Frutarom reports bumper year for flavours and functional ingredients
strategy, as it continues to snap up acquisitions to bolster its
flavours and fine ingredients divisions and develop new products to
expand its portfolio.
The Israeli flavours and fine ingredient firm has reported sales of US$287.2m in full year 2006, up from $243.8 in 2005. Operating profits for the year increased 12.9 per cent over 2005 to US$37.1m. The fourth quarter was a major factor in the overall growth story: operating profit for the three-month period was up 56 per cent to US$7.8m. In addition to being the company's seventh consecutive year of growth, 2006 will also go down in company annals as the year when Frutarom was in a position to claim it had achieved its aim of becoming one of the top ten flavour companies in the world. It also continued to strengthen its position in the field of natural ingredients on a health and wellness platform - not only targeting reduced fat and calories, but also proven ingredients to aid health in the form of functional ingredients. Nonetheless, sales growth was somewhat impacted by a decline in the selling price of certain raw materials (especially grapefruit, vanilla and natural gums) sold by Frutarom Fine Ingredients. As a consequence, the selling prices for flavours using these ingredients produced by its flavours division also took a knock. Despite these factors, however, in the event, Q4 sales were $72.6m - still a 38.1 per cent increase on the equivalent period of 2005. The sales increase for the year as a whole was attributed to the combination of a number of factors. Over the course of the year, however, sales grew in both the flavours and fine ingredients divisions - in the latter case this was derived mainly from the introduction of new products. The savoury solution activities of Nesse Group, in which Frutarom acquired a 70 per cent of the share equity, made an impact from January 2006. In the case of its other major acquisition for the year, 100 per cent of Acatris Health, these activities in the functional ingredients sector came to bear from October 2006. As well as adding more revenue streams, the acquisitions are also seen to have helped the company's existing operations by presented more synergy and cross-selling opportunities between Frutarom's divisions, customers and products. The rapid growth strategy is about internal development as well as external, however. "Frutarom invests considerable resources in research and development in order to expand the portfolio of natural, innovative products we offer our customers, such as natural functional food ingredients," said president and CEO Ori Yehudai. Yehudai said that, as part of the company's R&D activity, it is cooperating with academic institutions, research institutes and starts-up - both in its home country and on a global basis. "Over the last year Frutarom signed agreements on a number of such collaborations that strengthen and broaden the pipeline of new and innovative products that Frutarom intends to launch in the coming years." The company's R&D spend for the year is bundled with ling and marketing costs in its general and administrative expenses reporting line. In 2006, this line read $48.5m compared to $43.8 in 2005. Yehudai has also indicated that more strategic acquisitions could be on the cards; the company is investing "considerable resources" in locating and executing acquisitions. It is also "currently in contact with several interesting candidates for possible acquisition, mainly in countries and markets where the company has substantial activity." It is in a strong position to move in on opportunities that present themselves. As at the end of the reporting period, Frutarom had current assets of $149.1m, and non-current assets of $167.6m. Its current liabilities total $57.1m and its non-current $42.4m.