Israeli Businesses Warned of Lower Profits Despite Sales Growth

A new UN report projects a 4% growth in global trade by 2026, even as the global economy slows. Accountant Eran Buchris explains that increased sales do not guarantee profitability, especially when rising costs erode business revenues in Israel. The problem is particularly acute for businesses unable to fully pass increased costs onto consumers. Buchris illustrates this with an importer who, facing a 10% rise in goods costs, could see their profit margin shrink by 7,500 shekels on a 100,000 shekel sale if they cannot raise prices accordingly, resulting in higher turnover but less actual profit.

Exporters also face a complex situation. While global trade growth may offer opportunities, particularly for Israeli tech, service, and advanced manufacturing companies, a slowing global economy makes foreign clients more price-sensitive, demanding longer credit terms, and sometimes reducing orders. Buchris notes that exporters can experience revenue growth while simultaneously facing cash flow pressures and declining profit margins. Fluctuating exchange rates further complicate matters for Israeli businesses. An exporter receiving payments in dollars while paying salaries in shekels is exposed to shekel appreciation, while importers face currency appreciation on the goods they purchase.

Buchris concludes that in 2026, sales turnover alone will be an insufficient measure of business success. Israeli importers and exporters must meticulously evaluate profitability per transaction, financing costs, currency exposure, and actual cash flow. In an environment where trade expands faster than the economy, businesses that effectively manage their margins can achieve greater profits without necessarily increasing sales volume.