Flavours drive Frutarom's Q1 growth

By Jess Halliday

- Last updated on GMT

Related tags: Raw material prices, United states dollar

Frutarom has reported another positive set of the results for the
first three months of 2007, driven by growth in its flavours
division, integration of acquisitions and exploitation of
synergies.

The Israeli firm, which has two divisions, flavours and fine ingredients, reported sales of US$80.5m in Q1, up 13.4 on the prior year period. Operating profit was on a par with last year, around $10.4m, with raw material prices having an effect on margins. Growth in the flavours made and sold by the flavours division was identified as a leading factor in the company's good start to the year. Significantly, it has began 2007 with the acquisitions of UK flavour companies, Belmay and Jupiter, which it says propel it into the position of leader in the UK market. Company president and CEO Ori Yehudai said he expects the integration of these two businesses to be completed in the next quarter, and that resulting operational efficiencies and savings will total $3m per year. The integration of Acatris Health, acquired at the end of 2006, into the fine ingredients division is also cited as a positive factor - as were the synergies and cross selling opportunities within the divisions, customers and product ranges. Finally, the stronger Euro against the US dollar gave a positive spin to the value of sales, said to have accounted for 3.4 per cent of the growth since, although it reports in dollars, most of Frutarom's sales are in Euros. Another positive piece of news in the quarter has been the agreement with CapsiVit Biotechnology to commercialise the know-how to produce an extract of Capsicum annum as a source of bioavailable capsanthin. Such a deal has a precedent to follow, established with other arrangements like that with D-Herb over an extract of the Portaluca plant to stabilise glucose levels in diabetes patients. Another with Magnetika Interactive allows it to produce, market and sell omega-3 from Salvia sclarea. However the raw material prices did impact Frutarom's margin. The gross margin in the quarter was 37 per cent, compared to 38.1 per cent last year. The company has said it is continuing to adjust selling prices to offset the impact of raw material costs and improve its margin. Overall, Yehudai was upbeat: "Frutarom expects to achieve internal profitable growth in our core activities, while continuing implementing our rapid growth strategy at higher rates than the industry."

Related topics: Market Trends, Flavours and colours

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