Dean Foods warns 3Q may be toughest this year

Dean Foods posts 2Q loss and issues dire outlook for 3Q on weak sales volume

Associated Press

DALLAS (AP) -- Dean Foods Co. reported a second-quarter loss on Thursday and said its third quarter may be its most challenging this year, which sent the dairy company's shares down sharply.

The company is struggling with the recent loss of a major customer and an industry slump in milk sales volume, which has taken a toll on its revenue. The company has tried to offset this with cost cuts, including plans to close up to 15 percent of its plants.

Dean Foods, headquartered in Dallas, is the country's largest processor and distributor of milk.

The company posted a loss of $56.9 million, or 30 cents per share, for the quarter. That compares with net income of $56.2 million, or 30 cents per share, in the fourth quarter last year. On an adjusted basis, it earned 13 cents per share from continuing operations.

Revenue slipped to $2.23 billion from $2.23 billion.

Analysts polled by FactSet were anticipating adjusted earnings of 14 cents per share on revenue of $2.25 billion for the period.

The company previously disclosed the loss of a major customer, so investors were not entirely surprised by the results. It also got a $589 million boost during the quarter from the sale of its remaining stake in The WhiteWave Foods Co., a business it recently spun off that owns the Horizon Organic and Silk soy brands.

Dean Foods CEO Gregg Tanner said in a call with investors Thursday that the company has accelerated its cost-cutting efforts, including its plans to close up to 10 to 15 percent of its plants. It anticipates closing about eight to 12 of its plants through the middle of 2014. It has already closed or announced plans to close eight sites since it started this effort last year.

Tanner said the company believes the cost-cutting will allow the company to deliver solid full-year results, but said the third quarter will be the most challenging of the year. This is due to weaker fluid milk volume sales, the loss of the major customer and normal seasonality of the business.

Dean expects adjusted earnings of 5 to 8 cents per share for the quarter. Analysts had forecast 11 cents per share.

The company also updated its full-year guidance on Thursday. It now expects to earn between 47 and 53 cents per share on an adjusted basis, versus earlier forecasts of 45 to 55 cents per share. Analysts had forecast earnings of 54 cents per share for the year.

Shares of the company fell 97 cents, nearly 9 percent, to $10.04 by early afternoon. Its stock traded as low as $9.91 earlier in the day but remains in the middle of its 52-week trading range of $6.38 to $11.48.

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