Dean Foods Downsize In Difficult Times

DALLAS - Dean Foods seem to be the latest victim of the dairy crises, recently announcing a reduction in third quarter expectations culminating in the decision to drastically cut its workforce.
calendar icon 4 October 2007
clock icon 2 minute read

"Rapidly increasing and record high dairy commodity costs have created a very challenging operating environment and 2007 results have been well short of our expectations," said Gregg Engles, Chairman and CEO. "The third quarter has been particularly challenging as dairy commodity costs have risen sharply, hitting all time highs. This is by far the most difficult operating environment in the history of the company, reinforcing the importance of the long-term strategic initiatives we have underway. These efforts will better position us to face future challenges."

Jack Callahan, Chief Financial Officer of Dean Foods, added, "As a result of this extreme commodity environment, we face unprecedented cost challenges in our Dairy Group operations, including increased shrink costs and materially reduced profits from excess cream sales. At the same time, sales volumes in the Dairy Group have softened as consumers react to the record high prices. We are also seeing a pronounced shift from branded products to private label in some of our regional brands. At WhiteWave, results continue to be negatively impacted by the oversupply of organic milk."

Continued Callahan, "With these challenges in mind, it is now clear that our adjusted results for the third quarter will be below our previous guidance, and we now expect earnings per share to be approximately $0.15 per share in the third quarter and approximately $1.25 per share for the full year."

"While we had expected strong growth in milk supply to lead to lower conventional dairy commodity prices toward the end of the year, it now appears that prices will likely remain high for the balance of the year, due in part to continued strong export demand for non-fat dry milk powder," added Callahan. "However, we expect more favorable price movements as we get farther into 2008. We also expect the organic milk oversupply to continue to negatively affect results for the balance of this year and into at least the first half of 2008, despite the recent volume acceleration of the Horizon Organic brand."

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