Dean Foods reported a 19 percent net income loss over 2008 and “sluggish” organic milk sales in the company’s fourth quarter earnings report yesterday. Chairman and CEO Gregg Engles attributes the loss to rising commodity costs, pressures from retailers and increased competition.
“Our fourth quarter performance was below our expectations,” Engles said. “As the year came to a close, several of our businesses fell short of expectations. Morningstar profits were challenged by volume softness, steep commodity inflation and a charge incurred to renegotiate a distributor contract."
Fourth quarter net sales for Dean Foods’ WhiteWave-Morningstar division increased 8 percent over 2008, reaching $762 million for 2009. Engles cited the acquisition of European soy company, Alpro Soya, and strong sales growth in the WhiteWave creamer business as the reasons for the increase.
As for Dean Foods’ natural brands, like Mountain High Yoghurt, Horizon Organic, Rachel’s Organic, Oak Farms Dairy and Silk, sales remain slow and steady, according to Engles. Horizon Organic increased fourth quarter category share, and both Horizon and Silk netted essentially flat sales.
“The dairy processing industry is not immune to the economic downturn,” Engles said. The company is cautiously optimistic for 2010 first quarter earnings, predicting measured growth over the course of the year.
“Looking ahead at our expectations for 2010, the first quarter presents a challenging overlap," said Jack Callahan, chief financial officer for Dean Foods. “Reflecting on the current market-driven challenges we face, we are forecasting first quarter adjusted diluted earnings to be between $0.25 and $0.30 per share. [The company earned $.27 per diluted share in last year’s fourth quarter]. As we look at the balance of the year, however, the overlaps and commodity forecasts become much less daunting and we expect to be back to posting strong quarterly year over year growth by the back half of the year.”