Tags: China | deaths | milk | Dean Foods

Dean Foods Cuts Full-Year Profit Forecast as Milk Costs Rise

Thursday, 08 May 2014 10:58 AM

Dean Foods Co., the largest U.S. dairy processor, lowered its full-year adjusted profit forecast after posting weaker-than-expected first-quarter results as milk costs rose and a severe winter in the country hurt supplies.

Shares of the company, which sells Meadow Gold and Dean's milk, fell as low as 7.8 percent to $14.16 in trading before the bell on Thursday.

Dean Foods has been struggling to boost volumes amidst tough competition and volatile commodity costs after it lost a contract with Wal-Mart Stores Inc. last year.

"Due to the previously disclosed loss of business from a large retailer, Dean Foods' unadjusted fluid milk volumes declined 6.7 percent on a year-over-year basis (in the first quarter)," Dean Foods said in a statement.

The company now expects full-year adjusted earnings of at least 60 cents per share, down from its previous forecast of 73 cents to 86 cents per share.

Milk prices in the United States have been rising since 2008 when China started sourcing foreign-made milk powder and infant formula after six babies died and over 300,000 children fell ill due to local milk products contaminated with melamine.

The higher U.S. milk prices have been taking a chunk out of the margins of companies that buy raw milk such as sandwich chain Potbelly Corp. and organic food maker Annie's Inc.

Dean Foods said raw milk prices rose 22 percent, while the severe U.S. winter hurt its school milk business and led to additional costs of about $4 million, or 3 cents per share, in the first quarter ended March 31.

Net loss attributable to Dean Foods was $9 million, or 9 cents per share, in the quarter compared with a profit of $493 million, or $5.30 per share, a year earlier.

Excluding items, the loss was 5 cents per share.

Revenue fell about 2 percent to $2.34 billion.

Analysts on average were expecting a profit of one cent per share, on revenue of $2.27 billion, according to Thomson Reuters I/B/E/S.

Shares of the company, which have fallen over 20 percent in 6 months, closed at $15.35 on Wednesday on the New York Stock Exchange.

© 2017 Thomson/Reuters. All rights reserved.

 
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Dean Foods Co., the largest U.S. dairy processor, lowered its full-year adjusted profit forecast after posting weaker-than-expected first-quarter results as milk costs rose and a severe winter in the country hurt supplies.
China, deaths, milk, Dean Foods
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2014-58-08
Thursday, 08 May 2014 10:58 AM
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