Frutarom Reports First Quarter Results

HAIFA, Israel, May 25, 2005 /PRNewswire-FirstCall via COMTEX/ -- Frutarom (LSE: FRUT.L, TASE: FRUT, FRUTF.PK) today presented its first quarter 2005 results.

During the first quarter of 2005, Frutarom continued its trend of increased sales, profitability and profits for the twenty-second consecutive quarter. This growth in Frutarom's financial results is the result of the successful implementation of Frutarom's rapid growth strategy. This combines organic growth of 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, Frutarom Group's President and Chief Executive Officer, said, "The good results are due to both the above-industry-average organic growth in our core activities, the successful integration of Flachsmann's activity; and the successful completion of the first phase of the integration of the Food Systems activity. This was acquired from IFF during the second half of 2004, during which the operations, sales and marketing, and research and development activities were integrated within Frutarom's divisions. Following the completion of this first phase, Frutarom started the second phase of leveraging the many cross-selling opportunities between the new customers and products, and Frutarom's existing customers and products. We estimate that the full impact of the cross selling will materialize over the next two years."

The acquisition of the European Food Systems activity, significantly expanded Frutarom's customer base; geographic reach in Europe and its product portfolio, including new and unique products that integrate flavors and natural functional food ingredients. The acquisition strengthened Frutarom's savory flavor offering, which is a growing segment of the food industry, and an area which Frutarom focuses on strengthening. Frutarom expects that the acquired Food Systems activity will significantly leverage and strengthen its position as a leading supplier, offering comprehensive solutions - tasty, natural and with well-being qualities - to leading food manufacturers. In that respect, Mr. Yehudai mentioned the recent launch of Frutarom's functional ice cream product range. These products combine fruits, natural flavor extracts and natural functional ingredients that enhance and support well-being. Examples include ice cream with aloe vera, "to support inner beauty", or with green tea for "stress relief".

Mr. Yehudai added, "We have invested considerable efforts and resources in implementing our growth strategy in order to achieve our ambitious goals. We believe that this will significantly strengthen our position as a leading global company. We will continue to focus on both large multinational customers, and on mid-size and local customers by providing superior, high quality and tailor-made services. We will persevere in strengthening our presence in developed markets, Western Europe and the United States. In addition, we are 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. 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 first quarter of 2005 totaled US$ 64.7 million, a 47.3% increase compared with the same quarter of 2004. The integration of the Food Systems activity acquired from IFF in Switzerland, Germany and France with the Frutarom Group's global operation contributed to the growth in sales. Furthermore, the continued accelerated growth trend in the Flavors Division, which typically has higher margins compared to fine ingredients products (reaching 64.3% of total sales in the first quarter of 2005 compared with 31.0% in 2000), as well as the growth in the Fine Ingredients Division's sales, to which new, innovative high margin products developed in Frutarom's R&D labs, also contributed.

Gross profit for the period rose 47.1% to reach US$ 25.0 million compared with US$ 17.0 million in the same quarter last year. Operating profit grew by 80.3% to US$ 9.3 million compared with US$ 5.1 million in the same period 2004, while operating margin rose to 14.3% compared with 11.7% for the same period in 2004. Net profit grew sharply by 90.6% reaching US$ 6.8 million compared with US$ 3.6 million. Net margin also grew from 8.2% in the first quarter of 2004 to 10.6%. Earnings per share reached US$ 0.13 compared with US$0.08 in the first quarter of 2004.

During the first quarter of 2005, Frutarom achieved cash flow from operating activities of US$ 5.5 million, compared with US$ 3.7 million in the first quarter of 2004.

Yehudai concluded, "Frutarom continued to be focused on implementing it's rapid growth strategy combining organic growth of core activities, at rates above-industry average, with strategic acquisitions of activities and know-how 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 acquired activities form a solid base for realizing our rapid growth strategy and for ensuring our future growth. We will continue to invest substantial resources in identifying and executing potential acquisitions, in achieving rapid growth in our core activities and reaching our ambitious goals in order to create value for our shareholders."

Background on the Company

Frutarom is a global company with significant production and development centers on three continents, which markets its product to over 3,500 customers in more than 100 countries worldwide. Frutarom's products are intended largely for the food, beverage, flavor, fragrance and pharmaceutical industries.

Frutarom operates through two Divisions:

- The Flavors Division, which develops, produces and markets flavors and food systems

- The Fine Ingredients Division develops, produces, markets and sells natural flavor extracts, natural functional food ingredients, natural pharma/nutraceutical extracts, specialty essential oils and citrus products, aroma chemicals, natural gums and peptide building blocks

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 and India. The Company also works through local agents and distributors worldwide. Frutarom employs about 1,000 people worldwide.

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