Frutarom Continues to Achieve Growth

HAIFA, Israel, August 15, 2005 /PRNewswire-FirstCall via COMTEX/ -- Frutarom (UK:FRUT)(FRUTF) today presented its second quarter 2005 results.

During the second quarter of 2005, Frutarom continued its trend of increased sales, profitability and profits for the twenty-third consecutive quarter. This growth in Frutarom's financial results is the result of the successful implementation of Frutarom's rapid 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.

Ori Yehudai, the Frutarom Group's President and Chief Executive Officer, said, "The good results are due to the continuing organic growth in our core activities; the successful integration of Flachsmann's activity, which was acquired by Frutarom in 2003; and the successful completion of the first phase of the integration of the Food Systems activity, acquired from IFF during the second half of 2004. Frutarom is now focusing on identifying and leveraging the synergy and cross-selling opportunities between the new customers and products added by the acquisition, and Frutarom's existing customers and products. We estimate that the full impact of the cross selling will materialize over the next two years."

Frutarom invests considerable efforts and resources in implementing its growth strategy and achieving its goals, which will significantly strengthen Frutarom's position as a leading global company. Yehudai noted, "Frutarom's management invests considerable resources in finding and executing strategic acquisitions. Frutarom is in contact with several very interesting potential candidates for acquisition, mainly in countries and markets where we already have substantial activity."

Yehudai added, "Frutarom will continue to focus on both large multinational customers and on mid-size and local customers, providing superior, high quality and tailor-made services. We will persevere in strengthening our presence in developed markets, such as Western Europe and the United States, and in intensifying our activities in the fast growing emerging markets where we currently operate, as well as entering new emerging markets where the growth rate is higher than the global average. As part of implementing this strategy we recently announced the opening of an office in Indonesia, and have acquired the natural botanical extracts business of the American company, A.M. Todd, which we are rapidly integrating into Frutarom's existing activity in New Jersey. We will continue to invest in developing new products and offer our customers a broad product portfolio consisting largely of natural products and new innovative products such as functional food ingredients."

Frutarom's sales in the second quarter of 2005 totaled US$ 67.1 million, a 50.5% increase compared with the same quarter of 2004. Sales during the first half of the year totaled US$ 131.8 million, a 49.0% increase compared with the first half of last year. The integration of the Food Systems activity acquired from IFF in Switzerland, Germany and France with the Frutarom Group's global operations contributed to the growth in sales. Furthermore, the continued growth trend in the Flavors Division, which typically has higher margins compared to fine ingredients products (reaching 66.5% of total sales in the second quarter of 2005 and 65.4% during the first half of the year, compared with 53.1% in the second quarter of 2004 and 56.4% in all of 2004); the growth in the Fine Ingredients Division's sales, to which new, innovative high margin products developed in Frutarom's R&D labs contributed; the expansion and development of its global sales infrastructure; and the successful integration and materialization of the synergy between Frutarom's R&D and productions sites, also contributed to this growth in sales.

Gross profit for the second quarter of 2005 rose 52.6% to reach US$ 26.9 million compared with US$ 17.6 million in the same quarter last year. During the first half of the year gross profit grew 49.9% to reach US$ 51.9 million compared with US$ 34.6 million during the first half of 2004. Gross margin during the second quarter reached 40.1% compared with 39.6% during the same quarter in 2004 and during the first half reached 39.4% compared with 39.1% during the same half of 2004. Operating profit grew sharply by 91.1% during the second quarter of 2005 to US$ 11.6 million compared with the same period in 2004, while during the first half of 2005 operating profit continued the growth seen in previous years and reached US$ 20.8 million, up 86.1% compared with the first half of 2004. In parallel with the growth in operating profit, operating margin continued to rise, reaching 17.2% in the second quarter of 2005 compared with 13.6% for the same quarter in 2004, and to 15.8% in the first half of 2005 compared with 12.7% in the same period in 2004. Net profit for the second quarter grew by 86.9%, reaching US$ 8.4 million compared with US$ 4.5 million during the same quarter last year. Net margin reached 12.5% in the second quarter of 2005 to compared with 10.1% during the same quarter in 2004. Net profit for the first half of 2005 rose sharply by 88.6% to reach US$ 15.2 million compared with US$ 8.1 million in the first half of 2004. Net margin also grew and reached 11.5% compared with 9.1% during the first half of last year. Earnings per share continued to grow during the second quarter of the year and reached US$ 0.15 compared with US$0.10 in the second quarter of 2004. Earnings per share for the first half of the year totaled US$ 0.28 per share compared with US$ 0.17 during the first half of last year.

During the second quarter of 2005, Frutarom achieved cash flow from operating activities of US$ 8.2 million, compared with US$ 4.7 million in the second quarter of 2004. During the first half of 2005, Frutarom achieved cash flow from operating activities of US$ 13.6 million, compared with US$ 8.4 million in the first half of 2004.

Yehudai concluded by saying, "Frutarom continues to be focused on realizing its rapid growth strategy combining organic growth of core activities, at rates above the industry average, with strategic acquisitions of activities and knowhow in its main fields of business and in strategic geographic regions. To achieve our goal of executing strategic acquisitions in the future, during the first quarter of 2005 we completed a US$ 75.8 million (net) offering and registration of shares on the London Stock Exchange Official List. The proceeds from the offering together with the successful completion of the integration of the activities acquired by Frutarom form an even more solid base than previously for realizing our rapid growth strategy and ensuring future growth. Our management will continue to invest substantial efforts and resources in identifying and executing potential acquisitions, and in continuing to achieve rapid growth targets in our core activities, which will ensure that we reach our ambitious goals while creating value for our shareholders."

Background on the Company

Frutarom is a global company active in global flavor and fine ingredients markets. Frutarom has significant production and development centers on three continents and markets its products on five continents to over 3,500 customers in more than 100 countries. Frutarom's products are intended for the food and beverage, flavor and fragrance, pharmaceutical, nutraceutical, 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, markets and sells 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, 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 employs about 1,000 people worldwide.

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