(Corrects paragraph 2 to add dropped word "percent")
* Sees Q1 adj. profit of $0.12-$0.20/shr vs est $0.40
* Reports Q4 adj profit of $0.38/shr vs. est. $0.41
* Shares down 8.6 pct
Feb 16 Dean Foods Co forecast
first-quarter profit well below analysts' estimates due to weak
demand for milk and higher investments in a recently announced
joint venture to expand its organic milk business.
Shares of the largest U.S. dairy processor fell as much as
8.6 percent in morning trading on Thursday.
Dean Foods formed a joint venture with America's largest
cooperative of organic dairy farmers, CROPP, in November to
process and supply organic milk as the company seeks newer
avenues for growth.
Milk consumption has been falling in the United States, in
part due to years of high prices amid a drought-induced supply
deficit and shifting consumer preferences towards lower fat
alternatives such as juices and vitamin water.
For the first quarter, the company forecast adjusted profit
of 12-20 cents per share. Analysts on average expected earnings
of 40 cents, according to Thomson Reuters I/B/E/S.
Dean Foods said its profit forecast assumes an almost 20
percent rise in dairy commodity prices and about 1 percent drop
in the company's sales volumes.
However, the company said it may not pass on the entire
increase in commodity prices to customers.
Instead, Dean Foods plans to spend more modestly, setting a
capital expenditure budget of $120 million-$130 million for
2017, down from $145 million in 2016.
The company said it was also laying the groundwork to
implement zero-based budgeting across the company this year,
under which managers have to justify expenses in each new
Volume sales fell 0.8 percent in the fourth quarter ended
Dec. 31, while raw milk prices dropped 2 percent, the owner of
DairyPure and Meadow Gold milk said.
The company's net income rose to $32.83 million, or 36 cents
per share, in the latest quarter from $18.48 million, or 20
cents per share, a year earlier.
Excluding items, the company earned 38 cents per share,
missing the analysts' average estimate of 41 cents.
Net sales were little changed at $2.02 billion, marking
eight quarters of no revenue growth.
The company said it expected minimal contribution to its
earnings this year from the joint venture.
Dean Food's shares, which have fallen 1 percent in the last
12 months, were down 8.1 percent at $18.79 on the New York Stock
(Reporting by Sruthi Ramakrishnan in Bengaluru; Editing by
Savio D'Souza and Anil D'Silva)