Dreyer’s Quarterly Profit Jumps 71%

Dreyer’s Grand Ice Cream Inc., the nation’s largest ice cream company, said Wednesday that third-quarter net income surged 71% as it distributed more ice cream for competitors and paid less for ingredients.

The Oakland-based company, which is being acquired by Nestle’s Glendale-based Nestle Holdings division, said it earned $10.33 million, or 27 cents a share, for the three months ended Sept. 28, up from $6.05 million, or 17 cents, a year earlier. Sales rose 6.1% to $383.6 million from $361.6 million last year.

Much of the improvement in profit stemmed from its $14.8-million pretax gain from lower dairy prices and increased sales of rival brands that it distributes.

About 45% of the company’s sales came from products it sells for other ice cream makers, while sales of its own branded products, which make up the other 55% of the business, inched up just 2% for the quarter.

“The third quarter was a disaster,” said Prudential Securities analyst Jeffrey G. Kanter. “They completely missed expectations.”

Dreyer’s was expected to earn 59 cents a share, the average estimate of analysts surveyed by Thomson First Call.

Company executives acknowledged that they missed out on sales because they were focused on the merger and did not engage in the same kind of promotions that rivals did.

“We’ve seen an unprecedented level of discounting by Unilever” to gain market share, said Timothy Kahn, Dreyer’s chief financial officer. “It surprised us.”

Much of the discounting, he said, was on Unilever’s super-premium ice creams such as Ben & Jerry’s, which competes directly with Dreyer’s Dreamery and Godiva brands as well as Nestle’s Haagen-Dazs.

Expenses related to its acquisition by Nestle cost the company $2.8 million in the third quarter and could total $30 million by the time the two companies are integrated, the company said.

That deal, which is still under antitrust scrutiny by the Federal Trade Commission, probably will be completed by the end of this year or the beginning of next year, Kahn said.

Under the terms of the deal, announced in June, Nestle agreed to give Dreyer’s control of its U.S. ice cream business in exchange for shares in Dreyer’s that will boost its stake to 67% from 23%.

Dreyer’s shares rose 19 cents to close at $70.97 on Nasdaq.