Frutarom Reports Another Record Quarter
27 Nov 2013 --- Frutarom Industries Ltd., one of the world’s ten biggest companies in the flavors and fine ingredients industry, reported record results for the third quarter and for the first nine month of 2013 in terms of sales, gross profit, operating profit, EBITDA, net profit and earnings per share. The net profit and EPS doubled from the third quarter of 2011.
The record results for the third quarter and first nine months of 2013 were achieved owing to the significant expansion in the Company’s activities in developing markets with higher growth rates and in the USA; to the successful integration of all eight acquisitions that were made during 2011 and 2012 alongside Frutarom’s global activity, which bolster sales and improve profit and profitability; the stability in the prices of raw materials used by Frutarom and the improvement in the product mix, resulting from the development of new products with higher margins.
As part of the implementation of its rapid growth strategy, combining internal growth and strategic acquisitions and accelerated expansion into target markets with higher growth rates, Frutarom launched three additional acquisitions in 2013 of growing companies in South Africa, Russia and Guatemala. Frutarom’s share in developing markets as a percentage of total sales grew from 27% in 2010 to 36% in 2012. The last three acquisitions will accelerate the rise in market shares in these growing markets.
The eight acquisitions made by Frutarom in 2011 and 2012 have already been successfully merged with Frutarom’s global activities and they contribute to the growth in sales and the improvement in profit and margins. Owing to these acquisitions, Frutarom is exploiting the multiple cross-selling opportunities and is taking advantage of the vast technological capabilities added to the Company as a consequence. In addition Frutarom is acting to streamlining operations as a result of the consolidation of the R&D, sales, marketing, operations and purchase infrastructures. The consolidation and streamlining of production sites and the relocation of other activities to countries with lower operating costs are expected to generate savings of $10 million annually, as reflected in the financial statements for Q3, and whose impact will be strongly felt in 2014. In addition, Frutarom continues to optimize its global purchasing while exploiting the added purchasing power as a result of recent acquisitions. Frutarom is continually expanding its supplier base, while purchases are increasingly made in the countries of origin of raw materials (especially natural ingredients).
Frutarom anticipates further improvement in profit and margins as a result of its actions to streamline operations, reduce costs, reinforce its global purchase infrastructure and the successful merger of the acquisitions made in 2011 and 2012. The last three acquisitions in 2013 will also boost profit.
Frutarom reports continued growth in sales in the third quarter of 2013 to $ 161.0 million, up 2.5% from $157.1 million in the third quarter of 2012. Frutarom’s flavor sales, the most lucrative of all the Company’s business activities, grew 4.6% to a record $119.4 million in Q3/2013, accounting for 74.2% of total sales. In the first nine months of 2013 Frutarom’s sales rose to $481.9 million and flavor sales grew 2.8% to $355.1 million.
The gross profit in the third quarter of 2013 grew 7.8% to $62.6 million from $58.1 million in the third quarter of 2012. Gross profitability excluding the trade and marketing activity (which is not Frutarom’s core activity), soared in Q3/2013 to 40.3% of total sales compared to 38.1% in Q3/2012. Gross profitability excluding the trade and marketing activity reached 38.8% of total sales compared with gross profitability of 37.0% in Q3/2012. The improvement in gross profitability stems, among others, from Frutarom’s efforts to develop new products with higher margins and to improve its product mix. The gross profit for the first nine months of 2013 rose 6.8% to $186.6 million, 38.7% of total sales. Net of the trade and marketing activity, Frutarom’s gross profitability in the first nine months of 2013 reached 40.0% of total sales compared to 37.9% of total sales in the same period of 2012.
The operating profit in the third quarter of 2013 totaled $22.6 million, 14.0% of sales, up 15.7% from an operating profit of $19.5 million in Q3/2012, which accounted for 12.4% of sales. The operating profit in the first nine months of 2013, net of one-time expenses, rose 15.7% to $68.6 million, 14.2% of total sales. Without deducting one-time expenses the operating profit in the first nine months of 2013 rose 12.3% to $66.4 million, 13.8% of sales, compared to $59.1 million, 12.5% of total sales, in the same period of 2012.
The EBITDA in the third quarter of 2013 totaled $29.4 million, 18.3% of sales, up 12% from an EBITDA of $26.3 million, 16.7% of total sales, in Q3/2012. The EBITDA for the first nine months of 2013, net of one-time expenses, totaled $89.3 million, 18.5% of sales, up 11.7% from the same period of 2012. Without deducting one-time expenses, the EBITDA for the first nine months of 2013 grew 9.9% to $87.7 million, 18.2% of total sales, compared to $79.8 million in the same period of 2012, which accounted for 16.9% of total sales.
Net profit for the third quarter of 2013 rose 18.3% totaling $17.0 million compared with net profit of $14.4 million in Q3/2012. Net profit for the first nine months of 2013 totaled $48.7 million, 10.1% of total sales, up 17.4% from a net profit of $41.4 million, 8.8% of total sales, in the same period of 2012. Net of one-time expenses, net profit for the first nine months of 2013 totaled $50.3 million, up 22.3% from the same period of 2012.
Earnings per share for the third quarter of 2013 rose 16.2% $0.29 compared to $0.25 in Q3/2012. Earnings per share for the first nine months of 2013 were $0.83 compared to $0.72 in the same period of 2012. Net of one-time expenses, EPS for the first nine months of 2013 rose 20.8% to $0.86 compared with EPS of $0.71 in the same period of 2012.
Frutarom’s shareholders’ equity as of September 30, 2013, totaled $496.3 million, 61.7% of total assets, compared to $431.1 million, 56.1% of total assets, last year.
Ori Yehudai, President and CEO of Frutarom: “We are pleased with the results for the third quarter and first nine months of 2013 reflect the successful implementation of our rapid growth strategy. The considerable improvement in profitability and the net earnings in Q3, which doubled within two years, stems from the successful combination of organic growth with the acquisitions made in 2011 and 2012. We optimized business synergies and began capitalizing on cross-selling opportunities. The growth in gross profitability is also driven by the launch of unique, natural products with higher profit margins, which contribute to the improvement in the product mix. The expansion of the range of natural products with high profit margin is achieved by focusing on natural, health-oriented food, in response to a growing global demand.”
“All the acquisitions we made in 2011 and 2012 contribute to the growth in sales, earnings and margins. We managed to identify the right companies, the growing markets, to assimilative innovation and leading technologies, to add leading executives from acquired companies to Frutarom’s management and to exploit business opportunities, while making solid acquisitions at attractive prices. This excellent platform enables Frutarom to start benefiting from economies of scale.”
