COMMENT: Dutch courage needed at wobbly Wessanen

Dutch food maker Wessanen this week looked to kick off 2010 with confidence and announced it had found a permanent CEO, as well as outlining its plans to build in Europe. The markets, however, were unconvinced and the company's shares slid in consecutive days. Dean Best reports.

Shares in Wessanen, the Dutch food group behind brands like Kallo and So Good in the UK, are down - again - this morning (15 January).

Granted, the Wessanen stock was down only 2% at 09:16 CET but the dip in the shares followed two days of significant falls.

On Wednesday, the day when Wessanen set to put a tumultuous 2009 behind the company with the publication of its strategy for 2010, its shares closed down more than 5%. The following day the stock continued to fall, slipping by 4%.

Wednesday was supposed to be the day when Wessanen started the new year with a clean slate after a tough 12 months during which its CEO quit following boardroom clashes over strategy and the company struggled to offload its Tree of Life business - a key plank of its plan to quit North America.

Two days before Christmas, Wessanen announced it had found a buyer for Tree of Life but analysts were disappointed at the price the company had fetched for the business.

And analyst disappointment has continued into 2010 even after Wessanen named a new permanent CEO and unveiled plans to be the "organic champion" of Europe.

Richard Withagen, an analyst at SNS Securities in the Netherlands, told just-food the investment community is concerned Wessanen's plans will dampen profits.

"Investors are realising that the company will need to invest more in brands which will depress margins," he said.

Wessanen's attempt to shed some light on its ambitions for the business also went down like a lead balloon.

The group aims to build revenues from Wessanen Europe of over EUR1bn (US$1.44bn) through organic growth and acquisitions, although it did not issue a timetable for that growth.

"The target is meaningless because they declined to give a time frame," Withagen sniffed.

And, while Wessanen set out its stall to be a key player in Europe's organic sector, out came figures that showed Germany, the largest organic food market in Europe, had seen sales stagnate in 2009.

Building an organic business in 2010 will be tough, with the promise of still-weak consumer confidence across Europe. And, for a business that has had problems with its balance sheet in recent months, the next 12 months are likely to prove especially tough.

"The market needs to pick up at some stage because when Wessanen invests heavily now without a market recovery in say 2011 or 2012, they may face balance sheet issues again," Withagen warned.

New CEO Piet Hein Merckens will need plenty of Dutch courage.