Diplomat Reports 9.7% Revenue Drop in Q2 Amid South Africa Weakness and Currency Impact
Diplomat, an importer and distributor of consumer products operating in Israel, South Africa, Georgia, New Zealand, and Cyprus, reported a 9.7% decline in revenues to 865 million shekels in the second quarter of 2026. The company attributed the drop primarily to economic challenges in South Africa, where revenues fell 25.7% to 155 million shekels, compounded by a local currency depreciation of 18.8%. The South African market suffered from high inflation, rising unemployment, protests, and partial economic shutdowns during the quarter, causing operating profit there to plunge 68% to 1.8 million shekels.
In Israel, revenues decreased by 3.1% to 535 million shekels, affected by a strong sales comparison to June 2025, which included a promotional campaign. Operating profit in Israel declined 5.8% to 29.8 million shekels. Meanwhile, operations in Cyprus and Georgia partially offset the overall sales decline. Despite lower sales, the group’s gross profit margin improved to 23.2% from 21.7% due to a change in sales mix. Operating profit fell 14.2% to 35.4 million shekels, impacted by both lower sales and increased operating expenses.
Net profit sharply dropped 60.2% to 21.4 million shekels, influenced by the absence of a one-time gain of 28 million shekels from the previous year related to the sale of an option in Neve Pharma, as well as reduced income from currency exchange differences. Financing costs decreased due to lower interest and currency exchange expenses.
Looking ahead, Diplomat noted a recovery in South African commercial activity starting in the third quarter and expects this trend to continue, contingent on economic and political developments. The company is also preparing to expand its Israeli operations, having signed an exclusive distribution agreement in June 2026 with JTI for certain tobacco and smoking products, with distribution set to begin in February 2027. Additionally, Diplomat is negotiating to acquire a 60% stake in two private consumer goods distribution companies in Mexico, following a non-binding memorandum of understanding signed in March 2026, though no binding agreement has yet been finalized.