Feb 11 (Reuters) – Dean Foods Co, the largest U.S. dairy processor, warned it could post a loss in the first quarter due to a surprise rise in the price of raw milk, sending its shares down as much as 10 percent in early trading.
The company, which sells Meadow Gold and Dean’s milk, also posted a 7 percent fall in fourth-quarter revenue, the steepest drop in six quarters, due to a decline in milk volumes.
The company’s milk sales have been falling since it lost a contract with Wal-Mart stores Inc in the middle of last year. Dean Foods said on Tuesday it did not expect to “fully lap the impact” until the second half of this year.
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“We expect our first quarter will be our most difficult quarter of this year …,” Chief Executive Gregg Tanner said in a statement.
Dean Foods said while it previously expected raw milk prices to fall in the early part of 2014, they have risen sharply driven by global demand for imported dairy products.
The Dallas-based company said it now expects prices to rise through the first half of 2014 before flattening, and then declining moderately in the second half of the year.
Dean Foods said it could post between a loss of 3 cents per share and a profit of 3 cents per share in the quarter ending March.
Analysts on average expect a profit of 28 cents per share, according to Thomson Reuters I/B/E/S.
Dean Foods posted a net loss of $37.7 million in the fourth quarter, compared with a profit of $30.6 million, a year earlier.
On an adjusted basis, the company earned 18 cents per share, in line with the average analyst estimate.
Revenue fell 7 percent to $2.30 billion, slightly above the $2.27 billion analysts had expected for the quarter ended Dec. 31.
Dean Foods’ shares were down 8 percent at $13.98 in early trading on the New York Stock Exchange. They hit a low of $13.71 earlier.
