Standard & Poor's raises outlook on dairy processor Dean Foods to stable from negative, saying company's efforts to pay down debt have given it more financial flexibility

Nevin Barich

NEW YORK , March 20, 2012 (Associated Press) – Standard & Poor's Ratings Services raised its outlook on dairy processor Dean Foods Co. to "Stable" from "Negative,' saying the company's efforts to pay down debt have given it more financial flexibility.

The agency also affirmed its debt ratings on the Dallas-based company Tuesday. The ratings cover about $3.77 billion of debt.

Dean Foods processes and sells milk under its own brand name and others. The company also sells an array of dairy products, from sour cream and cottage cheese to coffee creamers.

The dairy market is risky, with milk prices sometimes swinging rapidly on global markets. Standard & Poor's said some consumers are turning away from pricier brand-name milk, which could cut profits for companies like Dean.

But S&P said Dean Foods' debt repayments in 2011 fattened its financial cushion. At the same time, improvements in the dairy industry could boost Dean Foods' bottom line and make it more likely to repay debt.

The agency suggested Dean might be shielded from some risks in the milk industry because of its position as the leading national dairy company, with close to a 40 percent market share.

Standard & Poor's ratings on Dean Foods are "B+" for its corporate credit rating, "BB-" for its senior secured rating and "B-" for its senior unsecured rating. Those ratings are considered non-investment of "junk" grade.

The ratings agency said it might raise Dean Foods' credit ratings, if the company can improve its ratio of debt-to-earnings before interest, taxes and other items.

Shares of Dean Foods fell 10 cents to $11.96 in afternoon trading amid a broader market sell-off.

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