Tags: Dean | grows | debt | DF

Dean Foods Grows, but So Does Debt

By    |   Wednesday, 19 Oct 2011 11:14 AM

Dean Foods (DF) is the country’s biggest processor and distributor of milk and other dairy products. While growing to its current size gives the company some advantages, it still has obstacles to overcome, including growing debt.

For instance, it’s vulnerable to rising commodity prices. While those prices have been falling for the last couple months, there’s no guarantee that the correction will last.

Second, Dean has exploded in size due to acquisitions. That’s all well and good on the surface. Dean’s annual sales have surged to $12 billion last year from $150 million in 1994, thanks to the purchases.

But debt has soared too. While the company already has begun reducing that burden, it stood at $3.8 billion as of June 30. Dean will likely have to continue shedding assets.

In addition, consumers are watching their budgets closely, given the precarious jobs market. Retailers are promoting their private-label products to draw customers to their stores. Some of Dean’s competitors are undercutting its prices, too. All this puts the company under pressure.

Dean Foods reported a loss of $50.5 million in the second quarter, reversing a profit of $44.8 a year earlier. Sales gained 12 percent to $3.3 billion.

Sales increase

Standard & Poor’s analyst Tom Graves has a hold rating on Dean Foods shares. He anticipates sales will rise 7 percent this year as a whole, largely thanks to the company passing on commodity price increases to its customers.

“In the future, we expect DF to aim for clear cost leadership in the fluid milk industry, through a focus on such areas as product standardization and sourcing, facility network optimization, productivity, and distribution costs,” Graves writes. “We expect some related costs.”

For example, in the first half of 2011, Dean registered a loss of 14 cents per share, 11 cents of which came from facility closing and reorganization costs.

The company next reports Nov. 9.


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Dean Foods (DF) is the country s biggest processor and distributor of milk and other dairy products. While growing to its current size gives the company some advantages, it still has obstacles to overcome, including growing debt. For instance, it s vulnerable to rising...
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