|Another Record Year for Frutarom as it Continues to Successfully Carry Out Its Rapid and Profitable Growth Strategy|
Fourth quarter 2015:
FRUTAROM FORESEES ANOTHER RECORD YEAR IN 2016; ANNUAL RUN-RATE FOR SALES ALREADY REACHING US$ 1.1B2 WITH THE ADDITION OF THE ACQUISITIONS MADE SINCE THE START OF 2015
SET SALES TARGET OF
CONSOLIDATION OF R&D, SALES, OPERATIONS AND PRODUCTION PLATFORMS AND THE COMPLETION OF PROJECTS TO CONSOLIDATE PRODUCTION FACIILITES AND OPTIMIZE RESOURCES ARE EXPECTED TO BRING
Main KPIs for 2015
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“2015 was another milestone year for us in our journey of rapid and profitable growth. The successful implementation of the growth strategy combining profitable internal growth at a higher rate than the growth rates of the markets in which we operate, and strategic acquisitions that contribute to the continuing improvement in our results, brings us to another record year in sales, profits and margins, cash flow and earnings per share.
“These record results were achieved despite the continued effect of the strengthening of the dollar against the various currencies in which we operate, which negatively impacted sales and profits in 2015 by 13.3%, and the effect of nonrecurring expenses for steps we are taking to optimize our resources, consolidate manufacturing facilities and towards achieving significant operational savings that will contribute to continued improvement in our results and strengthen our competitiveness in the market.
“We are continuing to work on significantly expanding the scope of our sales and market share. The successful integration of the acquisitions we made, expanding our activity and market share in
“Since the beginning of 2015 we have carried out 15 strategic acquisitions, 11 of which were completed in 2015 and four more in 2016. The combination of accelerated internal growth in 2015 and the 15 acquisitions has already brought us to an annual run rate in sales of
“The acquisitions support the fulfillment of our plans to penetrate new territories and strengthen our position in important strategic territories while raising our market share in
“We further expanded our North American activity through the acquisitions of BSA in
“We continued to strengthen, deepen and significantly increase our activities in the key markets of
“We are working on continuing to increase the Flavors activity, the more profitable among our activities, which has grown at an average annual pace of 25.8% over the past 15 years and makes up 70% of our activity. As part of our strategic plans to establish our position as a leading global player in the field of savory taste solutions, we acquired BSA in
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*Annual rate of sales following the acquisitions made and based on current exchange rates.
“We are also continuing to develop and expand our portfolio of specialty natural products based on innovative technologies. As part of this strategy, over the year we acquired Nutrafur, Ingrenat and Vitiva, with emphasis on natural products that combine taste and health, and the continued building up our activity in natural colors and in natural antioxidants that promote food protection. These acquisitions have also enabled us to pursue major streamlining measures, including plant closure and the transfer of production between various sites according to their various specializations in extract technology, improving our cost structure and competitiveness in the field of natural extracts which lies at the heart of Frutarom’s growth strategy.
“As part of the strategy of focusing on natural products, we also further deepened our activity in specialty citrus products through the acquisition of Scandia, in innovative products that provide for combining fruit components and flavors in food products through the acquisitions of Taura and Inventive, and in innovative biotech-based natural products through the acquisition of Grow and the investment in Algalo. Continued profitable internal growth along with the contribution made by the acquisitions serve to strengthen and reinforce Frutarom’s position as a leading global player in the fields of flavors and natural specialty fine ingredients.
“We are continuing to work towards achieving optimization of our resources, also with respect to the new acquisitions we have made, along with generating significant operational savings, boosting our competitiveness and getting the maximum out of our sites around the world. We are pleased with the pace at which the merger of our acquired activities is progressing, and believe the projects we are carrying out to optimize our global resources following the acquisitions made in recent years can be expected to generate operational savings at an annual range of
“Frutarom continues to maintain a high level of liquidity and conservative leveraging, based on a strong cash flow from operating activities that recorded a record
“We are convinced that the rapid and profitable organic 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
The record results in 2015 for both sales and profits, were achieved despite the significant effect of fluctuating exchange rates between the US dollar and currencies in which Frutarom transacts its business. Furthermore, nonrecurring expenses were incurred for measures being taken by Frutarom to optimize its resources, consolidate plants, and towards attaining maximum operational efficiency, and in connection with acquisitions carried out. All these will contribute to continuing improvement in profits and margins.
The continued successful integration of the acquisitions made in recent years into Frutarom's global activity is also a contributing factor to sales growth and improved profits and margins. Since the beginning of 2015 Frutarom has sped up its pace of acquisitions, taking advantage of strategic opportunities to perform 15 acquisitions. Frutarom anticipates the activities it has acquired containing much potential synergy and is working to successfully integrate them and reap the great potential they bring. Completing the merger of companies acquired and measures being taken by Frutarom to consolidate plants, optimize its production resources and combine its R&D, sales, operations, production and purchasing platforms, which are progressing according to plan, will bring annual operational savings in the range of
Frutarom's sales in 2015 as reported in US dollars grew 6.5% to reach a record US$ 872.8 million, reflecting constant-currency growth over the previous year of 4.9% on a pro-forma basis.
Frutarom's sales and profits in 2015 and the fourth quarter of the year were impacted by the continued trend of the US dollar considerably strengthening against most other world currencies. Since about 70% of Frutarom's sales are transacted in non-US dollar currencies, changing exchange rates have had a translation effect on Frutarom's reported US dollar results. Nonetheless, currency exposure is reduced by the fact that purchases of the raw materials used by Frutarom in manufacturing its products and operating costs in the various countries where it operates are in most cases also paid for in local currencies, such that the main effect is on the dollar translation of sales and profit figures. Currency exchange rates had a 13.3% impact on Frutarom’s 2015 annual sales and profits and a 10.8% impact on its Q4 2015 sales and profits.
It should be pointed out that the strengthening trend of the US dollar began taking shape mainly during the fourth quarter of 2014 such that, if exchange rates remain at their current levels, the effect on Frutarom's reported results in 2016 can be expected to weaken considerably compared to their effect in 2015.
Sales for the Flavors activity in 2015 as reported in US dollars rose 3.0% to reach a record US$ 607.5 million compared with
Sales for the Specialty Fine Ingredients activity in 2015 as reported in US dollars rose 16.8% to reach
Sales for Trade and Marketing activity in 2015 as reported in US dollars rose by 7.4% to reach US$ 84.3 million compared with
Frutarom sales for the fourth quarter of 2015 as reported in US dollars rose 11.6% to reach
Sales for the Flavors activity for the fourth quarter of 2015 as reported in US dollars rose 6.2% to reach
Sales for the Specialty Fine Ingredients activity for the fourth quarter of 2015 as reported in US dollars rose 42.0% to reach
Sales for Trade and Marketing activity (not a core activity of Frutarom) for the fourth quarter of 2015 as reported in US dollars rose 5.3% to reach
Profits and margins
The improvement in profits and margins has continued and this year record results were reached in gross profit, operating profit and margin, EBITDA and EBITDA margin, net income and earnings per share. Profits and profit margins for core activities also reached record levels.
Nonrecurring expenses were recorded with respect to measures Frutarom is taking to optimize its resources, consolidate plants and achieve maximum operational efficiency, and with respect to the acquisitions that were performed. In 2015 these nonrecurring expenses reduced reported gross profit by
Nonrecurring financial expenses totaling
Tables summarizing profits and margins in 2015:
In the fourth quarter of 2015:
Reported net income for 2015 rose 9.7% and reached a record
Earnings per share
Earnings per share in 2015 (on a constant-currency basis and adjusted for nonrecurring expenses) jumped 32.6% from
Earnings per share for the fourth quarter of 2015 (on a constant-currency basis and adjusted for nonrecurring expenses) climbed 30.3% to reach
Cash flow from operating activities
Cash flow from operating activities grew by 13.4% in 2015 from US$ 80.8 million to a record
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Frutarom (LSE:FRUT) (TASE:FRUT) is a multinational company operating in the global flavors and fine ingredients markets. Frutarom has significant production and development centers on four continents and markets and sells over 49,000 products its products to over 28,000 customers in more than 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 employs approximately 4,500 people worldwide and engages in two core activities:
Frutarom’s products are produced at its plants the US,
1 Non-recurring expenses were recorded in 2015 and in Q4 2015 concerning steps being taken by Frutarom towards optimizing its resources and attaining maximal operational efficiency and in connection with acquisitions. These non-recurring expenses reduced the reported gross profit for 2015 by
2 Assuming all acquisitions performed in 2015 and 2016 had been completed by
3 Assuming acquisitions completed in 2014 and 2015 had been consolidated from
4 Assuming the Profit & Loss Statements for 2014 were translated into US dollars according to average exchange rates in 2015
5 Assuming the Profit & Loss Statements for Q4/2014 were translated into US dollars according to average exchange rates in Q4/2015.