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Company Overview January 2015
DISCLAIMER
This presentation includes statements data, forecasts, goals and Company plans that are "forward-looking statements“, as defined in the Securities Law - 1968, whose occurrence is not certain and which are not solely in the Company's control. These forward-looking statements are included, inter alia, in discussions of strategy, objectives, goals, plans, events, future intentions or other information relating to future events or issues whose occurrence is not certain.
By their nature, forward-looking statements involve risk and uncertainty. Whether the forward looking information occurs or not is affected, inter alia, by risk factors characteristic to the Company's operations and developments in the general environment and external factors which impact the Frutarom Group and its area of activities.
This forward looking information could include facts and data based on the Company's subjective assessment, including with regards to the current status of the Company and its business, the current situation in the industry in which the Frutarom Group operates, macro-financial facts and information, all as are known to the Company on the date on which this presentation was prepared, some of which were given to the Company by external sources, the content of which was not independently examined by the Company, and therefore the Company is not responsible for their verity.
This presentation must be read together with the Company's periodic and immediate reports, and was not meant to replace the need for study of reports the Company has published, including, inter alia, the Company's periodic report for 2013, published on March 2014, and the Company's periodic reports subsequently published. These reports could include, inter alia, updates to the information regarding the Company's activities or of the forward looking statements appearing in this presentation.
Subject to the requirements of applicable law, the Company does not intend to update any industry information or forward-looking statements appearing in this presentation, and is not required to publish any additional presentations for its shareholders in future.
It is to be emphasized that the financial estimations and the pro-forma figures included in this presentation are based on figures which were not audited or reviewed by an auditor and therefore the actual results may differ from these financial estimations.
2
Frutarom’s Foundations
Founded in 1933, Frutarom combined the cultivation of aromatic plants and flowers with the extraction and distillation of flavors, fine ingredients and essential oils.
3
Frutarom - A Leading Fast Growing Global Flavor and Fine Ingredient House
4
Global company Broad product
portfolio Public company
Financial success since 2000
• Sales in 150 countries
• 15,500 customers • A Top 10 flavor
house
• 31,000 products • 4,000 raw
materials • Innovative
pipeline
• Listed on London & TLV Stock Exchanges
• From $13M to approx. $1. 5B market cap
• 9.8x growth in sales (CAGR 19.2%)
• 14.9x growth in EBITDA
• 17.7x growth in net profit
10 81 108
197 287
425 518
618
792
0
200
400
600
800
1000
Renenue, $M
*Pro-forma basis - had the acquisitions made in 2013 and the beginning of 2014 been consolidated starting from January 1, 2013
Frutarom - A Global Company
5
Accelerated growth – through organic and strategic acquisitions
Sales office Acquisition
2006 2007 2009 2012 1990-2000 2003 2004 2011 2001-2002 2005 2013
1996 Tel Aviv stock exchange
IFF FS
Adumim
Raychan
Rieber
EAFI
Savoury Flavours
Oxford
Belmay
Jupiter
FSI Corona
Nesse
CH Hansen DE
CH Hansen IT
Etol
Mylner
Aromco
FSI OH
Acatris
Flachsmann Tohar
Meer
Rayner HK F&F
CPL Aroma Flavour Key
Baltimore
Botanicare Kunshan
AM Todd
London stock
exchange
Russia
Canada
Turkey
France Mexico
Ukraine
Poland
Kazakhstan
Hong Kong
Costa Rica
Czech Rep.
S. Africa
India
Brazil
Gewurzmuller
Abaco
Rad
JannDeRee
PTI
Aroma
Hagelin
2014
Citrasource
Montana
Vitivia
Sales & Marketing – 82 Offices
Production – 36 Sites
R&D – 43 Labs
Frutarom - A Global Company We provide our customers with global and local support
Belgium
Brazil
China
Denmark
France
Germany
India
Indonesia
Israel
Italy
Kazakhstan
Mexico
Netherlands
Norway
Poland
Serbia
Singapore
Slovakia
Slovenia
South Africa
Turkey
Ukraine
UK South
UK North
Corona, CA New Jersey
Cincinnati, OH Switzerland
Moscow Saint Petersburg
Perm Saratov
Hong Kong
Costa Rica
Georgia
Guatemala
Novosibirsk Belarus
Moldova
Florida
Peru
Chile
6
7
Our Employees are our Key Asset
Employee by Region Employee by Function
~3,000 employees worldwide
8
Frutarom - A Profitable Growth Story (Sales, EBITDA, Net Profit, USD M)
1996 Tel Aviv stock exchange
IFF FS
Gewurzmuller
Adumim
Raychan
Rieber
EAFI
Savoury Flavours
Oxford
Balmey
Jupiter
FSI Corona
Nesse
CH Hansen DE
CH Hansen IT
Etol
Mylner
Aromco
FSI OH
Acatris
Flachsmann
Abaco
Tohar
Meer
Rayner HK F&F
CPL Aroma Flavour key
Baltimore
Botanicare Kunshan
AM Todd
Rad
London stock
exchange
Russia
Canada
Turkey
France Mexico
Ukraine
Poland
Kazakhstan
Hong Kong
Costa Rica
Czech Rep.
S. Africa
India
Brazil
JannDeRee
PTI
AROMA
Heglin
Net Profit 2000-2013
X17.7
EBITDA Profit 2000-2013
X14.9
Sales 2000-2013
X9.8 108
81 10
197
287
425
518
618 792*
4 6
18
30 33
42
52
71*
9 14
32
49
66
80
100
134*
1990 2000 2002 2004 2006 2009 2011 2012 2013
*Pro-forma basis - had the acquisitions made in 2013 and the beginning of 2014 been consolidated starting from January 1, 2013
Estimated Sales of Flavor US$ M
A Top-Ten Flavor House
Source: Companies’ Publications, Leffingwell & Associates, Reuters, Frutarom’s estimations * Sales in Core Business on a pro-forma basis - had the acquisitions made in 2013 and the beginning of 2014 been consolidated starting
from January 1, 2013 9
+700 smaller
companies
Continued Focus on Achieving Strategic Goals
Sales Grew From $10M at 1990 to $792M at 2013*
Accelerating Growth In Emerging Markets.
Fastest growing markets
Expanding Market Share In The US.
World’s biggest flavor market
Supply Chain Optimization.
Supported also by acquisitions
Accelerated Profitable Growth
Solid Cash Flow
EBITDA Grew From $1M at 1990 to $134M at 2013*
10
Constantly improving product mix.
Towards more profitable segments
*Pro-forma basis - had the acquisitions made in 2013 and the beginning of 2014 been consolidated starting from January 1, 2013
Accelerated Growth and Market Share in Emerging Markets
Asia
Central & South America Africa
Central and Eastern Europe
• Acquired Etol in Slovenia and PTI in Russia
• One of the only global players with major production sites in Russia
• Market leadership in Central and East Europe
• Cross selling and optimization opportunities
• Fast growing operation in South Africa, reinforced by JannDeRee acquisition
• Enhanced R&D and sales force in fast growing markets (Kenya, Nigeria and others)
• Building state-of-the-art manufacturing facility
• Expanded R&D and sales force in China, Indonesia, Philippines, Thailand, Vietnam, Sri Lanka
• Setting up flavor operation in India
• Building a state-of-the-art plant in China with both savory and sweet flavors capabilities
• Evaluating strategic acquisition opportunities
• Acquired Mylner in Brazil, Aroma in Guatemala and Montana in Peru and Chile
• Set up an independent operation in Costa Rica and Mexico
• Evaluating strategic acquisition opportunities
11
Expanding Flavors’ Market Share in the US
USA
Focus on the US as a key strategic market
Fast, above market rate, internal growth
Additional meaningful foothold through the
acquisition of Hagelin in 2013
• Lucrative beverage market
• Diversified customer base
• Technological know how
Strengthening US presence through 2
strategic acquisitions
• Flavor Specialties in the West Coast in 2009
• Flavor Solutions in Cincinnati in 2011
12
13
3x growth in emerging markets**
31% growth
in the BRIC
countries*
2x growth in the USA**
Growth Rate
Growing Share of Emerging Markets and the USA
Sales by Geography
* Pro-forma basis - had the acquisitions made in 2013 and the beginning of 2014 been consolidated starting from January 1, 2013 ** 9 months to Sep 2014 compared to 9 months in 2010
122 (27%)
222 (36%)
355 (45%)
229 (51%)
262 (42%)
272 (34%)
41 (9%)
66 (11%)
86 (11%)
60 (13%)
68 (11%)
79 (10%)
2010 2012 2013 Proforma
Emerging Markets Western Europe USA ROW
*
Fine Ingredients ~19%* of sales
Taste Solutions ~72%* of sales
• Unique, high quality creation of sweet and savory flavors for food and beverage products
• Expertise in local and global tastes • Operational flexibility and local global
supply chain • Value-added functional savory solutions
for the food industry (snacks, meat, fish, organic, and culinary segments)
• Comprehensive sweet and savory food systems
• Unique technologies for fruit, spice, vegetable, meat and fish preparations
• Specialty botanical extracts, distillates, essential oils and aroma chemicals
• Innovative, science-based health ingredients for phyto-pharmaceuticals, nutraceuticals, dietary supplements, functional foods, cosmetics, and personal care
• Supporting the growing demand for health, wellness and beauty
• Food protection solutions
• Natural Colors
14
Trade & Marketing, ~9%* of sales Strengthening Frutarom’s partnership and offering to customers
Growing the Core Business
*Pro-forma basis - had the acquisitions made in 2013 and the beginning of 2014 been consolidated starting from January 1, 2013
We share the…
Passion for Taste & Health
Taste Solutions Fine Ingredients
We develop tailored solutions combining excellent
taste with health and functionality all under one roof 15
Customer in the Center
Customer = Partner
Sweet & Savory Flavors
Functional Ingredients
Health Natural health ingredients,
natural pharmaceutical/ nutraceutical extracts,
natural algae-based biotechnical products
Food Systems
Beverage Base
Natural Color
Solutions
Natural Taste
Ingredients Natural flavor
extracts, specialty oils
Food Protection Anti-oxidants
Savory Solutions
16
Consumers Trends Health, Wellness & Functional Food 67% of consumers state they attempt to consume healthier food and beverages either "all" or "most" of the time, but unwilling to forgo taste even for health…
Source: DATAMONITOR 2011 REPORT, The NPD Group, 2011
Growth drivers
Aging population and Rising obesity
Rising Consumer Awareness
Lifestyle & Income
Opportunities
Positive nutrition and functional foods
Convenience and processed food
Avoidance products ("Free-from“/"zero“) or Moderation Products with "diet“, "low”, "less"
Shorter Life Cycle of new Launches Innovation
Natural & Healthy Natural products and clean label
17
Frutarom provides Novel and Natural Health & Taste solutions 18
Key Market Drivers
Health & Wellness
Reduced fat, calories & salt
Functional Food
Products with Health properties
Cost Reduction
Natural and Clean Label
Convenience Ready Meals
Innovation
27 45
187
297370
457
571
2000 2002 2006 2009 2011 2012 2013*
18.7%17.5%
16.5%
20 35
142
220270
346 355
442
2000 2002 2006 2009 2011 2012 2013 2014
19.0%
20.4%
18.1%17.1%
Flavors - Most Profitable Activity Growing Fast
19
Full Year
• Above average market growth rates • Increasing market share in Emerging Markets - Latin America, Asia, Central
and Eastern Europe, Africa • North America flavor sales grew by more than 5x times since 2010**
9M 2014 (Revenues in US$ M)
* Pro-forma basis - had the acquisitions made in 2013 and the beginning of 2014 been consolidated starting from January 1, 2013 ** based on sales in 9M of 2014 compared with 9M of 2010
72% 32%
(Revenues in US$ M)
% of total sales
EBITDA Margin
EBITDA Margin
Fine Ingredients – Improved profitability
20
EBITDA Margin
• Enhanced product mix
• Focus on Natural high added value taste and health fine ingredients
• New innovative products successfully launched
Improvement was driven by
14.7%
Growing Mid-Sized Food & Beverage Market Over 65% of Market Controlled by Mid-Sized and Local Companies
21
• New mid-sized/local companies emerging
• Private label
• Developing markets
• Service expectations
• Fragmented market
(% of Market Share) The Global Food Market
*Source: Feb, 2014 Datamonitor, Euromonitor and Frutarom’s estimations
F&F Market Fragmented But Consolidating
*Source: Leffingwell & Associates, company’s estimations
(% of Market Share)
Market Share by size
2013 F&F Sales*
22
• Large number of small niche companies with limited service capability and regional focus only
• Few mid-sized players with both regional strength and global platform
• Large F&F players with full service platform, focused on top multinational customers
2013 Market Size
$24bn
Private Label – Mid-Sized and Local
8-in-10 of
European consumers said that after the
economy improves they would not stop purchasing private
label(3)
1-in-4 of European
consumers said they will buy a larger
amount of private label brands than
currently(3)
In the USA, 39%
of consumers indicating plans to
increase their purchase of private
label products(2)
Private labels expected to
hold 50% of the global
food market by 2025(1)
23 (1) Source: Rabobank report: Private label vs. Brands: An Inseparable Combination, February 2011 (2) IRi: Private Label, Balancing Quality and Value, NOVEMBER 2013; (2) PLMA – Industry News 2014 (4) Source: The Nielsen Company, August 2009;
2009 Private label products held
20.4% of the food sector worldwide, with
European market penetration highest in the sector2 achieving
7.4% global growth(4)
Source: ACNielsen, industry insights, 2008, Private Label: Who will win the battle of the shelf? Branded or private label products? Sep 2009, ACNielsen, The global Staying Power of Private Label, Aug, 2010
24
50% by
2025
Private Label – Mid-Sized and Local
Frutarom’s Strategy: Clear Focus Going Forward Profitable Internal Growth
Customer Focus
Mid-sized and local Private label Multinational
Market Focus
Developed markets (Europe and USA) Emerging markets (e.g. Asia, Central & South America, Central
and Eastern Europe, Africa)
Product Portfolio
Natural Flavor solutions (extracts, fruit bases specialty essential oils)
Natural health solutions /functional food ingredients Natural customized color solutions Comprehensive, integrated solutions Cost reduction solutions
Core Competencies
R&D and innovation – internal and external Efficiencies, scale and synergies – cross selling Experienced global management Customer-driven organization
25
39 successful acquisitions
Strict acquisition criteria: Highly valuable and experienced
employees
Major synergies and cross-selling
potential
Additional unique products and
technology
Positive impact on EPS
Focus on integration execution
Optimization of cross selling
opportunities
Optimization and harmonization
of resources
Proven Acquisition Track Record
26
27
Recent Acquisitions in Emerging Markets and the US
• Strengthening market position in South America
• Complementary Colors activity
Montana Peru & Chile
PTI Russia & CIS
• Strengthening Leadership in East Europe
• Savory Solutions leadership
Aroma Guatemala
• Strengthening market position in Central America
Hagelin USA
• Strengthening market position in the US & EM
• Expertise in beverages
Strong management, R&D, sales and operational force
Cross selling opportunities
Leverage operational efficiencies
Opportunities for additional rationalization plans and improved margins
Continued implementation of rapid profitable growth strategy
CitraSource USA
• Strengthening Citrus capabilities and leadership
• Presence in Florida – world center for citrus
* Agreement signed on 23 Dec 2014, closing is in process
Vitivia* Slovenia
• Strengthening the health, natural colors & food protection activities
• Strong R&D
Ongoing Projects for Resource Optimization Leveraging economy of scale
Rationalizing Global R&D
Resources - CPM
Global Purchasing at countries of
origin
Production sites integration
Global Logistics integration
Sales force integration
Production Sourcing & Purchasing
Logistics Sales &
Marketing R&D
• Capitalizing on the operational synergies enhanced by the recent acquisitions;
• Other projects for optimization and margin improvement under way;
• Building and strengthening the global purchasing organization; 28
Gross Profit
EBIT8.7 14.4 17.024.218.6
26.3 29.439.0
135.3
157.1161.0
210.8
70.0
90.0
110.0
130.0
150.0
170.0
190.0
210.0
-10.0
10.0
30.0
50.0
70.0
90.0
110.0
130.0
150.0
Q3 2011 Q3 2012 Q3 2013 Q3 2014
Net Income EBITDA Sales
% EBITDAcore*
13.7%
16.7%18.3%
18.5%
20.2%
% EBITDA
19.1%17.3%
13.8%
* Core Business includes Flavor and Fine Ingredients activities
29
Frutarom Presents Strong Q3 of 2014
Reached $210.8 M
Revenues grew 30.9%
5.7% YoY Pro-forma growth1
(net of currency effect)
Reached $ 81.6 M
40.8% gross margin in Core Business*
Reached $ 39.0 M
20.2% EBITDA margin in Core Business*
Reached $24.2M
11.5% net margin
Gross Profit
EBITDA
Growth
Revenues
1Pro- forma growth - assuming acquisitions performed in 2013 had been consolidated as of January 1, 2013 and that CitraSource, which was acquired during the first quarter of 2014, had been consolidated as of March 1, 2013
Net Profit
($M)
Results driven by: • Organic growth above average market growth rates • Successful integration of the acquisitions • Improved product mix • New acquisitions that are already contributing to sales and profits and expected further contribute to growth
and margin improvement
26.1 29.338.4
Q3 2012 Q3 2013 Q3 2014
17.3%19.1%
20.2%
57.4 61.977.7
Q3 2012 Q3 2013 Q3 2014
38.1%40.3%
40.8%
30
Constantly Improving Core Business Margins & Profits
• Organic growth • Improved product mix • Recent acquisitions
Major contributors to growth in Profit & Profitability :
• Successful integration of the acquisitions • Exploiting operational efficiencies
($M, Core business) ($M, Core business) ($M, Core business)
Margin Margin Margin
19.3 22.430.5
Q3 2012 Q3 2013 Q3 2014
12.8%14.6%
16.0%
Q3 Gross Profit Q3 EBITDA Q3 EBIT
Gross Profit
EBIT
34.1 41.4 48.767.962.3
79.8 87.7114.5
386.9
473.1 481.9
617.3
100.0
200.0
300.0
400.0
500.0
600.0
0.0
50.0
100.0
150.0
200.0
250.0
300.0
YTD 2011 YTD 2012 YTD 2013 YTD 2014
Net Income EBITDA Sales
% EBITDAcore*
16.1%
16.9% 18.2%
18.5%
20.1%
% EBITDA
18.9%17.3%
16.2%
* Core Business includes Flavor and Fine Ingredients activities
31
Frutarom Presents Strong 9 Months of 2014
Reached $617.3 M
Revenues grew 28.1%
4.7% YoY Pro-forma growth1
(net of currency effect)
Reached $241.0 M
41.1% gross margin in Core Business*
Over $ 114 M
20.1% EBITDA margin in Core Business*
Reached $67.9 M
11.0% net margin
1Pro- forma growth - assuming acquisitions performed in 2013 had been consolidated as of January 1, 2013 and that CitraSource, which was acquired during the first quarter of 2014, had been consolidated as of March 1, 2013
Gross Profit
EBITDA
Growth
Revenues
Net Profit
($M)
Results driven by: • Organic growth above average market growth rates • Successful integration of the acquisitions • Improved product mix • New acquisitions that are already contributing to sales and profits and expected further contribute to growth and
margin improvement
78.9 87.2112.8
YTD 2012 YTD 2013 YTD 2014
17.3%18.9%
20.1%
58.3 65.9
88.7
YTD 2012 YTD 2013 YTD 2014
12.8%14.3%
15.8%
172.6 184.6230.5
YTD 2012 YTD 2013 YTD 2014
37.9%39.9%
41.1%
32
Constantly Improving Core Business Margins & Profits
• Organic growth • Improved product mix • Recent acquisitions
Major contributors to growth in Profit & Profitability :
• Successful integration of the acquisitions • Exploiting operational efficiencies
9M Gross Profit 9M EBITDA 9M EBIT
($M, Core business) ($M, Core business) ($M, Core business)
Margin Margin Margin
Profitable Growth Generates Solid Balance Sheet & Cash Flow from Operations
• $ 413 M - Cumulative cash flow since 2009 to the end of Sep 2014
Balance Sheet
• Net debt (30.09.14) - USD 165.7M
• Equity (30.09.2014) - USD 546.7 M
• Net Debt/EBITDA –
• Currently 1.16x (based on LTM EBITDA)
• Historically below 2x
33
($M)
Cumulative Cash Flow
Positive Outlook for 2015
Profitable internal growth
Focus on innovative natural healthy product mix
Successful integration of the recent acquisitions
Additional projects to improve efficiency and merge activities and operations
Strengthening & leveraging global purchasing
Strong acquisitions pipeline
34
* EPS LTM Sep 2014
Above-Industry Organic Growth
Frutarom’s Strategy
Proven Acquisition
Track Record
Margin Expansion
35
Achieving $1 billion in revenues by 2016 along the road to further growth
Continue successful strategy of combining rapid profitable organic growth with strategic acquisitions
Reaching a stepping stone of 20% EBITDA in our core business by 2016, given current product mix
Frutarom’s Vision
36
To Be The Preferred Partner For Tasty And Healthy Success
