
Israel Railways released its Q1 2025 results, showing significant passenger and freight activity improvements, yet a dramatic decrease in company profitability.
Quarterly revenues totaled approximately 828.9 million ILS (approximately $210 million), up about 9% compared to 908.5 million ILS in Q1 2024, but net profit fell from 57.9 million ILS to just 4 million ILS.
Growth in Activity - but Also in Costs
The revenue increase was attributed to recovery from the effects of "Swords of Iron" in the previous year, alongside an 18% rise in travel numbers, reaching 18.1 million trips.
Operating fees revenue rose to about 779 million ILS, and passenger transport revenue jumped 13% to 61 million ILS. Freight activity also strengthened: around 1.7 million tons were transported, a 16% increase.
Conversely, the total cost of sales and services soared by 18%, totaling 853 million ILS, an addition of 130 million ILS compared to the same period. The increase was mainly due to higher employee salaries, security and maintenance costs, property royalties, electricity, maintenance, communication, and cleaning expenses.
Operating Profit Slashed
Due to the sharp rise in expenses, operating profit was significantly slashed to just 1 million ILS, compared to an operating profit of 45.7 million ILS in the first quarter of last year.
Adjusted EBITDA also fell from 66.5 million ILS to 19.6 million ILS.
Cash Flow and Financial Status
Operating cash flow rose to 63 million ILS, but investment cash flow grew to 493 million ILS, primarily due to investments in fixed assets. Financing cash flow amounted to 79 million ILS, a decrease compared to the previous period. The company's working capital stood at 210 million ILS, a decline from the end of 2024.
Summary: Activity Improvement, Profitability Challenge
Despite the recovery in railway activity and the reopening of stations closed due to the war, Israel Railways faces a significant rise in expenses, impacting profitability. Continued government support through operating fees and development finance is expected to ease the burden on the company, but controlling costs will remain a key challenge in the upcoming quarters.