Frutarom U.S. Sales Bloom in 2007

HAIFA, Israel—Frutarom (LSE:FRUTq) reported an accelerated growth trend in sales for fiscal 2007 (FY07), which reached $368.3 million (USD), helping Frutarom achieve the goal it set some three years ago to become one of the 10 large, leading global companies in the field of flavors and specialty ingredients.

Ori Yehudai, president and CEO of Frutarom, said the company achieved double-digit organic growth in core activities, outgrowing its field of activity. In 2007, Frutarom also made seven strategic acquisitions that were synergetic with and complemented its activity in flavors and specialty ingredients. On a Proforma basis (assuming the acquired companies had been consolidated as of Jan. 1, 2007), sales for the year 2007 totaled $431.5 million, showing growth of 50 percent compared with 2006.

The sales growth was attributed to several factors, including: growth in the sales of flavors produced and sold by the Flavors Division; the integration of Acatris, 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; the merger of Belmay and Jupiter, which were acquired and consolidated as of April 2007 with the Flavors Division's activity in England; 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; 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; the utilization of the synergy and cross-selling opportunities between Frutarom's Divisions and all the new and existing customers and products; the strengthening of the European and Israeli currencies (in which most of Frutarom's sales are made) against the U.S. dollar; and growth in Frutarom's Trade & Marketing business in Israel.

While the 2007 sales results were boosted by the acquisitions, they temporarily reduced profitability, as was expected. Gross profit rose 43 percent in fourth quarter (4Q) and 24 percent in FY07, but net profits slipped 9 percent to $4.8 million in 4Q and dropped 18 percent in FY07 to $24.2 million. In addition to the acquisition expenses, management noted 2007 profit and profitability were influenced by: continued increased raw materials costs.

Yehudai said he anticipates 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," he added. "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."