From: Reuters
Published February 13, 2008 10:12 AM

Dean Foods profit falls on soaring milk costs

By Brad Dorfman

CHICAGO (Reuters) - Dean Foods Co <DF.N> reported lower-than-expected fourth-quarter profit and said it was uncertain about raw milk costs in 2008, sending its shares down as much as 8.5 percent.

The largest U.S. dairy processor and distributor also forecast first-quarter earnings below analysts' estimates.

"Given the volatile trading in dairy commodities, prices may continue to vacillate between strong up months and strong down months," Chief Executive Gregg Engles said in a statement.

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That uncertainty was as important to some analysts as the forecast itself.

"The combination of an earnings outlook well below street expectations ... and comments on the uncertainty of the outlook likely will take the shares down today," Morgan Stanley analyst William Pecoriello said in a research note before the market opened.

Dean was hammered in 2007 by record prices for raw milk, while excess supplies of organic milk drove prices down in that segment. The company also said it had spent more to promote its Horizon Organic dairy brand.

Fourth-quarter profit fell to $32.6 million, or 24 cents a share, from $73 million, or 53 cents a share, a year earlier.

Excluding costs for job cuts and other items, earnings were 27 cents a share, below the analysts' average forecast of 30 cents compiled by Reuters Estimates.

Sales rose nearly 25 percent to $3.23 billion as the company passed some of the higher raw milk costs on to consumers. But fluid milk volume, a measure that factors out currency and price fluctuations, was flat.

For the first quarter, Dean forecast earnings of 15 cents to 20 cents a share. Analysts on average expect 26 cents, according to Reuters Estimates.

The company said full-year profit would be at least $1.20 a share. Analysts have forecast $1.24.

Dean shares were down $1.78, or 6.6 percent, at $25.15 in morning New York Stock Exchange trade after falling as low as $24.64. The stock has dropped more than 40 percent in the past year and is trading near its lowest level in more than five years.

(Reporting by Brad Dorfman; Editing by Lisa Von Ahn)

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