Frutarom results herald more acquisitions next year

By Mike Stones

- Last updated on GMT

Related tags: Currency, United states dollar, Chief executive officer

Frutarom has reported a rise in net profit of 6.3 per cent to US$10m in the third quarter of this year and pledged to continue its acquisition strategy.

Sales totaled US$111.6m in the third quarter; a fall of about 1.6 per cent in local currency terms in contrast to the same period of last year. The Israel-based company posted a nine per cent improvement in net margin in the quarter.

Over the first nine months of this year, cash flow reached US$57.9m compared with $21.2m in the same period of 2008.

Global recession

Ori Yehudai, the flavour and specialty ingredients supplier’s president and chief executive officer, told that the company was well-placed to take advantage of acquisition opportunities created by the global recession. “We have a good (acquisition) pipeline of small and mid size companies and are evaluating the potential of bigger acquisitions,” ​said Yehudai. “Our cash flow has allowed us to reduce our debt to the banks even with the acquisitions,”​ he added.

So far this year, the company has made three acquisitions: UK flavour group Oxford, Flavor Specialties Inc in the US and Chr Hansen’s savoury division in Germany. The new companies made a combined contribution of US$9.1m in the first six months of the year.

In 2007, the company acquired seven new businesses.

Frutarom said its revenues in the third quarter and in the first nine months of year were influenced by the revaluation in the US $ rate compared with European currencies and the New Israeli Shekel in which most of the firm’s sales are made.

Destocking trend

Other factors were the moderating effects of the global economic crisis and the slow down in markets together with destocking trend which ended in the third quarter.

Frutarom said it maintained margins despite falling sales due to its improved efficiency and competitiveness while reducing expenses.

The company estimates that it maintained its market share among its customers and said it would strengthen its R&D and sales infrastructures to ensure its further profitable growth.

Commenting on brighter prospects for the global economy, Yehudai said: “We estimate that the stabilization of the global economy in recent months, the moderation in currencies fluctuations, the halt of the destocking trend and the signs of gradual improvement in consumption, including in countries significantly affected by the devaluation in their currency, will contribute to an improvement in our sales level and to future return to a growth trend at rates similar to those characterizing our activities in the past.”

The company is on track to achieve to achieve its target of doubling sales turnover in the next four years, to about US$ 1bn, he added.

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