D.E Master Blenders 1753 (DE), the beverage business spun off from the former Sara Lee Corp., said it will restate earnings because of accounting irregularities and tax provisions at its Brazilian operations.
The adjustments will reduce shareholders equity by as much as 95 million euros ($116.2 million) and its 2012 net result by about 55 million euros, the Amsterdam-based company said yesterday in a statement. The irregularities involve uncollectible accounts receivable and incorrect recognition of sales and make up less than half the total cut to stockholders’ equity, Michiel Quarles van Ufford, a company spokesman, said.
The maker of Pickwick tea and Senseo coffee, which trades in Amsterdam after being spun off from Sara Lee in June, discovered the accounting irregularities after the end of Sara Lee’s fiscal year that month, as new management conducted an investigation of the accounts, Quarles van Ufford said.
D.E Master Blenders said it will adjust financial statements for fiscal years 2009 through 2011 and the first half of fiscal 2012. Some items will also affect upcoming results this year, according to the statement. The adjustments aren’t expected to affect results for fiscal 2013, the company said.
Hillshire Brands Co. (HSH), the grocery business that remained after the spinoff, said D.E Master Blenders’ announcement will affect its historical statements for fiscal years 2009 through 2011 and the first three quarters of fiscal 2012.
The accounting irregularities should have minimal impact on Hillshire because it mostly involves D.E Master Blenders’ business in Brazil, said Tim Ramey, an analyst with D.A. Davidson & Co. in Lake Oswego, Oregon.
D.E Master Blenders said it is conducting a “comprehensive investigation” of the irregularities and will take “appropriate actions” to enhance internal controls in Brazil. The probe should be completed within a month, said Quarles van Ufford. There’s no evidence yet that the issues appeared in other parts of the company’s business, he added.
Hillshire fell 1.8 percent to $25.16. yesterday in New York. D.E Master Blenders rose 0.7 percent to 9.49 euros in Amsterdam, giving the business a market value of 5.6 billion euros. The company’s statement came after the close of Amsterdam trading yesterday.
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