Frutarom profit falls 16% in second quarter

by Eric Schroeder
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HAIFA, ISRAEL — Frutarom Industries Ltd., a global provider of flavors and ingredients, posted net income of $10,091,000, equal to 18c per share on the common stock, in the second quarter ended June 30. This was down 16% from $12,047,000, or 21c per share, in the same period a year earlier. Net sales for the second quarter were $106,717,000, down 20% from $132,573,000.

Frutarom said the decrease in sales was the result of strengthening of the U.S. dollar compared to the European currencies, as well as the impact of the global economic crisis and the inventory reduction trend among its customers.

"The global crisis and the economical slowdown in the world materially changed the growth trend which characterized most of the global markets in recent years," said Ori Yehudai, president and chief executive officer. "Frutarom entered this challenging and crisis-related economic period, as a leading, global, stronger-than-ever company, with a solid capital structure, experienced global management and varied and diversified customer base. Our core businesses are mostly geared for the food industry which is considered stable and defensive. And indeed, analyzing previous economic crises tells us that the food industry and its derived industries usually demonstrate relatively low sensitivity to the effects of slowdown and instability in the macro-economic environment, especially in comparison to other industries.

"Frutarom’s management acts regularly and even more intensely since the outbreak of the economic crisis for maximizing its efficiency while reducing and controlling expenses, which lead to the improvement of its competitiveness. Concurrently, we continue to strengthen our R.&D. and sales infrastructures in order to ensure our further profitable growth in the long term. Our rapid preparation for the global economic situation led to the maintenance of operating margin rates and to the improvement of net margin in spite of the effects of the slowdown in the markets. We estimate that with the stabilization of the global markets, the moderation of the fluctuations in exchange rates in the world, the discontinuation of the inventory reduction trend and the gradual improvement in consumption, mainly in countries significantly affected by the devaluation in their currency rate, Frutarom will return to growth rates similar to those characterizing its activities in the past."

Mr. Yehudai said Frutarom’s solid capital structure and the strong support the company received from leading financial initiations will enable it to utilize acquisition opportunities created due to the global economic crisis and to continue implementing its acquisition strategy.

"We consider the challenging and complex period which global economics undergoes as an opportunity for further strengthening," he said. "We are convinced that we will be able to achieve our goals and double Frutarom’s turnover again in the next four years, so that it will reach $1 billion by 2012."

For the first six months of fiscal 2009, net income fell 28% to $15,692,000, or 28c per share, from $21,752,000, or 38c per share, in the same period of fiscal 2008. Net sales were down 19% to $205,141,000.

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