Argaman, Survivor of Israel’s Old Textile Nation, Is Crushed by Debt

Argaman, which was founded in 1934, adopted high-tech and moved production abroad, but it still couldn't return to profitability.

A busy factory floor during the heyday of Israel’s textile industry.
Moshe Milner, GPO

It wasn’t long before the rise of Startup Nation that Israel could have been called Textile Nation. In the 1980s and ‘90s, textiles were one of the country’s biggest industries, employing thousands. But competition from low-cost Asia and trade liberalization that let cheaper products into Israel nearly killed off the sector within a few years.

Today only a few companies remain, among them the manufacturers of intimate apparel Delta Galil and Tefron. They survived and even thrived by going high-tech, moving most of their production to lower-cost countries and focusing on design and marketing to differentiate their products from competitors.

On Wednesday, Argaman Industries, a maker of undergarments whose origins go back to 1934, said it couldn’t pay some 21 million shekels ($5.5 million) in debt it owes to banks. So it is seeking a debt bailout with them, in effect putting it into insolvency.

The company told the Tel Aviv Stock Exchange, where it trades at a market value of just 9 million shekels after its shares tumbled three-quarters over two years, that it wouldn’t be able to repay 8 million shekels in debt coming due next month.

Argaman, which is based in the Tel Aviv suburb Kfar Sava, rescheduled its debt three years ago but has since failed to achieve a turnaround.

Like Delta and Tefron, Argaman adopted high-tech seamless technology to produce its apparel. Using specialized circular looms, seamless technology produces garments that adapt to the contours of the wearer’s body without the need for sewing or stitching. The cost of producing seamless underwear is almost twice as high as using traditional cut-and-sew technology, but low-cost competitors in Asia have struggled to employ it.

“Seamless technology is new so the competition is relatively small. In addition, the investment required to use the technology is still costly, so the barrier to competition with Israeli companies is higher,” Yair Rotlevy, Argaman’s chairman and a scion of the family that founded the company, told TheMarker in 2013.

Seamless garments account for about 70% of Argaman’s turnover, but technology has proved insufficient to reverse the company’s fortunes. From 2008 to 2011 it lost 50 million shekels, forcing it to slash costs.

Argaman closed its production lines in Kfar Sava and Kiryat Shmona, moving them to Romania. In 2013 sold its Lodzia Rotex retail chain including its Fix, Fix on You and Veto labels to Delta Galil.

None of that helped, which forced the company to renegotiate its debt the same year. The agreement was to cut its debt to as little 21 million shekels, which would be repaid from 2016 to 2018.

That helped, but not much. In 2014 Argaman posted a profit of just a few thousand shekels, and in 2015 it was back in the red again to the tune of 3.5 million shekels. Its shareholders’ equity turned negative. Its sales have fallen to 78 million shekels last year from 240 million in 2007.

The Rotlevy family no longer counts on textiles. As the business failed to turn around, the family has moved into real estate through Tel Aviv-listed Lodzia, which owns substantial land from its days as a textile maker. Earlier this year it sold a plot of land in Holon to the Azrieli Group for 290 million shekels.

In addition, the Rotlevys are among the controlling shareholders in Ratio, whose market capitalization of 2 billion shekels is more than 220 times Argaman’s and has a 15% stake in the giant Leviathan natural gas field. Even after energy prices have collapsed and regulatory doubts hover over Leviathan’s future, the field is worth an estimated $3 billion.