Frutarom benefits from Flachsmann merger
recent merger with Swiss counterpart Flachsmann to post a 55 per
cent increase in first quarter sales. Growth in the functional
foods sector also contributed to the strong Q1 growth.
Sales for the first quarter of the year reached $43.9 million, while net profits rose 115 per cent to $4.3 million during the same period, due almost entirely to the synergies from the Flachsmann takeover and the addition of its business units in Switzerland, Germany, Denmark, Hungary and Canada.
"Merging the two companies' activities, which was completed at the end of 2003, will continue to provide further efficiencies and synergies, while taking advantage of their complementary activities," said Ori Yehudai, Frutarom president and CEO.
"Flachsmann's and Frutarom's research and development teams are co-operating to develop new and innovative products. Operations and production staff are working to raise efficiency and unify production systems, taking optimal advantage of production capacity. Marketing and sales organisations have unified, making the most of Frutarom's and Flachsmann's relative advantages in each country. The Frutarom Group's customer base has expanded and many new customers have been added, including leading multinational food and pharmaceutical producers."
The flavours division, which is the more profitable of Frutarom's two main business units, saw particularly strong growth in the UK, but also stressed the impressive gains it had made in Russia, Ukraine, Kazakhstan, Turkey and China, countries with a high growth level and where processed food consumption is growing at a higher rate than the global average.
The fine ingredients division benefited from a revamped product mix and the launch of new products, Yehudai said. Individual figures for the two divisions were not released.
Flachsmann (or Frutarom Switzerland as it is now known) has given the group a much stronger position in one of the core growth markets in the food industry - functional foods, focusing as it does on natural botanical extracts, and the company said that its combined expertise in clinical studies, its understanding of food systems, proven capabilities for incorporating botanical extracts in food products, and good access to food manufacturers, gave it a real competitive advantage.
The merger did, however, lead to increased costs - selling, administration and general expenses of $9.2 million were up from $5.8 million in the previous year. Cash flow, on the other hand, recovered strongly, rising from a negative $0.3 million to a positive $3.7 million in this year's first quarter.
"Frutarom will continue the accelerated growth trend in its core activities and profitability, as well as to implement the successful strategy that has guided it over the past decade," Yehudai said. "The object is to fulfill our goal of being one of the ten largest, leading companies in the world in the flavour and fragrance field within a few years," he added, saying that further acquisitions could not be ruled out.
"The economic situation and the trend of mergers that has characterised the flavour and fragrance industry in recent years has created opportunities for interesting acquisitions, which Frutarom is acting to exploit. Frutarom also continues to invest, deepen and expand its activity, particularly in strategic markets where it has recently established development and applications laboratories, production facilities and sales and marketing offices."
The functional food industry is likely to be the main focus of Frutarom's R&D activities in the coming years, he added, with particular emphasis on innovative new product development.
