Dean Foods lowers '07 guidance citing dairy challenges

by Staff
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DALLAS — Dean Foods Co. has lowered its expectations for adjusted earnings in 2007 to $1.52 to $1.58 per share. For the second quarter, the company reduced its earnings expectations to 30c to 31c per share primarily due to the dairy group performance.

"We are faced with an unusually broad set of challenges across the portfolio," said Gregg Engles, chairman and chief executive officer. "First, conventional milk prices have risen rapidly and forecasts for the back half of the year have increased significantly as foreign and domestic market forces have combined to put significant pressure on the U.S. dairy industry. As a result, it has become increasingly likely that conventional raw milk prices will reach all-time highs by the third quarter."

Mr. Engles said he anticipates this putting pressure on the dairy group’s profit growth in the second and third quarter.

In addition, the Horizon Organic brand is facing a significant near-term industry-wide oversupply of raw organic milk, creating a disruption in the organic milk market as competitors are competing to expand sales and distribution. The company is responding by expanding distribution, lowering prices and increasing advertising support, actions Mr. Engles anticipates negatively impacting near-term profitability.

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