Dean Foods posts higher Q3 profit

Dean Foods, a US-based dairy company, has reported net earnings of $415.1m for the third quarter of 2013, compared with $36.4m for the same period a year ago.

The net earnings were attributable to gains from selling stock of the company’s former subsidiary WhiteWave; the spin-off of WhiteWave Foods was completed in May 2013.

For the quarter that ended 30 September, net sales decreased 2% to $2.2bn from $2.24bn a year ago.

The company’s US fluid milk sales volume share declined to 34.9% during the quarter from 36.4% in the previous quarter, while unadjusted fluid milk volumes declined 10% on a year-over-year basis due to the loss of business at a large retailer.

Dean Foods CEO Gregg Tanner said, "We are actively working to extend our competitive advantages through aggressively reducing costs and enhancing our strengths and capabilities.

"At the same time, we have put the pieces in place to enhance shareholder value by utilising our strong balance sheet and growing adjusted free cash flows, specifically through the adoption of a dividend policy, the initiation of a cash tender offer for up to $400 million of our bonds, and an increase in our available share repurchase authorisation up to $300 million."

Dean Foods stated that it is successfully moving forward with plans to achieve $120m cost savings in 2013, including the proposed closure of up to 15% of its manufacturing facilities by mid-2014.

Since the accelerated cost reduction initiative began in the fourth quarter 2012, the company has shut eight plants. Of these, seven ceased operations at the end of the third quarter.

Tanner said, "Turning to the forward outlook for the fourth quarter, although challenges remain, we still expect to deliver solid full-year results.The dairy commodity environment looks more challenging than previously thought as prices remain stubbornly high despite strong domestic production growth.

"We expect to continue to have temporarily higher costs in the fourth quarter related to the plant closure activities."

For the fourth quarter, the company expects adjusted earnings per share (EPS) of $0.17- $0.23 a share, leading to full year 2013 adjusted EPS between $0.85 and $0.91 and EBITDA of up to $400m.

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