Frutarom Continues Trend of Sales Growth

The trend of sales growth that has characterized Frutarom's activity inthe past seven years continued in the third quarter of this year whileachieving accelerated growth in core activities that is considerably higherthan the growth rate in Frutarom's field of activity. This growth is beingachieved through the successful implementation of Frutarom's rapid growthstrategy, combining organic growth in core activities with strategicacquisitions of activities and knowhow in its main business segments and instrategic geographic regions. This year Frutarom made seven strategicacquisitions that are synergetic with the activity at its sites worldwidewhile utilizing the Company's global spread, which enables it to quicklyenjoy the considerable commercial synergy in these acquisitions. Frutaromacquired Belmay and Jupiter in England at the beginning of the secondquarter, and Raychan and Adumim in Israel and the American company Abacoduring the third quarter. In October of this year, the German Gewurzmullergroup was acquired and in November, the activity of RAD Natural Technologieswas acquired in Israel. Frutarom is working to integrate the acquiredactivities with its existing activity and to extract synergy, both commercialand operational, in order to take best advantage of opportunities for crossselling while making substantial cost savings and significantly improving themargins of the acquired activities.

The accelerated growth contributed to establishing Frutarom's position asone of the ten leading global companies in its field and to strengthening itsglobal spread, with sales to over 120 countries, 18 production sites, 24research and development laboratories and 48 sales and marketing offices.

Frutarom's results and margins were significantly influenced by theacquisitions made this year. The acquisitions have contributed to salesgrowth but at this point in time, during the merger of the acquiredactivities with Frutarom's existing activity they have not contributed toprofit and have affected profitability, as expected. Upon completion of themerger process, savings will be made in many expenses and substantialoperational improvement achieved. Completing the merger of the three sites inEngland into one, following the acquisition of Belmay and Jupiter will, inFrutarom's estimation, lead to annual operational savings of over US$ 3million as of the beginning of 2008. Completion of the merger of Abaco withthe Fine Ingredients Division's activity in the USA and the merger ofRaychan's and Adumim's activity with the Flavors Division's activity inIsrael and its transfer to Frutarom's plants in Israel, while achievingconsiderable operational savings, is also expected to contribute to improvedmargin in 2008. Frutarom estimates that as of the first quarter of 2008, eachof the acquisitions will not only contribute to the continued trend of salesgrowth, but also to growth in profit through improved margin.

An additional, important influence on the results of Frutarom's activityand margin is the ongoing upward trend in most raw materials prices used byFrutarom in its production, with an even more significant increase in theprices of many natural raw materials, which are the majority of the rawmaterials used by Frutarom. During the third and fourth quarters Frutarom hasand will continue to act determinedly to raise the selling prices of itsproducts in order to adjust them to the continued rise in raw materialsprices, just as many of its customers in the global food industry are doing.

Frutarom's sales in the third quarter of 2007 grew 23.0% to total US$87.7 million. Excluding the influence of the strengthening Western Europeancurrencies, Frutarom's sales for the quarter grew 20.0%. The maincontributors to the growth in sales were: (1) growth in the sales of flavorsproduced and sold by the Flavors Division; (2) the integration of Acatris'sand Abaco's activities, which were acquired and consolidated as of October2006 and July 2007, respectively, with the Fine Ingredients Division's globalactivity; (3) the merger of Belmay and Jupiter, which were acquired andconsolidated with the Flavors Division's activity as of April 2007; (4) themerger of Raychan's and Adumim's activities, which were acquired andconsolidated with the Flavors Division's activity in Israel as of September2007; (5) utilization of the synergy and cross selling opportunities betweenFrutarom's Divisions, existing customers and products and those added throughthe acquisitions made in recent years; (6) the strengthening of the Europeancurrencies and New Israeli Shekel (in which most of Frutarom's sales aremade) against the dollar; and (7) growth in the activity of Trade & Marketingin Israel.

Sales in the first nine months of 2007 grew 21.1% to total US$ 260.0million. Excluding the influence of the strengthening Western Europeancurrencies, sales for the quarter grew 18.0%.

Gross profit for the third quarter rose 17.1% to reach US$ 31.5 millioncompared with US$ 26.9 million in the same quarter last year. Gross marginfor the third quarter reached 36.0% in the quarter compared with 37.8% in thesame quarter of 2006.

Operating profit for the third quarter totaled US$ 8.3 million, comparedwith US$ 9.2 million in the same quarter in 2006. Operating margin reached9.5% compared with 13.1% in the same period of last year. Operating profitfor the first nine months totaled US$ 27.2 million, compared with US$ 29.3million in the same period in 2006. Operating margin reached 10.4% comparedwith 13.6% in the same period of last year.

Excluding one-time expenses and income in the first nine months of theyear and the same period last year, operating profit rose to total US$ 28.4million compared with US$ 27.6 million in the first nine months of 2006.Operating margin was 10.9% compared with 12.9% in the same period last year.

Profit before tax for the third quarter totaled US$ 6.6 million, comparedwith US$ 9.2 million in the same period last year. Taxes on income for thethird quarter totaled US$ 0.7 million compared with US$ 2.2 million in thesame quarter in 2006. The decrease in taxes on income derives from theexpected reduction of the tax rate in Germany as of January 1, 2008, whichled to a decline of US$ 0.7 million in deferred tax, and from a decrease intax in the amount of US$ 0.5 million in Israel as the result of therevaluation in the New Israeli Shekel against the US dollar.

Net profit for the third quarter totaled US$ 5.9 million compared withUS$ 7.0 million in the same quarter last year. Net margin reached 6.7%compared with 9.8% in the same quarter of 2006. Net profit for the first ninemonths of 2007 was US$ 19.4 million compared with US$ 24.4 million in thesame quarter of 2006, and net margin reached 7.4% compared with 11.4%.Excluding one-time expenses and income in the first nine months of 2007 andthe same period in 2006, net profit for the first nine months of 2007 reachedUS$ 19.0 million compared with US$ 20.6 million in the first nine months of2006. As stated, margin was influenced by the increase in raw materialsprices and by the merger of acquisitions that have contributed to sales butnot to profit and have temporarily affected margin, as expected.

Frutarom's shareholders' equity as at September 30, 2007 totaled US$242.6 million (62.3% of the balance sheet) compared with US$ 206.7 million(69.7% of the balance sheet) at September 30, 2006. The growth inshareholders' equity is mainly due to the profit for the period and thechanges in the US dollar exchange rate against the other currencies that arethe autonomous subsidiaries' main activity currency, which influenced thecurrency translation differences equity fund and caused the growth in theshareholders' equity balance.

According to Ori Yehudai, Frutarom President and Chief Executive Officer,"In the third quarter of 2007, Frutarom again achieved accelerated organicgrowth in its core activities in line with the business strategy we have beenimplementing in recent years. This growth comes, among others, from theaccelerated shift of many leading food companies to the use of naturalflavors and ingredients, with the emphasis on clean labels and functional andorganic food, fields in which Frutarom intensified its investment in recentyears in implementing its vision: "To Be the Preferred Partner for Tasty andHealthy Success," while utilizing the considerable synergy with theacquisitions made from Frutarom in recent years. We expect this growth tointensify as we realize the synergy of the acquisitions made this year."Yehudai added, "Our plans for the merger of this year's seven acquisitionsare progressing according to our expectations and during the fourth quarterwe expect to complete the integration of Belmay and Jupiter in England,Raychan and Adumim in Israel, and Abaco in the USA, while achievingsubstantial savings and improving these activities' margin. Upon completingthese processes, the acquisitions made this year will contribute not just tothe ongoing upward trend in sales, but also to substantial growth in profitwhile improving margin." Yehudai also said, "Similar to many of our customersin the global food market, we are working determinedly to raise the sellingprices of our products in order to adjust them to the continuing rise in rawmaterials prices." Yehudai concluded, "Frutarom continues working toimplement the Company's strategy for rapid growth and to utilize the synergyand many cross selling opportunities in the acquisitions of recent years,which will contribute to sustain profitable organic growth in Frutarom's coreactivities. Frutarom invests considerable resources in identifying andexecuting additional strategic acquisitions, mainly in countries and marketswhere it has substantial activity."

Background on the Company

Frutarom is a global company active in the global markets for flavors andingredients. Frutarom has significant production and development centers onthree continents and markets its products on five continents to over 5,000customers in more than 120 countries. Frutarom's products are intended mainlyfor the food, beverage, flavor, fragrance, pharmaceutical, nutraceutical,health food, functional food, food additives, and cosmetic industries.

Frutarom operates through two Divisions:

- The Flavors Division, which develops, produces and markets flavorcompounds and food systems.

- The Fine Ingredients Division, which develops, produces and marketsnatural flavor extracts, natural functional food ingredients, naturalpharmaceutical/nutraceutical extracts, specialty essential oils and citrusproducts, and aroma chemicals.

Frutarom's products are produced at its plants in the United States,England, Switzerland, Germany, Israel, Denmark, China, and Turkey. TheCompany's global marketing organization includes branches in Israel, theUnited States, England, Switzerland, Germany, Belgium, Holland, Denmark,France, Hungary, Romania, Russia, Ukraine, Kazakhstan, Belarus, Turkey,Brazil, Mexico, China, Japan, Hong Kong, India and Indonesia. The Companyalso works through local agents and distributors worldwide. Frutarom hasabout 1,500 employees worldwide.

                            FRUTAROM INDUSTRIES LTD.                  CONDENSED CONSOLIDATED INTERIM BALANCE SHEET                                30 SEPTEMBER 2007                                       30 September 31 December                                       2007    2006        2006                                       U.S. dollars in thousands                                       (Unaudited)     (Audited)             A s s e t s    CURRENT ASSETS:    Cash and cash equivalents        17,229  28,080      18,417    Short-term investments              525   3,215       3,260    Accounts receivable:    Trade                            70,138  54,134      53,968    Other                             6,899   8,370      10,038    Prepaid expenses and advances    to    Suppliers                         6,521   4,100       3,662    Inventories                      76,992  52,541      59,754    T o t a l current assets        178,304 150,440     149,099    NON-CURRENT ASSETS:    Property, plant and equipment   114,437  99,805     101,655    - net    Intangible assets - net          90,608  38,528      60,172    Deferred income tax assets        4,419   5,863       3,833    Other non-current assets          1,908   1,948       1,938    T o t a l non-current assets    211,372 146,144     167,598    T o t a l assets                389,676 296,584     316,697                            FRUTAROM INDUSTRIES LTD.                  CONDENSED CONSOLIDATED INTERIM BALANCE SHEET                                30 SEPTEMBER 2007                                            30 September    31 December                                            2007    2006           2006                                             U.S. dollars in thousands                                             (Unaudited)       (Audited)     Liabilities and shareholders'     equity     CURRENT LIABILITIES:     Bank credit and loans                36,445     716           673     Accounts payable:     Trade                                29,641  23,047        27,500     Other                                35,531  28,644        27,997     Provisions                              377     947           946     T o t a l current liabilities       101,994  53,354        57,116     NON-CURRENT LIABILITIES:     Retirement benefit obligations        7,918   8,665         7,499     Deferred income tax liabilities      12,248   8,513        12,241     Other liabilities                    24,906  19,349        22,708     T o t a l non-current     liabilities                          45,072  36,527        42,448     T o t a l liabilities               147,066  89,881        99,564     SHAREHOLDERS' EQUITY:     Share capital                        16,466  16,427        16,434     Capital surplus                      94,092  92,791        93,116     Currency translation differences     13,595   1,047         5,716     Retained earnings                   120,477  98,338       103,658     Net of - cost of company shares     held by subsidiary                   (2,020) (1,900)       (1,791)     T o t a l shareholders' equity      242,610 206,703       217,133     Total shareholders' equity and     liabilities                         389,676 296,584       316,697    The accompanying notes are an integral part of these condensed financialstatements.                            FRUTAROM INDUSTRIES LTD.               CONDENSED CONSOLIDATED INTERIM STATEMENTS OF INCOME          FOR THE NINE AND THREE-MONTH PERIODS ENDED 30 SEPTEMBER 2007                                   9 months ended  3 months ended  Year ended                                     30 September    30 September 31 December                                     2007    2006    2007    2006        2006                                             U.S. dollars in thousands                                      (Unaudited)     (Unaudited)   (Audited)    SALES                         259,897 214,615  87,692  71,282     287,247    COST OF SALES                 165,738 134,389  56,152  44,356     181,370    GROSS PROFIT                   94,159  80,226  31,540  26,926     105,877    SELLING, MARKETING, RESEARCH    AND DEVELOPMENT, GENERAL AND    ADMINISTRATIVE EXPENSES - net:    Selling, marketing, research    and development    - net                          46,205  35,227  16,299  12,280      48,518    General and administrative     21,045  17,289   7,324   5,865      22,418    OTHER INCOME - net                303   1,573     412     466       2,114    OPERATING PROFIT               27,212  29,283   8,329   9,247      37,055    FINANCIAL EXPENSES - net        1,889     336   1,723      82         445    PROFIT BEFORE TAXES ON INCOME  25,323  28,947   6,606   9,165      36,610    TAXES ON INCOME                 5,932   4,565     733   2,183       6,908    NET INCOME                     19,391  24,382   5,873   6,982      29,702                                                U.S. Dollars    EARNINGS PER SHARE:    BASIC                            0.34    0.43    0.10    0.12        0.52    DILUTED                          0.34    0.43    0.10    0.12        0.51

The accompanying notes are an integral part of these condensed financialstatements.

    For further information, visit our website: .    Company Contact    Ori Yehudai, President & CEO    Frutarom Ltd.    Tel: +9724-846-2401    E-mail: