AMERICA’S largest milk processor Dean Foods yesterday forecast its first quarterly adjusted profit in a year, due to cost cuts and a steep fall in butterfat prices.
The company’s shares surged 13.73 per cent to $16.40 – a three- month high. It also reported a smaller-than-expected adjusted loss for the third quarter. Dean Foods said it expected a decline in production and distribution costs as a result of 12 plant closures and other cost-cutting measures.
“We don’t expect much relief on raw milk costs until early 2015, but we do expect significant butterfat cost declines at the end of the fourth quarter,” chief executive Gregg Tanner said in a statement yesterday.
It has been blaming volatile milk prices and higher costs for butterfat, a key ingredient in products such as ice creams and cottage cheese.
“The company’s cost reduction efforts are finally starting to show up in results,” Key Banc Capital Markets analyst Akshay Jagdale wrote in a note.
Net sales rose 8 percent to $2.37 billion and was slightly better than the average analyst estimate of $2.35 billion.
Dean Foods also forecast an adjusted profit of five-15 cents per share for the fourth quarter ending December.