Encouraging Q1 prompts Dean to increase 2011 profit forecast

By Guy Montague-Jones

- Last updated on GMT

Related tags Milk Marketing

Dean Foods has upped its profit forecast for the full year on the back of better than expected first quarter results.

The US dairy business has been struggling in the face of price volatility and tough competition from private label dairy products.

The private label trend continued to weigh on Dean in the first quarter but overall the company said results were better than expected.

Stronger start than expected

Gregg Engles, chairman and CEO, said: “Overall, the business is off to a stronger start than we had anticipated and we are somewhat encouraged as we look to the balance of the year.”

Net sales for the quarter were up to $3.05bn compared to $2.96bn in the equivalent period last year.

And progress continues to be made to reduce costs. Dean is cutting 140 jobs in the second quarter and now expects to double its 2011 target of a $30m reduction in selling, general and administrative costs.

Based on these figures and expectations for the second quarter, Dean has increased its profit forecast to $0.67-0.75 per adjusted diluted share from its previous outlook of $0.55-0.65 a share.

Dean operates two main businesses – Fresh Dairy Direct-Morningstar and WhiteWave-Alpro. The first is the largest fresh dairy processor in the US and the second sells more specialist products including organic dairy and soy products.

Business strategy

In the first quarter, Dean said Fresh Dairy Direct-Morningstar experienced “soft volumes” while WhiteWave-Alpro grew 7 per cent.

Engles said: “While we have a long way to go at Fresh Dairy Direct-Morningstar, I am cautiously optimistic that the trajectory of our business is upward… In our other major segment, WhiteWave-Alpro continued to perform well, with both strong top and bottom-line growth against a tough overlap and unfavorable holiday calendar.”

Moving forward Engles said Dean would continue to focus on cost reduction and pricing. In addition, to offset the weak volumes at Fresh Dairy Direct-Morningstar, he said the company is going after new business and expects the first results of this effort to show up in the second quarter results.

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