US dairy products firm Dean Foods has announced that unprecedented volatility in raw milk prices, a difficult retail grocery environment, and record-high fuel, resin and other commodity costs have caused it to reduce its earnings expectations for 2004.
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The company said that these and other factors are contributing to a weaker than expected performance across all of its businesses.
For the full year 2004, the company now expects to achieve adjusted earnings per share in the range of US$2.00 to $2.05. The company expects to report adjusted EPS of $0.44 to $0.46 and $0.63 to $0.66 in the third and fourth quarters of 2004, respectively.
Chief executive Gregg Engles said competitive pressures in the dairy sector had become more intense than the company had been expecting.
“While our volumes are strong in our Dairy Group and Branded Products Group segments, we have not realised the margin benefit we expected from the July and August declines in dairy commodity costs. Furthermore, we’ve continued to be impacted by rising fuel and resin prices, volatility in the butter market, and aggressive competition among our retail customers,” Engles said, adding that the Specialty Foods Group segment had also experienced commodity cost and competitive pricing pressures.
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By GlobalData“These trends have not abated and, in fact, we have seen sharply weaker demand from our co-pack customers in the nutritional drinks business, particularly in low-carb beverages…We are systematically analysing all aspects of our Specialty Foods business with a view to reducing costs and returning this operation to its historical levels of profitability,” he said.
