BANGALORE (Reuters) - Top U.S. dairy company Dean Foods Co said it has stepped up efforts to cut expenses and may raise prices to offset higher costs.
Shares of the company were up 7 percent before the bell, after it reported a higher-than-expected first-quarter profit, and raised its full-year earnings forecast, helped partly by strong sales of its Horizon Organic branded milk.
Dean, which has been struggling with rising commodity costs, weak demand and competition from cheaper private-label brands, expects to more than double its previous target of a $30 million cut in selling, general and administrative expenses from 2010.
As part of this effort, it cut 140 jobs early in the second quarter.
In the first quarter, sales at its WhiteWave-Alpro business, which sells Horizon Organic milk and Land O'Lakes creamers, rose 7 percent to $507 million and operating income was up 8 percent.
The company was also able to pass on higher commodity costs at its Fresh Dairy Direct-Morningstar segment, where demand fell.
Dean said "significant challenges remain in the Fresh Dairy Direct-Morningstar business."
"Pricing on private-label milk processing has been reset to lower levels and will continue to negatively impact year-over-year comparisons through the first half of the year," the company said in a statement.
Dean said it is pursuing new business to offset soft volumes at the fresh dairy business, and the additional sales would mitigate some of the volume weakness starting from the current quarter.
Q1 PROFIT BEATS
For the first quarter, net income attributable to Dean Foods was $25.3 million, or 14 cents a share, compared with $43.2 million, or 24 cents a share, a year ago.
Net sales rose 3 percent to $3.05 billion.
Analysts, on average, had expected earnings of 6 cents a share, before special items, on revenue of $3.07 billion, according to Thomson Reuters I/B/E/S.
The company expects 2011 adjusted earnings of 67-75 cents a share, up from its previous outlook of 55-65 cents a share.
Shares of the company, which closed at $10.98 on Monday on the New York Stock Exchange, were up 7 percent at $11.79 before the bell.
(Reporting by Mihir Dalal in Bangalore;Editing by Vyas Mohan)
