Acquisitions pay off for Frutarom

By Jess Halliday

- Last updated on GMT

Frutarom has seen the benefits of its seven acquisitions of 2007 on
its profits in its Q1 results, and is pledging to keep profits on
an even keel by adjusting selling prices in line with raw material

The Israeli company made a string of acquisitions last year across its flavours and fine ingredients divisions: UK flavour firms Belmay and Jupiter, fellow Israeli firm Raychan Food Industries, US ingredients maker Abaco, plant extract and vitamin firm Adumim, German-based Gewurzmuller Group, and Israel's RAD Natural Technologies. At the end of active year Frutarom reported double-digit organic growth but a drop in net income on the previous year to $24.2m, compared to $29.7 in 2006. The explanation for this was that the latest acquisitions had not yet had a chance to contribute positively to the results. It also paid out a one-time expense of $2m Frutarom to integrate the new business. For Q1 2008, however, Frutarom reported record income of $122m, up 51.6 per cent on the prior year period. Gross profit was $15.3m, up 50.2 per cent on the same three months of 2007. Although the income comparison is not like-for-like since Frutarom the new businesses' activities were not included in Q1 2007, a spokesperson for the company said organic growth remained in double-digits for the quarter. He told that a breakdown of figures from the existing and the new business is not available because of the acquisitions are so swiftly integrated. "It is hard to distinguish where each dollar comes from".Raw materials ​Company president and CEO Ori Yehudai saw some impact on its profitability last year as a result of rising raw material costs - as indeed have most companies in the food sector. In keeping with his pledge in March, when the 12-month results were released, Frutarom says it has taken "determined action" to adjust selling prices in line with costs, and this has made a significant impact on margin improvement. "We will continue to adjust selling prices to any further increases in raw material prices,"​ said Yehudai today. "We are committed to sustaining the trend of improvement to profit and profitability."The year from here ​Yehudai said that, from here on in, his company will focus on tapping the best potential of its new acqusitions, and bringing about as many commercial and operational synergies as it can. The rapid growth strategy, which is on-going, is a two-pronged approach that couples strategic acquisitions and organic growth. While he could not signpost any acquisitions on the table in the near term, the spokesperson did not discount the possibility. "We are working on [more acquisitions],"​ he said.

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