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S&P’s revises Dean Foods outlook on input cost concerns

25-Feb-2011

Standard & Poor’s has revised its rating outlook for Dean Foods warning that rising input costs are likely affect profitability at the company and other dairy processors.

The ratings agency revised its outlook to ‘negative’ from ‘stable’ and affirmed its junk B+ corporate credit rating – Dean Foods currently has $4.1bn in total debt outstanding.

In a note, S&P’s said: “We believe the industry outlook for continued rising prices in the near-term for raw milk and other commodity inputs is likely to have a negative effect on the operating results of Dean Foods and other dairy processors if they are unable to effectively pass along these increased costs.”

In addition, Dean Foods is facing a shift away from branded milk and aggressive retailer discounting of private label milk. This has resulted in falling demand although in its latest trading statement last week the US dairy said it is beginning to see signs that the fluid milk category is stabilising.

S&P’s said Dean Foods remains the leading dairy company in the US with a market share around the 40 per cent mark.

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