Dean Foods' Q2 Results Creates A Foul Taste Among Investors
Dean Foods (NYSE: DF) reported disappointing second quarter results Monday morning due to declining milk sales and headwinds in the dairy sector.
Dean Foods lost $0.14 per share, more than the $0.06 loss per share analysts were expecting. Revenue of $2.39 billion did come in higher than analysts expected by $70 million, while net loss attributable to the company plunged to $13 million from a net profit of $24 million in the same quarter a year ago. Dean Foods’ adjusted operating loss for the quarter plunged to $6 million compared to an operating income of $65 million a year ago.
During the quarter, Deans Foods saw its share of the U.S. fluid milk sales volume increase to 35.9 percent from 37.7 percent last quarter. However, the company notes that the entire industry saw milk volumes decline four percent year-over-year. Dean Foods’ unadjusted fluid milk volume declines was in-line with the industry at four percent.
“This quarter’s volumes continue to reflect the negative impact of the RFP-driven volume loss form a significant customer in 2013,” the company noted in its earnings release. The company added that excluding the impact of the RFP and another customer’s decision to vertically integrate last year, its fluid milk volumes only decreased 0.3 percent in the quarter.
“The second quarter was even more challenging than we had originally anticipated,” Gregg Tanner, Chief Executive Officer of Dean Foods said in a press release. “This is by far the most difficult operating environment in the history of the company, reinforcing the importance of the initiatives we have underway.”
Dean Foods noted that it “continues to make solid progress” in its accelerated cost reduction agenda. The company closed four manufacturing facilities in June and July as part of a goal of closing 10 percent to 15 percent of its total manufacturing facilities.
Dean Foods sees the remainder of 2014 being “rocky” given the unpredictable and volatile dairy commodity environment. As such, Dean Foods will only provide specific guidance for the upcoming quarter.
Dean Foods expects its net loss to be in a range of $0.05 to $0.15 per share in the third quarter.
The company hopes to see a more positive environment later on in 2014, but admitted that it is uncertain “whether or when that will occur.”
Shares of Dean Foods were trading lower by six percent at $14.85 on Monday.
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