The dollar eroded Rafael's profitability. CEO: "The state must intervene in the foreign exchange market"

Quarterly sales growth of 20% (45% in dollar terms) to 5.6 billion shekels (1.91 billion dollars), and a 39% jump (68% in dollar terms) in new orders, which totaled 6.9 billion shekels (about 2.3 billion dollars) against the backdrop of the "Lion's Roar" operation against Iran. This is how Rafael summarizes the second quarter of the year, following which CEO Yoav Turgeman, in a conversation with Globes, calls on Finance Minister Bezalel Smotrich and Bank of Israel Governor Prof. Amir Yaron to intervene in the foreign exchange market.

"In the first half as a whole, more than 60% of orders were for export, much higher than in the corresponding period," explains Turgeman. "When you receive orders in dollars and it goes down, or in euros and the euro goes down, there are far fewer shekels - and the profitability of the transactions decreases. Furthermore, it does something else: it makes the offers more expensive in dollar terms, because in the next ones, I will be required to take into account a high exchange rate. This harms competitiveness. It burdens the industrialists, and this is very bad news for the Israeli market. I hope that the Finance Minister and the Governor will be recruited to deal with the issue more significantly than until today. Whoever wants a solid industrial economy must ensure that it operates in a space of reasonable and not uncontrollable fluctuations."

According to him, within a year there was a drop from about 3.67 shekels to the dollar to less than 3, and the industry does not know how to withstand this. "State intervention is required. It was required in the past, and now even more so." In the second quarter of 2026, the war in Iran led Israel to account for 56% of Rafael's sales. It was followed by Europe (22%), Asia (16%), America (5%), and the rest amounted to a single percent.

The volume of sales at the end of the first half of 2026 stands at 10.6 billion shekels (about 3.57 billion dollars), a shekel growth of 13.6% and 35% in dollars compared to the first half of 2025. The volume of orders in the first half reached about 15 billion shekels (about 5 billion dollars), a growth of about 24.7%; while the order backlog jumped by 33% to about 75.8 billion shekels (about 25.47 billion dollars).

Alongside this, the net profit in the first half of 2026 stands at 663 million shekels (about 222.8 million dollars), a growth of 8% (28% in dollar terms) compared to the same period last year. This occurred in a period when the state's debts to the defense industries are unprecedented. "Rafael is a very solid company with the highest economic rating in the country, so banks are happy to lend," notes Turgeman. "However, credit costs money and it costs on the bottom line. Does it hurt performance? Yes."

Responsible for almost 100% of air defense in Israel

What are customers looking for at Rafael?

"The air defense market in all its layers occupies a central place in the world. In this market, Rafael, as the one responsible for almost 100% of air defense in Israel, is a central player. The Spyder deal in Romania is the largest in Rafael's history, and I assume there will be more like it - and not only in Europe, but in general. Europe has the greatest built-in tension, and the gap between need and ability. Therefore, I estimate that along with the ability to pay, great demand and many deals will come. Also, in the worlds of land, sea, air, and intelligence, we see significant growth, an active market with great appreciation for the products."

Rafael's CEO says that the increasing appreciation for Rafael's products is influenced by the impressive performance in the campaign against Iran, which proved the quality level well. "We are a supplier that delivers on time, and to meet the time, we increased supply capacity by 55% compared to the corresponding period. This is more than start-ups. We did this by improving the entire value chain: mechanization, automation, supply chains, production floors. When you look at problems in the world, there is difficulty in meeting demand and certain companies say 'you will receive in many years'. Therefore, they turn to choosing quality equipment, less expensive and on a short schedule."

Rafael Chairman Prof. Yuval Steinitz reiterated his call for the company's IPO, all the more so because of its achievements. "The business achievements receive additional validity in a period when the company operates in a complex security environment and in a competitive and dynamic global market. Looking ahead, the continued strengthening of Rafael as a leading defense industry also requires the adaptation of its growth infrastructure to the challenges of the coming years - including changing its status by issuing shares that will allow it to expand investments in breakthrough technologies, deepen its international activity, better compete for the employment of the best minds and preserve its scientific and operational advantage, while maintaining the security interests of the State of Israel," concludes Prof. Steinitz.