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November 8, 2016

Dean Foods hails underlying improvements as earnings slide

Dean Foods, the US dairy group, has reported lower sales and earnings for the third quarter of the year but stressed its adjusted performance improved year-on-year. 

Dean Foods, the US dairy group, has reported lower sales and earnings for the third quarter of the year but stressed its adjusted performance improved year-on-year.

In three months to 30 September, net sales slipped to US$1.96bn compared to $2.03bn in the comparable period of last year. Milk volumes dropped 1%, although Dean Foods stressed the result represented the “strongest volume performance in at least four years”.

The company also revealed operating profit in the three-month period was lower. EBIT declined to $42m compared to $50.5m. Net income dropped to $14.5m versus $20.23m in the third quarter of 2015. 

While earnings were lower, Dean Foods stressed that on an adjusted basis – stripping out one-time costs associated with restructuring, facility closures and its closing costs linked to its spin-off from WhiteWave Foods – its operating performance improved year-on-year with adjusted EBIT climbing to $69m versus $62m. 

“I am extremely pleased with our third-quarter results, which reflect the strongest volume performance we’ve seen in years, a disciplined go-to-market strategy and continued focus on reducing costs. Our entire organisation is focused on executing our strategic plan, and you see that in our results,” CEO Greg Tanner said. 

“With improving volume performance, in addition to continued pricing and cost discipline, we expect the fourth quarter to be our eighth consecutive quarter of year-over-year adjusted operating income improvement.”

Last month, The Financial Times reported Hangzhou Wahaha Group, the Chinese dairy-to-soft drinks company, was working on a bid for Dean Foods.

The FT, citing four unnamed sources, said on Friday (28 October) Hongsheng Beverage, a subsidiary of Wahaha, has contacted banks, including Goldman Sachs, as it prepares a move for Dean Foods.

Two of the sources said Hongsheng Beverage had also approached private-equity firms to partner the business on its offer.

When contacted by just-food last week, a spokesperson for Dean Foods said: “It’s our policy not to comment on rumours or market speculation.” Wahaha could not be contacted out of office hours.

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