Wessanen Reports Improved Underlying Operating Profit and EPS

Operating result (EBIT) was EUR 9.4 million, showing a strong increase over last year’s loss of EUR 4.8 million. Net financing costs amounted to EUR (1.7) million (Q2 2009: EUR (6.2) million) and total income taxes were EUR (1.4) million.

Jul 30 2010 --- Wessanen has said that in the second quarter, revenue from continuing operations was stable at EUR 193.7 million, including a positive currency effect of 1.5% (a stronger British pound partly and US dollar) and an acquisition effect of 1.3%. Autonomous growth amounted to (3.4)% with higher revenue at Wessanen Europe offset by lower reported revenue at ABC and to a lesser extent at Frozen Foods.

Operating result (EBIT) was EUR 9.4 million, showing a strong increase over last year’s loss of EUR 4.8 million. Net financing costs amounted to EUR (1.7) million (Q2 2009: EUR (6.2) million) and total income taxes were EUR (1.4) million. The effective tax rate was a relatively low 18.0%, reflecting the recognition of past tax losses. Profit from discontinued operations, net of tax, amounted to EUR 0.5 million. This relates to PANOS Brands for which the divestment process is progressing according to plan.

Net result, attributable to Wessanen equity holders, was EUR 6.6 million (Q2 2009: EUR (84.6) million). Operating cash flow from continuing operations (after interest and income tax paid) was EUR 18.0 million (Q2 2009: EUR 6.5 million), positively impacted by a tax refund due to the compensation of past losses, slightly offset by seasonally higher working capital primarily at ABC.

Net debt decreased to EUR 63.1 million (Q1 2010: EUR 66.2 million) due to higher operating cash flow, largely offset by capital expenditures, the acquisition of Kroon and the cash settlement in early April of an interest rate swap. The net debt to EBITDAE ratio amounted to 1.6x as at 30 June (Q1 2010: 2.0x).

For the second half of 2010, Wessanen expects its normalised operating result to be around break-even. The operating result of Wessanen Europe in the second half is expected to be below last year’s normalized earnings with especially the third quarter being marked by higher spending on marketing, sales and ICT. As indicated before, ABC expects to realise a full year operating result above break-even, with the fourth quarter being seasonally weakest. Non-allocated costs are expected to increase due to the corporate transition process.

As in the first half, the company expects the effective income tax rate to be below the normal level of 30-35%. Capital expenditures will be around the level of depreciation and amortisation of EUR 15 million.

Piet Hein Merckens, Wessanen CEO, comments: “Since joining Wessanen in April, I have familiarized myself with the business, our brands and our people. I have travelled to see our operations across Europe, met suppliers and customers and visited numerous stores. With the implementation of initiatives such as brand harmonisation and centralised sourcing, I see the first signs that our strategy is taking hold. Wessanen has clear pockets of strength, but we will need to re-establish focus and make progress in standardisation of processes and leveraging best practices.”

Meanwhile Royal Wessanen nv announced that Mr Durk Jager, Chairman of its Supervisory Board, has resigned from the Board with immediate effect. Mr Frans Koffrie has taken up the position of Chairman as from the end of business on 28 July 2010. Mr Jager expressed his desire to resign for personal reasons.