DALLAS (AP) — The largest U.S. milk producer, Dean Foods Co., said Tuesday that maintaining and raising its prices and expanding to new markets will help it fight falling milk sales and rising costs and meet its brightened earnings forecasts for the rest of the year.
Dean Foods, which cut 600 jobs and reduced other costs during the first quarter, said its net income for the period slid 41 percent from a year earlier. Its Fresh-Dairy Direct-Morningstar unit sold 2.4 percent less milk by volume, compared with the first quarter of 2010.
But the company's results and new forecasts beat analysts' average expectations, and its shares climbed $1.37, or 12.5 percent, to $12.35 by mid-afternoon. The stock has traded between $7.13 and $12.79 the past year.
Dean Foods' milk, creamer and cultured dairy products are sold under more than 50 local and regional brands and under store brands.
Chairman and CEO Gregg Engles said in a statement that the year is off to a stronger start than expected.
Dean Foods earned $25.3 million, or 14 cents per share, for the three months that ended March 31. A year earlier, it earned $43.2 million, or 24 cents per share. Its revenue for the period rose 3 percent to $3.05 billion as sales rose of its Horizon organic milk and of its WhiteWave-Alpro unit's Land O' Lakes milk products.
Analysts, on average, expected earnings of 6 cents per share and revenue of $3.06 billion, according to FactSet.
Dean Foods said in February that higher commodity costs and weak volumes would make the first quarter its toughest of the year. And it said Tuesday that it is getting paid less for processing milk.
Engles said during a conference call that retail prices for store-brand milk rose during the quarter as stores limited steep discounts.
"This reduced the price gap between private-label and our regional brands and led our brands to outperform private-label during the quarter," he said.
Engles said the company closed a dairy processing plant in the Southeast during the quarter and expects to close more plants this year.
The 600 job cuts were made across Dean Foods' operations, including such areas as manufacturing and distribution, Engles said. Distribution teams cut 28 routes in the quarter, and more reductions are expected.
Dean Foods now expects full-year adjusted earnings of 67 cents to 75 cents per share. It earlier forecast adjusted earnings of 55 cents to 65 cents per share.
For the second quarter, the Dallas company predicts adjusted earnings of 15 cents to 20 cents per share.
Analysts had been expecting full-year earnings of 57 cents per share and second-quarter earnings of 13 cents per share.