February 14, 2008

Dean Foods reports 55-percent plunge in profit on soaring milk costs

Dean Foods, the largest US dairy producer, announced that fourth-quarter profit tumbled 55 percent due to incessant increase in raw milk costs.

The company's net income fell to US$32.6 million, or 24 cents a share, from US$73 million, or 53 cents.

Excluding one-time items, the company earned 27 cents a share, trailing the 30-cent average estimate of 10 analysts surveyed by Bloomberg. Sales rose 25 percent to US$3.23 billion.

Dean Foods had its third straight quarterly profit decline as earnings from dairy operations fell 13 percent to US$150.9 million on higher raw milk prices. The stock slumped 39 percent last year as the company cut its full-year earnings forecast three times.

The company estimates first-quarter profit to be 15 cents to 20 cents share. Analysts expected 26 cents, the average of eight estimates in a Bloomberg survey.

Dean Foods said full-year profit will be at least US$1.20, trailing the US$1.43 average estimate of 10 analysts.

Chief executive officer, Gregg Engles, said dairy commodity markets remain meaningfully above year-ago levels, creating a significant drag on near-term earnings power. He added that it would be difficult to have much confidence in current dairy commodity forecasts, given the unprecedented levels of dairy commodity market instability.

Dean Foods forecast 2007 profit of as much as US$2.38 a share last February, then trimmed the figure three times, to US$1.25 a share in October.

On February 8, the USDA forecast 2008 milk production of 190.6 billion pounds, up from a January estimate of 190 billion.