Tnuva has decided against closing down its beef slaughterhouse and meat-packing plant, where its high-quality brand Adom Adom is produced, says a financial source in the farming sector.

The plant is expected to report a relatively small loss for the first half of 2008, after amending its business model and implementing an efficiency program. Previously it had been losing money hand over hoof.

Since its establishment in 2005, Tnuva's fresh beef business has accumulated a loss of an estimated quarter of a billion shekels. In 2007 it chalked up a loss of some NIS 80 million, but it apparently managed to reduce that pace of cash burn to NIS 40 million in the first six months of 2008.

According to the source, Tnuva decided not to shut down the slaughterhouse and fire all its employees because it believes that its new business model will allow it to successfully and profitably compete in the fresh meat market.

The source said that the employment issue at these sensitive times also played a part in its decision not to shut down the slaughterhouse. The majority of its 200 workers are residents of Beit She'an who - if laid off - would have a difficult time finding alternative employment.

Accordingly, Tnuva decided to continue production as long as there is a chance of the establishment becoming profitable, the source said.

Under the new business model, the slaughterhouse has stopped marketing packaged meat products. Instead, it has begun marketing cuts to butchers and retail chains, thereby lowering marketing costs.

In addition, Tnuva's beef division has changed its system of purchasing, feeding and raising calves for slaughter. The livestock is imported from Australia and raised in Israel.

The factory has also begun providing local beef producers slaughtering services at the "cleanest and most modern facility in the Middle East," according to the source.

Adom Adom had been the first to pioneer the sale of fresh beef, rather than frozen, in retail chains.