Cott Suffers US$6.9M Q4 Loss, Predicts Another Bad Year: 2006 Profit Will be ‘Substantially Below’ This Year

Cott Corp., the world’s biggest maker of store-brand soft drinks, reported a fourth-quarter loss from costs to shut a plant and fire workers. The stock fell after Cott said 2006 profit will be “substantially below” last year’s.

The net loss was US$6.9-million, or 10 cents a share, compared with net income of US$11.4-million (16 cents) a year earlier, Toronto-based Cott said yesterday in a statement. Sales rose 7.6% to US$397-million.

The company shut an inefficient plant in Columbus, Ohio, and fired 70 workers in December at a cost of 11 cents a share. Cott is cutting production expenses to compensate for rising materials costs to make cans and bottles, leading to a second straight quarterly loss. The rising expenses prompted Cott to forecast that 2006 earnings will be lower than 2005’s 34 cents a share.

“The results were awful, as awful as I expected them to be,” Jennings Capital Inc. analyst Cynthia Rose-Martel said in an interview yesterday.

Cott shares fell US$1.92, or 15%, to US$11.31 by the close of trading on the New York Stock Exchange. The drop was the biggest since Sept. 21, when Cott cut its profit forecast for the sixth time in a year. The Canadian shares fell $2.18, or 14%, to $13.02 on the Toronto Stock Exchange.

Cott said 2006 net income will be “substantially below” 2005 net income of US$24.6-million (34 cents) reported yesterday. The average estimate of 14 analysts surveyed by Thomson Financial for Cott’s 2005 profit was 69 cents a share. The company did not disclose full profit forecasts.

Investors are probably reacting more to the company’s forecast than the earnings report, Ms. Rose-Martel said.

“I don’t know why, because they have adequately demonstrated they can’t forecast anything,” she said. Ms. Rose-Martel rates the shares “buy” and owns the stock.

In October, Cott cut its 2005 earnings target to as low as 32 cents a share, after forecasting per-share earnings of about US$1.11 in July. Yesterday, the company said that after this year, per-share earnings will increase 8% to 12%, and sales should rise 5% to 7%.

Cott’s carbonated soft drinks, sold by retailers such as Wal-Mart Stores Inc. and Loblaw Cos., are losing sales as consumers switch to beverages such as bottled water and “energy” drinks. Wal-Mart, the world’s biggest retailer, also is Cott’s largest customer, accounting for 41% of sales in the first nine months of 2005.

Cott is planning to boost prices above the cost increases for its raw materials, chief executive John Sheppard, 48, said on a conference call with analysts yesterday.