Sales for the quarter ended June 30 2006 were up 7.4 per cent from last year's Q2, but operating profit fell from $11.6m to 9.7m.
Together with growth for the flavours division and cross selling between the company's divisions, the increase in sales was attributed an $8.9m contribution by newly acquired flavours and functional ingredients firm Nesse.
Company president and CEO Ori Yehudai said: "Frutarom's management continually seeks to find and execute strategic acquisitions. Frutarom is in contact with several companies that are interesting candidates for potential acquisition, mainly in countries and markets where we already have significant activity."
At this stage there is no indication of whether these may encompass more natural or functional ingredients, but it is certainly a keen area of interest for the company.
The fine ingredients division has a turnover of around US$100m, Yehudai told NutraIngredients.com, and 70 per cent of this is from natural products, be it health ingredients or flavours.
Yehudai said that the company has experienced good growth in the functional foods arena, with healthy ingredients showing high double digit growth for the quarter.
Yehudai expects this growth rate to continue for the rest of the year, and Frutarom has a "nice pipeline" of new functional ingredients. These include an omega-3 from Salvia seed oil, which has garnered lots of interest even though it is yet to be officially launched.
The company also launched its EFLA955 Wild Green Oat Neuravena Special Extract at Vitafoods in Geneva in May, and this is already proving popular with clients from the US, Far East and Europe.
Factors contributing to the slip in operating profits include a sharp decrease in prices for raw materials grapefruit, vanilla and natural gums compared to last year, when prices were inflated due to adverse weather conditions in growing regions. As supply has increased, prices have returned to their previous levels.
Frutarom is involved in improving the product mix of the food systems activity, shifting from low margin products to unique, value-added offerings with higher margins - and during the transitional period this shift is listed as having had an impact on sales.
Frutarom has two facilities in the north of Israel, which has been affected by the war with Lebanon in the past month, emplying 300 people. Yehudai said these facilities have still operated on a regular basis and fulfilled orders both from Israel and overseas.
"Frutarom's board of directors and management express their appreciation and thanks to the company's employees in Israel for the extraordinary efforts," he said.