passion for taste & healthaug 17, 2017 · above market growth in north america & emerging...
TRANSCRIPT
Company OverviewAugust 2017
Passion for Taste & Health
DISCLAIMER
This presentation includes statements data, forecasts, goals and Company plans that are "forward-looking statements“, as defined in theSecurities Law - 1968, whose occurrence is not certain and which are not solely in the Company's control. These forward-looking statementsare included, inter alia, in discussions of strategy, objectives, goals, plans, events, future intentions or other information relating to futureevents 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 factorswhich 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 thecurrent status of the Company and its business, the current situation in the industry in which the Frutarom Group operates, macro-financialfacts and information, all as are known to the Company on the date on which this presentation was prepared, some of which were given tothe Company by external sources, the content of which was not independently examined by the Company, and therefore the Company is notresponsible 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 forstudy of reports the Company has published, including, inter alia, the Company's periodic report for 2016, published on March 2017, andthe Company's periodic and immediate reports subsequently published. These reports could include, inter alia, updates to the informationregarding 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-lookingstatements 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 werenot audited or reviewed by an auditor and therefore the actual results may differ from these financial estimations.
A Leading Fast Growing Global Flavor & Fine Ingredient House
Global Presence
Public Company
Financial Success
2000-2016
Broad Product Portfolio
• A Top 10 flavor house • Sales in over 160
countries• Over 30,000 customers
• 60,000 products• Over 6,000 raw
materials• Innovative pipeline
• Listed on London & TLV Stock Exchanges
• From $13M to approx. $4 B market cap
• 14x growth in sales (CAGR 18%)
• 24x growth in EBITDA*
• 35x growth in Net Profit*
* Excluding non-recurrent expenses** Assuming all acquisitions made and completed since 2016 were consolidated as of 1.7.2016
Global Expansion throughout the years
2000-2016 Sales CAGR of 18%Amco
Wiberg
2016
Sales office
Acquisition
2006 2007 2009 20121990-2000 20112001 -2004 2013-20142005
1996 Tel Aviv stock
exchange
IFF FS
Adumim
Raychan
Rieber
EAFI
SavouryFlavours
Oxford
Belmay
Jupiter
FSI Corona
Nesse
CH Hansen DE
CH Hansen IT
Etol
Mylner
Aromco
FSI OH
Acatris
FlachsmannTohar
Meer
RaynerHK F&F
CPL Aroma
FlavourKey
Baltimore
Botanicare
Kunshan
AM Todd
Russia
Canada
Turkey
France
Mexico
Ukraine
Poland
Kazakhstan
Hong Kong
Costa Rica
Czech Rep.
S. Africa
India
Brazil
Gewurzmuller
Abaco
Rad
London stock
exchange
JannDeRee
PTI
Aroma
Hagelin
CitraSource
Montana
2015
Ingrenat
Food Blenders
Sonarome
BSA
Taiga
Foote&Jenks
Scandia
Vitiva
Nutrfur
Inventive
Taura
Grow
Algalo
ExtraktChemie
Redbrook
NardiAromas
Piasa
2017
Unique Flavors
Rene Laurent
WFF
F&E
SDFLC
Global Presence
77 R&D laboratories
100 Sales & Marketing offices
62 Production sites
A Profitable Growth Story
* Excluding non-recurrent expenses** Assuming all acquisitions made and completed since 2016 were consolidated as of 1.7.2016
Our Employees are the Key to Our Success
5,000 employees worldwide
Goals & Strategy
Continue Margin Expansion Above-industry Growth
$2 Billion in revenues in 2020
Above 22% EBITDA in our core business by 2020
Geographic Focus
Accelerate growth in key Emerging
Markets
Customer Focus
Local Mid Size & Private Label
Innovative solutions to MNCs
Leverage Cross-selling
Opportunities
Continue Acquisitions Strategy
*
* Given current product mix
Unique Offering
Natural & Clean Label
Taste & Health
More profitablesegments
Supply Chain Optimization
Integration ofoperations
Global Purchasing
Expand market share in North America
Frutarom’s Unique Offering
Growing Core Business
• 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 forhealth, wellness and beauty
• Natural Food protection solutions
• Natural Colors
• Supporting the growing demand forhealth, wellness and beauty
• 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
Expands offering to enhance customer partnership
Sharing the
Passion for Taste & Health
We develop tailored solutions combining excellent tastewith health and functionality all under one roof
Taste Solutions
Fine Ingredients
Strategically Positioned to meet Market Trends
Cost Reduction
Creation through Science and Innovation
Convenience Ready Meals
Natural Taste
Solutions
Natural and Clean
LabelFunctional
FoodProducts with
Healthproperties
Health & Wellness
Reduced fat, calories & salt
NaturalFood
Protection
NaturalColors
Annatto Plantations in LATAM Algae Farms in Israel
Oat in Poland
Rosemary Plantations in Spain
Harpagophytum (Devil’s claw) in Namibia Fenugreek in India
Seeds used for natural food coloring Developing cosmetics, natural food colors and food supplements unique solutions
Rosemary, as powerful natural anti-oxidant for food & beverages
Extract helps to improve overall mental fitness/ enhances cognitive function
Extract, as a natural and safe alternative topharmaceutical heartburn medications
Used for the production of EFLA®pharmdevil’s claw extract, an API for joint health
Frutarom’s Natural Offering: Fully Integrated Solutions -Backward integration projects with farmers
Managing Fully Traceable Value Chain, from local agriculture to final applicationGlobally
Agriculture R&D Plants extraction & bioscience
Formulation Applications Global value chain
Frutarom’s Natural Offering: Fully Integrated Solutions
Accessibility to strategic raw materials enhances our Affordable Natural Offering of Flavoring and Health
Ecofriendly practices in agricultural and production processes as core part of our Sustainability Approach
Customer=
Partner
Sweet &Savory Flavors
SavorySolutions
Natural Food
ProtectionNatural Colors
BeverageBase
Starter Culture
Natural Health
Solutions
Natural Fruitbased
Ingredients
Food Systems
Natural Taste Ingredients
AlgaeBased
Ingredients
Herbal Extracts
Citrus Specialties
Natural Anti-Oxidants
Culinary
Functional Ingredients
Customer in the CentreA Unique product offering
Frutarom’s Growth Strategy
Flavor Division Growing Faster than Market While Improving Profit & Profitability
Major contributors to growth in Profit & Profitability :
• Above market organic growth rate• Successful integration of recent acquisitions• Exploiting operational efficiencies
FlavorsEBITDA %*
30% of sales
74% of sales
Flavor Activity Trends• Higher growth rates• Higher profitability • Margin improvement
Sales, $M
* Net of non-recurrent expenses** As of Q2/2017
**
FI Division – Accelerated Growth with Focus on Specialty Natural Offering
Major contributors to growth in Profit & Profitability :
• Expanding offering into growing fields • Successful integration of recent acquisitions• Exploiting operational efficiencies
FIEBITDA %
~20% of sales
Fine Ingredient Activity Trends• Double digit growth rate in natural colors
and natural food protection• Increased capacity & margin improvement• Backward integration program
Sales, $M
* As of Q2/2017, net of non-recurrent expenses
18.5%*
Above Market Growth in North America & Emerging Markets
4.6x growth in Emerging
Markets
4.3x growth in North America
9.3x growth in Flavors
North America
*Assuming all acquisitions made and completed since 2016 were consolidated as of 1.7.2016
Frutarom’s Strategy: Clear Focus Going Forward
Mid-sized and local Private label Multinational
Developed markets (Europe and USA) Emerging markets (Asia, LATAM, Central and Eastern Europe, Africa)
Natural Flavor Solutions (extracts, fruit bases specialty, essential oils) Natural Health Solutions /functional food ingredients Natural Color Solutions Natural Solutions for Food Protection Cost reduction solutions
R&D and innovation – internal and external Efficiencies, scale and synergies – cross selling Experienced global management Customer-driven organization
CustomerFocus
GeographicReach
Product OfferingIntegrated solutions
Core Competencies
Profitable Internal Growth
Strict Acquisition Criteria: Highly valuable and experienced
management and employees
Acquiring new customers
Market share gain
Product portfolio expansion
R&D capabilities and unique technologies
Capacity expansion
Cost reduction opportunities
Positive impact on EPS
Frutarom’s Strategy: Clear Focus Going Forward
Focus on Integration Execution Retaining Management and Customers
Cross Selling Opportunities
Optimization & Harmonization of Resources
Global Knowledge Sharing
Operational Streamlining
Cost Reduction and savings
Proven Acquisition Track Record of 62 Successful Acquisitions
24 companies acquired since the beginning of 2015
5 companies acquired since the beginning of 2017
Margin Improvement Accelerated Growth
Value Creation
Realizing Strategy through Acquisitions
Additional improvement in margins
Strong management, R&D and sales Cross-selling opportunitiesLeveraging Synergies Optimization & Savings
Geographic Focus
Food protection Natural ColorsHealth Ingredients
TauraBelgium, New Zealand, AustraliaStrengthening market position in Natural Fruit-Based Ingredients and specialty solutions
Scandia Citrus• Strengthening market
position in the US• Specialty Citrus solutions Expertise
CitraSource• Strengthening Citrus
capabilities & leadership• Presence in Florida – World
Center for Citrus
Inventive China
Strengthening market position in Southeast AsiaAlgalo Israel
Biotechnology startup for Algae-Based products
Grow USA
Biotechnology products for the supplement and nutraceutical market
Natural & Healthy
North America Emerging MarketsHagelin• Strengthening market position
in the US and EM• Expertise in Beverages
CitraSource• Strengthening Citrus
capabilities & leadership• Presence in Florida – World
Center for Citrus
BSA Canada , India• Strengthening savory position
in North America and India
Scandia Citrus• Strengthening market position
in the US• Expertise in specialty Citrus
solutions
WibergUSA, Canada• Strengthening savory position
in North America
PTI Russia & CIS• Strengthening leadership position
in Eastern Europe • Savory solutions leadership
Amco Poland
Strengthening savory solutions leadership in Eastern Europe
Sonarome India
Strengthening market position in India and AfricaInventive China
Strengthening market position in Southeast AsiaNardi Aromasbeverage flavoring in Brazil
Aroma Guatemala
Strengthening market position inCentral America
VitivaSlovenia
Montana FoodPeru & ChileStrengthening market position in LATAM
Montana FoodPeru & ChileStrengthening market position in LATAM
Continuing to improve product mix and strengthening position in Health & Wellness
IngrenatSpainFood protection Natural Colors
NutrafurSpecialty natural plant extracts for food, health and food protection
Extrakt ChemieNatural extracts for Pharma
PiasaSavory solutions leadership in Mexico
Unique Flavors WFF Vietnam
S. Africa
SDFLC Brazil
Resource Optimization
Several projects underway for optimization and margin improvement, including:
Reorganization of the production infrastructure of the Savory business in Europe following the Wiberg acquisition(Flavors Activity) is almost completed and will yield annual savings of over US 12M, part of which are already startedto be seen in H1 2017 and the balance will be gradually reflected during the course of H2 2017
Streamlining of the global production resources in the field of natural plant extracts (Specialty Fine IngredientsActivity) which is planned to yield annual savings of US$ 6M, to be reflected towards the end 2017
The projects are advancing successfully and according to plan with US$ 20-22M expected total operational savingson an annual basis vs Frutarom’s Q2/2016 cost structure, that are partly already reflected in H1 2017, and the rest tobe reflected gradually during the course of 2017t to be reflected gradually during the course of 2017
Building and strengthening the global purchasing organization will contribute to improved competiveness, profits and profitability
Global Purchasing from countries of
origin
Rationalizing global R&D resources
Sales force integration;Cross-selling opportunities
Leveraging economies of scale
R&D Sales & Marketing Production Logistics
Sourcing &Purchasing
Global logistics integration
Production sites integration
Frutarom’s Q2/2017 & H1/2017 Results
Q2/2017 KPI’s -Continued Accelerated Growth - Record Revenues and Profits
Revenues - $343.6M
Flavor Business approx. 74% of Revenues
Growth - Sales Growth - 14.4%
Sales YoY Growth – 6.8% (on LFL basis)*
Core Business YoY Growth – 7.6% (on LFL basis)*
Flavors YoY Growth – 6% (on LFL basis)*
Specialty Fine Ingredients YoY Growth – 14.3% (on LFL basis)*
Gross Profit - $132.6M*
13.5% YoY Growth*
40.4% Core Business Gross Margin*
EBITDA - $68.1M*
18.4% YoY Growth*
21.2% Core Business EBITDA Margin*
Net Income - $38.1M*
13.1% YoY Growth*
11.1% Net Margin*
* Sales on a constant currency and pro-forma basis assuming the acquisitions performed and completed in 2016 had been consolidated on January 1, 2016, and the acquisitions performed in 2017 had been consolidated in 2016 according to their date of acquisition; Gross Profit, EBITDA, Net income, their growth rates and profitability margins are net of non-recurrent expenses which reduced each of the reported Q2/2017 Gross Profit by 0.5M$, Operating Profit and EBITDA by 1.2M$ and the Net Income by 0.9M$, and on a constant currency basis.
27.533.7
38.142.9
57.5
68.1
218.5
300.2
343.6
Q2 2015 Q2 2016 Q2 2017
Net Income* EBITDA*
H1/2017 KPI’s -Continued Accelerated Growth - Record Revenues, Profits and Cash Flow
Revenues - $646.1M
Flavor Business approx. 73% of Revenues
Growth - Sales Growth - 15.8%
Sales YoY Growth – 6.1% (on LFL basis)*
Core Business YoY Growth – 7.1% (on LFL basis)*
Flavors YoY Growth – 6.3% (on LFL basis)*
Specialty Fine Ingredients YoY Growth – 10.8% (on LFL basis)*
Gross Profit - $249.1M*
16.4% YoY Growth*
40.0% Core Business Gross Margin*
EBITDA - $124.7M*
19.0% YoY Growth*
20.5% Core Business EBITDA Margin*
Net Income - $72.5M*
20.6% YoY Growth*
11.2% Net Margin*
Cash Flow From Operations - $75.4M*
37.5% YoY Growth*
* Sales on a constant currency and pro-forma basis assuming the acquisitions performed and completed in 2016 had been consolidated on January 1, 2016, and the acquisitions performed in 2017 had been consolidated in 2016 according to their date of acquisition; Gross Profit, EBITDA, Net income, their growth rates and profitability margins are net of non-recurrent expenses which reduced each of the reported H1/2017 Gross Profit by 1.3M$, Operating Profit and EBITDA by 2M$ and the Net Income by 1.6M$, and on a constant currency basis.
49.1
60.172.579.8
104.8
124.7
412.7
558.0
646.1
H1 2015 H1 2016 H1 2017
Net Income* EBITDA* Sales
Solid Balance Sheet & Cash Flow from Operations
Cash Flow
• $902M - Cumulative cash flow since 2000
• H1/2017 - $75.4M YoY growth of 37.5%
Balance Sheet
• Net debt (30.06.17) - $512M
• Equity (30.06.17) - $769M
• Equity Ratio1 at approx. 43%
• Leverage Ratio2 at approx. 28.6%
• Net Debt / EBITDA3 ratio = ~2
Cumulative Cash Flow From Operations (M$)
1 Equity ratio = Total equity / total assets2 Leverage ratio = net financial debt / total assets3 LTM adjusted Pro Forma EBITDA
Positive Outlook for 2017 & 2018 and Onwards
Recent Acquisitions
Strategy
Financial Strength
Announced 38 acquisitions since 2011 and 24 acquisitions since the beginning of 2015
13 companies acquired since the beginning of 2016 for ~330M$
5 companies acquired since the beginning of 2017
Cross-selling will contribute to improved accelerated growth of the combined activities
Operational efficiencies and synergies from successful integration of acquisitions expected to generate savings of $20-22 M Vs Frutarom’s Q2/2016 cost structure
Global purchasing will further contribute to improvement in profits and margins
Strong acquisitions pipeline for supporting growth strategy remains intact
Maintaining a solid balance sheet based on strong business fundamentals, healthy profitability and robust cash flow from operations
Cumulative cash flow since 2000 - approx. US$ 902M
Product Focus - unique offering and product portfolio focused on innovative integrated solutions combining taste and health, natural and clean label products
Customer Focus - mid-size and local customers, the private label sector and unique added value solutions to MNCs
Geographic Focus - Global leading position with focus on North America and on high growth Emerging Economies
Positive Outlook for 2017 & 2018 and Onwards
Profitable internal growth in core business
Focus on innovative, health & wellness oriented, natural product mix
Additional projects to improve efficiency, merge activities and operations
Successful integration of the recent acquisitions
Strong acquisitions pipeline
Strengthening & leveraging global purchasing
* Excluding non-recurrent expenses
Focus on small, mid-size and private label customers with better organic growth rate than the MNC’s
Frutarom’s Strategic Goals
Combining rapid profitable organic growth with strategic acquisitions
* Given current product mix
Continue Margin Expansion Above-industry Growth
$2 Billion in revenues in 2020
Above 22% EBITDA in our core business by 2020
Continue Acquisitions Strategy
*
Frutarom’s Vision
To Be The Preferred Partner For Tasty And Healthy
Success