Cott Corp. posts net profit in third quarter reversing year-earlier loss
Published Thursday October 29th, 2009
TORONTO - Beverage maker Cott Corp. (TSX: BCB) reported a net profit for its third quarter Thursday, reversing a year-earlier loss through stringent cost control, optimized capital expenditures, and improved customer relations.
The world's third-largest soft drink producer, which supplies many retailers and grocers with private-label products, said Thursday it made a profit of US$13.9 million or 18 cents per share in the quarter ended Sept. 26. This was a significant improvement from a net loss of US$87.6 million or $1.25 per share a year ago.
Meanwhile the company, which keeps its books in U.S. dollars, said its quarterly revenue dipped to $404.9 million from $420.5 million a year ago but met analyst expectations.
Estimates compiled by Thompson Reuters predicted third-quarter revenue of $405 million and earnings per share of 16 cents per share.
Cott noted that once the impact of foreign exchange was excluded, revenue for the quarter had increased by 1.1 per cent.
"I'm encouraged by the success we've achieved and been able to sustain this year," said Jerry Fowden, Cott's chief executive officer in a conference call.
"Our results highlight the fact that our refocused plan is continuing to deliver profitability," he said.
Fowden noted that Cott achieved its positive quarterly results without much price discounting and unplanned promotional activity.
He added that the third-quarter performance rested at the higher end of the company's predicted range despite a slight increase in commodity costs and the impact of foreign exchange.
Cott said it had prepared it self for commodity costs in the fourth quarter by securing about half of its aluminium and sweetener ahead of time.
As part of its aggressive cost management, Cott cut selling, general and administrative expenses to 9.2 per cent of sales from 10.1 per cent in the third quarter. These expenses included $2.8 million in severance costs.
"Our business is stronger in ways not easily visible," said Fowden.
Cott pointed out that a significant highlight in the quarter was strong top and bottom line contribution from its U.K. operations, which is the company's largest outside of North America.
The company's largest market is the United States but it also has a presence in Canada, where Cott originated, and in Mexico - all signatories to the North American Free Trade Agreement.
Cott said it saw strong revenue growth in the U.K., although this was partly offset by the impact of foreign exchange and aggressive competition in North America.
Still, the company said its gross margin approached the upper end of its expectations.
Cott's North American operations posted revenue of $287 million, which was a 3.3 per cent decline from last year, due largely to a four per cent drop in volume. This came largely from a cooler Canadian summer which caused sales to slow.
However, Cott said it made up for this with tight cost management.
"Improved margins and lower operating expenses have much more than offset the impact of lower volume and foreign exchange," said Neal Cravens, Cott's chief financial officer.
Positive news in U.K. operations were a result of a nine per cent volume increase, as well as a favourable product mix.
South of the border, Cott's Mexican operations saw a decline in case volume which was attributed to difficult economic conditions and a tighter credit policy implemented to stabilize the business.
However, Cott said it expected its Mexican side to improve in 2010 with lower costs and improved financial controls.
The company is also focusing on growth plans which target small retailers with its "down the street" program.
"As I look out in the future I think our opportunities and challenges are much more balanced and much more manageable," said Fowden.
"We've had a good nine months and I look forward to completing 2009 on the same positive note," added Cravens.
Cott said it had won nine million cases of new business in the third quarter, which included a significant customer in the U.K. and two in Mexico. The company said it expects to see the volume impact of new customers in 2010.
"Our ability to now turn more of our attention to winning new businesses is partially a result of what I like to call a result of putting our financial house in order," said Fowden.
Cott shares were up 15 cents or 1.76 per cent to $8.67 in early morning trading Thursday on the Toronto Stock Exchange.
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