Another Record Quarter for Frutarom - Continues to Successfully Implement its Rapid & Profitable Growth Strategy

HERZLIYA, Israel, Nov. 21, 2017 (GLOBE NEWSWIRE) --

Following the Acceleration of Internal Growth and Acquisitions since the Beginning of the Year, Frutarom’s Sales run-rate is Approaching USD 1.5B1

Frutarom Raises its Sales Target for 2020 to USD 2.25B
And Target EBITDA Margin from Core Activity to 23%2

In Q3 2017:

  • Sales grew by 19.6% to a record US$ 358.8 million.

Constant currency pro-forma growth of 6.0%.

  • Sales from core activities grew by 20.2% to a record US$ 336.6 million.

Constant currency pro-forma growth of 7.4%.

  • Sales from Flavor activities grew by 21.3% to a record US$ 272.9 million,

Constant currency pro-forma growth of 6.0%.

  • Sales from the Natural Specialty Fine Ingredients activities grew by 19.4% to a record US$ 67.1 million. Constant currency pro-forma growth of 17.8%.
  • Record-level quarterly profits and cash flow:
    • Gross profit grew by 21.5% to US$ 138.4 million; 38.6% gross margin
    • EBITDA grew by 27.2% to US$ 71.1 million; 19.8% EBITDA margin
    • Net income grew by 26.7% to US$ 40.8 million; 11.4% net margin
    • Earnings per share grew by 26.5%;
    • Cash flow from operating activity grew by 52.7% and reached a record US$ 63.5 million.
  • Profits adjusted for non-recurring effects in the third quarter3:
    • Gross profit grew by 19.6% to US$ 140.0 million; 39% gross margin
    • EBITDA grew by 23.3% to US$ 73.8 million; 20.6% EBITDA margin
    • Net income grew by 22.3% to US$ 43.0 million; 12% net margin
    • Earnings per share grew by 22.0%.

Ori Yehudai, President and CEO of Frutarom:
“We are pleased with the results achieved in the third quarter and the first nine months of 2017 in which we again set ourselves new records in sales, profits and cash flows. The results reflect the successful implementation of the rapid and profitable growth strategy in our core businesses, Flavors and Natural Specialty Fine Ingredients, combining profitable internal growth at higher growth rates than those of the markets in which we operate, together with the successful merger of the strategic acquisitions we have made which are contributing to the continuing and consistent improvement in our results.

“Following the accelerated internal growth and ten acquisitions made since the beginning of 2017, Frutarom’s run rate in sales is approaching US$ 1.5 billion. After examining our strong competitive position, accelerated rate of internal growth, our latest acquisitions, our pipeline for future acquisitions and the contribution of the streamlining and global procurement activity, we are raising our target sales for 2020 to US$ 2.25 billion and EBITDA margin from our core businesses to 23%.

“The accelerated internal growth rates in recent years and our optimism concerning the continued realization of high future profitable growth is due to the continuing implementation of our strategic plan which includes continuing focus on six key areas: (1) continued improvement in the product mix with continued rapid growth in both our flavors activity and our specialty fine ingredients activity, while focusing on unique and innovative natural products that combine taste and health and address the current and future preferences of billions of consumers throughout the world; (2) developing and furnishing unique added value solutions to our large multinational customers while providing our local, medium-sized and private label customers a full and comprehensive portfolio of solutions in the areas of taste and health; (3) capitalizing to the utmost on the many cross-selling opportunities between our varied activities to which are also contributing the acquisitions we have and will carry out; (4) continued improvement to margins and profits by exploiting our resources to the fullest, following the acquisitions as well, with the generating of significant operational savings and the strengthening of our global procurement and supply chain platform; (5) continued improvement of our geographic sales mix by significantly increasing the percentage of sales in North America and in the growing emerging markets; and (6) building global market leadership in natural herbal extracts while adopting a vision that includes global collaborations with research institutes and growers for developing strains and crops of strategic natural raw materials in taste and health to ensure quality and competitive supply of raw materials and supporting the stepping up among our customers in switching from the use of raw materials that are synthetic to those that are natural.

“We are convinced that the rapid and profitable internal growth and the strategic acquisitions we have made, combined with continued improvement in our product mix, our progress with natural and healthy products in step with demand from billions of consumers throughout the world, the geographic expansion in North America and in the emerging markets with high growth rates, the moves we are making to optimize our resources while capitalizing on the abundant cross-selling opportunities and the operational savings brought about by the acquisitions, the building of a global procurement platform and the strong pipeline of further synergetic strategic acquisitions, will support our continuing journey of profitable growth also in the years ahead, and attaining our strategic goals.”

Frutarom Industries Ltd. ("Frutarom"), one of the world's 10 largest companies in the field of flavors and specialty fine ingredients, reports another record-breaking results for the third quarter and first nine months of the year in sales, gross profits, operating profits, EBITDA, net income, earnings per share and cash flow.

The increase in revenues in the third quarter and first nine months of 2017 stems from a combination of the accelerated internal growth in Frutarom’s core activities - the Flavors Division and Specialty Fine Products Division - and the acquisitions it has performed.

Sales

Frutarom’s sales in the third quarter of 2017 rose 19.6% to a record US$ 358.8 million compared with US$ 300.1 million in the parallel quarter, reflecting year-over-year internal growth of 6.0% in pro-forma terms on a constant currency basis. Changes in the exchange rates of currencies in which the Company operates as against the US dollar boosted sales by 2.8%.

Sales for Frutarom’s core activities (its Flavors activity and Specialty Fine Ingredients activity) rose 20.2% in Q3 2017 to reach a record level US$ 336.6 million compared with US$ 280.0 million in the same quarter last year, reflecting 7.4% year-over-year growth in pro-forma terms on a constant currency basis. Changes in exchange rates boosted results by 2.6%.

Sales from the Flavors activity rose 21.3% to reach US$ 272.9 million in Q3 2017 as against US$ 225.0 million in Q3 2016, reflecting 6.0% year-over-year growth in pro-forma terms on a constant currency basis. Currency effects boosted results by 2.8%.

Sales from Specialty Fine Ingredients activity rose 19.4% to US$ 67.1 million in Q3 2017 compared with US$ 56.1 million in Q3 2016 and reflect 17.8% year-over-year growth in pro-forma terms on a constant currency basis. Currency effects boosted results by 1.6%.

Sales from Trade & Marketing (which does not constitute part of Frutarom’s core activities) rose by 10.8 to US$ 22.2 million in Q3 2017 compared with US$ 20.0 million in Q3 2016. Contributing to the increase were the added sales of trade & marketing goods by Piasa in Mexico which was acquired in December 2016 and currency effects which boosted trade and marketing activity sales by 4.8%. In constant currency and pro-forma terms, trade & marketing activity sales declined 12.5% from the same period last year.

Frutarom’s sales in the first nine months of 2017 rose 17.1% to a record US$ 1,004.9 million compared with US$ 858.0 million in the same period last year, reflecting 6.0% year-over-year growth in pro-forma terms on a constant currency basis. Changes in the exchange rates of currencies in which the Company operates as against the US dollar boosted sales by 0.6%.

Sales for Frutarom’s core activities (its Flavors activity and Specialty Fine Ingredients activity) rose 17.2% in the first nine months of 2017 to reach a record US$ 938.4 million compared with US$ 800.6 million in the same period last year, reflecting 7.2% year-over-year growth in pro-forma terms on a constant currency basis. Changes in exchange rates boosted results by 0.3%.

Sales from the Flavors activity rose 18.2% to reach US$ 746.5 million in the first nine months of 2017 as against US$ 631.7 million in the same period last year, reflecting 6.2% year-over-year growth in pro-forma terms on a constant currency basis. Currency effects boosted results by 0.4%.

Sales from Specialty Fine Ingredients activity rose 15.1% to US$ 200.2 million in the first nine months of 2017 compared with US$ 174.0 million in the same period last year, reflecting 13.0% year-over-year growth in pro-forma terms on a constant currency basis. Currency effects negatively impacted sales by 0.5%.

Sales from Trade and Marketing (which does not constitute part of Frutarom’s core activities) rose 15.8% to reach US$ 66.5 million in the first nine months of 2017 compared with US$ 57.4 million in the same period last year, Contributing to the increase were the added Trade and Marketing product sales of Piasa of Mexico which was acquired in December 2016 and the currency effects which boosted sales by 4.8%, In constant currency and pro-forma terms, Trade and Marketing sales decreased by 8.9%.

Profits and margins

In the third quarter and the first nine months of 2017 record results were achieved in sales and in gross and operating profit, EBITDA, net income, earnings per share and cash flow.

Record results were also achieved in profits of core businesses which include the Flavors activity and the natural Specialty Fine Ingredients activity:

In Q3 2017, adjusted for non-recurring expenses, gross profit for the core businesses rose 21.1% to reach US$ 135.7 million (gross margin of 40.3%) compared with US$ 112.1 million (gross margin of 40.0%) in the parallel quarter last year, operating profit for the core businesses rose 22.7% to reach US$ 60.0 million (17.8% operating margin) compared with US$ 48.9 million (17.5% operating margin) in Q3 2016, and EBITDA for the core businesses rose 23.4% to reach US$ 73.4 million (21.8% EBITDA margin) compared with US$ 59.4 million (21.2% EBITDA margin) in Q3 2016.

In the first nine months of 2017, adjusted for non-recurring expenses, gross profit for the core businesses rose 16.8% to reach US$ 376.5 million (gross margin of 40.1%) compared with US$ 322.3 million (gross margin of 40.3%) in the same period last year, operating profit for the core businesses rose 22.8% to reach US$ 161.7 million (17.2% operating margin) compared with US$ 131.7 million (16.4% operating margin) in the same period last year, and EBITDA for the core businesses rose 20.7% to reach US$ 196.8 million (21.0% EBITDA margin) compared with US$ 163.1 million (20.4% EBITDA margin) in the same period last year.

In Q3 2017 non-recurring expenses were recorded in connection with acquisitions and for measures that Frutarom is taking to attain optimization and efficiency mainly in the natural extracts operations of the Specialty Fine Ingredients Division. These non-recurring expenses diminished gross profit by US$ 1.6 million (by US$ 2.9 million in the first nine months of 2017), operating profit and EBITDA by US$ 2.7 million (by US$ 4.8 million in the first nine months of 2017), and net income by US$ 2.2 million (by US$ 3.7 in the first nine months of 2017).

In the parallel quarter last year non-recurring expenses were recorded for measures taken to optimize resources, combine plants and attain maximum operational efficiency, and in connection with acquisitions, which in Q3 2016 diminished gross profit by US$ 3.1 million (by US$ 7.2 million in the first nine months of 2016), operating profit and EBITDA by US$ 4.0 million (operating profit and EBITDA respectively by US$ 15.4 million and US$ 13.9 million in the first nine months of 2016), and net income by US$ 2.9 million (by US$ 11.2 million in the first nine months of 2016)..

Successfully moving ahead are the processes of merging the companies acquired in recent years and the actions being taken by Frutarom to optimize the administrative, R&D, sales and marketing, production resource, operations, purchasing and logistics platforms. These are bringing significant operational savings and strengthen Frutarom’s competitive proficiency through maximum utilization of its sites around the world.

Following the acquisition of Wiberg, Frutarom has combined and streamlined its management, R&D, marketing, sales, procurement and production platforms in Germany and various countries to strengthen its market leadership position and achieve maximum operational efficiencies and savings, estimated at over US$ 12 million (on an annual basis), most of which have already gradually taken effect over the first nine months of 2017 with the balance taking effect in the coming months.

Also, in the framework of the overall drive towards optimization and operational efficiency in the herbal extracts activities, which has included the significant growth in production capacity for natural extracts following the acquisition of Vitiva, Ingrenat, Nutrafur and Extrakt-Chemie and the optimization of production between the various plants according to their various expertise in extract technology accompanied by substantial improvement in their operational efficiency, Frutarom’s plant in Wädenswil, Switzerland will be shut down. These actions, which will contribute to significant improvement in cost structure and competitive ability in the field of natural plant extracts, which is at the heart of Frutarom’s growth strategy, are expected to bring about savings estimated at over US$ 6 million (on an annual basis) which will begin to take effect starting in the first quarter of 2018

Also continuing according to plan are actions to build up and strengthen the global procurement platform for raw materials used by Frutarom in the manufacture of its products which will capitalize on the purchasing power, which has increased considerably in recent years, while switching to direct purchasing from producers in source countries, particularly for natural raw materials (which make up over 80% of the raw materials used by Frutarom). The global procurement platform will contribute as well to further improvement in purchasing costs and gross margins.

Net income

Net income in the third quarter of 2017 climbed 26.7% to US$ 40.8 million (net margin of 11.4%) compared with US$ 32.2 million (net margin of 10.7%) in Q3 2016. Net income in Q3 2017 adjusted for the non-recurring expenses grew by 22.3% to US$ 43.0 million (12.0% net margin) compared with US$ 35.1 million (11.7% net margin) in Q3 2016.

Earnings per share in the third quarter of 2017 climbed 26.5% to US$ 0.68 compared with US$ 0.54 in the same quarter last year. Earnings per share in Q3 2017 adjusted for the non-recurring expenses rose 22.0% to reach US$ 0.72 compared with US$ 0.59 for the same quarter last year.

Net income in the first nine months of 2017 climbed 33.0% to reach US$ 111.8 million (net margin of 11.1%) compared with US$ 84.0 million (net margin of 9.8%) in the same period last year. Net income in the first nine months of 2017 adjusted for the non-recurring expenses grew by 21.2% to reach US$ 115.5 million (11.5% net margin) compared with US$ 95.3 million (11.1% net margin) in the same period last year.

Earnings per share in the first nine months of 2017 climbed 32.3% and reached US$ 1.86 compared with US$ 1.41 in the same period last year. Earnings per share in the first nine months of 2017 adjusted for the non-recurring expenses rose 20.4% to reach US$ 1.92 compared with US$ 1.60 in the same period last year.

Cash flow from operating activity

In the third quarter of 2017 Frutarom achieved a record net cash flow from operating activities of US$ 63.5 million, a 52.7% increase compared with US$ 41.6 million in the same quarter last year.

In the first nine months of 2017 Frutarom achieved a record net cash flow from operating activities of US$ 138.9 million, a 44.0% increase compared with US$ 96.4 million in the same period last year.

Tables summarizing profits and margins in Q3 2017 and the first nine months of 2017:

Third quarter 2017:

Reported results in US dollars:

In millions of
US dollars
Core BusinessesTotal Frutarom Group
Flavors and Specialty Fine Ingredients
Q3 2016Q3 2017% increaseQ3 2016Q3 2017% increase
Sales280.0 336.6 20.2%300.1 358.8 19.6%
Gross profit109.0 134.1 23.0
%
114.0 138.4 21.5
%
Margin38.9%39.8%38.0%38.6%
Operating profit44.9 57.3 27.5%
45.3 57.8 27.5
%
Margin16.0%17.0%15.1%16.1%
EBITDA55.4 70.5 27.4%
55.9 71.1 27.2%
Margin19.8%21.0%18.6%19.8%
Net income 32.2 40.8 26.7%
Margin 10.7%11.4%

Adjusted for non-recurring expenses:

In millions of
US dollars
Core BusinessesTotal Frutarom Group
Flavors and Specialty Fine Ingredients
Adjusted for non-recurring expenses% increase
adjusted for non-recurring expenses
Adjusted for non-recurring expenses% increase
adjusted for non-recurring expenses
Q3 2016Q3 2017Q3 2016Q3 2017
Gross profit112.1 135.7 21.1%117.1 140.0 19.6%
Margin40.0%40.3% 39.0%39.0%
Operating profit48.9 60.0 22.7%49.3 60.5 22.7%
Margin17.5%17.8% 16.4%16.9%
EBITDA59.4 73.3 23.4%59.9 73.8 23.3%
Margin21.2%21.8% 20.0%20.6%
Net income 35.1 43.0 22.3%
Margin 11.7%12.0%

First nine months of 2017:

Reported results in US dollars:

In millions of
US dollars
Core BusinessesTotal Frutarom Group
Flavors and Specialty Fine Ingredients
2016 2017 % increase2016 2017 % increase
Sales800.6 938.4 17.2%858.0 1,004.9 17.1%
Gross profit315.1 373.7 18.6%327.4 386.3 18.0%
Margin39.4%39.8%38.2%38.4%
Operating profit116.3 156.9 35.0%117.4 158.3 34.8%
Margin14.5%16.7%13.7%15.8%
EBITDA149.2 192.0 28.7%150.7 193.8 28.5%
Margin18.6%20.5%17.6%19.3%
Net income 84.0 111.8 33.0%
Margin 9.8%11.1%

Adjusted for non-recurring expenses:

In millions of
US dollars
Core BusinessesTotal Frutarom Group
Flavors and Specialty Fine Ingredients
Adjusted for non-recurring expenses% increase
adjusted for non-recurring expenses
Adjusted for non-recurring expenses% increase
adjusted for non-recurring expenses
2016 2017 2016 2017
Gross profit322.3 376.5 16.8%334.6 389.2 16.3%
Margin40.3%40.1% 39.0%38.7%
Operating profit131.7 161.7 22.8%132.8 163.1 22.8%
Margin16.4%17.2% 15.5%16.2%
EBITDA163.1 196.8 20.7%164.6 198.5 20.6%
Margin20.4%21.0% 19.2%19.8%
Net income 95.3 115.5 21.2%
Margin 11.1%11.5%

Contact Details:
ir@frutarom.com +972-9-9603800

____________________________________________________________________

Investor Conference Call

On Tuesday, November 21, 2017 at 4:00pm in Israel (2:00pm GMT; 3:00pm CET; 9:00am EST) Frutarom will host a conference call in which management will review and discuss the results and will be available to answer investor questions.

To participate, please call one of the following teleconferencing numbers. Please begin placing your calls at least 5 minutes before the conference call commences. If you are unable to connect using one of the toll-free numbers, please try the international dial-in number.

USA Dial-in Number: 1-888-668-9141
UK Dial-in Number: 0-800-917-5108
SWITZERLAND Dial-in Number: 0-800-834-878
ISRAEL Local Dial-in Number: 03-918-0610
INTERNATIONAL Dial-in Number: +972-3-918-0610

A replay of the call will be available by telephone from Tuesday, November 21 until November 23, 2017 and on Frutarom's investor relations website at www.frutarom.com starting November 24, 2017. To access the replay please dial: 1-888-782-4291 (USA), 0-800-917-1246 (UK), 0-800-837-191 (Switzerland), or +972-3-9255929 (Israel).

About Frutarom

Frutarom (LSE:FRUT) (TASE:FRUT) is a leading global company operating in the global flavors and natural fine ingredients markets. Frutarom has significant production and development centers on all six continents and markets and sells over 70,000 products to more than 30,000 customers in over 150 countries. Frutarom’s products are intended mainly for the food and beverages, flavor and fragrance extracts, pharmaceutical, nutraceutical, health food, functional food, food additives and cosmetics industries.

Frutarom, which employs approximately 5,000 people worldwide, has 2 main core activities:

  • The Flavors Activity which develops, produces and markets flavor compounds and food systems;
  • The Specialty Fine Ingredients Activity, which develops, produces and markets natural flavor extracts, natural functional food ingredients, natural pharma/nutraceutical extracts, natural algae-based biotechnical products, natural food colors, natural antioxidants that provide solutions for natural food protection, aroma compounds, essential oils and unique citrus products. The Specialty Fine Ingredients products are sold primarily to the food and beverages, flavor and fragrance, pharmaceutical/nutraceutical, cosmetics and personal care industries.

Frutarom’s products are produced at its plants in the US, Canada, the UK, Ireland, Switzerland, Germany, Belgium, Italy, Spain, France, Slovenia, Poland, Russia, Turkey, Israel, South Africa, Morocco, China, India, Mexico, Guatemala, Peru, Chile, Brazil and New Zealand. The Company’s global marketing organization encompasses branches in Israel, the US, Canada, the UK, Ireland, Austria, Switzerland, Germany, Slovenia, Belgium, the Netherlands, Denmark, France, Italy, Spain, Hungary, Romania, Russia, Ukraine, Poland, Kazakhstan, Belarus, Turkey, Brazil, Mexico, Guatemala, Costa Rica, Peru, Chile, South Africa, China, Japan, Hong Kong, India, Indonesia and New Zealand. The Company also works through local agents and distributors throughout the world. For further information, please visit the Company’s website at: www.frutarom.com.

1 Including the Mighty and Enzymotec acquisitions on which agreements were signed in October 2017 and have not yet been completed.

2 Assuming the current product mix.

3 Net non-recurring expenses were recorded in the third quarter and the first three quarters of the year concerning optimization and combining of plants, and for costs tied to transacting the acquisitions, which in the third quarter reduced gross profit by US$ 1.6 million, operating profit by US$ 2.7 million and net income by US$ 2.2 million. In the first three quarters of the year these net non-recurring expenses reduced gross profit by US$ 2.9 million, operating profit by US$ 4.8 million and net income by US$ 3.7 million.

Source:Frutarom, Ltd.