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Frutarom Q3 Profit Soars on Acquisitions, Emerging Markets Growth

Posted: November 27, 2012

Frutarom Industries Ltd.'s (Haifa, Israel) third-quarter profit rose 66%, boosted by sales growth in emerging markets and a string of acquisitions. 

For the three months ended Sept. 30, the flavors and fine ingredients company said its earnings rose to $14.4 million from $8.7 million a year earlier. Third-quarter sales rose 16% to $157.1 million from $135.3 million in the year-ago period.

By segment, revenue from Fruatrom's flavors operations rose to $114.2 million from $96.9 million during the same year-earlier period. Fine ingredients revenue for the quarter slipped to $37.2 million from $37.8 million a year ago. 

Ori Yehudai, Frutarom’s President and CEO, told investors during a conference call that most of the growth in flavor was due more to volume rather than pricing and the company’s main strengths are currently in beverage and savory.

The executive also added that 35% of Frutarom’s sales are in emerging markets. As a result, the flavors and fine ingredients company is looking for acquisition opportunities in fast-growing Asian markets.

“In Asia, we are growing double digits [over] the last three years,” Yehudai added.

Other than Asia, Central and Eastern Europe and Latin America have also been key markets for growth. As consumers in the emerging markets shift from staple foods to processed foods, the executive said there are now more opportunities in functional ingredients and food manufacturers have been using Frutarom’s complete systems, rather than just a few flavors.

Yehudai also said the company’s goal to be valued at $1 billion in the next three to four years will be “supported by acquisitions” and if it completes a roughly $250 million acquisition, “organic growth will be there.”

This year, Frutarom completed a number of deals including acquiring Brazilian flavor company Mylner Indústria E Comércio Ltda. and its parent company, as well as UK company Savoury Flavours Holding Ltd. and a stake in public Slovenian company Etol.

“The proportion of the emerging markets is growing,” said Yehudai, who later added that a growth outlook above 5% for the emerging markets should be reasonable over the next several years.