May 1, 2009 / 11:20 AM / 9 years ago

UPDATE 3-Cott climbs to profit, shares jump

* EPS $0.28 vs year-earlier loss $0.30

* Net income $20.8 mln vs loss $20.9 mln

* Revenue drops 5.8 pct to $367 mln on foreign exchange

* Shares jump 44.6 percent (Adds analyst and company comments. Updates stock price. In U.S. dollars unless noted)

By Scott Anderson

TORONTO, May 1 (Reuters) - Soft-drink maker Cott Corp (BCB.TO) (COT.N) said on Friday it swung to a first-quarter profit, helped by cost cuts and a move by recession-wary consumers to private-label products, and the news sent its shares 40 percent higher.

The turnaround for Cott, the world’s largest maker of private-label soft drinks, comes as consumers opt for cheaper products as they reduce discretionary spending, including restaurant visits and purchases of high-end goods, to try to save money during the recession.

“Private-label and commodity cost trends have turned significantly in Cott’s favor,” said BMO Capital Markets analyst David Hartley.

Cott shares have tumbled 22 percent in the past year as the company has struggled with weak demand, high commodity prices and tough competition from brand-label drink makers.

Earlier this year, U.S.-based retail giant Wal-Mart (WMT.N) ended an exclusive supply agreement in the United States with the company. Wal-Mart, the world’s biggest retailer, represented more than 30 percent of Cott’s business.

The Toronto-based company said it earned $20.8 million, or 28 cents a share, for the quarter ended March 28, compared with a loss of $20.9 million, or 30 cents a share, for the same period a year earlier.

Revenue for the quarter slipped 5.8 percent to $367 million due to rise of the U.S. dollar against the currencies of several countries in which Cott operates.

Analysts, on average, were expecting a loss of 5 cents a share and revenue of $367 million, according to Reuters Estimates.

Cott shares jumped 44.4 percent to C$3.47 on Friday morning on the Toronto Stock Exchange.

Gross margin increased to 15.9 percent of sales in the quarter, compared with 10.5 percent last year, as higher volumes in North America improved net selling price per beverage case and lower costs helped offset the impact of foreign exchange and lower volumes outside North America.

The company’s global beverage case volume was flat with a 4.6 percent hike in North American sales offset by a 9.8 percent drop in Britain and a 26.3 percent decline in Mexico.

Despite its return to profit, the company remained cautious, noting that a number of one-time factors including deferred spending, lower commodity prices and tax benefits boosted the results.

Cott Chief Executive Jerry Fowden also noted that sales of national brands are expected to rise as the global economy improves.

“I remain keenly aware that one good quarter does not make a successful turnaround,” he said during a conference call. “We still face challenges in the competitive environment, our capital structure and customer base.”

$1=$1.19 Canadian Reporting by Scott Anderson; editing by Peter Galloway

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