Falling US milk consumption hampers strategic revamp.
Dean Foods shares have sunk in pre-market trading after the largest US dairy milk supplier flagged lower earnings in the current quarter as it continues to grapple with a strategic turnround amid falling domestic milk consumption.
The Dallas-based company, whose products include Swiss Premium and TruMoo milk, has implemented an “aggressive but necessary” productivity plan to make it more competitive, which includes dramatically reducing its cost structure to enable it to deliver “solid and consistent” earnings and cash flow over the long term.
Dean said that due to implementation and timing of its turnround efforts, balanced against its investments and other industry challenges, it expects to deliver adjusted earnings per share in 2018 in the range of 55 cents to 80 cents. That compares with 80 cents in 2017, which was at the bottom end of the company’s own guidance.
“We expect the first quarter earnings to be disproportionately lower than the fourth quarter of 2017, and we expect to see an increase in adjusted earnings per share as we move through the year and into 2019,” the company said in a statement on Monday.
Shares were down 11.2 per cent at $9 in pre-market trading on Nasdaq on Monday.
In the final trhee months of last year, Dean chalked up adjusted earnings, excluding a benefit from recent tax reform, of $44m. At 25 cents a share that was down slightly more than one-third from a year earlier. Revenue of $1.93bn was 4.2 per cent lower than the same time last year, in line with analyst estimates in a Thomson Reuters survey.
In August, the company’s quarterly results badly missed analysts’ expectations and it slashed its 2017 outlook by 40 per cent. Dean’s chief financial officer departed soon after.
Dean said today total volume in the December quarter across all its products was down 6 per cent from a year earlier.
The company said it expected benefits from its productivity initiatives would generate savings this year that “will begin to mitigate some of the anticipated impact from volume deleverage and non-dairy input cost inflation.” Adjusted earnings per share should increase into 2019, it added.
By: Peter Wells
Source: THE FINANCIAL TIMES