Dean Foods swings to profit in third quarter

US dairy company Dean Foods has swung to a profit of $36.44m in the third quarter of 2012, compared to a loss of $1.55bn in 2011, when the company incurred a $1.9bn goodwill impairment charge related to its Fresh Dairy Direct segment.

Net sales in the quarter ended 30 September 2012 declined 7.9% to $3.14bn, compared to $3.41bn in 2011.

Dean Foods chairman and CEO Gregg Engles said the company reported growth for the fifth consecutive quarter, driven by strong performance across each of the three operating segments.

"Our strong performance this year has created the flexibility to pursue important strategic actions like the recently completed initial public offering of The WhiteWave Foods Company," Engles added.

In October 2012, the company spun off its WhiteWave-Alpro division, which offers a range of branded dairy, soya, and plant-based foods and beverages, in a $391m initial public offering.

Currently, it holds an 87% stake in WhiteWave and is evaluating the sale of its Morningstar dairy business in a deal worth an estimated $1bn.

Segment-wise, the WhiteWave-Alpro division posted a 13% increase in sales to $598m, compared to $531m in 2011, driven by the coffee creamers and beverages platform.

Operating income of the division grew 25% to $64m, up from $52m in 2011.

The Fresh Dairy Direct segment, which is the company’s largest revenue generator, saw a 13% decline in net sales to $2.2bn, due to higher raw milk costs, while operating income rose 32% to $100m.

The Morningstar Foods division, a warehouse delivery dairy business that sells traditional and speciality dairy items, registered a 3% fall in net sales to $338m, and a 54% rise in operating income to $31m.

For the first nine months of 2012, the company’s net income totalled $130m, up from a loss of $1.56bn in 2011, while net sales rose 2.8% to $9.48bn.

Dean Foods increased its full year 2012 adjusted diluted earnings forecast to between $1.27 and $1.32 per share, compared to its earlier estimate of $1.18 to $1.28, and it expects fourth quarter adjusted diluted earnings per share to be between $0.27 and $0.32.