Frutarom Sales and Profits Up

22/11/06 Further to recent years, during the third quarter of 2006 Frutarom achieved growth in sales and profits, 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. In line with this strategy, Frutarom acquired at the beginning of the year 70% of the issued and paid up share capital of Nesse, which develops, produces, markets and sells innovative, unique solutions that include savory flavors and unique functional ingredients, and in October acquired 100% of the share capital of the Acatris Health Group, which develops, produces and markets unique and innovative botanical ingredients possessing scientifically proven health properties.

Net profit for the third quarter rose 2.9% to US$ 7.0 million compared with US$ 6.8 million in the same quarter of 2005, and net margin reached 9.8% compared with 11.4%. The decline in net margin during the quarter results from a one time tax benefit of US$ 1.0 million recorded in the third quarter of 2005 for previous periods. Net profit for the first three quarters of 2006 rose 11.0% to reach US$ 24.4 million compared with US$ 22.0 million for the same period of 2005. Net margin reached 11.4% compared with 11.5% in the same period in 2005. The decline in the rate of taxes on income results from a one time reduction in the amount of US$ 1.5 million in the tax expenses of the Company recorded during the second quarter of the year, which derives from tax arrangements made recently in Germany following the Nesse acquisition at the beginning of the year.

Frutarom’s sales for the third quarter of 2006 totaled US$ 71.3 million, showing growth of 20.0%, compared with the same quarter of 2005. Sales for the first three quarters totaled US$ 214.6 million, growing 12.2% compared with the same period last year.

The following factors were the main contributors to the growth in sales during the quarter:

• The integration of the Nesse activity, which was acquired and consolidated from January 2006 with Frutarom’s global activity.
• Growth in the sales of flavors produced and sold by the Company’s Flavors Division.
• Growth in the sales of the Fine Ingredients Division, deriving mainly from the introduction of new products with higher than average margin.
• 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.
• Strengthening of West European currencies (in which most of Frutarom’s sales are made) against the US dollar, which contributed 3% to the sales growth.

The increase in sales during the third quarter was offset by the following factors:

• A decrease in sales of the food systems activity due to planned improvement to the product mix, which was achieved by shifting from products with lower than average margin to unique, value added products with higher than average margin.
• A decrease, compared with the same period in 2005, in the prices of several natural raw materials (mainly grapefruit and natural gums) that are sold by the Fine Ingredients Division to the food, flavor and fragrance industries, and of the selling prices of flavor compounds produced by the Flavors Division using these natural raw materials.

Sales during the first three quarters of the year were also influenced by the weakening of the Western European currencies (in which most of Frutarom’s sales are made) against the US dollar.