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Three 2012 Acquisitions Add $31.4 Million to Frutarom Q1 Results

Posted: May 30, 2012

Frutarom Industries Ltd., in the wake of eight acquisitions since 2011, has reported first quarter 2012 sales of $151.2 million.

The flavor group posted first quarter sales gains of 39.4% (local currency terms), totaling $109 million.

Specialty fine ingredients sales for the period reached $37.5 million, a 3.3% decrease in local currency terms. According to Frutarom, "The decrease in sales was affected to a certain extent by the continued trend of inventory reduction among some of Frutarom’s fine ingredients customers."

Gross revenues for the period grew 20.3%, totaling $54.9 million. Gross margin was hit by a "substantial rise in raw material prices."

The company notes, "Frutarom has continuously acted with diligence in order to prevent future adverse effects on its results and margins, including by increasing prices of products, optimizing the potential to reduce raw material costs by strengthening global purchasing, utilizing the increased purchasing power generated due to recent acquisitions, strengthening procurement in its primary countries of production such as India, China and Brazil, employing harmonization of raw materials and maximally utilizing the diverse capacities of its many production sites throughout the world and its many operational synergies from its acquisitions over 2011 and 2012."

Operating profit for the quarter increased by 7.3%, reaching $17.8 million.

The three acquisitions made over Q1 2012 (Etol, Savoury Flavours and Mylner) contributed $31.4 million from their dates of completion, according to the company.

Frutarom said in a statement, "The integration of research and development, procurement and production activities of the eight activities acquired in 2011 and during the first quarter of 2012 are progressing as planned and successfully, and their contribution to the increase in profits is expected to increase in the coming quarters as the integration process progresses."

Of the results, Ori Yehudai, president and CEO of Frutarom, said:

This quarter we continued our successful implementation of our rapid growth strategy, combining internal growth with acquisitions, again recording quarterly highs for the company. Record highs were achieved in gross revenues, EBITDA and net profits.

After seven acquisitions in 2007, and three in 2009, all of which have been successfully integrated with Frutarom’s global activities and contribute to both a growth in sales and improved margins, we continued to implement strategic acquisitions and completed five acquisitions in 2011 and an additional three at the beginning of 2012. The scope in revenues from the last eight acquisitions made, based on 2010 figures, stood at US$145 million. The acquisitions, whose value is yet to be fully reflected in the outcomes of our operations, are in advanced stages of integration and support our expanding global reach. These acquisitions have deepened our presence in developed markets as well as in emerging markets where growth rates are higher than the global average and expanded our customer base throughout the world, and the unique and diverse product portfolio we can offer our customers.

In the upcoming months we will continue to integrate sites and activities, to utilize the many streamlining opportunities and to realize the substantial cross-selling possibilities created by the acquisitions. At the same time we will continue to identify opportunities for additional strategic acquisitions in attractive target markets and in emerging countries.

A combination of the subsiding global trend of sharp price increases for most raw materials, and the beginning of a fall in some raw material prices from the record highs of 2011, together with the effect of adjusted prices for our products which we have implemented over the last few months, the reduction of raw material costs through stronger global purchasing and maximum utilization of the diverse capacities of our many production sites throughout the world and their many operational synergies following our recent acquisitions, which are in advanced stages of integration, alongside the continued realization of our strategy combining internal growth and acquisitions, will bring about a further significant leap in Frutarom’s sales as well as profits and margins.