Flavor Maker Frutarom Disappoints Investors With Slow Growth
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Flavor and fragrance manufacturer Frutarom saw its stock fall 6.2% after reporting disappointing third-quarter results, with organic growth slowing significantly to 2.4%. Despite record quarterly revenues of $94 million, the company's reliance on acquisitions, including nine this year, is impacting profitability. Operating expenses have risen, and while net profit increased, the overall growth rate failed to meet investor expectations. The company has completed 29 acquisitions since 2017, with its strategy mirroring that of the former Frutarom.
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- Frutarom's stock dropped 6.2% due to disappointing third-quarter growth figures.
- Organic growth slowed to 2.4%, a sharp decline from 18% in the prior year.
- Third-quarter revenues reached a record $94 million, with annual revenues nearing $400 million.
- The company has made 29 acquisitions since 2017, including nine in 2025.
- Operating expenses increased, impacting the company's profitability and growth.
- Fragrance sector revenues surged 80%, but organic growth was only 5.2%.
Frutarom, a manufacturer of flavor extracts for the food industry and fragrance extracts for cosmetics, has once again disappointed investors with its insufficient growth rate, causing its stock to drop by approximately 6.2% on the reporting day. According to the company's reports, controlled and managed by Keren Cohen-Hasson, third-quarter revenues reached a record $94 million. While this marks a quarterly revenue record and brings annual revenues close to $400 million, the organic growth was only 2.4%, a significant decrease from the 18% recorded in the same quarter last year. The company's EBITDA for the third quarter was $21.7 million, representing 23% of sales, down from 24.4% in the prior year's quarter. Net profit increased by 9.4% to $6.6 million.
The fragrance sector is Frutarom's fastest-growing area, with revenues soaring by 80% to about $27 million, compared to $15 million in the previous year's quarter. However, organic growth in this segment was only 5.2%, and the operating profit margin decreased from 26.3% to 21%. The company attributes this decline to amortization of intangible assets following recent acquisitions. Core business sales grew by 29%, but organic growth was 5.6%, down from 11.6% year-over-year.
Frutarom's growth strategy heavily relies on acquisitions, drawing parallels to the former Frutarom under Ori Yehudai, which was eventually sold for $7 billion to the American corporation IFF. Since 2017, Frutarom has completed 29 acquisitions globally, with nine occurring since the start of 2025. This year's largest acquisition was the American company Phoenix for $95 million, followed by the French company Romessence for approximately 22 million euros and 70% of South Africa's Sensory for about $10.7 million.
The synergy from these acquisitions, the latest of which is not yet fully integrated, has yet to prove its value. Operating expenses and commitments continue to weigh on growth and profitability. Sales and marketing expenses rose from $7.6 million to about $10 million in the quarter, and general and administrative expenses increased from $8 million to approximately $11 million. Operating profit saw a modest increase of only 3.5% to $13.8 million.
For the first nine months of the year, revenues reached $268 million, a 22.6% increase from the same period last year. However, organic growth was only 6%, with the remainder attributed to acquisitions completed in the first nine months of 2026 in the US, France, and South Africa. EBITDA for the nine-month period rose by 31.5% to $61.7 million, representing 23% of sales. Core activities grew by 39%, while currency-neutral organic growth stood at only 6%. Net profit increased by 55% to $25.8 million, accounting for 9.6% of sales, up from 8.3% in the corresponding period last year.