Dean Foods Co. on Thursday reported a better-than-expected quarterly profit and raised its full-year outlook as strong sales of soy milk and other products offset declines in its fresh dairy business, sending its shares up nearly 3 percent.
Dean, which spun off part of its business last month into WhiteWave Foods Co and is weighing a sale of its Morningstar unit, said that Chief Financial Officer Shaun Mara and General Counsel Steve Kemps will leave the company after the end of the year to pursue other opportunities.
The resignations will follow last month's change at the top of the company after CEO Gregg Engles stepped aside in order to lead WhiteWave. He remains Dean's chairman. Gregg Tanner, formerly president of Dean's Fresh Dairy Direct business, became Dean's CEO.
Chris Bellairs, currently CFO of the fresh dairy business, will take over as CFO of Dean Foods. Rachel Gonzalez, deputy general counsel, will take over as general counsel.
Dean also said on Thursday the Morningstar sale process was ongoing and it would make an announcement if a deal is reached. The sale of Morningstar would "serve to further deleverage Dean Foods and significantly increase financial flexibility going forward," said Engles.
With higher growth and higher returns on capital, the Morningstar business should trade at a higher multiple than the fresh dairy business, Engles said. The best way to unlock that value to shareholders is through a sale, he said.
PROFIT TOPS VIEW
Dean reported third quarter net income $36.4 million, or 20 cents per share, compared with a net loss of $1.5 billion, or $8.39 per share, a year earlier, when it took a $1.9 billion goodwill impairment charge to write down the value of its then-struggling fresh-dairy business.
Excluding facility closing and reorganization costs and other items, Dean earned 33 cents per share, handily topping analysts' average estimate of 26 cents, according to Thomson Reuters I/B/E/S.
Sales fell 8 percent to $3.14 billion, missing analysts' target of $3.23 billion.
The WhiteWave-Alpro segment grew net sales 13 percent, helped by strong sales of Silk soy and almond milks. Sales volume in the Morningstar business rose 6 percent.
Excluding lost sales from a recent divestiture, volume in the Fresh Dairy Direct business declined 1.4 percent, though Dean said that outperformed the overall industry.
That business, which sells fresh milk under a variety of regional brands, would be what remains of Dean if it spins off the remainder of WhiteWave, which also sells Horizon Organic dairy products, and sells Morningstar, maker of mostly private label dairy products.
That fresh dairy business has been under pressure for years due to higher ingredient costs and falling prices.
The company raised its full-year adjusted earnings forecast to between $1.27 and $1.32 per share, from its previous range of $1.18 to $1.28. Analysts were looking for a profit of $1.19, according to Thomson Reuters I/B/E/S.
Dean expects fourth-quarter adjusted earnings of between 27 cents and 32 cents per share, largely above analysts' estimates of 26 cents.
Shares of the company were up 43 cents, or 2.7 percent, at $16.51 on the New York Stock Exchange. They had fallen 12 percent since the IPO of WhiteWave.
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