Dean Declares Record Quarter
Dean Foods Co. posted its strongest quarter in the company’s history as a drop in costs helped double fourth-quarter profits.
Net income for the Dallas-based processor jumped to $66.4 million, or 42 cents a share, in the quarter ended Dec. 31, 2008, compared with $32.6 million, or 24 cents a share, a year ago, the company reported.
The jump was fueled largely by a drop in costs for items such as raw milk, fuel, energy and resin for bottles, Dean reported. Furthermore, the company’s cost for raw milk dropped 23% per hundredweight, and the company dropped 250 delivery routes, yielding diesel fuel savings of 5%.
Operating income for the quarter was $190 million, the highest in company history and a gain of 27% over the year-ago period. The company also reported free cash flow of $462 million for the year, another record.
“By many measures, the fourth quarter of 2008 was the strongest in our history,” said Gregg Engles, chairman and chief executive officer of the No. 1 dairy processor. “We’re pleased with the results for the quarter and the full year.”
The earnings jump came despite a nearly 5% dip in fourth-quarter sales, to $3.1 billion from $3.2 billion a year ago.
Engles called 2008 “a year of tremendous progress.” For 2009, the company predicts earnings of at least 38 cents a share for the first quarter, and $1.50 for the year, up from the $1.20 a share the company earned last year.
Cheese Helps Kraft Deliver Turnaround Results
Northfield, Ill.-based Kraft Foods Inc. reported solid top-line and bottom-line results for 2008 in the second year of its three-year turnaround plan.
Operating income growth at the No. 2 dairy processor exposed the benefits of further investments in brand building and improved cost management, the company explained. This, combined with better working capital management, resulted in strong cash flow.
Specifically, the cheese category delivered an increase in profit. Organic net revenues grew 3.3%, reflecting the impact of cost-driven pricing actions taken throughout the year and the associated decline in volume, the company reported. Operating income more than doubled versus a weak fourth quarter in the prior year as the company better aligned pricing with input costs. During the quarter, pricing more than offset the impact of lower volume and unfavorable product mix as the benefits of past pricing actions caught up to the escalation of costs experienced during the year, according to Kraft’s investor relations reports.
However, as the company predicted, fourth-quarter numbers decreased in earnings per share largely due to the final costs related to its previously announced restructuring program.
“Despite a difficult environment in 2008, we delivered our commitments and made significant strides in staging the portfolio for sustainable growth,” said Irene Rosenfeld, Kraft’s chairman and chief executive officer. “While our 2009 earnings face a number of headwinds, particularly currency and pension costs, we will complete our turnaround in 2009 by continuing to invest in our brands, better leveraging our overhead costs and improving both market shares and profit margins from 2008 levels.”
For 2009, Kraft expects an organic net revenue growth of 3%, down from a previous expectation of at least 4%. This is due to lower-than-projected pricing contributions from declining input costs in the dairy industry.
Yoplait plans to go ‘rBST-free’
General Mills announced plans to eliminate milk sourced from cows treated with artificial bovine growth hormones in the production of its Yoplait yogurts by August.
The Minneapolis-based food giant said it’s making the move in response to consumer demand. “We estimate that more than 70% of our milk is already coming from cows that are not treated with rBST,” said Becky O’Grady, General Mills’ vice president of marketing for the Yoplait brand. “We are committed to reaching 100% no later than August. General Mills and Yoplait strive to offer only the highest-quality products to consumers. While the safety of milk from cows treated with rBST is not at issue, our consumers were expressing a preference for milk from cows not treated with rBST, and we responded.”
Approved by the FDA in 1993, recombinant bovine somatotropin, or recombinant bovine growth hormone, is considered chemically identical to naturally occurring bovine hormones. Although milk produced by rBST-supplemented cows has been deemed safe both by the FDA and USDA, many processors have said their consumers are demonstrating greater support for products from cows not treated with rBST.
Crave Bros. Expands Cheese Plant
Waterloo, Wis.-based Crave Bros. Farmstead Cheese doubled the size of its cheese-making facility, adding specialized equipment and increasing its employee size by bringing on an additional cheesemaker and about 10 more employees.
The changes are necessary, says company president George Crave, to meet the growing demand for the company’s existing cheese varieties so that it can produce more cheese varieties that may offer more potential in the retail and foodservice markets.
The cheese plant was designed so fresh milk could be piped directly from the milking parlor to the cheese plant. Inside the plant, a combination of modern-day equipment and old-world techniques are used to craft their award-winning cheeses. The original varieties of cheese include mascarpone, fresh mozzarella, mozzarella rope/Oaxaca and the company’s own creation, European-style cheeses known as Les Frères (French for “the brothers,”) and Petit Frère (“little brother”).
A year of planning precedes the changes, Crave explained, to ensure that the growth is smooth and conforms to the family’s long-held belief in working in harmony with the land.
NDRP Steps Forward for Industry
With the creation of the National Dairy Research Program, the U.S. dairy industry has taken a significant step forward in leveraging research to impact the future of dairy products and ingredients.
The NDRP is a formalized research initiative aimed at enhancing collaboration and partnerships around dairy product and ingredient research. Its participants include Dairy Management Inc., the National Dairy Council, the USDA-Agricultural Research Service and the Department of Defense Combat Feeding Program – Natick Soldier Research, Development and Engineering Center. The four partners share a common commitment to the future of the dairy industry through research, fostering new processes and producing acceptable, convenient and healthy dairy-based products for consumers.
Product research priorities will entail bringing more demand-driven dairy foods to the consumer, producing longer-life dairy products, offering milk components as enhancers of nutrition and health and delivering enhanced health and functional products through bioprocessing and dairy food safety. Nutrition research priorities will include obesity prevention, food composition and dietary guidance.
Western NY Processor Celebrates Half Century
Batavia, N.Y.-based dairy cooperative O-AT-KA is celebrating 50 years of advancing the quality and diversity of milk products.
A subsidiary of Upstate Farms Cooperative Inc., O-AT-KA began operations in 1959 with five full-time employees responsible for producing originally balanced excess milk through the manufacturing and selling of skim, condensed and cream as ingredients. It has since grown to employ more than 300 and offers full research and development capability, marketing consultation and production of a wide variety of value-added dairy products that are distributed internationally by Fortune 500 companies.
“Over the past five decades, we have maintained the highest level of quality in products, service and technology while broadening our capabilities to meet or exceed our partners’ and customers’ expectations,” said Mac McCampbell, chief operating officer.
O-AT-KA processes more than 600 million pounds of milk per year, 100% of it supplied locally. The cooperative’s owners and their dairy farmer members have made significant investments in capital projects to market an increasing range of value-added products. In addition to producing traditional items like evaporated milk, butter and bulk fluids, the cooperative has diversified to include infant formula, dietary nutritional beverages, protein drinks, energy drinks and indulgent beverages including ready-to-drink coffees and teas and dairy-based liqueurs.
Farmers extend CWT
The members of Cooperatives Working Together (CWT) voted to fund the self-help program through December 2010 to help bring the dairy supply into balance with shrinking demand. “America’s dairy farmers are looking to CWT to help them overcome the dire financial circumstances they are facing,” said Jerry Kozak, president and CEO of the National Milk Producers Federation. The decision is based on achieving 67% participation of the nation’s milk supply at the current 10 cent per hundredweight assessment. CWT members agreed to warrant to cease dairy production for one year for those bids accepted in future herd retirement programs.
March 1, 2009