Dean: Unprecedented challenges

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Dean Foods Company announced weaker second quarter 2014 financial results – and took the unique step of pulling back on any longer-term financial forecasts.

The company reported a second quarter 2014 operating loss of $4 million, compared to second quarter 2013 operating income of $44 million. Second quarter 2014 adjusted operating loss totaled $6 million, compared to income of $65 million in the year-ago period.

"The second quarter was even more challenging than we had originally anticipated," said Gregg Tanner, Dean chief executive officer. “This is by far the most difficult operating environment in the history of the company, reinforcing the importance of the initiatives we have underway."

Chris Bellairs, Dean chief financial officer, added, "As a result of the extreme dairy commodity environment, we face unprecedented challenges, including softening category volumes, mix shift out of our brands and significant cost friction."

"The balance of the year appears rocky, with a continued unpredictable and volatile dairy commodity environment. That makes it difficult to provide guidance beyond the immediate quarter," stated Tanner. "Therefore for the time being, we are going to provide specific guidance only for the next quarter, where our visibility is better. While we hope to see a more positive environment later in the year, the uncertainty surrounding whether or when that will occur leads us to withdraw our full year guidance for the present time."

Among the quarterly financial report highlights:

  • Second quarter 2014 net sales totaled $2.4 billion, compared to $2.2 billion in the second quarter of 2013.
  • Dean Foods' share of U.S. fluid milk sales volume increased to 35.9% during the second quarter, up from 35.7% in the first quarter of 2014.
  • On a full quarter same basis, Dean Foods' unadjusted fluid milk volumes declined 4% on a year-over-year basis. The decline continued to reflect the negative impact of its loss of its contract with Wal-Mart, and another customer's decision to vertically integrate last year. Industry fluid milk volumes, through the two months ending in May, declined approximately 4.0% year-over-year on an unadjusted basis, based on USDA data.
  • With the closure of 12 manufacturing plants since the first quarter of 2013, Dean said it had reached its plant closure goal in an effort to cut costs.
  • The second quarter 2014 average Class I mover, a measure of Dean’s raw milk costs, was $23.66/cwt., up 31% from the second quarter of 2013, and 6% above the first quarter 2014 level. The second quarter 2014 average was the highest quarterly Class I mover average in the history of the U.S. dairy industry.

Visit www.deanfoods.com.



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