Dutch food group Wessanen saw its operating profit tumble during the first quarter of the year and admitted the business now exceeded an agreed limit on its debt ratio.
The company booked operating profit of EUR0.3m (US$0.4m) for the first three months of 2009, down sharply from the EUR12.4m reported a year earlier.
Revenue was up 7.1% to EUR412m but that was boosted by the strength of the US dollar. On an organic basis, sales were “flat”, Wessanen said.
Wessanen also booked a net loss of EUR3.3m, against a net profit of EUR7.2m a year ago. Increased debt financing and costs linked to diesel fuel price hedging in North America led to higher interested costs and hit Wessanen’s bottom line.
Wessanen’s debt ratio stands at 3.2, although the company said it is still in compliance with its lending agreements, which state the business can exceed a limit of 3.0 for two consecutive quarters.
Last month, Wessanen said it was mulling whether to offload its North American operations in order to focus on its businesses in Europe.
During the first quarter of the year, the company said it had seen a “slight improvement” in operating profit from its distribution business across the pond. However, its branded operations in North America booked an operating loss of EUR4.6m.
CEO Frans Koffrie said Wessanen’s moves to cut costs would “help” offset weaker demand. “However, it is still premature to provide a specific outlook for the full year. Reduction of our net debt remains a key priority,” Koffrie said.
Koffrie took over as CEO in February following the departure of Ad Veenhof, who left Wessanen after a clash over the future direction of the business.
Wessanen shares were down 6.6% at EUR3.28 at 13:53 CET this afternoon.