just On Call - Cott Corp eyes higher impact of cost pressures
The incremental PET resin impact to Cott Corp will be over $30m
Cott Corp has said that the financial impact to the business from rising commodity costs may increase if PET prices remain at current levels for the remainder of the year.
This morning (5 May), the US-based soft drinks firm recorded a drop in first-quarter profits, blaming a substantial rise in commodity costs for the impact.
Speaking on the firm's earnings call today, CEO Jerry Fowden told analysts that the results were not what he, or the management team would have regarded as pleasing.
"The most significant issue impacting our results was the increase of commodity costs in the quarter - some $10m to $12m per month starting in January," Fowden said. "Our latest estimate is that the incremental PET resin impact will be over $30m on a full-year basis, compared to our prior estimate of some $25m plus."
He added that this figure may increase if PET resin prices do not drop, as forecast.
"We are fully covered on high fructose corn syrup, and are mostly covered, around 70% on aluminium and somewhat higher at 80% on key juice ingredients for 2011," Fowden said. "While the majority of industry experts still do project lower PET prices as the year progresses, this may in our opinion be less likely now because of higher oil prices. Therefore, we are mindful that if the lower forecast on prices of PET resin does not materialise in the second half of 2011, our $30m estimate could increase by a further $10m to $20m."
He added: "Whatever the path of PET prices for the remainder of the year, we are taking cost and temporary pricing action to offset part or the worst of this incremental resin inflation."
Despite this, Fomwden said that the quarter also produced "a number of positives, including a continued strong performance in our UK business, good progress on our Cliffstar synergies and integration, a slightly positive top-line performance overall and progress towards the end of the quarter on pricing."
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