Turpaz Industries Ltd.

Management Reports • Mar 14, 2022

March 14, 2022

Dear shareholders,

With the publication of the results of the Turpaz group for 2021, I am pleased to share with you the company's achievements since its IPO in May 2021, based on an integrated growth strategy whose goals include double-digit growth and improving geographical deployment, through organic growth and through mergers and acquisitions of companies and businesses which are synergetic to the company's activity.

As is well known, the company itself and through subsidiaries in Israel, the USA, Poland, Belgium, Vietnam and Latvia, is engaged in the development, production, marketing and sales of fragrance extracts for use in cosmetics, toiletries, personal care products and homecare perfumes; flavor extracts for food and beverage production; and intermediates for the pharma industry as well as unique raw materials, for the agro and fine chemicals industries.

The Turpaz group has a wide and diverse portfolio of products, the fruit of in-house development and production. As of the date of publication of the report, the group develops, manufactures, markets and sells products to more than 1,500 customers in more than 30 countries across the globe, and operates 12 production sites including R&D centers, laboratories and sales, marketing and regulatory offices in Israel, USA, Poland, Belgium, Vietnam and Latvia.

I would like to thank the investors for expressing confidence in the company. Myself, the experienced management team, and dedicated employees of the Turpaz group work tirelessly to ensure quality and advanced services to our customers, whilst building a continuous advantage and expanding the geographical spread of the Turpaz group.

The year 2021 and looking to the future

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The successful implementation of the Turpaz group's growth strategy in 2021, led the company to record results this year, leading to an annual revenue rate in proforma¹ totaling over \$ 100 million. The company's revenues grew by 61.8% compared with the same period last year and amounted to \$ 85.3 million, as a result of acquisitions and organic growth of 18.6% neutralizing the effect of currencies. Compared with the same period last year,

¹ Assuming all acquisitions carried out in 2021 were carried out on January 1, 2021

Adjusted EBITDA increased by 46.0% and amounted to \$ 20.5 million and operating profit increased by 57.5% and amounted \$ 16.0 million.

The year 2021 was a significant milestone in the implementation of the growth strategy, in which the group acquired four synergistic companies for its areas of activity in strategic locations in Israel and around the world. The acquisitions include the acquisition of the operations and assets of Pilpel and Galilee Herbs, the acquisition of SDA and the acquisition of control of FIT, which allows the Turpaz group to be a one-stop-shop for its customers and establish the flavors segment in the group.

In September, the Turpaz Group completed the acquisition of the remaining 49% of the shares in SDA, which produces spices, unique spice blends and natural materials with high added value for the food, cosmetics and animal feed industry, in Israel, so that the company currently holds 100% of SDA rights. This acquisition enabled the company to accelerate SDA's streamlining and profitability program, the acquisition of which enabled the company to enter the field of spice blends.

In October, the Turpaz group completed the acquisition (60%) of FIT in Belgium, which manufactures, develops and markets SAVORY, for broad segments in the food industry including the meat, fish, ready-meals, plant-based solution), coatings for the fast-food industry, soups and sauces. This acquisition enabled the establishment of Turpaz's presence in Western Europe, and was a cornerstone in the implementation of the company's strategic plan to expand the field of savory flavors and create a full value chain for the group's customers, while leveraging synergies between the group's companies.

In October, the Turpaz group also completed the acquisition of the business and assets of Pilpel and Galilee Herbs in Israel, which focuses on the production of savory spices for the meat and sausage industry, fish, special flours (gluten-free), flavor extracts and meat substitutes. This acquisition enabled the company to expand and complete for its customers a wide range of products in the field of flavors and natural ingredients for the food industries in Israel and around the world and to continue to leverage the synergy between the group's companies.

In addition to acquisitions made in the field of flavors, in January 2022, the company completed a deal that it signed in December for the acquisition of LORI in Riga, Latvia, which is engaged in the development and production of perfume extracts. This acquisition is an important step in the development of global activity in the field of perfume extracts, with an emphasis on emerging markets with high growth rates.

All acquisitions implemented during 2021 were made with an emphasis and thought on expanding the geographical spread, building a continuous competitive advantage,

leveraging synergies between the group companies in sales (cross-selling), procurement, development and regulation that contribute to improving profitability and all while maintaining strong cash flow and constant growth.

According to public reports, the global flavor, fragrance and chemical (aroma chemical) extracts markets are expected to continue the growth trend that has characterized recent years and is expected to reach \$ 37.3 billion in 2026² . This trend is expected to enable the company new opportunities and continued growth worldwide. Turpaz has operated and will continue to operate continuously for the development and production of products in accordance with the requirements of its customers and market trends. Today the group is working to build an infrastructure for the beginning of the development and production of aroma chemicals in Israel and around the world.

In 2022, we will continue to implement the company's strategy based on organic growth alongside mergers and acquisitions, whilst maintaining quality service to our customers, developing new technologies and materials, constant operational efficiencies, maintaining good relationships with suppliers and accountability and transparency to all our shareholders.

In conclusion, I am pleased to highlight our strong cash flow and balance sheet as evidenced by the financial results for 2021, which allow Turpaz to finance and realize the company's strategy, which combines organic growth and acquisitions.

Also, in accordance with the company's policy as published in the prospectus we are pleased to share with you the earnings of 2021 in the amount of 3.86 cents per share (12.6 Israeli penny).

Thank you again for your support and trust in the company, its managers and employees.

Sincerely, Karen Cohen Khazon, CEO and Chairman of the Board Turpaz Industries Ltd.

The information contained in this letter does not exhaust the full data about the company and its activities. In order to obtain complete and comprehensive information on the company's condition, business and financial results, please read the company's prospectus, its timely and immediate reports, including the periodic report for 2021.

²https://www.perfumerflavorist.com/flavor/trends/news/22093651/flavors-and-fragrances-market-to-reach-373b-by-2026

The information contained in this letter above, regarding the company's assessments regarding the market growth and continued growth of the Company, is a forward-looking statement, as defined in the Securities Law 5768-1688, which is based on the company's assessments of global trends in taste, smell and chemicals. Their realization is uncertain and may differ, inter alia, due to external factors, including regulatory changes in the field of operations, changes in the company's business plan and the occurrence of other risk factors including as specified in section 1.31 of the Periodic Report for 2021, which may have a material effect on the aforesaid company assessments.