UPDATE 2-Wessanen defers sale of drinks unit as profits jump

Wed Sep 14, 2011 5:44am EDT

* Wessanen sees turnaround at U.S. drinks subsidiary ABC

* Profit improvement driven by strong demand

* Sees $17-19 mln in 2011 EBIT at ABC

* ABC's value now 85 mln euros, vs 50 mln before - analyst

* Shares up 7 pct, briefly touch 3.5-month high

(Adds CEO, analyst comments, details, shares)

By Aaron Gray-Block

AMSTERDAM, Sept 14 (Reuters) - Dutch food group Wessanen (BSWSc.AS) postponed plans to sell its U.S. drinks subsidiary ABC, hoping to cash in on improved profits thanks to strong demand for its ready-mix cocktails and fruit smoothies.

Wessanen has struggled with debt and lacklustre growth in recent years, forcing it to sell several businesses and focus on its organic food business in Europe.

As part of that restructuring, ABC had been earmarked for sale this year, but Wessanen said on Wednesday that ABC's sales and earnings growth in the second half of 2011 would beat previous forecasts, driving its shares to their highest level since the start of May.

Chief Executive Piet Hein Merckens said on a conference call the company was seeing "staggering sales" at ABC, and that the company was investing in new capacity to meet demand. He said that as a result, interest from potential buyers would only increase.

"We now attach a value of 80 to 85 million euros to ABC, compared with 50 million euros previously," SNS Securities analyst Richard Withagen said, upgrading his rating on the company to "accumulate" from "hold".

Wessanen issued shares last year to reduce debt. Its shares were up 7.1 percent at 3.033 euros at 0850 GMT, the second-biggest gainer in a flat Amsterdam market.

Wessanen said ABC would report full-year earnings before interest and tax (EBIT) of $17-19 million, up from 1.9 million euros ($2.6 million) in 2010.

It said second-half autonomous sales growth at ABC was now expected to be well above the 21 percent growth achieved in the first half of the year, and that further sales and earnings growth was expected in 2012.

In upgrading the stock to "buy" from "accumulate," KBC Securities also raised its forecast for full-year EBIT for ABC to $17.8 million from $5.2 million.

CEO Merckens said he still wanted to sell ABC in the short term and that Wessanen would assess a potential sale on a monthly or quarterly basis.

"Wessanen believes that a divestment at this point in time would not unlock the full value of the business for shareholders," the company said in a statement.

Besides strong demand, Wessanen said it was supplying its drinks to new supermarket clients alongside existing customers Wal-Mart and Kroger and that promotional activities could further boost its sales. (Editing by Sara Webb and Will Waterman) ($1=.7317 Euro)