Hurricanes have inflicted serious damage on the U.S. in recent months, causing major disruptions to many businesses. So no one would have accused Dean Foods
The Dallas-based company's quarterly revenue rose 2.4% to $2.6 billion year over year. Because Dean Foods has been shutting down and reorganizing plants and retiring debt early, we need to look at adjusted income from continuing operations to get a clearer picture of its results. That figure increased 17.9% to $77.7 million.
Considering the problems Dean Foods faced in the quarter, these results are commendable. The dairy group was hit particularly hard. The hurricanes damaged its New Orleans facility, and its Houston plant lost three days of sales due to a temporary shutdown. Further, the storms had the indirect effect of pushing up costs for fuel (Dean Foods' dairy division buys 4 million gallons of diesel a month) and pumping up prices for polyethylene resin, which the firm uses in milk bottles. All told, Dean Foods estimates that the hurricanes were responsible for a $15 million increase in costs year over year.
Lower raw milk and butterfat costs helped offset some of the storms' effects, but how the company did in its dairy group is also softening the blows. Dean Foods is gaining market share and cutting costs, and experienced a 3.4% increase in fluid milk volume in the quarter, even as U.S. Department of Agriculture data indicated milk consumption was flat for the first two months of the period. In addition, the company is closing unproductive plants, including one in Mexico and another in New Jersey.
Dean Foods' fat-trimming isn't limited to the dairy group. In its WhiteWave division, it's consolidating manufacturing and distribution and cutting as many as 1,900 stock-keeping units (SKUs) to concentrate on the biggest potential earners. This should slow sales in the group in the near term, but it seems Dean Foods already has found at least one winner-- its Horizon organic milk, whose sales rose 55% in the quarter.
In keeping with the spinoff of its TreeHouseFoods
Rich, creamy further Foolishness:
The Motley Fool has kicked off its ninth annual Foolanthropy campaign! Nominate your favorite charities on our Foolanthropy discussion board through Nov. 6. For guidelines on what makes a charity Foolish, visit www.foolanthropy.com .
Fool contributor Brian Gorman is a freelance writer in Chicago. He does not own shares of any companies mentioned in this article.