Income for Dean Foods down 62% in year

by Staff
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DALLAS — Facing continued challenges in its Fresh Dairy Direct-Morningstar business, income for Dean Foods Co. for the full-year 2010 was down 62%.

Income for the year ended Dec. 31, 2010, was $91,491,000, equal to 48c per share on the common stock, which compared with income of $240,308,000, or $1.41 per share, during fiscal 2009. Sales for the year were $12,122,887,000, up 9% from $11,113,782,000 during the previous year.

“2010 was an exceptionally difficult year for Dean Foods, and our fourth-quarter results reflect many of the same trends that have impacted the business all year,” said Gregg Engles, chairman and chief executive officer. “At Fresh Dairy Direct-Morningstar, wholesale pricing for private label milk remained pressured during the quarter, and volume softened. As a consequence, Fresh Dairy Direct-Morningstar operating profit was little changed from the third quarter.

“We have, however, begun to see signs that the fluid milk category is stabilizing, albeit at historically low levels of profitability. Some retailers have taken early steps to reduce heavy private label promotions and our regional brand volume mix has begun to stabilize. Regional branded milk volumes outperformed private label on a year-over-year basis in the fourth quarter. Moreover, private label wholesale prices appear to have stopped declining, although we have not yet seen them rise. Volume, however, remains weak, which we believe will limit upward price mobility. The net result is an industry that appears to be stabilizing at a price and profit level meaningfully below historical norms. To move forward in such an environment means that we must continue to optimize our network to offset volume weakness and drive efficiency to rebuild profits, which is the path that we are on.”

For the fourth quarter ended Dec. 31, 2010, the company sustained a loss of $20,744,000, which compared with income of $50,266,000, or 28c per share, during the same quarter of the previous year. Sales for the quarter were $3,152,961,000, up 5% from $2,989,747,000 during the same quarter of the previous year.

“We expect the first half of 2011 to be particularly difficult as we battle soft volumes and spiking commodities,” Mr. Engles said. “However, as we lap the most difficult challenges of 2010, as new business comes on line, and as our cost reduction efforts accelerate further, we expect results to strengthen in the back half of the year, and to exceed 2010 performance by the fourth quarter. Our first quarter is historically our weakest quarter, and we expect it will be without doubt the most difficult quarter of this year as we chase the unexpected spike in dairy commodity costs, experience weak volumes, and begin to accrue incentive compensation at normal rates.”

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