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US milk price fall lifts Dean Foods profits

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Shares in Dean Foods soared 10% after the US dairy group unveiled a bigger-than-forecast boost from falling milk prices, and unveiled a profits outlook ahead of market expectations.

Dean Foods shares touched $17.94 in early deals in New York, before easing back to stand at $17.44 in mid-morning deals, up 7.1% on the day.

The gains followed the release of results showing that underlying earnings per share reached $0.24 for the January-to-March period, compared with a loss of $0.05 per share a year before.

The result was ahead of market expectations for a $0.18-per-share result.

And Dean Foods forecast earnings reaching $0.20-0.30 per share in the April-to-June period, at least matching the $0.20 per share that Wall Street is expecting.

'Easing commodity environment'

The group said that its improved performance reflected "solid execution within an easing commodity environment", with prices of benchmark Class 1 Mover milk, averaging $16.79 per hundredweight during the quarter, down 25% year on year.

However, the price falls were not passed on in full to consumers, allowing better margins for processors.

"We witnessed retailers lean first and foremost into pricing architectures to restore profitability to dairy products and the dairy case," said Chris Bellairs, the Dean Foods finance director.

"Significant price realisation was the primary driver of sequentially improving results."

Debt repayment

Dean Foods reported result was a loss of $73.74m, up from a loss of $8.96m a year before.

The deterioration reflected an increased tax payment, and a $43.6m hit from the early repayment of long-term debt.

By Agrimoney.com

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