Rising milk costs force Dean to lay off 600

Oct. 3, 2007

Dean Foods Company announced a reduction in third quarter and full year adjusted earnings per share and a reduction in workforce that is expected to affect approximately 600-700 positions. Layoffs will begin immediately with a voluntary reduction program followed by an involuntary reduction, if necessary.

"Rapidly increasing and record high dairy commodity costs have created a very challenging operating environment and 2007 results have been well short of our expectations," said Gregg Engles, chairman and CEO. "The third quarter has been particularly challenging as dairy commodity costs have risen sharply, hitting all time highs. This is by far the most difficult operating environment in the history of the company, reinforcing the importance of the long-term strategic initiatives we have underway. These efforts will better position us to face future challenges."

Jack Callahan, Chief Financial Officer of Dean Foods, added, "As a result of this extreme commodity environment, we face unprecedented cost challenges in our Dairy Group operations, including increased shrink costs and materially reduced profits from excess cream sales. At the same time, sales volumes in the Dairy Group have softened as consumers react to the record high prices. We are also seeing a pronounced shift from branded products to private label in some of our regional brands. At WhiteWave, results continue to be negatively impacted by the oversupply of organic milk."

Continued Callahan, "With these challenges in mind, it is now clear that our adjusted results for the third quarter will be below our previous guidance, and we now expect earnings per share to be approximately $0.15 per share in the third quarter and approximately $1.25 per share for the full year."

"While we had expected strong growth in milk supply to lead to lower conventional dairy commodity prices toward the end of the year, it now appears that prices will likely remain high for the balance of the year, due in part to continued strong export demand for non-fat dry milk powder," added Callahan. "However, we expect more favorable price movements as we get farther into 2008. We also expect the organic milk oversupply to continue to negatively affect results for the balance of this year and into at least the first half of 2008, despite the recent volume acceleration of the Horizon Organic brand."

Engles continued, "Over the past 18 months, we have been working to increase the efficiency and capability of our Dairy Group operations. We are now ready to move forward with a workforce reduction. Our decision is part of our multi-year productivity initiative which will help better position the company during this incredibly difficult period for Dean Foods and the industry. It is a tough decision but it is a necessary action to improve our competitive position."

Sponsored Recommendations

Revolutionizing Healthcare: The Impact of Digitalization in Biopharma Innovation

Biopharma enables an entirely new level of innovation that’s simply not possible in conventional drug development. It’s an approach that can fundamentally change the way healthcare...

Navigating the Automotive Industry's Electric Future

The automotive industry is at a turning point. Bloomberg estimates that by 2040, 54% of new vehicle sales will be electric. And by 2030, we’re looking at 100% of passenger vehicles...

Unified Process Control Brings Operational Clarity

Inland Empire Utilities Agency replaces its SCADA enterprise system with the PlantPAx Distributed Control System and reduces complexity for operators

PlantPAx DCS Improves Operational Reliability

KC Water calls on R.E. Pedrotti to replace obsolete wastewater SCADA solution with a unified Modern Distributed Control System (DCS).