DALLAS — A 21% jump in third-quarter operating income at its DSD Dairy segment paced a dramatic increase in quarterly profits at Dean Foods Co.
Net income at Dallas-based Dean Foods in the third quarter ended Sept. 30 was $37,752,000, equal to 25c per share on the common stock, up 482% from $6,482,000, or 5c per share, in the third quarter last year. Net sales were $3,149,669,000, up 2.5%.
Adjusted net income from continuing operations in the third quarter was $43.5 million, up 133% from $18.7 million in the third quarter last year.
In addition to stronger results from DSD Dairy, profits were boosted by lower interest expense.
"The third-quarter results demonstrate the clear progress the business has made over the last year," said Gregg Engles, chairman and chief executive officer. "Third-quarter adjusted operating income for the DSD Dairy segment is 21% higher than the very difficult third quarter of last year while fluid milk volumes were over 3% higher this quarter than the third quarter of 2007. At WhiteWave-Morningstar, sales continue to grow at a strong pace, while profitability was challenged in the quarter by increasing commodity costs at Morningstar and the continued effects of higher organic milk costs on WhiteWave’s Horizon Organic brand. Overall, it was a very encouraging quarter and positions us well to finish out the year strong."
Operating income of DSD Dairy was $140,444,000 in the third quarter, up from $116,543,000.
Net sales of the DSD Dairy business were $2,523,357,000, up 1% from $2,498,634,000 billion in the same period last year. Higher volumes were partly offset by the effects of lower overall dairy commodity costs. The lower costs were a significant contributor to higher operating profits for the division as were increased proceeds from excess cream sales and cost control efforts. Energy costs and packaging costs were countervailing forces.
WhiteWave-Morningstar operating income in the third quarter was $41,321,000, down 4% from $43,062,000. Net sales were $3,194,669,000, up 9%.
Operating margins in the segment narrowed to 6.2% in the quarter from 7% in the same period last year. Increasing dairy costs at Morningstar, specifically higher butter prices, pressured results.
"Higher raw organic milk costs also continued to challenge the Horizon Organic brand in the WhiteWave portfolio, offsetting efficiency gains and improving profitability across the rest of the branded portfolio," the company said.
Horizon Organic milk prices were up 20% from the third quarter last year because of higher prices. Silk sales also chalked up double-digit gains. The company credited distribution expansion and "integrated marketing that featured both print and television advertising highlighting the heart health benefits of the Silk product line."
In the first nine months of 2008, Dean Foods net income was $117,409,000, or 80c per share, up 19% from $98,718,000, or 75c per share. Net sales were $9,374,188,000, up 9%.