Higher casein prices have weighed on earnings at US organic dairy group Galaxy Nutritional Foods.

The company yesterday (11 February) booked net income of US$224,079 for its fiscal third quarter to 31 December. The result compared to $295,365 a year earlier.

Galaxy Nutritional said a "substantial increase" in the cost of casein had led gross margins and net income to fall during  the three-month period.

The company said margins during its fourth quarter would be similarly affected but forecast margins to improve during the first three months of its next fiscal year as casein prices are expected to fall.

Third-quarter net sales dipped from $6.4m a year ago to $6.3m.

"While dealing with higher costs and a softening economy, management's focus has been on nurturing sales and controlling expenses in order to deliver a positive bottom line along with generating positive operating cash flow," Galaxy Nutritional CEO Michael Broll said.

Earlier this week, it emerged that Galaxy's controlling shareholder had agreed to join forces with a private equity firm to buy the remaining shares in the company.

Galaxy Partners, which owns 51.1% of Galaxy Nutritional, and private equity group Mill Road, have agreed to contribute their combined 53% stake in the business to investment vehicle MW1.

MW1 plans to make a cash tender offer to buy the remaining shares in Galaxy Nutritional with a bid worth US$0.36 a share.

The offer will open on 13 February and is expected to last until 16 March.

Upon the successful completion of the offer, Mill Road and Galaxy Partners will, through MW1, be joint owners of Galaxy Nutritional.