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Wessanen reveals financial fallout from irregularities at beverage unit

By Guy Montague-Jones , 29-Jul-2009

Royal Wessanen is planning court proceedings against its former CEO and has revealed the financial fallout of accounting irregularities discovered at its subsidiary American Beverage Company (ABC).

The Dutch multinational had announced its intention to sell the maker of cocktail mixers, fruit drinks and spring water back in February. These plans were then delayed following the discovery of accounting irregularities at ABC in June.

Financial consequences

An investigation was launched, revealing yesterday that the equity position at Wessanen at the end of 2008 was overstated by €15m, some €5 above the original estimate given last month.

The financial fallout from the problems at ABC stuck out in Wessanen’s results in the second quarter. Impairment charges at the subsidiary weighed heavily on the bottom line.

Despite reporting a 4.8 per cent increase in revenue to €408.5m, Wessanen posted an operating loss of €5.4m. Without the impairments and other incidental results at ABC, the company would have posted an operating profit of €7.3m.

A recovery plan is now underway to return ABC to profitability, and although the original plan to sell ABC has been delayed, Wessanen said the company still intends to go ahead with a sale “in due course.”

Court action

Alongside its quarterly results, Wessanen published a statement announcing plans to request court action to dissolve the employment agreement of former CEO Ad Veenhof.

Veenhof had resigned on 24 February, but the company now wants to dissolve the contract. The final decision regarding court action rests with shareholders who will vote at an extraordinary meeting on 8 September. The reasons for the termination of Veenhof’s contract will be published on the company website before then.