Frutarom blames currency and destocking for sales drop

27-May-2009 - Last updated on 28-May-2009 at 11:52 GMT

Functional ingredients, fragrance and flavour supplier Frutarom has reported a decrease in sales and net income for the quarter but confirms growth plans.

Sales for the Israel-based company dropped 19.3 per cent to $98.4m, from $122m in the corresponding quarter last year.

The acquisition of Oxford Chemicals, and Flavors Specialties, that occurred within the quarter contributed an estimated $3.5m to sales. Figures regarding organic sales growth were not given.

Net income suffered from the drop in sales coming in at $5.6m for the quarter in comparison to $9.7m the year previously.

According to the company, much of the sales decrease can be explained by the strengthening of the US dollar against the European currencies and the Israeli Shenkel.

In addition, it cited inventory reduction among its customers as a contributing factor; as well as a devaluation of the currency in Russia, Ukraine, Turkey and Korea, where the company does significant business, leading to a reduction in purchasing power of customers in these regions.

Despite the drop in sales and net income, Frutarom is confident that it did not lose market share with its customers during the quarter.

Rapid growth plans

In contrast to 2008, when the company concentrated on integrating the acquisitions made in the previous year, 2009 has already seen the purchase of two companies and CEO Ori Yehudai confirmed the company’s growth strategy.

“Frutarom will continue to act determinedly to implement its rapid growth strategy, combining organic growth and strategic acquisitions,” he said.

“We are convinced that we will be able to achieve our goals and double Frutarom’s turnover, so that it will reach US $1 billion by 2012.”

Unlike many of its competitors, fragrance sales held up slightly better than flavours.

Sales for the fragrance division, which accounts for just under a third of the company’s business, dropped 16.1 per cent. In comparison, the flavours division suffered a drop of 20.2 per cent.

Nevertheless, the company remains confident that this sector of the business will prove fairly resilient to the economic struggles.

“Frutarom’s core businesses and products, mostly intended for the food industry, which place it in a relatively stable and defensive field, and its ability to continue improving its cash flow generation from current activities, will enable it to successfully glide through the global economic crises,” said Yehudai.