DALLAS — Adjusted earnings at Dean Foods Co. were higher in the third quarter ended Sept. 30, helped in part by ebbing pressure on sales volumes.
Net income at Dean in the third quarter was $14,526,000, equal to 16c per share on the common stock, down 28% from $20,233,000, or 22c per share, in the third quarter of 2015. Net sales were $1,964,601,000, down 3% from $2,033,693,000.
Adjusted net income during the quarter was $33 million, up 18% from $28 million in the third quarter last year. Adjusted operating income was $69 million, up 11%. Included in the adjustments are a range of more than a dozen excluded items, including asset impairment charges, facility closing costs and market-to-market gains/losses on derivative contracts.
Adjusted earnings per share were 37c, up from 30c in the third quarter last year. The 2016 results were in line with guidance of 32c to 40c, issued three months ago.
Third quarter sales volume was down 1% from a year earlier, which was the smallest year-over-year decline in four years.
|Gregg Tanner, c.e.o. of Dean Foods|
“I am extremely pleased with our third-quarter results, which reflect the strongest volume performance we’ve seen in years, a disciplined go-to-market strategy and continued focus on reducing costs,” said Gregg Tanner, chief executive officer. “Our entire organization is focused on executing our strategic plan, and you see that in our results.”
Average Class I Mover, a measure of raw milk costs, was $15.11 per cwt in the third quarter, up about 12% from the second quarter of 2016 but down about 8% from the third quarter of 2015. The company is projecting fourth-quarter 2016 average Class I Mover at of $15.96 per cwt, up 6% sequentially but still down about 2% decline year-over-year.
Third-quarter volume across all products was 651 million gallons, down 1% from 658 million gallons in the third quarter of 2015. Dean said the third-quarter volume “represents the healthiest year-over-year volume performance the company has delivered in at least four years.” The company said volume trends should continue to improve in the fourth quarter.
Based on fluid milk sales data published by the U.S. Department of Agriculture through August, fluid milk volumes decreased 0.9% year-over-year in the third quarter of 2016 on an unadjusted basis. On this same basis, Dean Foods’ share of U.S. fluid milk volumes increased by 60 basis points sequentially to 35.1% for the quarter-to-date through August.
For the final period of the year, the company is forecasting adjusted earnings of 37c to 45c per share.
“For the fourth quarter, with improving volume performance, in addition to continued pricing and cost discipline, we expect the fourth quarter to be our eighth consecutive quarter of year-over-year adjusted operating income improvement,” Mr. Tanner said.
In the nine months ended Sept. 30, net income at Dean Foods was $87,098,000, equal to 96c per share, versus a loss in January-September 2015 of $26,988,000. Sales were $5,692,217,000, down 6% from the same period in 2015.Adjusted net income in the first three quarters was $110 million, up 34% from $82 million.