Dean Foods Co. Inc. (DF) Wednesday posted a 67 percent drop in third-quarter profit as volatile milk and butter prices and diminished consumer appetite for pickles along with one-time items hit the largest U.S. dairy company.

But earnings were also at the high end of the company's lowered estimates, with sales beating analysts expectations. Dean also added $100 million to its share repurchase authorization.

Dean has been roiled by raw milk prices (search) that hit historic highs earlier this year, higher costs for fuel and the resin used in its milk containers, a volatile butter market and a cooler, wetter summer that cut into demand for pickles, a summer barbecue staple.

Net income fell to $40.2 million, or 25 cents a share, from $122.1 million, or 76 cents a share, a year earlier, the marketer of Dean's milk, Peter Piper's pickles (search) and other products said.

Net income in the quarter included charges of 8 cents a share to exit the nutritional beverages business and 13 cents a share from the write-off of deferred financing costs. In the 2003 quarter, the company had a gain of 25 cents a share from the sale of its frozen pre-whipped topping (search) operations.

Excluding charges, earnings were 46 cents a share in the 2004 quarter. In September, Dean lowered its forecast, excluding items, to 44 to 46 cents a share for the quarter, below analysts estimates at the time.

Sales rose 20 percent to $2.77 billion, largely due to higher prices as the company passed increased raw milk costs on to consumers. Analysts had on average expected sales of $2.56 billion, according to Reuters Estimates.

Dairy sales rose 17 percent to $2.2 billion. But operating profit in the unit fell about 10 percent, due to higher raw material prices.

In September, Dean also said it would not be able to meet its long-term earnings per growth goal in 2004 and forecast profit of $2 to $2.05 a share before items, well below its previous forecast. On Wednesday, it stood by its fourth-quarter forecast of 63 to 66 cents a share, which would make 2004 profit $2.02 to $2.05 a share.

It forecast $2.20 to $2.30 a share for 2005. Analysts on average forecast $2.22 a share for 2005, according to Reuters Estimates.

Dean shares rose $1.80 to $31.75 on Wednesday on the New York Stock Exchange (search).