Frutarom Continues to Grow and Expand for the Eighth Consecutive Year

HAIFA, Israel, March 18 /PRNewswire/ -- Frutarom (LSE: FRUTq, TASE: FRUT, OTC: FRUTF.PK) today presented its 2007 full year and fourth quarter results.
The trend of accelerated growth in sales that has characterized Frutarom's activity for the last seven years continued in 2007 following successful implementation of Frutarom's rapid growth strategy, combining organic growth in core activities with strategic acquisitions of activities and knowhow in its main business segments and in strategic geographic regions. In accordance with Frutarom's strategic plan, sales in 2007 exceeded the US$ 300 million level, totaling US$ 368.3 million. As a result, Frutarom achieved the ambitious goal it set some three years ago to become one of the ten large, leading global companies in the field of flavors and specialty ingredients. On a Proforma basis (assuming the acquired companies had been consolidated as of January 1, 2007), sales for the year 2007 totaled US$ 431.5 million, showing growth of 50% compared with 2006.
According to Ori Yehudai, President and Chief Executive Officer of Frutarom, "In 2007 we continued the implementation of our rapid growth strategy combining rapid internal growth in core activities with strategic acquisitions. This year Frutarom achieved double digit organic growth in core activities that is considerably higher than the growth rate in our field of activity. In 2007 Frutarom also made seven strategic acquisitions that are synergetic with and complement our activity in flavors and specialty ingredients. Frutarom has extensive experience in successfully merging and integrating acquired companies and we are, as planned, in the advanced or final stages of merging the activities acquired in 2007, while maximizing the commercial and operational synergies to extract the cross selling opportunities, achieve optimal savings in expenses, and substantially improve profitability and profit. The 2007 results were influenced by the acquisitions, which contributed to the growth in sales but as expected temporarily reduced profitability. It is our view that the acquisitions will contribute from the first quarter of 2008 to the continued growth trend in sales as well as to the growth of profit, while improving margins. At the same time, 2007 was characterized by a challenging business environment as price rises in raw materials used in Frutarom's production continued, with more significant price increases for many natural raw materials, which make up the majority of raw materials used by Frutarom . We will continue to act resolutely to improve margins by raising the selling prices of our products to adjust them to the ongoing rise in raw materials prices."
Frutarom's sales for the fourth quarter grew sharply by 49.2% to total US$ 108.4 million. For the entire year of 2007, sales totaled US$ 368.3 million, growing 28.2% compared with 2006. On a proforma basis (assuming that the acquired companies had been consolidated as of January 1, 2007), sales for 2007 totaled US$ 431.5 million, which is growth of 50% compared with 2006.
The following factors contributed to the sales growth: (1) growth in the sales of flavors produced and sold by the Flavors Division; (2) the integration of Acatris's activity, which was acquired and consolidated as of October 2006 and of Abaco, which was acquired and consolidated as of July 2007 with the global activity of Frutarom's Fine Ingredients Division; (3) the merger of Belmay and Jupiter, which were acquired and consolidated as of April 2007 with the Flavors Division's activity in England; (4) the merger of Raychan's and Adumim's activities, which were acquired and consolidated as of September 2007, and of Rad, which was acquired and consolidated as of November 2007 with the Flavors Division's activity in Israel; (5) the merger of the Gewurzmuller Group's activity, which was acquired and consolidated as of October 2007 with the Flavors Division's activity in Germany; (6) utilization of the synergy and cross selling opportunities between Frutarom's Divisions, existing customers and products and those added through the acquisitions made in recent years; (7) the strengthening of the European and Israeli currencies (in which most of Frutarom's sales are made) against the US dollar; and (8) growth in Frutarom's Trade & Marketing activity in Israel.
Profit and profitability for the year 2007 were influenced by: (1) the continued trend of price increases for most of the raw materials used in Frutarom's production, with a more significant price increase in many natural raw materials, which are the majority of raw materials used by Frutarom; (2) the acquisitions of Belmay and Jupiter in England, Abaco in the USA, Rad, Raychan and Adumim in Israel, and the Gewurzmuller Group in Germany, whose merger was completed only by the end of 2007 and therefore the results for 2007 do not reflect the substantial savings expected from the merger; and (3) one-time expenses in the amount of US$ 2.0 million for the merger of the acquired companies and activities. In contrast, in 2006 profit and profitability were positively influenced by one-time income of US$ 2.7 million in accordance with the agreement and earn out mechanism for the acquisition of Food Systems from IFF and due to the reduction in liability for employee pension benefits in the German subsidiary.
Gross profit for the fourth quarter rose by 42.6% to US$ 36.6 million compared with US$ 25.7 million in the same quarter last year. Gross profit for the year 2007 grew 23.5% to US$ 130.8 million compared with US$ 105.9 million in 2006.
Operating profit for the quarter totaled US$ 7.3 million compared with US$ 7.8 million in the same period of 2006. Operating profit for 2007 reached US$ 34.5 million compared with US$ 37.1 million in 2006. Excluding the above one-time influences, operating profit for the quarter rose to US$ 7.8 million compared with US$ 6.1 million in the last quarter of 2006, and in 2007 rose to US$ 36.5 million compared with US$ 34.3 million in 2006.
Taxes on income in the fourth quarter were US$ 1.5 million compared with US$ 2.3 million in the fourth quarter of 2006.
Net profit for the fourth quarter totaled US$ 4.8 million compared with US$ 5.3 million in the fourth quarter of 2006. Excluding the one-time influences mentioned, net profit for the fourth quarter of the year rose to US$ 5.2 million compared with US$ 4.2 million in the fourth quarter of 2006. Net profit for 2007 totaled US$ 24.2 million compared with US$ 29.7 million in 2006. Excluding the above one-time influences, net profit for 2007 totaled US$ 24.9 million compared with US$ 25.2 million in 2006.
Frutarom's equity as at December 31, 2007 totaled US$ 251.1 million (45.8% of the balance sheet) compared with US$ 217.1 million (68.6% of the balance sheet) as at December 31, 2006. The growth in equity is mainly due to the profit during the period.
Yehudai concluded, "Frutarom's management is acting resolutely to extract the greatest commercial and operational synergy from the seven acquisitions made in 2007 and to continue raising the selling prices of our products. These activities will yield the expected improvement in profitability and profit in 2008. Frutarom also continues to implement its rapid growth strategy and invests considerable resources in identifying and executing additional strategic acquisitions."
Background on the Company
Frutarom is a global company active in the global markets for flavors and ingredients. Frutarom has significant production and development centers on three continents and markets its products on five continents to over 10,000 customers in more than 120 countries. Frutarom's products are intended mainly for the food, beverage, flavor, fragrance, pharmaceutical, nutraceutical, health food, functional food, food additive, and cosmetic industries.
Frutarom operates through two Divisions:
- The Flavors Division, which develops, produces and markets flavor compounds and food systems.
- The Fine Ingredients Division, which develops, produces and markets natural flavor extracts, natural functional food ingredients, natural pharma/nutraceutical extracts, specialty essential oils and citrus products, and aroma chemicals.
Frutarom's products are produced at its plants in the United States, England, Switzerland, Germany, Israel, Denmark, China, and Turkey. The Company's global marketing organization includes branches in Israel, the United States, England, Switzerland, Germany, Belgium, Holland, Denmark, France, Hungary, Romania, Russia, Ukraine, Kazakhstan, Belarus, Turkey, Brazil, Mexico, China, Japan, Hong Kong, India and Indonesia. The Company also works through local agents and distributors worldwide. Frutarom has about 1,500 employees worldwide.
For further information, visit our website: http://www.frutarom.com.
FRUTAROM INDUSTRIES LTD. BALANCE SHEETS As of 31 December 2007 2006 2005 U.S. dollars in thousands A s s e t s CURRENT ASSETS: Cash and cash equivalents 31,942 18,417 33,723 Short term investments 1,279 3,260 Accounts receivable: Trade 78,006 53,968 40,289 Other 11,995 10,038 6,756 Prepaid expenses and advances to 3,637 3,662 2,206 suppliers Inventories 90,452 59,754 46,886 T o t a l current assets 217,311 149,099 129,860 NON-CURRENT ASSETS : Property, plant and equipment - 135,607 101,655 86,108 net Intangible assets - net 190,150 60,172 12,601 Deferred income tax assets 3,745 3,833 3,319 Other non-current assets 1,898 1,938 1,978 T o t a l non-current assets 331,400 167,598 104,006 T o t a l non-current assets 548,711 316,697 233,866
As of 31 December 2007 2006 2005 U.S. dollars in thousands Liabilities and Equity CURRENT LIABILITIES: Bank credit and loans 44,221 673 289 Accounts payable: Trade 38,797 27,500 17,895 Other 96,412 27,997 22,162 Provisions 440 946 547 T o t a l current liabilities 179,870 57,116 40,893 NON-CURRENT LIABILITIES: Loans and credit from banks (net of current maturities) 82,579 Retirement benefit obligations 11,518 7,499 7,775 Deferred income tax liabilities 22,209 12,241 7,390 Others 1,420 22,708 T o t a l non-current 117,726 42,448 15,165 liabilities COMMITMENTS AND CONTINGENT LIABILITIES T o t a l liabilities 297,596 99,564 56,058 EQUITY: Share capital 16,466 16,434 16,399 Capital surplus 94,392 93,116 91,666 Currency translation 17,638 5,716 (5,160) differences Retained earnings 125,279 103,658 75,934 Net of - cost of Company shares held by subsidiary (2,660) (1,791) (1,031) T o t a l shareholders' equity 251,115 217,133 177,808 T o t a l shareholders' equity and liabilities 548,711 316,697 233,866
FRUTAROM INDUSTRIES LTD. INCOME STATEMENTS Year ended 31 December 2007 2006 2005 U.S. dollars in thousands, except for per share data SALES 368,261 287,247 243,803 COST OF SALES 237,506 181,370 149,285 GROSS PROFIT 130,755 105,877 94,518 SELLING, MARKETING, RESEARCH AND DEVELOPMENT, GENERAL AND ADMINISTRATIVE EXPENSES - net: Selling, marketing, research and development 66,898 48,518 43,818 - net General and administrative 29,525 22,418 18,217 OTHER INCOME - net 194 2,114 1,255 OPERATING PROFIT 34,526 37,055 33,738 FINANCIAL EXPENSES - net 2,923 445 416 PROFIT BEFORE TAX INCOME 31,603 36,610 33,322 TAXES EXPENSES 7,410 6,908 6,475 NET INCOME 24,193 29,702 26,847
U.S dollars EARNINGS PER SHARE: BASIC 0.42 0.52 0.49 DILUTED 0.41 0.51 0.48

Company Contact Ori Yehudai, President & CEO Frutarom Ltd. Tel: +972-4-846-2401 Email: oyehudai@frutarom.com
Company Contact: Ori Yehudai, President & CEO, Frutarom Ltd., Tel: +972-4-846-2401, Email: oyehudai@frutarom.com