Dude, you're a millionaire: what's up with the kibbutz industry?

An examination of companies from the kibbutz industry that have become public, reveals that this is usually a very good long-term investment.

Begin called them "millionaires with swimming pools," but some became millionaires just cleaning it up

Roast Greenberg

09/06/2022

Thursday, 09 June 2022, 10:31 Updated: 10:46

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Fifteen public companies are currently controlled by the kibbutzim - and the hand is still out.

Four of them (see table) have even grown over the years for some of the large companies on the local stock exchange, after their share price has jumped by an average of 2,520% since they began trading on the Tel Aviv Stock Exchange, and have become an integral part of long-term investments.

The four companies were joined about two years ago by an energy farm company, which deals in the field of solar energy and is controlled by the kibbutz farms.

This is after it completed last April the purchase of 40% of the shares of the Dalia power plant for about NIS 1.32 billion.

The energy economy is an exception in the landscape of the companies owned by the kibbutzim, whose center of activity is in the manufacturing industry.

There are currently 270 kibbutzim in Israel, managing about 300 companies (excluding subsidiaries), which employ about 50,000 workers (about 30,000 of them in Israel) and have become a household name in the world.

Most of the production activity of the 300 companies is export-oriented (65%) and the rest to the domestic market (35%).

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Squad factory in Kibbutz Sde Nehemia in the Hula Valley.

Prior to the IPO, the company's value is estimated at NIS 900 million (Photo: courtesy of the kibbutz)

Do not look for a quick exit

But the magic that these companies place on investors is the complete opposite of why they are so popular with their customers.

While the capital market would like the companies in which it invests to make quick business decisions, in companies controlled by the kibbutzim the response time is slower due to their community nature.

This is the case even if the capital market demands that the investment generate quick exits and immediate dividends, in companies controlled by the kibbutzim they take the time.

Among the listed companies, it was Mitronics, the manufacturer of pool cleaning robots controlled by Kibbutz Jezreel in the north (56.29%), which occupied the highest position in the table.

Mitronics has grown by about 7,160% since it began trading on the stock exchange in August 2004, and most of its growth came precisely due to the corona plague, which increased the use of private pools, and as a result increased the demand for robots that the company produces.

It should be noted that at its peak, during November 2021, the company's value exceeded NIS 9 billion, giving the kibbutz's maintenance a value of over NIS 5 billion, which could have been a handsome exit for its members.

Since then, like the other sectors and companies on the stock exchange, the companies controlled by the kibbutzim have also experienced a decline in their share price, which still remains tens and even hundreds of percent higher than the low in the early Corona (see table).

Shares of public companies in the kibbutz industry (Photo: Walla !, no)

The quarries in Kfar Giladi are already worth more than a billion shekels

Gil Lin, CEO of the Kibbutz Industry Association

, explained to Walla! Money and Maariv Business that "the purpose of the companies established by the kibbutzim is to provide a source of livelihood for the kibbutz members, using their knowledge and abilities.

Some of them entered the stock market at a time when those companies wanted to grow, but found it difficult to raise funds for their activities.

The stock market was an effective solution, which in retrospect also introduced new managerial approaches alongside more correct corporate governance, and more professional conduct.

It should be noted in this context that non-public companies established by the kibbutzim also benefited from the fact that the changes made to the public companies also passed to the private companies controlled by the kibbutzim. "

In recent months, publications have appeared about the possibility of additional companies controlled by the kibbutzim entering the local stock exchange.

One of them is the quarry activity of Kibbutz Kfar Giladi, valued at NIS 1.1 billion, and the other is a vertebrate plant, which is controlled by Kibbutz Sde Nehemia and Keren Tene and produces plastic pipes for the water sector, valued at up to NIS 900 million.

Gil Lin, CEO of the Kibbutz Industry Association (Photo: Dudi Moskowitz)

Millionaires from swimming pools

"Most companies in the kibbutz industry do not find fundraising through the stock exchange a top priority," explains

. The same worldview and organizational culture.

The kibbutzim were among the first to adopt the industry, which suited them very well as those who always worked to test efficiency, and it works.

Apparently, the companies have been operating for decades, and are constantly growing. "

Menachem Begin did call them" millionaires with swimming pools ", and indeed some are millionaires, and almost everyone even has swimming pools (or at least robots that clean them), The kibbutzniks are perceived as working people

.

CPA Doron Arami, director and director of the Agrotech Cluster, Industry and Settlement Cluster at the consulting and accounting firm BDO (Photo: Liel Arami)

There is no problem of recruiting

"There are also hard times in the industry," Lin continues, "but kibbutzim do not give up a field they enter so quickly. There is composure and a commitment to bring results.

The source of power of a kibbutz-owned company is being community-owned." In fact, they proved that this is an advantage, and time has confirmed this with the business results of the various companies, and the trust that investors have expressed and continue to express in them

. And the

commitment to invest in it.The

commitment to the company, alongside the innovation, made the kibbutz companies very prominent during the Corona period for example, and this is probably one of the things that contributed to the increases they experienced since the stock price slump then.

For example, even before the Corona, companies implemented digital systems for customer retention, marketing and sales, and while the Corona were among the first to implement these measures.

In addition, automation and robotics solutions have been implemented in companies that have reduced dependence on employees.

Alongside these, the kibbutz community provided an envelope that enabled the work of the factories and workers to continue, through quick and effective solutions to the educational frameworks, care for the elderly, and everything necessary for the workers to be able to get to work in peace, and protected.

This is also the reason why the activity of the kibbutzim manages to meet the new demand created after the corona and the companies are even increasing in the number of employees.

Recruitment is one of the main problems today, as about 75% of the kibbutzim are located in the periphery, and most of them are in the far borders of Israel.

"Although the kibbutzim are not perceived as part of the high-tech industry, some of the new activities that have been established and are being established in recent years by some of them concern technology areas, such as software, biotech, agrotech, podtech and other technologies."

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