Tomer Food Company Faces Financial Scrutiny Over Inflated Inventory

Tomer Food Company, which has experienced significant turmoil in recent months due to concerns about irregularities in its financial reports, has released findings from an independent committee investigation. The committee discovered inflated inventory values and premature recognition of revenue within a subsidiary. The controlling shareholder, Chairman, and CEO, Doron Kimelov, admitted to influencing the inventory's valuation.

As a result of these findings, the company is expected to re-publish the financial statements for its subsidiary, Tomer Import and Marketing of Food Products, for 2025. An initial estimate suggests these corrections will reduce the net profit for 2025 by approximately 3.1 million shekels and decrease equity by about 3.2 million shekels. Conversely, net profit for 2024 and 2023 are projected to increase by roughly 0.3 million and 1.4 million shekels, respectively.

The investigation, conducted by Fahn Kna and overseen by independent directors, found that inventory costs were improperly increased without supporting purchase documentation. This led to inventory being reported at values exceeding its fair worth by approximately 2.5 million shekels at the end of 2025, 0.5 million shekels at the end of 2023, and 2.3 million shekels at the end of 2022. Additionally, the company recognized revenue for goods that had been invoiced but remained in its warehouses, reducing 2025 revenues by about 5.7 million shekels.

Reports indicate Kimelov's intervention, directly or indirectly, in setting inventory values. He stated during questioning that he influenced or caused the inventory's value to be affected at various times. The committee concluded that the errors were qualitatively material, aligning with the Israel Securities Authority's stance. Kimelov has not yet provided a full response to the draft report.

Further investigations into related-party transactions, including the commingling of private expenses, are ongoing but are not expected to have a significant quantitative impact at this stage. The independent committee is also working to separate the Chairman and CEO roles and appoint an active chairman. Guy Freeman, appointed CFO and deputy CEO, has taken charge of compliance, and signing authorities have been altered. The committee is also assessing the impact of these corrections on the merger deal completed in May, which involved injecting Tomer into a publicly traded shell company, including the valuation basis of that transaction.