Turpaz Industries : Periodic report for the quarter ended June 30, 2022

Turpaz Industries Ltd.

Periodic report for the quarter

ended June 30, 2022

This is an English translation of a Hebrew Periodic report that was published on August 24, 2022 (reference no.: 2022-01-107518) (hereafter: the "Hebrew Version"). This English version is only for convenience purposes. This is not an official translation and has no binding force. Whilst reasonable care and skill have been exercised in the preparation hereof, no translation can ever perfectly reflect the Hebrew Version. In the event of any discrepancy between the Hebrew Version and this translation, the Hebrew Version shall prevail.

Table of Contents

Chapter	Page
A. Board of Directors' Report on the State of the Corporation's Affairs..........	A-1
B. Financial Statements as of June 30, 2022.........................................................	B-1
E. Managers' statements........................................................................................	C-1

Directors' Report on the State of the Corporation's Affairs

For the period ended June 30, 2022

The Company's Board of Directors is pleased to submit the Board of Directors' Report on the state of affairs of Turpaz Industries Ltd. (hereinafter - the "Company"), for the six and three months ended June 30 2022, all in accordance with the Securities Regulations (Periodic and Immediate Reports), 1970.

This report was drawn out assuming that the Description of the Corporation's Business chapter as included in Chapter A to the 2021 Periodic Report, which was published on March 14 2022 (Ref. No.: 2022-01- 029359) (hereinafter - the "2021 Periodic Report") is available to the reader. Unless otherwise stated, terms included in this report shall have the meaning assigned to them in the 2021 Periodic Report.

Part A - Board of Directors' Explanations to the State of the Corporation's Affairs, Operating

Results, Shareholders' Equity and Cash flows

1. General

The Company was incorporated and registered in Israel as a private company limited by shares on February 10 2011.

On May 23 2021, the Company completed an IPO, its shares were listed on the Tel Aviv Stock Exchange (hereinafter - the "Stock Exchange"), and it became a publicly-traded company, as this term is defined in the Companies Law, 1999.

The Company operates, independently and through its subsidiaries ("Turpaz" or the "Group"), in the development, production, marketing and sale of fragrance extracts, used in the production of cosmetics, toiletries, personal care, air care & odor neutralizers products; sweet and savory taste extracts used in the production of food and beverages, intermediates for the pharma industry, and specialty ingredients for the agrochemical and the fine chemicals industry, and citrus products and aromatic chemicals for the flavor and fragrance industry.

The Turpaz Group has an extensive and diversified range of products, which are developed and produced by the Group. As of the report's publication date, the Group develops, produces, markets and sells products to more than 1,500 customers in more than 30 countries across the world, and operates approx. 12 manufacturing facilities, including R&D centers, laboratories and sales, marketing and regulation offices in Israel, the USA, Poland, Belgium, Vietnam and Latvia.

Set forth below are the key operating results of Turpaz for the second quarter and first half of 2022:

• Turpaz Group presents record results for the second quarter and first half of 2022: record sales, gross profit, operating income and adjusted EBITDA.
• In the second quarter of 2022, Turpaz's sales increased by 50.0% and amounted to USD 30.3 million, compared with a total of USD 20.2 million in the corresponding quarter last year. The increase stems from the acquisition of operations and companies completed in 2021 and 2022 and

A - 2

from organic growth1, net of the effects of exchange rates of approx. 11.0%. In the first half of 2022, Turpaz's sales increased by approx. 46.3% and amounted to USD 57.7 million, compared with a total of USD 39.4 million in the corresponding half last year. The increase also stems from the acquisition of operations and companies completed in 2021 and 2022 and from organic growth2, net of the effects of exchange rates of approx. 10.3%.

The said results were achieved despite the changes in the exchange rates against the dollar of the currencies used in the Group's activities; those changes reduced sales by 7.7% in the second quarter of 2022, and by 5% in the first half of 2022.

• Gross profit increased by approx. 40.7% and amounted in the second quarter of 2022 to USD 11.7 million compared with USD 8.3 million in the corresponding period last year. Gross profit increased by approx. 41.7% and amounted in the first half of 2022 to approx. USD 22.4 million compared with USD 15.8 million in the corresponding period last year, despite the increase in raw materials and freight prices across the world during the reporting period.
• Operating profit increased by approx. 19.8% and amounted in the second quarter of 2022 to approx. USD 5.0 million compared with USD 4.1 million in the corresponding period last year. Operating profit increased by approx. 18.8% and amounted in the first half of 2022 to approx. 9.5 million compared with USD 8.0 million in the corresponding period last year.
• Net income increased by approx. 32.7% and amounted in the second quarter of 2022 to approx. USD 4.2 million compared with USD 3.2 million in the corresponding period last year. Net income

increased by approx. 29.8% and amounted in the first half of 2022 to USD 8.2 million compared with USD 6.3 million in the corresponding period last year.

• Adjusted EBITDA3 increased by approx. 34.7% and amounted in the second quarter of 2022 to USD 7.0 million compared with USD 5.2 million in the corresponding period last year. Adjusted EBITDA increased by approx. 35.0% and amounted in the first half of 2022 to USD 13.3 million compared with USD 9.9 million in the corresponding period last year.
• Turpaz Group's equity structure, low leverage levels, cash flow from operating activities, and the enhancement of management and managerial infrastructures enable the implementation of the
  Group's combined growth strategy.
• Turpaz completed three acquisitions since the beginning of 2022 and six acquisitions since the issuance of its securities on the Stock Exchange in May 2021; two of those acquisitions - Balirom and Pentaor - were reflected in the Company's results for the first time in the second quarter of 2022.
  The Turpaz Group intends to continue the implementation of the Company's growth strategy, and make acquisitions which are synergetic to its areas of activity.

1. Organic growth - assuming that the acquisitions that were carried out in 2021 were consolidated in the financial statements as from January 1 2021, and acquisitions that were carried out in 2022 were consolidated in the 2021 financial statements in accordance with the date on which they were made in 2022.
2. See footnote 1 above.
3. Adjusted EBITDA means - earnings before interest, taxes, depreciation and amortization, net of non-recurring expenses in respect of acquisition of companies.

A - 3

Adjusted EBITDA - second quarter

Second quarter sales

.

Adjusted EBITDA - first half

Sales - first half

(*) The above data are based on internal Company data and are not reviewed or audited.

Turpaz Group is engaged in the following four segments:

1.1 The fragrances segment- in this segment, Turpaz Group is engaged in the development, production, marketing and sale of natural and synthesized fragrance extracts for customers in the cosmetics, toiletries, detergents, wet wipes, scented candles, hair care, air care & odor neutralizers industries for hotels and households. Furthermore, Turpaz Group operates to manufacture specialty ingredients of high added value, whose purpose is to conceal bad odors, and give and enhance desired scents in consumer or industrial products. The fragrance extracts developed by the perfumers are tailored to customers' requirements while creating long-term relationships between Turpaz Group and its customers across the world. When they select a supplier, customers focus on the suppliers' innovation capabilities, uniqueness, reliability, the quality and excellence of their services and their knowledge of the needs of the customers for whom the specialty extracts were developed.

1.2 The tastes segment- as part of the tastes segment, Turpaz Group is engaged in the development, production, sale and marketing of natural and synthesized, sweet and savory flavor extracts, seasonings and gluten free flours, which are used mainly in the production of food, including meat and egg substitutes, plant-based solutions, snacks, ready-made meals, dairy products, ice creams,