HAIFA, Israel, March 15, 2006 /PRNewswire-FirstCall via COMTEX/ -- Frutarom (UK:FRUT) today presented its 2005 full year and fourth quarter results.
2005 is the sixth consecutive year in which Frutarom has achieved good results. This year, the growth trend in sales, profits and profitability continued following implementation of Frutarom's rapid growth strategy, combining organic growth in core activities with strategic acquisitions of activities and know-how in the Company's main business segments and in strategic geographic regions.
According to Ori Yehudai, Frutarom President and Chief Executive Officer, "In 2005 Frutarom continued to establish its position as one of the leading flavour and fine ingredient producers in the world. The activities of the Swiss company, Flachsmann, which was acquired in 2003, and of the European food systems activity, which was acquired from IFF during the second half of 2004, were successfully integrated with Frutarom's existing activity. These acquisitions strengthen Frutarom's position, and considerably expanded its customer base in food, beverages and pharmaceuticals, its global geographic reach, and its product offering. The acquisitions provide Frutarom with many new cross-selling opportunities between the new customers and products added by the acquisition and Frutarom's existing customers and products."
As part of implementing its rapid growth strategy, Frutarom signed an agreement in January 2006 to acquire 70% of the Nesse group's issued and paid share equity, with an option to acquire the remaining 30% as of the end of 2007. Established in 1880, Nesse is today an international group achieving high organic growth rates and employing 120 workers. Nesse develops, produces, markets and sells unique, innovative savoury solutions that include savoury flavours and unique functional ingredients. According to Ori Yehudai, "This strategic acquisition is an additional milestone in realizing Frutarom's strategy for rapid growth. It strengthens the technological capabilities and product portfolio offered by Frutarom to customers in the savoury field, and support Frutarom's growing strengthen and position in West and East Europe as a leading flavours supplier. Frutarom intends to use its global sales and marketing infrastructure to realize the cross selling possibilities created by this acquisition through the expansion of both our customer base and product portfolio." In addition, in June 2005 the Company acquired the natural extracts activity of the American company A.M. Todd Botanical Therapeutics.
During February 2005, Frutarom raised capital by way of issuing ordinary shares and registering Global Depositary Receipts in the London Stock Exchange Main List. Frutarom received a net consideration of US$ 76 million for the offering, which added leading global investors to the Company's shareholders. The offering supports Frutarom's positioning as a global company and provides Frutarom with the means required for continuing to make strategic acquisitions as part of implementing its rapid growth strategy.
Frutarom's sales in 2005 totalled US$ 243.8 million, a 23.9% increase compared with 2004, when sales reached US$ 196.8 million.
According to Yehudai, "The sales growth was achieved as a results of the integration of the food systems activity acquired from IFF in Switzerland, Germany and France with the Frutarom Group's global activity; the growth in the Fine Ingredients Division's sales, mainly due to the introduction of new products, expansion and development of the global sales infrastructure and the successful integration and utilization of the synergy existing between the Division's research and development and production sites worldwide; and utilization of the synergy and cross selling possibilities between Frutarom's Divisions and between existing customers and products and those added due to the acquisitions made in recent years. In 2005 the relative portion of the Flavors Division's sales, the most profitable of Frutarom's activities, continued to grow and reached 64.2% of Frutarom's total activity (compared with 32.9% in 2000). The growth in sales was offset mainly by the weak period experienced by the processed food industry, particularly in Europe during the second half of the year partly due to the cold and wet summer; the weakened European currencies (in which most of Frutarom's sales are made) against the US dollar; and the significant drop in ArtChem sales, which is not a core activity of Frutarom."
Gross profit for the period rose 27% to reach US$ 94.5 million compared with US$ 74.3 million last year. Gross margin grew from 37.8% to 38.8%. Operating profit rose by 53.3% to US$ 33.7 million compared with US$ 22 million in 2004, while operating margin reached 13.8% compared with 11.2% last year. Net profit grew sharply by 70.4% to reach US$ 26.9 million compared with US$ 15.8 million in 2004. Net margin also rose, from 8.0% in 2004 to 11.0% in 2005. Earnings per share showed growth of 44% per share and reached US$ 0.49. This growth was achieved despite the growth in the Company's issued share capital as a result of the capital raising and registration on the London Stock Exchange Main List in February 2005.
During 2005, Frutarom achieved cash flow from operating activities of US$ 32.5 million, compared with US$ 17.3 million in 2004. Frutarom's equity as at December 31, 2005 totalled US$ 177.8 million (76% of the balance sheet) compared with US$ 78.7 million (36.8% of the balance sheet) in 2004. The growth is mainly due to the capital raised by the Company and the profit for the period.
Frutarom's sales in the fourth quarter of 2005 totalled US$ 52.6 million, a 1.6% decrease when currency influences are excluded (a 7.6% decline including the currency influences) compared with the same quarter of last year. The decrease in sales results from the continued relatively weak period for processed food manufacturers in West Europe; the weakened European currencies (in which most of Frutarom's sales are made) against the US dollar; substantial recent erosion of selling prices for natural extracts and flavours produced from vanilla due to the decline in the prices of raw materials used in their production; and the significant drop in ArtChem sales, which is not a core activity, due to lower demand by the major customer.
Gross profit for the fourth quarter decreased 3.3% to reach US$ 19.6 million. Despite this, the trend of improvement in profit and operating profitability continued. Operating profit grew by 16.4% to US$ 5.0 million, while operating margin continued to improve, reaching 9.5% compared with 7.5% in the same period in 2004. Net profit for the fourth quarter grew by 60.8%, reaching US$ 4.9 million compared with US$ 3.0 million during the same quarter last year. Net margin also rose, reaching 9.3% compared with 5.3% during the same quarter in 2004. Cash flow from operating activities totalled US$ 5.6 million, compared with US$ 1.8 million in the same quarter last year. Earnings per share grew during the fourth quarter of the year and reached US$ 0.09 (despite the growth in the Company's issued share equity as a result of the offering made in February 2005).
According to Ori Yehudai, "Frutarom's management continued to implement its growth strategy during 2005. The sales target that we have set as part of the strategic process for the next several years, is to surpass the half billion dollar sales threshold in 2008 while continuing to improve profitability. Frutarom will continue to focus on both large multinational customers as well as on mid-size and local customers, providing superior, high quality and tailor-made service. 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. Additionally, Frutarom will continue to offer our customers a broad product portfolio consisting largely of natural products and new innovative products such as functional food ingredients, which are growing faster than the industry average.
Yehudai concluded by saying that Frutarom's management believes it will continue to execute the Company's strategy for rapid growth and to realize the synergy and cross selling possibilities in the acquisitions of recent years, which will help to sustain organic growth in Frutarom's core activities. Frutarom invests considerable resources in locating and executing strategic acquisitions and is currently in contact with several interesting candidates for possible acquisition, mainly in countries and markets where the Company already has substantial activity. The offering in the amount of US$ 76 million that we completed in February 2005 enables Frutarom to leverage its strong equity structure in order to make future strategic acquisitions.
Background on the Company
Frutarom is a global company with significant production and development centres on three continents that markets its products on five continents to over 3,500 customers in more than 100 countries. Frutarom's products are intended mainly for the food, beverage, flavour, fragrance and pharmaceutical industries.
Frutarom operates through two Divisions:
- The Flavors Division, which develops, produces and markets flavour compounds and food systems.
- The Fine Ingredients Division, which develops, produces and markets natural flavour 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, Norway, France, Hungary, Spain, Italy, Romania, Poland, 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 1,000 employees worldwide.