Dean Foods Co.'s (DF) first-quarter profit fell 41%, handily topping its forecast, as sales increased but margins slid and costs rose.
The company raised its current-year earnings forecast to 67 cents to 75 cents a share from its earlier downbeat view of 55 cents to 65 cents. For the current quarter, it forecast per-share earnings of 15 cents to 20 cents, topping the 13-cent average forecast of analysts polled by Thomson Reuters.
The biggest U.S. dairy processor and distributor by revenue was battered last year by heavy competition from private-label brands, as grocers discounted milk to lure consumers into their stores. It said Tuesday that pricing on private label milk will continue to hurt results throughout the first half of the year.
The maker of Horizon Organic dairy products, Silk soy milk and International Delight coffee creamers reported a first-quarter profit of $25.3 million, or 14 cents a share, down from $43.2 million, or 24 cents a share, a year earlier. In February, the company had forecast earnings of 5 cents, well below Wall Street's then-estimates.
Net sales rose 3% to $3.05 billion, falling short of the $3.07 Street estimate.
Gross margin narrowed to 24.6% from 25.3%. Operating costs increased 2.6% while interest expenses jumped 12%.
The fresh dairy direct segment, Dean Foods' largest business, saw profit drop 12% and sales rise 2%. Volume slid 3.8% amid a 2.4% drop in milk volume.
At the WhiteWave-Alpro segment, which includes ice cream and yogurt as well as organic products, sales increased 7% and earnings rose 8.9%.
Shares closed Monday at $10.98 and were inactive in recent premarket trading. Through the latest close, the stock is up 24% so far this year.
-By Matt Jarzemsky, Dow Jones Newswires; 212-416-2240; firstname.lastname@example.org