By Canadian Vending
By Canadian Vending
Aug. 26, 2008, Toronto, Ont.
– Soft drink maker Cott Corp. has "substantially" cut its profit
expectations for 2008 as its North America sales volumes wane and costs
rise while operations in the United Kingdom and Mexico experience a
The Toronto-based maker of store brand beverages said it now expects to see adjusted operating profit between 28 per cent below and five per cent above the $36.3 million it earned in 2007.
The company had said in July it expected to see adjusted operating profit between 50 and 70 per cent above last year.
"Faced with recent disappointing results including steeper than expected volume declines and higher than expected increases in PET resin costs, we initiated a comprehensive financial review of our business," chief financial officer Juan Figuereo said in a statement.
"It has now become clear that our previously-announced target is out of reach."
Cott said its North American sales volume is declining faster than expected, "mainly due to heavier than anticipated national brand promotional activity."
Increases in packaging costs were also driven higher by gains made by the U.S. dollar against its Canadian counterpart.
A bottled water project expected to boost Cott's earnings has experienced higher than anticipated startup costs and has seen shipment delays that will also delay its contribution to the bottom line.
While there were some encouraging signs that volume and cost trends improved in the second quarter, "the disappointing results we have seen over the past few weeks, at the beginning of our most critical quarter, indicate we will fall substantially short of our expectations for 2008," said interim CEO David Gibbons.
"Our focus for the remainder of 2008 is to implement our plans to refocus Cott on its private label business. We believe this remains the best path to improved profitability."
Cott's U.K. unit was hurt by poor weather and Mexican sales fell prey to "softness in the supermarket/mass channel" and were further reduced by changes to credit policy in that country.
The company planned to explain its revised outlook in an investor conference call on Wednesday morning at 9 a.m. ET.
At the end of July, Cott reported its fourth consecutive quarterly loss amid declining revenue due to intense promotional activity from brand name competitors and reduced shelf space at Wal-Mart.
The world's largest maker of store-brand soft drinks lost US$1.8 million during the second quarter, down from year-earlier earnings of $4.7 million as revenue fell 6.4 per cent to $466.5 million.
Cott, restructuring under pressure from activist shareholder Crescendo Partners, wants to return to its core business of producing store-branded private label soft drinks, rather than developing new products such as energy drinks.
The troubled company is in the process of cutting jobs, streamlining operations and focusing on its private label business in a move to reduce operating costs by up to $43 million a year and improve the bottom line.
Four new plants producing bottled water products – which represent about 17 per cent of its North American business – were expected to be up and running by September, contributing positive returns.
Source: The Canadian Press