Moody’s downgrades Dean, notes

Moody's Investors Service said it downgraded Dean Foods Co.’s corporate family rating to B2 from B1, probability of default rating to B2-PD from B1-PD and senior unsecured notes to B3 from B2.

The speculative grade liquidity rating was lowered to SGL-3 from SGL-2.

The outlook is stable.

Moody’s said the downgrade reflects its expectation of lower earnings and cash flow, and weaker liquidity in the years ahead.

“Earnings will be lower as the company continues to lose volume. Industry volumes are declining as consumers move away from fluid milk to alternative products, such as almond milk and soy milk,” Moody’s said in a news release.

“Dean has been losing volume at a greater rate than the industry, because it has also lost private label milk business to competitors.

“Dean estimates that it will lose between 100 million to 110 million gallons annually of private label milk production when Walmart Inc, its largest customer, opens its own milk processing plant this year. This loss represents 4.3% of its 2017 total volume across all products.”

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