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June 12, 2007

US: Dean Foods issues profit warning

Dean Foods today (12 June) said that its full-year and second-quarter profits will miss expectations due to the inflated price of raw milk.

Dean Foods today (12 June) said that its full-year and second-quarter profits will miss expectations due to the inflated price of raw milk.


Dean Foods, the largest processor and distributor of milk in the US, said that it expected adjusted earnings to total $0.30-31 per share in the second quarter and $1.52-1.58 per share in the full year.


The company predicted that the third quarter will be “particularly challenging”, with raw milk prices expected to reach all-time highs.


“We are faced with an unusually broad set of challenges across the portfolio,” said Gregg Engles, chairman and CEO. “Conventional milk prices have risen rapidly and forecasts for the back half of the year have increased significantly as foreign and domestic market forces have combined to put significant pressure on the US dairy industry.


“As a result, it has become increasingly likely that conventional raw milk prices will reach all- time highs by the third quarter. We expect this steep rise in dairy costs to put pressure on Dairy Group profit growth, especially in the second and third quarter.”


In contrast, the company said that its Horizon Organic brand was faced with a significant oversupply of organic milk, forcing prices down.


“Our WhiteWave team is responding with an aggressive program to protect Horizon Organic’s leadership position through this period,” Engles said.


Looking ahead, Engles said profit growth should accelerate in 2008, as the company cuts costs and builds up its marketing, product development and sales operations.


Engles added: “As we look ahead to 2008, I expect our profit growth to accelerate based on the progress we are making in building the New Dean Foods, and as the short-term challenges across the portfolio moderate.”

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