August 4, 2010 / 8:42 PM / in 7 years

UPDATE 2-Cott profit falls; to offer debt, shares

* Q1 EPS $0.28 vs $0.48 yr ago, analyst forecast $0.27

* Revenue $425 million vs $439 million

* To issue $65 million in common shares for Cliffstar fund (Adds details, conference call; in U.S. dollars unless noted)

TORONTO, Aug 4 (Reuters) - Cott Corp’s BCB.TO quarterly profit took a hit from higher taxes and an extended North American promotional campaign by competitors, the world’s biggest maker of private-label soft drinks said on Wednesday.

Cott, which markets beverages in over 50 countries, also said it would offer $375 million in senior notes and $65 million of its common shares to fund its acquisition of private-label juice maker Cliffstar Corp, announced earlier this month.

The company declined during a conference call after markets closed to elaborate on the offerings.

The U.S. carbonated soft drinks business is extremely competitive and dominated by Coca-Cola KO.N and Pepsi-Cola PIP.PS, both heavy advertisers. Cott said the promotional campaigns during the quarter were deep, at low price points not seen in some time and were backed by television, print, radio and in-store advertising.

“There is no doubt we would have seen somewhat better volume performance had this situation not arisen. However, let’s not cry over spilled milk,” said Chief Executive Jerry Fowden during the conference call with analysts.

The Toronto-based company, whose customers include Wal-Mart Stores Inc WMT.N, said net earnings fell to $22.3 million, or 28 cents a share, for the second quarter ended July 3, compared with $33.7 million, or 48 cents, in the year-before period.

Overall revenue slipped 3 percent to $424.7 million. North American revenue fell 7 percent.

The income tax expense was $9 million versus a tax benefit of $5 million the year before.

Analysts, on average, had expected earnings of 26.7 cents a share and revenue of $432.2 million, according to Thomson Reuters I/B/E/S.

“This performance demonstrates a level of resilience in our business that is encouraging, particularly considering the challenging competitive environment we faced in the second quarter, which benefited some national brand producers but created a headwind for Cott,” said Fowden.

Cott said its gross margin increased to 17.3 percent on efficiencies and cost savings in raw materials and cost of goods.

Operating income rose 15 percent to $39 million.

Last week, Cott was granted early termination of the waiting period for its proposed $569 million acquisition of Cliffstar.

Cott shares closed down 17 Canadian cents, or 0.1 percent, at C$5.99 on the Toronto Stock Exchange.

$1=$1.02 Canadian Reporting by Solarina Ho; editing by Rob Wilson

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