The many successful acquisitions of companies around the world by Frutarom Industries Ltd. (TASE: FRUT; LSE:FRUT; Bulletin Board: FRUTF) in recent years, combined with its organic growth, are reflected in the company's good results published today. Frutarom , managed by CEO Ori Yehudai, which produces raw materials and flavor extracts for the food and beverages industry, reported a 19% rise in sales to a record $1.4 billion in 2017.
Frutarom completed eight acquisitions in 2016 and 12 more in 2017, including the acquisition of Israeli company Enzymotec, Frutarom's largest ever acquisition, at a company value of $290 million. The acquisitions contributed to Frutarom's sales growth in 2017.
Frutarom's 2017 operating profit totaled $211 million, up 41%, and its EBITDA jumped 34% to $257 million. The company reported 37% growth in its 2017 net profit, which reached $150 million.
Frutarom's organic flavors business posted 7% organic growth in 2017. With the addition of acquired activities, the company's growth in this segment was 21%, boosting its total sales to $1 billion. Its special raw materials business posted 11.8% in organic growth and 14% in total growth, with revenue totaling $260 million. Sales in trading and marketing grew 14% to $91 million.
Frutarom's revenue totaled $357 million in the fourth quarter, 24% more than in the corresponding quarter in 2016. Operating profit was up 65% to $53 million in the quarter, and net profit jumped 47% to $40 million. Together with its results, Frutarom announced the distribution of a NIS 30 million dividend ($8.6 million), to be carried out in early May.
Frutarom currently does business in over 150 countries. It has 5,400 employees and over 30,000 customers (12,000 of these customers joined the company following its 39 acquisitions over the past five year). The company's share price responded to the news with a 2.4% jump, and has now rise by over 60% over the past year, pushing Frutarom's market cap up to NIS 20 billion.
Yehudai today repeated the goal he set for the company in 2020 - $2.25 billion in sales and a 23% EBITDA rate in its core activity. Commenting on Frutarom's 2017 results, Yehudai said, "Frutarom continues to maintain a high liquidity level and conservative leverage, based on a strong cash flow from current activities, which grew 50.5% to $187.5 million in 2017. Our sound capital structure and strong cash flow enable us to continue initiating and taking advantage of acquisition opportunities."
IBI Investment House analyst Shira Achiaz notes in response to Frutarom's reports that the company had reported good results with contributions from currencies, strong growth in the sales line, and improvement in profit, thanks to streamlining measures. Looking at 2018, Achiaz believes, "The contribution of the Enzymotec acquisition, together with other acquisitions and continued streamlining measures, are expected to support the company's results. Leumi Capital Markets analyst Gil Dattner believes that despite the good results, Frutarom's share is expensive, saying, "The company has already presented targets for 2020 that reflect continued strong growth and ongoing improvement in profit margins. In our opinion, the company has proven that it is capable of achieving these goals. Still, it appears to us that the pricing is still too aggressive. This high pricing has been more prominent recently, following higher returns in the US and poor performance by most shares in the sector since the beginning of the year."
Published by Globes [online], Israel Business News - www.globes-online.com - on March 20, 2018
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