US dairy products company Dean Foods has posted a 10% rise in quarterly net income, but warned its earnings would come under pressure in 2004 due to high commodity costs.

The company reported net income of US$69.2m for the first quarter to 31 March, compared to $63.2m in the prior year period. Earnings per share were flat at 43 cents.

Net sales for the first quarter totalled $2.5bn, an increase of 14% over the first quarter of 2003, primarily due to the acquisitions of Horizon Organic and Ross-Swiss Dairies in 2004 and the acquisitions of Melody Farms and Kohler Mix Specialties last year; increased selling prices resulting from higher raw material costs; and growth in strategic brand volumes.

“I’m pleased with our results for the first quarter, particularly in light of the difficult raw material environment we are experiencing,” said chairman and CEO Gregg Engles.

Dean Foods said it has accelerated its plant rationalisation program in light of the difficult commodity environment, and it will close more plants in 2004 than originally anticipated. The company now estimates that it will close a total of eight to ten facilities this year.

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“As a result of these unusually high commodity costs, 2004 will be a challenging year,” added Engles. “We are working diligently to manage through these commodity cost increases. However, the unprecedented pace of these increases will put pressure on our earnings in 2004. Our Specialty Foods Group is not able to pass through increased commodity costs as quickly as our other segments and, therefore, we expect Specialty Foods to have a particularly challenging year.”