Dean Foods cuts earnings expectations

by Staff
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DALLAS — Dean Foods Co. has reduced its earnings expectations for the third quarter and the full 2007 fiscal year. The company anticipates third-quarter earnings per share to be about 15c and expects $1.25 per share for the full-year.

The company previously had given a range of 24c to 28c per share for the third quarter and $1.52 to $1.58 per share for the full-year.

"Rapidly increasing and record high dairy commodity costs have created a very challenging operating environment, and 2007 results have been well short of our expectations," said Gregg Engles, chairman and chief executive officer. "The third quarter has been particularly challenging as dairy commodity costs have risen sharply, hitting all-time highs. This is by far the most difficult operating environment in the history of the company, reinforcing the importance of the long-term strategic initiatives we have under way."

Jack Callahan, chief financial officer, said sales volumes in the Dairy Group have softened as a result of high prices. He said the company also is seeing a shift from branded products to private label in some of the regional brands, and WhiteWave is being impacted by an oversupply of organic milk.

"We expect more favorable price movements as we get farther into 2008," Mr. Callahan said. "We also expect the organic milk supply to continue to negatively affect results for the balance of this year and into at least the first half of 2008, despite the recent volume acceleration of the Horizon Organic brand."

The company also announced it is cutting its workforce by 600 to 700 positions throughout the country.

"Our decision is part of our multi-year productivity initiative, which will help better position the company during this incredibly difficult period for Dean Foods and the industry," Mr. Engles said. "It is a tough decision, but it is a necessary action to improve our competitive position."

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