Suiza says higher prices for raw
                  milk hurt profits


                  By Dianne Solís / The Dallas Morning News

                  Suiza Foods Corp., the nation's largest dairy-products
                  processor and distributor, said Thursday that it posted a
                  12 percent increase in first-quarter operating profit,
                  though results were hurt by high prices for butterfat and
                  raw milk.

                  The Dallas-based company, whose proposed
                  acquisition of rival Dean Foods Co. is awaiting federal
                  antitrust clearance, said operating profit rose to $23.8
                  million, or 82 cents a share, from $21.3 million, or 71
                  cents, a year earlier. Sales rose 5.8 percent to $1.47
                  billion from $1.39 billion.

                  Counting one-time items, net income fell 14 percent to
                  $22.1 million, or 77 cents a share, from $25.6 million,
                  or 82 cents.

                  In the most recent quarter, Suiza had a $498,000 charge
                  for closing a plant in Canton, Miss., a $1.44 million
                  charge for an accounting change, and a gain of
                  $169,000 from a minority interest in subsidiaries. A
                  year earlier, paying off debt created a gain of $4.97
                  million, and plant closings brought a $1.8 million
                  pretax charge.

                  No cows

                  In an industry dominated by small dairies and farming
                  co-operatives, the dairy-products giant owns no farms
                  or cows and must buy raw milk and butterfat, leaving it
                  vulnerable to price increases.

                  "Nevertheless, we successfully managed through the
                  rising cost environment this quarter and we expect to
                  continue to do so as the year progresses," said
                  chairman and chief executive Gregg Engles.

                  Suiza sales were up nearly 6 percent in the first quarter
                  because of organizational changes and improvements in
                  Suiza's Puerto Rico operations, Mr. Engles noted.

                  Last month, Suiza said it agreed to buy Dean Foods for
                  about $2.5 billion in stock, cash and debt assumption.

                  The merger would give the combined companies a 35
                  percent market share and a combined revenue flow of
                  $10 billion annually, but there is some opposition to it
                  on Capitol Hill. Suiza said the new company to be
                  based in Dallas but named Dean Foods would have a
                  30 percent market share after planned divestitures.

                  Of particular concern is the market dominance that the
                  new company might have in regions such as New
                  England, Sen. Patrick Leahy, D-Vt., has said.

                  This week, the merger debate intensified with Mr.
                  Leahy citing a newly released study by the University
                  of Connecticut that noted that in the areas of Boston and
                  Providence, R.I., Suiza processes 80 percent to 90
                  percent of the milk sold in supermarkets.

                  That means that Suiza can "basically set whatever price
                  they want" for an essential food, Mr. Leahy said.

                  Thursday, Suiza's chief executive took aim at the study.

                  "Milk is political and this is political, and anyone who
                  looks at this study will see that this guy came out of the
                  soft social sciences and not the harder sciences of
                  addition and subtraction," Mr. Engles said.

                  Greatest risk

                  Suiza also owns a 43 percent stake in Consolidated
                  Container Co., a Dallas-based plastic-packaging unit.
                  Suiza previously owned the entire unit but sold a
                  majority stake to a private company two years ago.

                  Mr. Engles warned that results from the unit represent
                  the "greatest area of risk" for the company.

                  Among Suiza's national brands are International Delight
                  coffee creamers, Mocha Mix nondairy creamer and Sun
                  Soy, a refrigerated soy milk product.

                  This year it launched Hershey's Milk products with
                  Pennsylvania-based Hershey Foods Corp. The new
                  brand already represents 10 percent of Suiza branded
                  products sales, thanks, in part, to discount-coupon
                  marketing, company officials said Thursday.

                  As volatility has roiled through the stock market, Suiza
                  has remained relatively stable, reflecting its perch as an
                  essential product.

                  Suiza closed down 10 cents Thursday to $45.85 a
                  share. While the S&P 500 has tumbled about 25 percent
                  in the last year, Suiza shares have risen about 10

                  Bloomberg News contributed to this report.