HERZLIYA, Israel, Aug. 17, 2017 (GLOBE NEWSWIRE) --
5 STRATEGIC ACQUISITIONS SINCE THE BEGINNING OF 2017 STRENGTHEN PENETRATION INTO NEW MARKETS AND DEEPEN ACTIVITY IN MARKETS WITH SIGNIFICANT GROWTH POTENTIAL
FRUTAROM ADVANCING TOWARDS ACHIEVING SALES TARGET OF AT LEAST US$ 2B BY 2020 WITH EBITDA MARGIN FROM CORE ACTIVITY OF OVER 22%
In Q2 2017:
• Sales grew 14.4% to a record US$ 343.6 million. Pro-forma constant currency growth of 6.8%
• Sales from core activities grew 13.8% to a record US$ 318.3 million. Pro-forma constant currency growth of 7.6%
• Sales from Flavor activities grew 13.3% to a record US$ 254.3 million. Pro-forma constant currency growth of 6%
• Sales from Specialty Fine Ingredients activities grew 15.3% to a record US$ 66.4 million, reflecting pro-forma constant currency growth of 14.3%
• Record-level quarterly profits:
- Gross profit grew 15.7% to US$ 132.2 million;
- EBITDA grew 22.5% to US$ 66.9 million;
- Net income grew 22.7% to US$ 37.2 million;
- Earnings per share grew by 21.7%.
In First Half 2017:
• Sales grew 15.8% to a record US$ 646.1 million. Pro-forma constant currency growth of 6.1%
• Sales from core activities grew 15.6% to a record US$ 601.8 million. Pro-forma constant currency growth of 7.1%
• Sales from Flavor activities grew 16.4% to a record US$ 473.6 million. Pro-forma constant currency growth of 6.3%
• Sales from Specialty Fine Ingredients activities grew 13% to a record US$ 133.2 million. Pro-forma constant currency growth of 10.8%
• Record-level quarterly profits:
- Gross profit grew by 16.2% to US$ 247.9 million;
- EBITDA grew by 29.3% to US$ 122.6 million;
- Net income grew by 36.9% to US$ 70.9 million;
- Earnings per share grew by 36%;
- Cash flow from operating activity grew by 37.5% and reached a record US$ 75.4 million.
Ori Yehudai, President and CEO of Frutarom:
“We are pleased with the results achieved in the second quarter and first half of 2017 in which we again set ourselves new records in sales, profits and cash flows. Our sales turnover in the last 12 months on a pro-forma basis already stands at US$ 1.3 billion. The results reflect the successful implementation of our rapid and profitable growth strategy combining profitable internal growth at higher growth rates than those of the markets in which we operate, together with the successful merger of our strategic acquisitions that contribute to the continuing and consistent improvement in our results.
“The accelerated 14.4% increase in revenues this quarter results from continued rapid internal growth of our core activities, Flavors and Specialty Fine Ingredients, at a rate of 7.6% this quarter (on a pro-forma and constant currency basis).
“This handsome growth is being achieved thanks to the implementation of our strategic plan which includes the continuing focus on five key areas: (1) continued improvement of our product mix with continued rapid growth both in our flavors activity, which is the more profitable, and in 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) continued improvement of our geographic sales mix by significantly increasing the percentage of sales in North America and in the growing emerging markets (with emphasis on Southeast Asia, Latin America and Africa); (4) capitalize 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; and (5) 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, the building of a global procurement platform and the strengthening of our competitive proficiency.
“We are progressing according to plan with the full merging and integration of the 24 strategic acquisitions we made over the past two and a half years. Since the beginning of the year we have performed five additional strategic acquisitions which open up growth opportunities for us in new markets: René Laurent provides us an entry into local production activity in the significant French flavors market, WFF constitutes our first penetration into growing Vietnamese flavors market, Unique Flavors in South Africa which contributes towards significantly strengthening our position in the field of savory products in the rapidly growing areas of Africa, SDFLC which provides us entry into the growing and profitable area of taste solutions in the field of ice cream and desserts in Brazil and South America, and Flavours and Essences which reinforces our market leadership in the field of natural flavor and color solutions in the UK.
“We are continuing to capitalize on the integration and maximum streamlining, achieving the significant savings made possible from the acquisitions we make. The merger and streamlining processes are already contributing and will continue to contribute in the coming years towards strengthening our competitiveness and to improving profits and margins with the achieving of operational savings of an annual scope of US$ 20-22 million (as compared with Frutarom’s cost structure in Q2 2016).
“We continue to present a strong cash flow from operating activity which has grown this half year by 37.5% to a record US$ 75.4 million. Our sturdy equity structure, high level of liquidity and conservative leverage enable us to continue initiating and capitalizing on acquisition opportunities based on our strong and high quality pipeline of future strategic acquisitions that support fulfilling our plans for accelerated growth in our core activities, expanding the portfolio of natural solutions in the fields of flavors, health, colors and the natural antioxidants we offer our customers, and accelerating our growth and expanding our market share in North America and in emerging markets with high growth rates.
“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 in the years to come as well, and the achieving of our strategic goals: At least US$ 2 billion in sales with an EBITDA of over 22% in our core activities by 2020.”
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 second quarter and first half of the year in sales, gross profits, operating profits, EBITDA, net income and in earnings per share.
The increase in revenues in the second quarter and first half 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 second quarter of 2017 rose 14.4% to a record US$ 343.6 million compared with US$ 300.2 million in the parallel quarter, reflecting year-over-year internal growth of 6.8% 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 had a 0.8% negative impact on sales growth in pro-forma terms compared with Q2 2016.
Sales for Frutarom’s core activities (its Flavors activity and Specialty Fine Ingredients activity) rose 13.8% in Q2 2017 to reach a record level US$ 318.3 million compared with US$ 279.7 million in the same quarter last year, reflecting 7.6% year-over-year growth in pro-forma terms on a constant currency basis. Changes in exchange rates had a negative 1.1% impact on results in pro-forma terms.
Sales from the Flavors activity rose 13.3% to reach US$ 254.3 million in Q2 2017 as against US$ 224.4 million in Q2 2016, reflecting 6.0% year-over-year growth in pro-forma terms on a constant currency basis. Currency effects negatively impacted results in pro-forma terms by 1.0%.
Sales from Specialty Fine Ingredients activity rose 15.3% to US$ 66.4 million in Q2 2017 compared with US$ 57.6 million in Q2 2016 and reflect 14.3% year-over-year growth in pro-forma terms on a constant currency basis. Currency effects negatively impacted sales by 1.5% in pro-forma terms.
Sales from Trade & Marketing (which does not constitute part of Frutarom’s core activities) rose by 23.4% to US$ 25.3 million in Q2 2017 compared with US$ 20.5 million in Q2 2016. Contributing to the increase was 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 3.1% in pro-forma terms. In constant currency and pro-forma terms there was a 2.7% decline in Trade & Marketing sales against the parallel period.
Frutarom’s sales in the first half of 2017 rose 15.8% to a half-year record of US$ 646.1 million compared with US$ 558.0 million in H1 2016, reflecting 6.1% 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 had a 0.6% negative impact on sales growth in pro-forma terms compared with H1 2016.
Sales for Frutarom’s core activities (its Flavors activity and Specialty Fine Ingredients activity) rose 15.6% in H1 2017 to reach a half-year record of US$ 601.8 million compared with US$ 520.6 million in the first half of last year, reflecting 7.1% year-over-year growth in pro-forma terms on a constant currency basis. Changes in exchange rates had a negative 1.0% impact on results in pro-forma terms.
Sales from the Flavors activity rose 16.4% to reach US$ 473.6 million in H1 2017 as against US$ 406.8 million in H1 2016, reflecting 6.3% year-over-year growth in pro-forma terms on a constant currency basis. Currency effects negatively impacted results in pro-forma terms by 0.9%.
Sales from Specialty Fine Ingredients activity rose 13.0% to US$ 133.2 million in H1 2017 compared with US$ 117.9 million in H1 2016 and reflect 10.8% year-over-year growth in pro-forma terms on a constant currency basis. Currency effects negatively impacted sales by 1.4% in pro-forma terms.
Sales from Trade and Marketing (which does not constitute part of Frutarom’s core activities) rose 18.5% to reach US$ 44.3 million in H1 2017 compared with US$ 37.4 million in H1 2016. Contributing to the increase was the added sales of trade and marketing goods by Piasa in Mexico, acquired in December 2016. Currency effects boosted trade and marketing activity sales by 4.9% in pro-forma terms. In constant currency and pro-forma terms there was a 7.0% decline in sales against the parallel period.
Profits and margins
In the second quarter and first half of 2017 record results were achieved in sales and in gross and operating profit, EBITDA, net income and earnings per share.
Record results were also achieved in profits of core businesses which include the Flavors activity and the Specialty Fine Ingredients activity:
In Q2 2017 gross profit for the core businesses rose by 15.5% to reach US$ 128.0 million (gross margin of 40.2%), operating profit for the core businesses rose by 32.1% to reach US$ 54.8 million (operating margin of 17.2%), and EBITDA for the core businesses grew by 22.0% to reach US$ 66.4 million (EBITDA margin of 20.9%).
In the first half of 2017 gross profit for the core businesses rose by 16.3% to reach US$ 239.6 million (gross margin of 39.8%), operating profit for the core businesses rose by 39.6% to reach US$ 99.7 million (operating margin of 16.6%), and EBITDA for the core businesses grew by 29.5% to reach US$ 121.5 million (EBITDA margin of 20.2%).
In Q2 and H1 2017 nonrecurring expenses were recorded in connection with acquisitions and for measures taken by Frutarom to attain optimization and efficiency in the natural extracts operations of the Specialty Fine Ingredients Division. In Q2 2017 these nonrecurring expenses diminished reported gross profit by US$ 0.5 million, reported operating profit and EBITDA by US$ 1.2 million, and reported net income by US$ 0.9 million. In the parallel quarter last year net nonrecurring expenses were recorded for measures taken to optimize resources, combine plants and attain maximum operational efficiency, and in connection with acquisitions, which in Q2 2016 diminished reported gross profit by US$ 2.6 million, reported operating profit by US$ 4.4 million, reported EBITDA by US$ 2.9 million and reported net income by US$ 3.4 million.
In H1 2017 these nonrecurring expenses diminished reported gross profit for the period by US$ 1.3 million, reported operating profit and EBITDA by US$ 2.0 million, and reported net income by US$ 1.6 million. In H1 2016 nonrecurring expenses were recorded which in total diminished reported gross profit by US$ 4.1 million, reported operating profit by US$ 11.4 million, reported EBITDA by US$ 9.9 million, and reported net income by US$ 8.3 million.
In Q2 2017, adjusted for nonrecurring expenses, gross profit for the core businesses rose by 13.3% to reach US$ 128.5 million (gross margin of 40.4%), operating profit for the core businesses rose by 22.1% to reach US$ 56 million (operating margin of 17.6%), and EBITDA for the core businesses grew by 18% to reach US$ 67.6 million (EBITDA margin of 21.2%).
In the first half of 2017, adjusted for nonrecurring expenses, gross profit for the core businesses rose by 14.6% to reach US$ 240.9 million (gross margin of 40%), operating profit for the core businesses rose by 22.8% to reach US$ 101.7 million (operating margin of 16.9%), and EBITDA for the core businesses grew by 19.1% to reach US$ 123.5 million (EBITDA margin of 20.5%).
Completing the merging of the companies acquired in recent years and the actions being taken by Frutarom to optimize the administrative, research, development and sales, production resources, operations, purchasing and logistics platforms, which is progressing according to plan, will bring significant operational savings and strengthen its competitive proficiency through maximum utilization of its sites around the world. Substantial operational savings in the annual range of US$ 20-22 million (as against Frutarom’s cost structure in the second quarter of 2016) are and will be already reflected in the results this year. As such, the merging of savory activities in Europe following the acquisition of Wiberg is moving ahead towards successful completion. This move began contributing to improvement in profitability in the first half of 2017 upon completion of the integration and streamlining processes from combining the management, R&D, sales, marketing, production, operational, logistical and administrative platforms of the savory activity in Europe, being carried out in a gradual and measured manner, with emphasis on retaining key personnel and customers. These actions, upon their completion by the end of 2017, will bring savings projected at over US$ 12 million (on an annual basis).
Also successfully moving forward is the project for substantially streamlining the natural extracts operations of the Specialty Fine Ingredients division, part of an overall move to expand the scope of activity in natural extracts and improve its margins by increasing output and optimizing production lines, along with improving control and supervision over the value chain thanks to targeted cooperative ventures with growers which provides Frutarom an efficient and stable supply of strategic raw materials in a way that is already contributing to expansion of activity and improvement in its profit margins. These measures will bring annual savings of over US$ 6 million which will start emerging towards the end of 2017.
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 70% 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 second quarter of 2017 climbed 22.7% to US$ 37.2 million (net margin of 10.8%) compared with US$ 30.3 million (net margin of 10.1%) in Q2 2016. Net income adjusted for the non-recurring expenses grew by 13.1% in Q2 2017 to reach US$ 38.1 million (11.1% net margin) compared with US$ 33.7 million (11.2% net margin) in Q2 2016.
Net income in the first half of 2017 climbed 36.9% to US$ 70.9 million (net margin of 11.0%) compared with US$ 51.8 million (net margin of 9.3%) in H1 2016. Net income adjusted for the non-recurring expenses grew by 20.6% in H1 2017 to reach US$ 72.5 million (11.2% net margin) compared with US$ 60.1 million (10.8% net margin) in H1 2016.
Earnings per share in the second quarter of 2017 climbed 21.7% to US$ 0.61 compared with US$ 0.50 in the same quarter last year. Earnings per share adjusted for the non-recurring expenses rose 12.0% in Q2 2017 to reach US$ 0.63 compared with US$ 0.56 in the same quarter last year.
Earnings per share in the first half of 2017 climbed 36.0% to US$ 1.17 compared with US$ 0.86 in H1 2016. Earnings per share adjusted for the non-recurring expenses rose 19.5% in H1 2017 to reach US$ 1.20 compared with US$ 1.00 in H1 2016.
Cash flow from operating activity
In the first half of 2017 Frutarom achieved a record net cash flow from operating activities of US$ 75.4 million (37.5% growth) compared with US$ 54.8 million in H1 2016.
Tables summarizing profits and margins in Q2 2017 and H1 2017:
Second quarter:
Reported results in US dollars:
| In millions of US dollars | Core Businesses | Total Frutarom Group | |||||||||||
| Flavors and Specialty Fine Ingredients | |||||||||||||
| Q2 2016 | Q2 2017 | % increase | Q2 2016 | Q2 2017 | % increase | ||||||||
| Sales | 279.7 | 318.3 | 13.8 | % | 300.2 | 343.6 | 14.4 | % | |||||
| Gross profit | 110.8 | 128.0 | 15.5 | % | 114.3 | 132.2 | 15.7 | % | |||||
| Margin | 39.6 | % | 40.2 | % | 38.1 | % | 38.5 | % | |||||
| Operating profit | 41.5 | 54.8 | 32.1 | % | 41.6 | 55.2 | 32.7 | % | |||||
| Margin | 14.8 | % | 17.2 | % | 13.9 | % | 16.1 | % | |||||
| EBITDA | 54.4 | 66.4 | 22.0 | % | 54.6 | 66.9 | 22.5 | % | |||||
| Margin | 19.4 | % | 20.9 | % | 18.2 | % | 19.5 | % | |||||
| Net income | 30.3 | 37.2 | 22.7 | % | |||||||||
| Margin | 10.1 | % | 10.8 | % | |||||||||
Adjusted for nonrecurring expenses:
| In millions of US dollars | Core Businesses | Total 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 | ||||||||||
| Q2 2016 | Q2 2017 | Q2 2016 | Q2 2017 | ||||||||||
| Gross profit | 113.4 | 128.5 | 13.3 | % | 116.9 | 132.6 | 13.5 | % | |||||
| Margin | 40.6 | % | 40.4 | % | 38.9 | % | 38.6 | % | |||||
| Operating profit | 45.9 | 56.0 | 22.1 | % | 46.0 | 56.4 | 22.6 | % | |||||
| Margin | 16.4 | % | 17.6 | % | 15.3 | % | 16.4 | % | |||||
| EBITDA | 57.3 | 67.6 | 18.0 | % | 57.5 | 68.1 | 18.4 | % | |||||
| Margin | 20.5 | % | 21.2 | % | 19.2 | % | 19.8 | % | |||||
| Net income | 33.7 | 38.1 | 13.1 | % | |||||||||
| Margin | 11.2 | % | 11.1 | % | |||||||||
First half:
Reported results in US dollars:
| In millions of US dollars | Core Businesses | Total Frutarom Group | |||||||||||
| Flavors and Specialty Fine Ingredients | |||||||||||||
| H1 2016 | H1 2017 | % increase | H1 2016 | H1 2017 | % increase | ||||||||
| Sales | 520.6 | 601.8 | 15.6 | % | 558.0 | 646.1 | 15.8 | % | |||||
| Gross profit | 206.1 | 239.6 | 16.3 | % | 213.4 | 247.9 | 16.2 | % | |||||
| Margin | 39.6 | % | 39.8 | % | 38.2 | % | 38.4 | % | |||||
| Operating profit | 71.4 | 99.7 | 39.6 | % | 72.1 | 100.5 | 39.4 | % | |||||
| Margin | 13.7 | % | 16.6 | % | 12.9 | % | 15.6 | % | |||||
| EBITDA | 93.8 | 121.5 | 29.5 | % | 94.9 | 122.6 | 29.3 | % | |||||
| Margin | 18.0 | % | 20.2 | % | 17.0 | % | 19.0 | % | |||||
| Net income | 51.8 | 70.9 | 36.9 | % | |||||||||
| Margin | 9.3 | % | 11.0 | % | |||||||||
Adjusted for nonrecurring expenses:
| In millions of US dollars | Core Businesses | Total 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 | ||||||||||
| H1 2016 | H1 2017 | H1 2016 | H1 2017 | ||||||||||
| Gross profit | 210.3 | 240.9 | 14.6 | % | 217.5 | 249.1 | 14.5 | % | |||||
| Margin | 40.4 | % | 40.0 | % | 39.0 | % | 38.6 | % | |||||
| Operating profit | 82.8 | 101.7 | 22.8 | % | 83.6 | 102.6 | 22.8 | % | |||||
| Margin | 15.9 | % | 16.9 | % | 15.0 | % | 15.9 | % | |||||
| EBITDA | 103.7 | 123.5 | 19.1 | % | 104.8 | 124.7 | 19.0 | % | |||||
| Margin | 19.9 | % | 20.5 | % | 18.8 | % | 19.3 | % | |||||
| Net income | 60.1 | 72.5 | 20.6 | % | |||||||||
| Margin | 10.8 | % | 11.2 | % | |||||||||
Investor Conference Call
On Thurs., August 17, 2017 at 4:00pm Israel Time (1:00pm GMT; 3:00pm CET; 9:00am EDT) 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 August 17, 2017 until August 19, 2017 and on Frutarom's investor relations website at www.frutarom.com starting August 21, 2017. To access the replay please dial: 1-888-326-9310 (USA), 0-800-917-4256 (UK), 0-800-837-191 (Switzerland), or +972-3-9255925 (Israel). For further information please contact Chen Livne at Gelbart-Kahana Investor Relations chen@gk-biz.com at tel: +972-3-6074717 or fax: +972-3-6074711.
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 60,000 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.