Wessanen Issues Profit Warning on US Subsidiary ABC

An operating profit of US$ 10-12 million is now expected for 2011 reflecting an operating loss in the fourth quarter, excluding the reversal of impairment charges and any other non recurring items.

Nov 22 2011 --- American Beverage Corporation (ABC) - Wessanen's US subsidiary - is well on its way to significantly increase revenue and operating profit compared to 2010. However, recent sales developments indicate that the previously published expected full year 2011 operating profit of US$ 17-19 million will not be achieved. An operating profit of US$ 10-12 million is now expected for 2011 reflecting an operating loss in the fourth quarter, excluding the reversal of impairment charges and any other non recurring items.

According to Wessanen, ABC's prospects remain very sound, resulting in expected strong revenue and earnings growth in 2012. This is based on an expected further increase in consumer demand and incremental distribution of Daily's. In addition, innovations, increased brand activation and in-store promotional activities will drive sales. Investments in additional production lines have resulted in sufficient capacity to meet anticipated future demand and will avoid stock allocation as experienced this year.

The lower than expected fourth quarter sales are driven by a number of factors. Firstly, the distribution complexity of the three-tier liquor channel creates a lag between shipments and consumption levels, which is amplified by the strong growth of this breakthrough innovation. This was further exacerbated by the ready-to-drink pouches being on allocation during most of the third quarter, resulting in continued high customer orders towards the end of September. Secondly, this customer order pattern masked the seasonal softness in consumer consumption. Finally, prospective new customers who agreed on new listings, but could not be served due to product allocation, decided to postpone listings to 2012.

Piet Hein Merckens (CEO) comments: "ABC is moving up the learning curve, especially regarding its ready-to-drink-pouches. Although we are disappointed by the reduced outlook for ABC for 2011, we remain encouraged by the success and growth of Daily's experienced during 2011. Over the last two years we changed management at ABC, resulting in a successful turnaround of the business. Multiple processes in areas such as production, supply chain, sales, marketing and finance have improved drastically. The prospects for ABC in 2012 and beyond remain very sound."

Wessanen's strategy is to focus on organic food in Europe with the clear vision to make our organic brands most desired in Europe. In line with this strategy we previously flagged our intention to divest ABC.