Record Results Again for Frutarom for Third Quarter

28 Nov 2012

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Frutarom reports continued rapid growth and record results again for Q3 2012 and for the first nine months of 2012 in terms of sales, gross profit, operating profit, EBITDA, net profit and earnings per share, presenting substantial increase in cash flow.

28 Nov 2012 --- Frutarom Industries Ltd a top-ten company in the Flavors and Fine Ingredients markets, reports continued rapid growth and record results again for Q3 2012 and for the first nine months of 2012 in terms of sales, gross profit, operating profit, EBITDA, net profit and earnings per share, presenting substantial increase in cash flow. Frutarom’s organic growth, reflected also in its accelerated expansion into target markets in emerging markets where growth rates are high, the continued rapid growth of the Company's Flavors sector in North America, the largest flavor market, alongside the successful integration and utilization of the synergies and cross selling opportunities resulting from the eight acquisitions Frutarom made since 2011, have brought about record results for the third quarter, despite challenging market conditions in the global economy in general and in Western Europe in particular and despite the strengthening of the dollar versus the main currencies in which the Company operates, which detracted from sales and dollar profits.

The process of integration of sales, marketing, research and development, purchasing, supply chain and production activities of the eight acquisitions are progressing successfully as planned. Over Q3 these acquisitions continued to contribute not only to a growth in sales but also to improved profit. As integration progresses and the many synergies achieved from the acquisitions are realized, their contribution to profits will increase, the greater part of which will come to fruition in 2013. In addition, Frutarom is also progressing with plans to integrate a number of production sites and moving other activities to countries where operational costs are lower. The contribution of these activities will come to fruition starting in the second half of 2013.

The Company reports continued rapid growth in third quarter sales, to US$157.1 M, a 24% growth net of currency effects, compared with US$135.3 M during the same quarter in 2011. In dollar terms, sales grew by 16.2%. Frutarom's sales in the Flavors segment, the most profitable of the Company's activities, grew, net of currency effects, by 26.4% during Q3 of this year, compared with the same quarter last year, reaching a third quarter record high of US$114.2 M. Flavors’ sales already constitutes 73% of total Frutarom sales (compared with 40% in 2001).

Over the first nine months of 2012, Frutarom sales grew, net of currency effects, by 27.9%, achieving record sales for the first nine months of US$473.1 M, versus US$386.9 M during the first nine months of 2011. In dollar terms, sales grew by 22.3%. Frutarom's sales in the Flavors segment, net of currency effects, increased by 34.6% compared with the first nine months of last year, reaching a high of US$345.6 M for the first nine months. Frutarom’s internal growth in Flavors is above growth rates in the main markets in which Frutarom operates and in markets which are strategic for the Company, with an emphasis on North America, Latin America, Asia, Africa and Central and Eastern Europe.

The trend of improvement in profit and gross and operational margins continues. Organic growth, strategic acquisitions, adjustments in Frutarom's product selling prices to its customers, continued stabilization and even the start of a decrease in the prices of some of the raw materials Frutarom uses in the manufacture of its products, actions taken for lowering costs of raw materials by strengthening global purchase and utilization of the many operational synergies derived from the recent acquisitions and improvement in the cost structure have led to a significant rise in Frutarom’s margins and profit, also expected to continue in 2013.

The Company’s gross profit in Q3 2012 increased by 21.8%, reaching a third quarter record high of US$58.1 M compared with US$47.7 M during the same quarter last year. Gross margin net of the trade and marketing activity of the acquired company Etol, a non-core activity of Frutarom, increased, reaching 38.1% compared with gross margin of 35.2% during the same period in 2011. Gross profit including the trade and marketing activity of Etol, also increased, coming to 37% of sales. Gross profit for the first nine months of 2012 increased by 23.2%, reaching a record high for the first nine months of US$174.8 M compared with US$141.8 M in for the first nine months of 2011.

Operating profit in Q3 2012 achieved a record third quarter high of US$19.5 M, 12.4% of sales, a 51.5% increase compared with US$12.9 M during the same quarter last year, which constituted 9.5% of sales. Operating profit in the first nine months of 2012 increased by 27.1% to US$59.1 M - 12.5% of sales, compared with US$46.5 M -12.0% of sales - over the same period last year. The EBITDA achieved by Frutarom in Q3 reached a third quarter record high of US$26.3 M - 16.7% of sales, a 41.7% increase compared with US$18.6 M during the same period last year - 13.7% of sales. Frutarom’s EBITDA in the first nine months of 2012 came to US$79.8 M, a 28.1% increase, compared with US$62.3 M in the same period last year.

Net profit in Q3 2012 was the highest in the Company's history, reaching US$14.4 M - 9.2% of total revenues, a 66% increase, compared with US$8.7 M in Q3 2011, when it comprised 6.4% of total revenues. In the first nine months of 2012 net profit came to US$41.4 M, a 21.5% increase, compared with US$34.1 M in the first nine months of 2011.

Earnings per share In Q3 2012 reached a quarterly high of US$0.25 per share, compared with US$ 0.15 in the same quarter last year. Earnings per share in the first nine months of 2012 reached US$0.72 per share, compared with US$ 0.59 per share in the first nine months of 2011. Q3 2012 also showed a marked improvement in the Company's cash flow from operating activities, reaching US$22.7 M, compared with a cash flow of US$16.6 M for the same quarter last year. Over the first nine months of 2012 cash flow from operating activities increased by 93% reaching US$62.6 M, compared with US$32.5 M during the corresponding period last year. Growth in profit and the actions taken for optimizing inventory levels were the main drivers for the growth in cash flow.