Lifeway Foods Inc. (Nasdaq: LWAY) left investors with a sour taste on news before the start of trading that third-quarter net income narrowed due to higher milk costs.

The Morton Grove, Ill.-based maker of dairy foods announced that its third-quarter net income was $0.47 million, or $0.03 per share, compared with a net income of $0.74 million, or $0.04 per share, a year earlier. Two analysts surveyed by Thomson Financial were looking for earnings of $0.06 per share.

The company blamed the decline on a doubling of the cost of milk over the past one year.

Lifeway Foods saw its sales increase 32% to $9.82 million from $7.46 million during the third quarter of 2006, but that result missed Wall Street’s projections of $10.18 million in revenue.

Founded by a Russian immigrant in 1986, Lifeway Foods is a family-owned company that mainly produces Kefir—a creamy probiotic dairy beverage similar to but distinct from yogurt.

At 12:52 p.m. ET, shares of Lifeway Foods (LWAY) had sunk $3.22, or 24%, to $10.50. The 52-week low of $7.85 was established on Nov. 20, 2006. The 52-week high of $20.75 was reached on Oct. 2.

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