Fourth Acquisition for Frutarom in 2017: Continues Its Penetration into Growing Latin American Markets & Fortifying Its Presence in the Brazilian Market


 FRUTAROM ACQUIRES 80% OF SDFLC, A LEADING BRAZILIAN PRODUCER OF TASTE SOLUTIONS IN THE FIELD OF ICE CREAM AND DESSERTS, FOR BRL 110 M (APPROX. USD 33 M)

 SALES OF BRL 72 M (APPROX. USD 22 M) FOR SDFLC IN THE 12 MONTH PERIOD ENDING MAY 2017 AFTER GROWING AT AN AVERAGE ANNUAL RATE OF APPROX. 17% OVER THE PAST 5 YEARS

 FRUTAROM HAS A GROWING GLOBAL INFRASTRUCTURE IN THE FAST-GROWING FIELD OF TASTE SOLUTIONS FOR ICE CREAM AND DESSERTS AND INTENDS TO EXPAND IT INTO ADDITIONAL COUNTRIES WHILE EXPLOITING SIGNIFICANT CROSS-SELLING OPPORTUNITIES

HERZLIYA, Israel, June 25, 2017 (GLOBE NEWSWIRE) -- Frutarom Industries Ltd. ("Frutarom"), one of the world's 10 largest companies in the field of flavors and natural specialty fine ingredients, continues its momentum of acquisitions and implementation of its rapid and profitable growth strategy: The Company announced today the purchase of 80% of the shares of SDFLC Brasil Indústria E Comércio Ltda. ("SDFLC"), a leading Brazilian producer of taste solutions for ice creams and desserts, in exchange for BRL 110 million (approx. US$ 33 million), less adjustments for debt and working capital, plus future consideration based on SDFLC’s future business performance. The purchase agreement includes an option for the purchase of the balance of shares beginning about two and a half years after the date of completion of the transaction at a price based on SDFLC’s business performance during this period. The transaction was completed upon signing and financed through bank debt.

SDFLC had sales over the 12 month period ending May 2017 of approximately BRL 72 million (approx. US$ 22 million) after achieving average annual growth of 17% over the past five years.

SDFLC was founded in 2001 in the city of Sete Lagoas in the Brazilian state of Minas Gerais and has a leading position in the market for taste solutions for ice creams and desserts in Brazil based on longstanding Italian tradition and technological specialization. The company provides its customers support in product R&D built on a full and high quality portfolio of solutions for ice creams and desserts based on natural ingredients and includes: diverse taste solutions, texture solutions, coatings and glazing, as well as a unique diversity of innovative functional solutions (low sugar, low fat, low calorie and non-allergenic).

SDFLC employs about 90 workers and serves around 2,250 customers in Brazil in the field of ice cream and desserts, including independent artisan ice cream makers, multinationals, food processing companies and leading dining chains, and this is by means of a sales and marketing network with wide-ranging professional knowledge and broad nationwide deployment. SDFLC has advanced and innovative R&D capabilities and proven abilities in developing innovative taste solutions for ice creams adapted to consumer demand and Brazilian tastes.

The activity of SDFLC is synergetic to a large degree with Frutarom's taste solutions activity, with emphasis on sweet flavors and the innovative taste solutions based on natural ingredients aimed at desserts, where Frutarom has a growing global infrastructure that has been strengthened and deepened based on the growing activity of Inventive (acquired by Frutarom in December 2015) in the Chinese and Southeast Asia market, and thanks to the diverse natural and innovative fruit-based solutions of Taura (acquired by Frutarom in May 2015). The acquisition of SDFLC allows Frutarom continued expansion of its global activity in natural sweet taste solutions along with the expansion and deepening of its activity and market share in Brazil and Latin America by leveraging SDFLC’s specialized know-how and technology as well as Frutarom’s expansive sales and marketing platform in the region in order to expand SDFLC’s activity into additional countries as well as capitalizing on the many cross-selling opportunities for Frutarom products among SDFLC customers.

In light of its rapid growth, SDFLC is currently in the process of building a new, modern 20 thousand square meter site that will include state-of-the-art R&D laboratories and an advanced automatic production platform to allow for doubling its production output without any additional workforce. Construction of the new site will be completed in 2018 at an investment of approximately US$ 6 million.

Brazil’s economy is the largest in Latin America and the ninth largest in the world, with GNP estimated at US$ 1.8 trillion1 and a market for food products estimated at US$ 140 billion2. The Brazilian ice cream market has grown over the past decade at an average annual rate of 7% with average annual consumption of approximately 1.3 million liters, which translates to 6.4 liters annual per capita consumption as opposed to 4.1 liters annual per capita consumption a decade ago and an average of 16.5 liters per capita annually in developed countries3.

Minas Gerais, the state where SDFLC’s production site is located, is Brazil’s second largest in population and ranks third in economic importance. The SDFLC site, near the city of Belo Horizonte, is situated in an area with an abundance of international industrial firms enjoying government incentives. Frutarom intends to continue expanding SDFLC’s activity significantly, leveraging SDFLC’s leading market position and the excess production capacity created upon completion of the new site, by means of Frutarom’s global resources along with the exploiting of synergies stemming from Frutarom’s activity in the Brazilian market, and with emphasis on cross-selling activity between the companies’ products and customers.

The acquisition of SDFLC is Frutarom’s third acquisition in the Brazilian market and its sixth in the Latin American market in the last five years. In 2012 Frutarom acquired the Brazilian company Mylner which specializes in sweet flavors for beverages and baked goods, as well as in natural flavors and herbal extracts. In 2013 Frutarom acquired Aroma in Guatemala that specializes in producing sweet flavors for beverages, dairy products, confectionery and snacks, in 2014 it acquired the natural flavors and colors division of Montana of Peru which produces natural flavors and colors for the food industry and has significant activity in Peru and in Chile, and in 2016 Frutarom acquired the Brazilian company Nardi Aromas, which specializes in the production of natural flavors and herbal extracts for the Brazilian beverages industry, and Piasa, Mexico’s leading local player in savory solutions. In addition, Frutarom has taken steps in recent years to expand its activity in Latin America on the basis of its local and global production infrastructure and R&D and marketing capabilities and by exploiting the synergies arising from its acquisitions. Today Frutarom has growing activity in most countries of the region and intends to continue expanding its activity in the region, both in Brazil, Latin America’s most important market, and in the other Latin American countries.

Mr. Vincenzo Simonetti, Mr. Roberto Leardini, Mr. Stefano Fioravanti, and Mr. Claudio Di Caro, SDFLC’s founders and managers, will continue managing and serving in their roles along with continuing on as shareholders in SDFLC.

Ori Yehudai, President and CEO of Frutarom Group, said: "The acquisition of SDFLC is the continuation of the implementation of Frutarom Group's rapid profitable growth strategy and the realization of its vision 'to be the preferred partner for tasty and healthy success.' This is an important strategic acquisition that provides Frutarom with significant reinforcement of its position in the Brazilian market, which is Latin America’s foremost market. SDFLC has a leading position in Brazil’s market of sweet taste solutions for ice creams and desserts which is based on longstanding tradition and know-how and cutting-edge technology, and we intend to continue expanding its activity by means of Frutarom’s global support and the exploiting of the many cross-selling opportunities, both by offering Frutarom’s broad portfolio of solutions to SDFLC customers in Brazil and by expanding SDFLC’s activities into countries in the region where Frutarom already has a sales and marketing infrastructure in place. Completion of construction on the modern new site will permit the doubling of SDFLC’s production capacity while supporting the further rapid growth in activity and exploitation of the abundant operational synergies with our existing activity in Brazil.

“We will continue working to expand our activity in Brazil and Latin America and other growing emerging markets where our growth engines are focused," said Mr. Yehudai. "The SDFLC acquisition is the fourth that Frutarom has made this year and Frutarom’s sixth in Latin America in the past five years, a period in which we have built a broad sales and marketing infrastructure in most Central and South American countries, supported by our local and global R&D and production activity. I am convinced that this infrastructure will support the continued rapid growth of our activity in Latin America both by means of organic growth and through additional acquisitions which we are evaluating. In recent years Frutarom has been implementing a strategy of geographic expansion in North America and in emerging markets (Asia, Africa, Central and Eastern Europe and South America) that exhibit higher rates of growth. The result of this strategy is that while Frutarom sales over the past 6 years have grown by a factor of 2.6, sales in the same period in emerging markets grew by a factor of 3.8 such that the percentage of sales in 2016 in emerging markets constituted 41% of total Frutarom sales compared with 27% in 2010.”

In conclusion, Mr. Yehudai said: "We are working on seeking out and executing additional acquisitions of companies and activities in our fields of activity, with special focus on high-growth markets and natural products in the field of taste and health, and we have a strong pipeline of potential strategic acquisitions. We will continue carrying out our rapid profitable growth strategy, which is based on profitable internal growth and strategic acquisitions, in order to achieve the targets we recently set: sales of at least US$ 2 billion with an EBITDA margin of over 22% in our core activities by the year 2020.”

About Frutarom:
Frutarom (LSE:FRUT) (TASE:FRUT) is a leading global company operating in the global flavors and natural fine ingredients markets. Frutarom has significant production and development centers on all six continents and markets and sells over 60,000 products to more than 27,000 customers in over 150 countries. Frutarom’s products are intended mainly for the food and beverages, flavor and fragrance extracts, pharmaceutical, nutraceutical, health food, functional food, food additives and cosmetics industries.

Frutarom, which employs more than 4,800 people worldwide, has 2 main core activities:

  • The Flavors Activity which develops, produces and markets flavor compounds and food systems;

  • The Specialty Fine Ingredients Activity, which develops, produces and markets natural flavor extracts, natural functional food ingredients, natural pharma/nutraceutical extracts, natural algae-based biotechnical products, natural food colors, natural substances for food protection, aroma compounds, essential oils, unique citrus products, natural gums and resins. The Specialty Fine Ingredients products are sold primarily to the food and beverages, flavor and fragrance, pharmaceutical/nutraceutical, cosmetics and personal care industries.

Frutarom’s products are produced at its plants in the US, Canada, the UK, Ireland, Switzerland, Germany, Belgium, Italy, Spain, Slovenia, Russia, Poland, Turkey, Israel, South Africa, China, India, Brazil, Guatemala, Peru, Chile, Brazil and New Zealand. The Company’s global marketing organization encompasses branches in Israel, the US, Canada, the UK, Ireland, Switzerland, Germany, Austria, Slovenia, Belgium, the Netherlands, Denmark, France, Italy, Spain, Hungary, Romania, Russia, Ukraine, Poland, Kazakhstan, Belarus, Turkey, Brazil, Guatemala, Costa Rica, Peru, Chile, South Africa, China, Japan, Hong Kong, India, Indonesia and New Zealand. The Company also works through local agents and distributors throughout the world. For further information, please visit our website at: www.frutarom.com.


1 According to figures from the World Bank for 2015
2 According to figures from the Brazilian Food Processors Association for 2015
3 According to the Brazilian Ice Cream Industries’ Association


            

Contact Data