Excess supply in the organic dairy market and an expected rise in commodity costs have forced US food group Dean Foods to lower its full-year earnings guidance for 2007.
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CFO Jack Callahan warned shareholders that Dean Foods had adjusted its earnings per share forecast. The company, Callahan said, only expects to be able to meet the lower end of its US$1.72-1.78 earnings per share forecast.
Dean Foods said its WhiteWave Foods subsidiary is likely to see growing price competition as the industry faces excess supply of organic milk.
“The industry-wide raw organic milk supply appears to be increasing over 40% this year, while category growth has been steadily increasing approximately 20-25% per year over the recent past,” said chairman and CEO Gregg Engles.
“This significant supply-demand imbalance in the organic milk market creates a very challenging and volatile marketplace for Horizon Organic as competitors attempt to stimulate demand through lower retail prices and aggressive distribution expansion.”
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By GlobalDataThe company’s cautious tone came as it saw growing dairy sales boost revenue and earnings during the first quarter of the year.
Dean Foods yesterday (3 May) posted operating profit of US$154.2m for the three months to 31 March. Revenue rose 5% to $2.6bn as dairy volumes increased and the company enjoyed rising sales from its WhiteWave Foods arm.
Chairman and CEO Gregg Engles said: “The dairy group continued its trend of solid volume and operating income growth and WhiteWave Foods posted balanced growth across our core branded portfolio while leveraging operational efficiencies to achieve 25% growth in operating income for the quarter.”
