Thorpe Reports Record Quarter, but Investors Concerned Over Margins

The flavor and fragrance manufacturer, Thorpe, has concluded another record quarter with significant growth in both revenue and profit. However, investors in Tel Aviv, seemingly disappointed by the erosion in operating profitability, sent the stock lower at the start of the trading day.

Thorpe ended the second quarter with record revenue of approximately 90.2 million dollars, a 42% increase compared to the same quarter last year. This growth was driven by 7.3% organic growth alongside acquisitions completed during the period. A similar trend was recorded for the first half of the year, with revenue reaching approximately 174 million dollars, a 40.5% increase year-over-year.

Net profit rose by 56.4% to 8.2 million dollars for the quarter. For the half-year, the company reported a net profit of 19.2 million dollars, an 81% jump compared to the first half of 2025. The increase was attributed to acquisition-related synergies and non-cash financing income from the early buyout of seller holdings in the company FIT.

Despite strong bottom-line results, the company experienced some erosion in operating margins. While operating profit grew by 28%, its margin as a percentage of revenue stood at 13.4% for the quarter, compared to 15.6% in the same period last year.

During an investor call, Thorpe CEO Keren Cohen Hazon addressed the margin pressure: "The decline is mainly due to the amortization of customer relationships and know-how created during acquisitions. Two new companies were acquired during this quarter; they have been active for only two months, and we have not yet managed to utilize the vast majority of synergies, which remain on the table. We will complete this in the coming quarters, which will lead to an increase in divisional operating profit."

Goal: Doubling Sales Every Four Years

Investors also expressed concern regarding stagnation in the flavors sector, which grew by 22% this quarter but has been slowing down. "The flavors market is stable. While it is not growing at the high rates seen two years ago, it remains a market that is clearly expanding in specific segments," Cohen Hazon noted.

Regarding the fragrance sector, Cohen Hazon expects continued growth. "It is a market with very strong momentum. There is a global trend toward fragrance integration, and we are developing additional functional areas that make this field highly interesting," she said.

Reiterating the company's expansion strategy, Cohen Hazon stated: "Thorpe has a structured strategy for fast, combined growth through M&A and organic expansion. Our goal is to double sales turnover every four years or less. We have consistently beaten this target and believe we will continue to do so. We aim to become one of the top ten global companies in flavors and fragrances. We intend to strengthen our presence in America and Asia through future acquisitions, evaluating each opportunity for its technological or customer-base value. We are currently examining a large pipeline of acquisitions to expand our geographical footprint."

Year-to-date, Thorpe's stock has fallen by approximately 8.5%, though it maintains a 24% return over the last year. Over the past three years, the stock has surged by over 450% to a current market value of 6.5 billion shekels.