Dean Foods to accelerate closure of milk processing plants

US dairy company Dean Foods has announced plans to speed up the closure of up to 15% of its processing facilities in a move to offset the impact of increasing competition and declining volumes of fluid milk sales in the country.

The company stated that it plans to shut down eight to 12 of its facilities by mid 2014.

Dean Foods, which sold a number of its food brands to strengthen its milk business, lost a large contract with Wal-Mart Stores earlier this year.

The company reported a net loss in its second quarter of 2013 on an attributable basis of $56.9m, compared with a profit of $56.2m for the same period in 2012, primarily due to a decline in the company’s fluid milk sales volume in the US.

For the quarter ended 30 June 2013, net revenues decreased 0.3% to $2.22bn, compared with $2.23bn a year ago.

Dean Foods estimates that more than two-thirds of the decline in fluid milk volumes is attributable to the transition of volume to other providers.

Dean Foods CEO Gregg Tanner said that the company successfully offset the majority of the volume deleverage associated with lower volumes in the quarter through execution of its accelerated cost reduction and productivity agenda.

"These initiatives build on our competitive advantages and position us to succeed going forward," Tanner added.

"Additionally, we have continued to make progress in other areas as well, including the recent replacement of our credit facility and the disposition of our remaining WhiteWave ownership interest that delivered $589m to Dean Foods to further bolster our financial strength and flexibility."

The company noted that the fluid milk category volumes for this year appear to be a bit softer than previously anticipated.

Due to the full-quarter impact of the RFP-related volume reduction in the third quarter, continued soft category trends and normal seasonality in the business, the company expects the third quarter to be the most challenging of the year.

For the third quarter, the company has forecast adjusted diluted earnings of $0.05 to $0.08 per share.

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Image: Dean Foods plans to shut down eight to 12 of its facilities by mid 2014. Photo courtesy of Alessandro Paiva.