UPDATE 1-Dutch coffee firm reports fraud, tax hits in Brazil
AMSTERDAM Aug 1 (Reuters) - D.E Master Blenders 1753 , the Dutch company behind the Douwe Egberts coffee brand, said its 2012 results will be hit by fraud, tax and inventory issues at its Brazilian operations and that it would have to redo past financial statements.
D.E Master Blenders, whose brands also include Senseo and Pickwick, was spun off by U.S. group Sara Lee, now known as Hillshire Brands, and returned to Amsterdam in a highly publicised stock exchange listing last month. It promised to use its well-known coffee brand to expand at home and abroad.
But on Wednesday after the market closed, the Dutch company said it had identified adjustments in its accounts for fiscal years 2009-2012 and that these would reduce its net result for the fiscal year ended on June 30, 2012 by about 45 million to 55 million euros ($55.3 million-$67.6 million).
Roughly half of that -- or 20-25 million euros -- is expected to be accounted for within operating profit, it said.
"These adjustments, which all involve the company's Brazilian operations, are partly caused by accounting irregularities involving uncollectible accounts receivable and incorrect sales recognition," it said in a statement.
"In addition, the company has taken provisions on inventory levels and made other corrections, including additional tax provisions."
Hillshire Brands, the company that Sara Lee turned into after D.E. Master Blenders was spun off, said the irregularities would impact its historical financial statements for fiscal 2009 through 2011 and for the first three quarters of fiscal 2012. The restatement will primarily affect its discontinued operations and should have no impact in fiscal 2013.
A spokesman for D.E Master Blenders told Reuters that tax, fraud and inventory issues had come to light when the management closed the books in June.
D.E Master Blenders' shares started unofficial or "grey" market trading in Amsterdam on June 12 at 8.000 euros, and officially listed on the exchange on July 9. The stock opened at 9.790 euros and fell to as low as 9.621 euros on the first day of official trading. It closed at 9.485 euros on Wednesday, up 0.7 percent.
The Dutch firm said it was investigating the accounting irregularities and would take steps to improve internal controls over financial reporting and governance procedures at its Brazilian operations.
It will publish its preliminary fiscal 2012 results on Aug. 28 and said it would file its audited financial statements for the fiscal year ended June 30, including restated historical carve-out combined financial statements, at the end of September 2012.
"These adjustments are not expected to affect the company's financial performance in fiscal 2013," it added.
D.E Master Blenders has 5.9 percent of the global coffee market, the third-largest after Nestle SA, which has 22.8 percent, and Kraft Foods Inc with 12.9 percent.