Frutarom reports record quarter, continues to implement growth strategy

17 Aug 2017 --- Frutarom’s sales in the first half of 2017 rose 15.8 percent to a half-year record of US$646.1 million compared with US$ 558.0 million in H1 2016, reflecting 6.1 percent year-over-year growth in pro-forma terms on a constant currency basis. Frutarom’s sales in the second quarter of 2017 rose 14.4 percent to a record US$ 343.6 million compared with US$300.2 million in the parallel quarter, reflecting the year-over-year internal growth of 6.8 percent in pro-forma terms on a constant currency basis.

Ori Yehudai, President and CEO of Frutarom said: “We are pleased with the results achieved in the second quarter and the first half of 2017 in which we again set ourselves new records in sales, profits and cash flows. Our sales turnover in the last 12 months on a pro-forma basis already stands at US$1.3 billion.”

“The results reflect the 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 14.4 percent increase in revenues this quarter results from continued rapid internal growth of our core activities, Flavors and Specialty Fine Ingredients, at a rate of 7.6 percent this quarter.”

Earlier this week, the company announced their fifth acquisition this year. The company is continuing its momentum of acquisitions after the agreement purchase of 100 percent of shares of UK company Flavours and Essences (F&E). The deal was completed for approximately US$19.5 million (£15 million) and based on F&E’s future business performance over the period of three years from the purchase date. You can read the full story here. 

Speaking about the acquisition, a Frutatom spokesperson told FoodIngredientsFirst: “Frutarom is already very active in the Flavors segment in the UK and we believe we hold a leading position. The acquisition of F&E is an add on to our businesses which will reinforce our growing activity in the UK, increase our market share and the product offering to the many customers of both Frutarom and F&E. We intend to exploit to the utmost the cross selling opportunities inherent in this acquisition.”

“The acquisition of Flavours and Essences reinforces our market leadership in the field of natural flavor and color solutions in the UK,” notes Yehudai. 

“We are continuing to capitalize on the integration and maximum streamlining, achieving the significant savings made possible from the acquisitions we make. The merger and streamlining processes are already contributing and will continue to contribute in the coming years towards strengthening our competitiveness and to improving profits and margins with the achieving of operational savings of an annual scope of US$ 20-22 million (as compared with Frutarom’s cost structure in Q2 2016). We continue to present a strong cash flow from operating activity which has grown this half year by 37.5 percent to a record US$75.4 million,” he explains.    

Changes in the exchange rates of currencies in which the company operates as against the US dollar had a 0.6 percent negative impact on sales growth in pro-forma terms compared with H1 2016. Sales for Frutarom’s core activities (its Flavors activity and Specialty Fine Ingredients activity) rose 15.6 percent in H1 2017 to reach a half-year record of US$601.8 million compared with US$520.6 million in the first half of last year, reflecting 7.1 percent year-over-year growth in pro-forma terms on a constant currency basis. Changes in exchange rates had a negative 1.0 percent impact on results in proforma terms. 

Sales from the flavors activity rose 16.4 percent to reach US$473.6 million in H1 2017 as against US$406.8 million in H1 2016, reflecting 6.3 percent year-over-year growth in pro-forma terms on a constant currency basis. Currency effects negatively impacted results in pro-forma terms by 0.9 percent. Sales from Specialty Fine Ingredients activity rose 13.0 percent to US$133.2 million in H1 2017 compared with US$117.9 million in H1 2016 and reflect 10.8 percent year-over-year growth in pro-forma terms on a constant currency basis. Currency effects negatively impacted sales by 1.4 percent in pro-forma terms. 

Changes in the exchange rates of currencies in which the Company operates as against the US dollar had a 0.8 percent negative impact on sales growth in pro-forma terms compared with Q2 2016. Sales for Frutarom’s core activities (its Flavors activity and Specialty Fine Ingredients activity) rose 13.8 percent in Q2 2017 to reach a record level US$318.3 million compared with US$279.7 million in the same quarter last year, reflecting 7.6 percent year-over-year growth in pro-forma terms on a constant currency basis. 

Changes in exchange rates had a negative 1.1 percent impact on results in pro-forma terms. Sales from the flavors activity rose 13.3 percent to reach US$254.3 million in Q2 2017 as against US$224.4 million in Q2 2016, reflecting 6.0 percent year-over-year growth in pro-forma terms on a constant currency basis. Currency effects negatively impacted results in pro-forma terms by 1.0 percent. Sales from Specialty Fine Ingredients activity rose 15.3 percent to US$66.4 million in Q2 2017 compared with US$57.6 million in Q2 2016 and reflect 14.3 percent year-over-year growth in pro-forma terms on a constant currency basis. Currency effects negatively impacted sales by 1.5 percent in pro-forma terms. 

Profits and margins in the second quarter and the first half of 2017 record results were achieved in sales and in gross and operating profit, EBITDA, net income and earnings per share. Record results were also achieved in profits of core businesses which include the flavors activity and the Specialty Fine Ingredients activity. In Q2 2017, gross profit for the core businesses rose by 15.5 percent to reach US$128.0 million (gross margin of 40.2 percent), operating profit for the core businesses rose by 32.1 percent to reach US$54.8 million (operating margin of 17.2 percent), and EBITDA for the core businesses grew by 22.0 percent to reach US$66.4 million (EBITDA margin of 20.9 percent). 

In the first half of 2017 gross profit for the core businesses rose by 16.3 percent to reach US$ 239.6 million (gross margin of 39.8 percent), operating profit for the core businesses rose by 39.6 percent to reach US$ 99.7 million (operating margin of 16.6 percent), and EBITDA for the core businesses grew by 29.5 percent to reach US$ 121.5 million (EBITDA margin of 20.2 percent). 

In Q2 and H1 2017, non-recurring expenses were recorded in connection with acquisitions and for measures taken by Frutarom to attain optimization and efficiency in the natural extracts operations of the Specialty Fine Ingredients Division. In Q2 2017 these non-recurring expenses diminished reported gross profit by US$0.5 million, reported operating profit and EBITDA by US$1.2 million and reported net income by US$0.9 million. In the parallel quarter last year net non-recurring expenses were recorded for measures taken to optimize resources, combine plants and attain maximum operational efficiency, and in connection with acquisitions, which in Q2 2016 diminished reported gross profit by US$2.6 million, reported operating profit by US$4.4 million, reported EBITDA by US$2.9 million and reported net income by US$3.4 million.