Gains posted by shares of Lifeway Foods (LWAY -11.1%) following the company's Q1 report held up very well — until today. The stock is under quite a bit of pressure following Q2 results that came in light on the bottom line.
Gross margin came in at 33% for the quarter, down from 37% in Q2 2012 and 35% in Q1. The decrease is primarily attributable to a 20% increase in the cost of milk. Presumably, margins will eventually expand following the acquisition of Golden Guernsey dairy plant (which cost the company $300K in professional fees in Q2) as the money the company saves on processing costs provides a ~5-10% cushion against rising milk prices.
On this quarter's call, CFO Edward Smolyansky alludes to future cost savings, saying LWAY will "be able to utilize [new assets] ... to process milk and things like that." (transcript)