Alrov's profit fell by 71%: the impact of stock volatility

Alrov Real Estate and Hotels, controlled by Alfred Akirov, concluded the second quarter of 2026 with a net profit of approximately 172 million shekels, a 71% decrease compared to the 588 million shekels recorded in the same quarter last year. However, this gap reflects the performance of two specific stock holdings—Clal Insurance and Bank Leumi—rather than the state of the company's core business.

The explanation is straightforward: in the second quarter of 2025, Alrov recorded an exceptional profit of 709 million shekels from the appreciation of these two stocks. This year, the profit from the same item was a more modest 116 million shekels. If these securities are neutralized from both periods, it becomes clear that the company's other income streams have remained largely stable.

This is not a new phenomenon. In 2024, for instance, holdings in Clal and Leumi contributed 382 million shekels out of a total net profit of 386 million, meaning almost the entire annual profit was derived from stocks rather than office rentals or hotel operations. The Clal holding stems from Akirov's long-standing attempt to gain control over the insurance company, which manages vast amounts of public funds.

This effort effectively ended in May 2025, when Capital Markets Commissioner Amit Gal announced that Akirov would not receive a permit for control. Consequently, the 14.4% stake in Clal Holdings remains a purely financial asset, whose value fluctuates with the stock market, generating "paper" profits or losses for Alrov each quarter.

In core operations, some weakness was recorded: hotel revenues fell by approximately 16% to 173 million shekels, influenced by the security situation and Operation "Lion's Roar". Rental income declined by about 10% to 111 million shekels. Conversely, net financing expenses shrank by 23% to 75 million shekels, partially offsetting the damage in a high-interest-rate environment.

Notably, Alrov recorded a total loss of 77 million shekels, compared to a total profit of 608 million shekels last year. This gap is primarily due to exchange rate differences; the company holds significant assets abroad, mainly in Switzerland, making its capital sensitive to currency fluctuations even when business operations are stable.

Despite the profit decline, Alrov's balance sheet has strengthened. Equity attributable to shareholders stood at approximately 7.4 billion shekels at the end of June, with the equity-to-balance ratio rising to 48% from 42% a year earlier. Rating agency S&P Maalot reaffirmed Alrov's ilA+ issuer rating with a stable outlook, signaling low credit risk and favorable future financing conditions.

For the first half of the year, Alrov reported a net profit of 283 million shekels, a 61% decrease, again due to the absence of the one-time profit from Clal and Leumi stocks seen last year.

Relevant data for the future appeared in the margins: after the balance sheet date and prior to the report's publication, Alrov recorded a pre-tax profit of approximately 196 million shekels from the appreciation of Clal and Leumi stocks based on last Friday's closing prices. This confirms that the same mechanism that caused the quarterly profit to fall is now working in the opposite direction.

For investors, Alrov today represents both a high-quality real estate and hotel firm with a solid balance sheet and, in practice, a leveraged play on two leading financial stocks. Anyone considering the stock should remember that its bottom line will continue to track Clal and Leumi far more closely than the stable pace of rent and hotel stays.