Dean concludes 'strong year'

Dean concludes 'strong year'

- WhiteWave offering and Morningstar sale make Dean more focused. - Dean breaking "old paradigm" about milk costs and performance. - F

DEAN Foods Co. has reported significantly improved income for its fourth quarter and full year in 2012, reflecting the company's initial public offering of its WhiteWave division and the sale of its Morningstar division.

The fourth quarter "marked the successful conclusion of a strong year," chief executive officer Gregg Tanner said.

He said the company's now primary business -- fluid milk -- despite a highly inflationary commodity cost environment, significantly outperformed expectations, reflecting the successful pass-through of commodity prices.

Dean's financial results are shown in the Table.


Breaking paradigm

For its fluid milk operations, which are organized as Fresh Dairy Direct, Dean said commodity costs rose in the second half of the year, especially in the fourth quarter, due to higher prices for raw milk, but the fourth-quarter gross profit per gallon was improved from the third quarter and the year-before period.

Dean noted that the fourth-quarter Class I Mover, a measure of what the company paid for raw milk, was $20.22/cwt., 23% higher than in the third quarter and 8% more than in the fourth quarter of 2011.

Nevertheless, the company's fluid milk volume declined just 0.8% in 2012 versus 2011, compared with an industry-wide decline of 0.9%, based on agriculture department and company estimates, and fourth-quarter operating income in 2012 matched fourth-quarter income in 2011.

Tanner said this demonstrates the benefits of Dean's newly "focused agenda" following the WhiteWave and Morningstar events and starts "to break the old paradigm" that fluid milk relies on favorable prices for raw milk in order to perform successfully.

Dean, through Fresh Dairy Direct, is the largest milk processor and marketer in the U.S., distributing milk directly to stores under more than 50 local and regional brands and private labels. It also distributes cultured dairy products, ice cream, juices, teas and bottled water.



Tanner said Dean is entering 2013 with "considerable momentum" but also with challenges, including the loss of a portion of milk sales to an important customer that will begin to show up in the 2013 second-quarter results.

In response, he said the company will be focused on cost reductions this year, including actions that will close 10-15% of the company's plants and that will eliminate "a significant number" of distribution routes.

Dean noted that its WhiteWave offering involved selling a minority stake in the division, which was offered out as The WhiteWave Foods Co. and is trading on the New York Stock Exchange as "WWAV" (Feedstuffs, Oct. 29, 2012).

Dean continues to hold 86.7% of WhiteWave common stock but confirmed its plans to spin off a majority stake in May, retaining 19.9% of the stock that will be monetized or distributed at a later date.

WhiteWave includes plant-based beverages and foods such as the Silk line, premium dairy milk and other products under the Horizon Organic brand and coffee creamers. It also includes plant-based beverages and products in Europe.

Dean additionally noted that it sold its Morningstar division to Saputo Inc. for $1.45 billion in January (Feedstuffs, Jan. 14), and proceeds from the sale have been used to repay debt.

Dean has headquarters in Dallas, Texas.


Dean Foods earnings and sales*


-Fourth quarter-

-Full year-






Sales (billion $)





Earnings (million $)





Earnings per share (cents)





*For the quarters ended Dec. 31, 2012, and Dec. 31, 2011.


Volume:85 Issue:08

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