Frutarom Industries Ltd. (TASE: FRUT; LSE:FRUT; OTCBB:FRUTF), which is coming to the end of its existence as an independent company, today reported strong results for the second quarter. Frutarom, which develops, manufactures, and markets ingredients and flavors for the food industry, posted $401 million in sales in the quarter, 17% more than in the second quarter of 2017. The company reported a 31% increase in operating profit to $72.5 million, with an 18% operating profit margin, and a 44% rise in net profit to $52 million.
Frutarom finished the first half of the year with $786 million in revenue, 21.5% more than in the corresponding period last year. Operating profit in the first half was up 35% to $135 million, reflecting a 17% operating profit margin, while net profit in the period jumped 40% to $98 million.
The company's share price is down 1% in today's trading, but has climbed nearly 40% over the past year, pushing its market cap up to NIS 22 billion.
Frutarom's report comes after the Tel Aviv Stock Exchange (TASE) announced yesterday that it would reduce the weight of the company's shares in the Tel Aviv 35 and Tel Aviv 125 Indices to zero starting after the end of trading on September 6. Two weeks ago, Frutarom's shareholders approved by a large majority the company's merger into US company IFF. The two companies announced in early May their intention to merge, a merger that will probably be completed during the fourth quarter of this year. IFF plans to acquire Frutarom at a company value of $6.5 billion (NIS 23.5 billion).
Despite overwhelming support for the merger, an announcement by Frutarom indicates that the shareholders did not approve a special one-time $20 million bonus for Frutarom CEO Ori Yehudai that would have been paid before the merger completion date.
Yehudai said, "Frutarom entered 2018 at its peak with a broad and innovative basket of products that emphasized natural products at the interesting and growing junction between flavor, nutrition, and health. The company focuses on medium-sized local customers and private brand manufacturers, who provide a substantial competitive advantage. We regard our strategic focus as an important growth engine for Frutarom's business in recent years and plan to continue accelerating processes that will lead to continued rapid growth in our core activity - special flavors and ingredients."
Yehudai added, "We are working in full cooperation with IFF's management in order to devise a plan for integration of these two wonderful companies, which complement each other, in order to ensure successful business, operational, technological and organizational integration, while taking optimal advantage of the extensive cross-selling opportunities. I am convinced that the merged company's potential growth in profit is substantial, and will enable its shareholders to benefit from a large increase in value in the future."
Published by Globes [online], Israel business news - www.globes-online.com - on August 23, 2018
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