Frutarom Report Record Quarter, Bolstered by Sales in Specialty Ingredients

24 May 2017 --- Frutarom Industries Ltd one of the world's 10 largest companies in the field of flavors and specialty fine ingredients, reports another record-breaking quarter in sales, profits, cash flows from operating activities and in earnings per share.

The rapid increase in revenues this quarter stems from a combination of rapid internal growth in Frutarom’s core activities - the Flavors Division and Specialty Fine Products Division - and the acquisitions it has made.

Frutarom’s sales in the first quarter of 2017 rose 17.4% to a record US$ 302.5 million compared with US$ 257.7 million in the parallel period, reflecting 5.3% year-over-year growth on a pro-forma and constant currency basis. Changes in the exchange rates of currencies in which the Company operates as against the US dollar had a 0.4% negative impact on sales growth in pro-forma terms compared with Q1 2016.

Sales for Frutarom’s core activities (Flavors activity and Specialty Fine Ingredients activity) rose 17.7% in Q1 2017 to reach a record level US$ 283.5 million compared with US$ 240.8 million in the same quarter last year, reflecting 6.6% year-over-year growth on a pro-forma and constant currency basis. Changes in exchange rates had a negative 1.0% impact on results in pro-forma terms.

Sales for Flavors rose 20.3% in Q1 2017 to reach US$ 219.4 million in Q1 2017 as against US$ 182.4 million in Q1 2016, reflecting 6.6% year-over-year growth on a pro-forma and constant currency basis. Currency effects negatively impacted results in pro-forma terms by 0.9%.

Ori Yehudai, President and CEO of Frutarom said: “We are pleased with our continuing business trends and performance that have led once again in the first quarter of 2017 to record results for sales, for profits, for cash flow and for earnings per share. The results reflect the continued successful implementation of our rapid and profitable growth strategy combining profitable internal growth at higher growth rates than those of the markets in which we operate, together with the successful merger of our strategic acquisitions that contribute to the continuing and consistent improvement in our results.”

“The accelerated 17.4% increase in revenues this quarter results from continued rapid internal growth of our core activities, Flavors and Specialty Fine Ingredients, at a rate of 6.6% this quarter (in pro-forma terms and on a constant currency basis) and from the contribution of the strategic acquisitions we made.”

Sales for Specialty Fine Ingredients rose 10.8% to US$ 66.8 million in Q1 2017 compared with US$ 60.2 million in Q1 2016 and reflect 7.6% year-over-year growth on a pro-forma and constant currency basis. Currency effects negatively impacted sales by 1.3% in pro-forma terms.

In Q1 2017 Frutarom achieved record quarterly results in sales, gross profit, operating profit, EBITDA, net income, earnings per share and cash flow from operating activities.

These record results were achieved thanks to the profitable internal growth combined with the acquisitions made and the beginning of contributions from the merger activities and efficiency measures.

Gross profit for core businesses (which include the Flavors activity and the Specialty Fine Ingredients activity) rose 17.1% to reach US$ 111.6 million (gross margin of 39.4%) in Q1 2017 as compared with US$ 95.3 million (gross margin of 39.6%) in Q1 2016. Adjusted for non-recurring expenses, gross profit for core businesses rose 16.1% to reach US$ 112.4 million (gross margin of 39.6%) as compared with US$ 96.8 million (gross margin of 40.2%) in Q1 2016.

Operating profit for core businesses rose 50.1% to reach US$ 44.8 million (operating margin of 15.8%) in Q1 2017 as compared with US$ 29.9 million (gross margin of 12.4%) in Q1 2016. Adjusted for non-recurring expenses, operating profit for core businesses rose 23.8% to reach US$ 45.6 million (operating margin of 16.1%) as compared with US$ 36.9 million (operating margin of 15.3%) in Q1 2016.

EBITDA for core businesses rose 39.8% to reach US$ 55.1 million (EBITDA margin of 19.4%) in Q1 2017 as compared with US$ 39.4 million (EBITDA margin of 16.4%) in Q1 2016. Adjusted for non-recurring expenses, EBITDA for core businesses rose 20.4% to reach US$ 55.9 million (EBITDA margin of 19.7%) as compared with US$ 46.4 million (EBITDA margin of 19.3%) in Q1 2016.

Operating profit for the Flavors activity climbed 55.0% to US$ 35.9 million (operating margin of 16.4%) in Q1 2017 compared with US$ 23.2 million (operating margin of 12.7%) in Q1 2016. Adjusted for non-recurring expenses, operating profit for the Flavors activity rose 20.7% to US$ 35.9 million (operating margin of 16.4%) in Q1 2017 compared with US$ 29.8 million (operating margin of 16.3%) in Q1 2016.

Operating profit for the Specialty Fine Ingredients activity rose 34.2% to US$ 8.9 million (operating margin of 13.4%) in Q1 2017 compared with US$ 6.7 million (operating margin of 11.1%) in Q1 2016. Adjusted for non-recurring expenses, operating profit for the Specialty Fine Ingredients activity rose 37.6% to US$ 9.7 million (operating margin of 14.6%) compared with US$ 7.1 million (operating margin of 11.7%) in Q1 2016.

Nonrecurring expenses were recorded in Q1 2017 for measures taken by Frutarom to attain optimization and efficiency in the natural extracts operations of the Specialty Fine Ingredients Division. These nonrecurring expenses diminished gross profit, operating profit and EBITDA each by US$ 0.8 million and net income by US$ 0.6 million. Nonrecurring expenses were recorded in Q1 2016 for measures taken by Frutarom to optimize its resources, combine plants and attain maximum operational efficiency, which diminished gross profit for that quarter by US$ 1.5 million, operating profit by US$ 7 million, EBITDA by US$ 7 million and net income by US$ 4.9 million.

Completing the merger of companies acquired in recent years and measures being taken by Frutarom to optimize the management, R&D, sales, production resources, operations, purchasing and logistics systems, which are proceeding according to plan, will bring significant operational savings and strengthen its competitiveness through the maximum utilization of its sites worldwide. These actions are expected to result in annual operational savings in the range of US$ 20-22 million (as compared with Frutarom’s cost structure in Q2 2016), a smaller part of which have already begun to come into play in the first quarter of 2017 with the balance to gradually manifest itself in the course of 2017.

In addition, activity continues according to plan for building and reinforcing the global platform for purchasing raw materials used by Frutarom in the manufacture of its products which will capitalize on the purchasing power that has grown significantly in recent years, along with switching to purchasing directly from producers in source countries, primarily of natural raw materials (which constitute over 75% of the raw materials used by Frutarom). The global purchasing platform will contribute as well to further improvement in purchasing costs and gross margins in the years to come.