The Golan Ramat Dairies Company, the fifth largest in Israel, applied today (Monday) to the District Court in Nazareth with a request to appoint a trustee and temporarily freeze the proceedings against it, after accumulating debts of approximately NIS 40 million. This is after last Thursday the company informed the dairy council and the dairy farmers of the Golan Heights that it was forced to stop purchasing milk.
According to the company, it cannot continue operating in the normal course of business and needs to start the legal process in order to recover financially and continue operating. The opening of the procedure is intended to allow her not to accumulate debts and not to pay her creditors.
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The dairy has been operating since 1983 and employs about 100 workers and about 30 contractor workers in the Katzrin industrial area in the Golan Heights, alongside a logistics center in the Emek Hafer industrial area. The company buys milk from about 17 dairy farms every day. For a long time now, the dairy has been dealing with flow difficulties and accumulated losses, which are mainly due to a continuous increase in raw milk prices and production costs and inputs.
“The alternative to what is requested is the liquidation of the company, which will destroy value for the company’s creditors and cause heavy damages to its employees and creditors. There is no dispute that it is very important to make every effort to find a ‘revival’ for the company, whose activities are in the field of agriculture and in the periphery,” claims the application submitted to the court through the Pearl Law Firm Cohen was right about Tzer Baretz.
Low profitability that eroded over time
The application states that the debt accumulated due to low profitability that has eroded over time, along with increases in the company’s production costs in raw materials, inputs, manpower and electricity. This is when the company does not have the ability to make its products more expensive, because most of them are under supervision or are sold under a private label and suffer from low profitability.
In 2020, the company earned approximately NIS 1.2 million, and according to the draft financial statements in 2021, the profit line turned into a loss at the rate of approximately NIS 7 million.
According to the company, “Despite extensive activity in the milk market, as well as agreements with large and significant customers in their field, the company’s operations suffer from very low profitability that erodes over time. Some of the reasons for the low profitability lie in the fact that 60%-70% of the company’s products are regulated products, and their price Limited, as well as the company’s agreements with the various chains for marketing under the chains’ private brands are also of low profitability, in light of the desire of the marketing chains to sell to the consumer at as low a price as possible.”
It was further claimed that “due to the accumulated deficit and given the state of things, the company can no longer continue its business activities and needs the help of the honorable court to try to bring about its rehabilitation, through the appointment of a temporary trustee.”
The company, most of whose assets are pledged to Bank Hapoalim, the company’s secured creditor, requests to appoint the bank’s attorney, attorney Yaron Alkaoui, alongside attorney Amir Palmer, as temporary trustee. The bank agrees to the request to freeze the proceedings.
The dairy wishes to adopt a temporary operating plan for 30 days that includes massive efficiency and downsizing measures, and to try to find an investor for the company or a buyer for its operations, while continuing to operate the company as a “going concern”, and with the desire and intention to rehabilitate the company as a last resort before liquidating the company. The projected operating profit is about half a million shekels.
Golan Ramat Dairies was established in 1983, and is fully owned by the “Northern Periphery Agricultural Cooperative Association” company. The members of the AGS are Kibbutz Ortal (38%), Kibbutz Sasa (38%), Kibbutz Ein Zivan (19%) and Yuval Eitan (about 4%). The “Northern Periphery” company agrees to provide funding of up to half a million shekels for the operation of the program .
In the last year, the activity was reduced by about 20%
The request shows that the company’s annual production volume is about 18.5 million liters of raw milk. The annual sales volume of the company was until the last year about NIS 120 million. In the last year, the scope of the company’s activity was reduced by about 20%.
It was also noted that about 60%-70% of the company’s products are milk and cream products that are under supervision, and in these the gross profit is the lowest and currently stands at only about 3%, while about a decade ago it was more than three times higher. According to the request, “under the existing agreements with the marketing chains, and as long as the products under supervision do not become more expensive by at least 10%, the company is unable to maintain any profitable business activity.”
The dairy tried to find an investor to put in capital, but was unsuccessful. According to her, the marketing chains did not agree to change the terms of the agreements in order to generate profitability for her.
The company owes Bank Hapoalim about NIS 26 million, and it owes its employees about NIS 850,000 in wages from the beginning of November, and it also has a debt for pension payments and advance notice to laid-off workers amounting to about NIS 440,000.