Boston, MA 08/12/2014 (wallstreetpr) – Dean Foods Co (NYSE:DF) reported more than expected loss in the second quarter of the present fiscal, in the backdrop of increasing milk costs as well as decreasing consumer demand. In the meanwhile, Dean Foods also warned that in Q3 2014, there would again be a considerable loss.
Company’s Most difficult Operating Environment
The Chief Executive Officer of the company, Gregg Tanner, said that in the 90-year old history of Dean Foods Co (NYSE:DF), this was the toughest operating environment. It must be noted that Dean Foods is the largest processor of milk in the U.S. in terms of sales.
On August 11, 2014, the shares of company dropped 3.9%. The company explained that the higher prices of milk hurt sales at grocery stores in Q2 2014. This contributed, in turn, towards a sink of around 4% in the milk sales volumes of second quarter, in comparison to the previous quarter.
Another reason for declining milk sales was due to continuous decline in the breakfast cereal sales in the country. It is important to note that consumers in the U.S., these days prefer those breakfasts which they can consume instantly and on the go.
Withdrawn Earnings Guidance
In the meanwhile, after reporting loss for the second quarter, Dean Foods Co (NYSE:DF) also withdraw the complete year guidance, on the grounds of volatile and unpredictable dairy-commodity environment.
Cost of Raw Milk
It must be noted that the cost of raw milk jumped up 31% in Q2 2014 in comparison to the same time period in the previous year. In comparison to the previous quarter, i.e. Q1 2014, the cost surged to all-time high.
Also, the Dean Foods Co (NYSE:DF)’s CEO explained, that the action of company to move some of the plants to other locations has also added to the new costs, which appeared in the form of increase in the miles driven to move product to and from present facilities.
It is noteworthy that the company is combating against increased costs of raw milk which is bought from the farmers and this is because of increase in the demand of U.S. dairy products from the buyers from abroad.
