Frutarom product mix shift shows results

The Israeli firm reported today that its 3Q sales have increased by 20 per cent compared to last year's quarter, to US$71.3m. Operating profit was up almost as much, by 16.9 per cent, to $9.2m.

The increases are attributed in part to efforts to increase the selling prices of its product mix by focussing on higher-margin value-added products - a strategy informed by a growth rate in functional foods that outstrips that of the food industry as a whole.

Ori Yahudai, president and CEO, summed up the quarter by expressing satisfaction at the company's achievements. "Our diligent activity to raise the selling prices of our products has already begun to yield results in the third quarter,"​ he said, "and, we estimate, will continue to contribute to improving profit margins in the coming quarters."​

Frutarom's efforts in this direction have already yielded results in the Fine Ingredients division, with new launches rolled out this year including pink rock rose (a herbal extract aimed at respiratory health), omega-3 rich Salvia seed oil, and wild green oat extract for mental health.

Nor does it seem that Frutarom's launch pad will be vacant for long. Yehudai said that the company has "an abundant and interesting pipeline of new products"​, on which it is closely cooperating with its customers.

But in food systems activity planned improvements in the product mix has led to a decrease in sales for the time being.

Frutarom also attributed its positive set of results to organic growth in core activities (flavours and fine ingredients), and new acquisitions. The purchase of 90 per cent of the issued and paid up share capital of Nesse at the beginning of this year was a key factor in this growth. Yahudai said that it "continues to grow and contribute very nicely to Frutarom's activity"​.

In October Frutarom announced the acquisition of Acatris Health for €10.5m. Although this will not show up in financial statements until Q4, Yehudai said that efforts are underway to merge it with the company's existing activities and "to extract the extensive synergy inherent in these complementary activities"​.

Synergies and cross-selling opportunities between the company's divisions, customers and products, from existing operations as well as acquisitions, is also said to be a factor in the ongoing growth story.

Although no breakout figures are given for the two divisions, sales of flavours are said to have increased in Q3.

On the down side, the costs of grapefruit and natural gums in the Fine Ingredients division's natural raw material portfolio fell compared to last year's Q3, having an additional knock-on effect for flavour compounds in which they are used.