US dairy processor Dean Foods has improved its first-quarter and full-year earnings outlook, as low raw milk prices have boosted profit margins.
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Lower input costs will flow through to Dean Foods’ bottom line, management said ahead of an investor meeting today (26 February).
“We expected the first quarter to be strong as the commodity environment continues to improve,” noted CFO Jack Callahan.
“Based on our analysis of the January results and what looks to be, based on preliminary reports, a solid February, the quarter will likely be even stronger than we initially thought.”
Dean Foods increased its Q1 EPS guidance from US$0.38 to $0.41 per share. The US’s largest dairy group was also able to increase its full-year guidance by $0.05 a share to $1.55 per share.
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By GlobalDataDuring the investor conference, Dean Foods will also highlight its efforts to control costs, including a scheme to generate $300m in savings over the next three to five years.
Cost reduction will largely target the DSD dairy segment, which primarily consists of Dean Foods’ conventional dairy operations, the company revealed.
Over the last year, Dean Foods has already looked to reduce costs by improving supply chain and distribution efficiencies and reducing its workforce.
The company also revealed today that it plans to increase capital expenditure by about 17% this year, to $300m.
“Dean remains a well-positioned leader in numerous attractive categories,” said Gregg Engles, chairman and CEO. “We possess multiple paths to drive growth, including executing against our cost productivity initiatives, driving revenue and profitability in our core businesses and the opportunity to invest in new platforms for future growth.”
