CANADA: Cott on track after strong Q1

By | 27 April 2007

Cott Corporation has returned to profitability in its first quarter of 2007 on the back of strong sales growth in its international business.

The Canadian company said yesterday (26 April) that net income reached C$4.8m (US$4.3m) or $0.07 per diluted share, compared to a loss of $2.1m or ($0.03) per diluted share respectively in the first quarter of 2006.

The world's largest retailer brand soft drink provider said first quarter volume totalled 317.8m eight-ounce equivalent cases, up 7.7% compared to the first quarter of 2006. The increase was driven by a 31.8% increase in the international business unit compared to the prior year first quarter, the majority of which was Royal Crown concentrate volume growth.

Revenue increased 1.5% in the quarter to $400.2m, compared to $394.2m in the first quarter of the prior fiscal year. Excluding the impact of foreign exchange, revenue was relatively flat compared to the prior year first quarter.

First quarter gross margin was 13.4%, flat compared to the prior year first quarter. The company said the result reflected the benefits of the company's recent cost reduction efforts, which offset commodity cost increases of $16m above those of the prior year first quarter.

"The first quarter performance is further evidence that we are taking the right actions to rebuild Cott's profitability," said Cott CEO Brent Willis. "Our teams are doing a good job executing against our objectives and are demonstrating the discipline, focus and commitment required to deliver against our priorities of cost reduction, customer partnership and innovation."

North American revenue declined 4.9% when compared to the first quarter of 2006, as a result of overall industry softness and actions the company has taken to rationalise underperforming SKUs, product lines and customers, Cott said.

"These actions have had a positive impact on North American gross margin and the company plans to continue rationalisation of unprofitable products where it makes sense to do so, despite the potential short-term negative impact on volume and revenue," the company said.

Revenues at the international business unit were up 25.6% compared to the same period last year. All components of the business unit, which is comprised of the UK, Europe, Mexico, and all of Cott's other international markets combined, contributed to the strong organic revenue growth in the quarter.

"We are beginning to unlock the potential of Cott's international business," said Willis. "We're leveraging international expertise across geographies, and beginning to capture the benefit of the company's global functions and resources. Our expansion plans with key global retailers are progressing well and we look forward to introducing new beverages to new consumers in targeted international markets."

Commenting on its business plan, the company added: "First quarter results were in line on volume and gross margin, and well ahead on operating income, against our long-term business targets. Results were short of the revenue range in the quarter, but as the Company completes its portfolio rationaliSation and as it continues to implement its new product/channel expansion initiatives over the course of the year, it expects revenue growth to come closer to its long-range targets."

"We remain confident that there is multi-year growth ahead for Cott," Willis concluded. "As previously communicated, for 2007 we expect volume and revenue growth to be on the lower end and operating income growth to be on the upper end of the company's long-term targets."

Sectors: Soft drinks, Water

Companies: Cott

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