OREANDA-NEWS. Frutarom Industries Ltd. ("Frutarom"), one of the world's 10 largest companies in the field of flavors and specialty fine ingredients, reports another record-breaking quarter for sales, operating profit, EBITDA and net income.

The accelerated growth in sales this quarter resulted from a combination of rapid internal growth in Frutarom’s core activities - Flavors and Specialty Fine Ingredients - and the acquisitions carried out.

Sales

Frutarom sales for the first quarter of 2016 rose 32.7% to reach US$ 257.7 million compared with US$ 194.2 million in the parallel quarter, reflecting constant-currency growth in pro-forma terms of 5.9% from the parallel period. Changes in the exchange rates of currencies with which the Company operates against the US dollar reduced sales growth in pro-forma terms by 4.2%.

Sales for Frutarom’s core activities (Flavors and Specialty Fine Ingredients) for the first quarter of 2016 as reported in US dollars rose 37.1% to reach a record US$ 240.8 million compared with US$ 175.6 million in the parallel quarter last year, reflecting constant-currency growth in pro-forma terms of 6.3% from the parallel quarter. Currency effects reduced sales in pro-forma terms by 3.7%.

Sales in the field of Flavors for the first quarter of 2016 as reported in US dollars rose 36.8% to reach a record US$ 182.4 million compared with US$ 133.4 million in the parallel quarter last year, reflecting constant-currency growth in pro-forma terms of 5.3% from the parallel quarter. Currency effects reduced sales in pro-forma terms by 4.4%.

Sales in the field of Specialty Fine Ingredients for the first quarter of 2016 as reported in US dollars rose 39.3% to reach a record US$ 60.3 million compared with US$ 43.2 million in the parallel quarter, reflecting constant-currency growth in pro-forma terms of 11.0% from the parallel period. Currency effects reduced sales in pro-forma terms by 1.3%.

Sales in the field of Trade and Marketing (not a core activity of Frutarom) for the first quarter of 2016 as reported in US dollars rose 1.0% on a constant currency basis. Without adjusting for currency effects, sales in the first quarter of 2016 declined by 9.0% to US$ 16.9 million compared with US$ 18.6 million in the parallel quarter. Currency effects reduced sales by 10.0%.

Profits and margins

In Q1 2016 Frutarom achieved record results in sales, gross profit, operating profit, EBITDA and net income.

These record results were achieved despite the effects of shifts in the exchange rates of currencies in which the Company operates against the US dollar which had a 4.2% negative impact on the sales and profit reported in USD (in pro-forma terms).

Profits for the core businesses, comprising the Flavors activity and the Specialty Fine Ingredients activity, reached record levels and, adjusted for the non-recurring expenses, gross profit for the core businesses in the first quarter rose 37.1% and reached US$ 96.8 million (gross margin of 40.2%), operating profit rose 29.6% and reached US$ 36.7 million (operating margin of 15.2%) and EBITDA rose 29.1% and reached US$ 46.0 million (EBITDA margin of 19.1%).

Non-recurring expenses were recorded this quarter concerning the actions being taken by Frutarom towards optimizing its resources, amalgamating plants, and towards attaining maximal operational efficiency. These non-recurring expenses reduced reported gross profit for the quarter by US$ 1.5 million, operating profit by US$ 7 million and net income by US$ 4.9 million. Most of the non-recurring expenses concern the reorganization being carried out by the Company on its savory activity in Germany and center around closing Frutarom's main production plant at Stuttgart during 2016, including provisions for severance pay, along with steps to combine the R&D and sales and marketing platforms for the savory activity in Europe and with regards to the acquisitions performed during the quarter. The reorganization of savory activity is expected to bring savings on an annual basis of over US$12 million, most of which will realized towards the end of 2016 and part of it in the first quarter of 2017.

The acquisitions that were made contributed to growth in sales and profit, but the quarterly results do not yet reflect the profitability expected following their merger and the efficiency measures being taken by Frutarom. Most of the expected savings from completing the merger of activities and from realizing savings resulting from the consolidation of production sites and of the R&D, sales and marketing, supply chain, operations and procurement platforms of the acquired companies, which are estimated at a total of US$ 20-22 million on an annual basis, will be reflected in Frutarom’s results during 2016 and at the beginning of 2017.

In addition, proceeding according to plan is the building up and strengthening of the global platform for purchasing raw materials serving Frutarom in the manufacture of its products such that it can exploit its purchasing power which has grown significantly in recent years while switching to direct purchasing from producers in source countries, particularly natural raw materials (which constitute over 70% of the raw materials used by Frutarom). The global purchasing platform will contribute as well the further improvement in purchasing costs and gross margin.

Net income

Net income for the first quarter of 2016 (adjusted for non-recurring expenses) grew by 22.1% and reached US$ 26.4 million. Reported net income reached US$ 21.5 million compared with US$ 21.4 million in the first quarter of 2015.