Frutarom Reports Strong Second Quarter

23/08/06 Israel based Frutarom has reported that during the second quarter of 2006 Frutarom achieved growth in sales, while continuing to implement its growth strategy, combining organic growth in core activities (at rates above the industry average), with strategic acquisitions of activities and know-how in the Company's main fields of business and in strategic geographic regions.

Frutarom's sales for the second quarter of 2006 totaled US$ 72.3 million, showing growth of 7.9%, compared with the same quarter of 2005 (sales increased by 7.3% excluding currency effect). Sales for the first half totaled US$ 143.3 million, growing 8.7% compared with the first half of last year (sales increased by 11.1% excluding currency effect).

Nesse, whose acquisition was completed at the beginning of the year, contributed about US$ 8.9 million to second quarter sales; the integration of Frutarom's and Nesse's activities is proceeding very successfully, and Frutarom continues working to realize the considerable synergy included in this strategic acquisition, while utilizing the many cross selling opportunities resulting from it.

Growth in the sales of flavors produced and sold by the Company's Flavors Division and the utilization of the synergy and cross selling opportunities between Frutarom's Divisions and between customers and products, both existing and those added through the acquisitions made in recent years also helped increase sales.

Operating profit during the second quarter of 2006 totaled US$ 9.7 million compared with US$ 11.6 million in the same quarter of 2005. Operating profit during the first half of 2006 totaled US$ 20.0 million compared with US$ 20.8 million in the first half of 2005. Operating margin for the quarter reached 13.4% compared with 17.2% in the second quarter of 2005, and to 14.0% during the first half of 2006 compared with 15.8% during the first half of 2005. The decline in gross profit and in gross profitability resulted in a decline in operating profit and operating margin.

Net profit for the second quarter rose 2.2% to US$ 8.6 million compared with US$ 8.4 million in the same quarter of 2005, and net margin reached 11.8% compared with 12.5%. A one time reduction of US$ 1.5 million in the Company's taxes on income, resulting from tax arrangements made recently in Germany following the Nesse acquisition in January 2006, contributed to the Company's net profit. Net profit for the first half of 2006 rose 14.4% to reach US$ 17.4 million compared with US$ 15.2 million for the first half of 2005. Net margin also rose, reaching 12.1% compared with 11.5% in the same half in 2005.

Earnings per share for the second quarter maintained the same level as during the same quarter of 2005 reaching US$ 0.15. Earnings per share for the first half of the year totaled US$ 0.31 compared with US$ 0.28 during the first half last year.

Ori Yehudai, Frutarom Group's President and Chief Executive Officer commented: "Frutarom's management continually seeks to find and execute strategic acquisitions. Frutarom is in contact with several companies that are interesting candidates for potential acquisition, mainly in countries and markets where we already have significant activity." With regard to the war in the north, Yehudai said that "Frutarom's two sites in the north-in Haifa and in Acco-which employ some 300 people, operated on a regular basis and supplied the orders of the Company's customers in Israel and worldwide. Frutarom's Board of Directors and management express their appreciation and thanks to the Company's employees in Israel for their extraordinary efforts."

Yehudai concluded by saying that "Frutarom will continue to invest considerable resources in realizing its rapid growth strategy, combining profitable organic growth of core activities with strategic acquisitions of activities and know-how in its main fields of business and in strategic geographic regions with the aim of achieving our ambitious goals while creating value for our shareholders."