Lower commodity costs boost Dean Foods earnings

by Keith Nunes
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DALLAS — Strong performances from its Fresh Dairy Direct and Whitewave-Morningstar divisions led to a 32% earnings increase for Dean Foods Co. during the third quarter of fiscal 2009, ended Sept. 30. For the quarter the company recorded net income of $47,104,000, equal to 28c per share on the common stock. The results compared favorably to the same period during the previous year when net income was $37,752,000, or 25c per share.


Sales for the quarter were $2,773,507,000 compared with $3,194,669,000 the previous year.


“We are reporting another strong quarterly performance with continued solid operating income and earnings per share growth,” said Gregg Engles, chairman and chief executive officer. “These strong results highlight the key advantages of our business, including a national footprint that provides an unmatched ability to service customers, as well as unique cost savings opportunities. This breadth is complemented by strong branded and private label positions across the refrigerated case, with key offerings in the fastest growing on-trend product segments.”


The benefits of recent acquisitions led to a combined 2.5% growth in fluid milk sales for the third quarter, as compared to the balance of the industry, which was down slightly in the same period, according to Dean Foods. Net sales for the Fresh Dairy Direct business declined 18% to $2.1 billion from $2.5 billion in the third quarter of 2008 due to lower dairy commodity costs that were partially offset by higher volumes.


Cost control efforts combined with volume growth led to Fresh Dairy Direct operating income growth of 4% in the quarter to $145.7 million in the third quarter, from $140.4 million in the same period of 2008.


Operating income in the third quarter for the WhiteWave-Morningstar division was $68.6 million, a 66% increase over $41.3 million in the third quarter of 2008. WhiteWave-Morningstar, which includes the recently acquired Alpro business, had third-quarter net sales of $709.7 million, 6% higher than third-quarter 2008 net sales of $671.3 million.


Sales of the branded portfolio at WhiteWave/Alpro increased 19% to $452.1 million as a result of the Alpro acquisition, offset by a previously announced exit of a food service relationship in the Silk brand and the exit of some private label organic milk products in the United Kingdom. Net sales at Morningstar declined 12% to $257.6 million driven by lower dairy commodity costs and modestly lower product sales volumes.


For the first nine months of fiscal 2009, Dean Foods’ net income was $184,620,000, or $1.11 per share of common stock. The results are an increase over net income of $117,409,000, or 77c per share, the company earned during the first nine months of fiscal 2008.

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