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
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
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.
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
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.