TORONTO (Reuters) - Soft drinks maker Cott Corp (BCB.TO) (COT.N) lowered its 2008 profit outlook on Tuesday, citing declining sales volumes and rising packaging costs, sending its stock tumbling nearly 20 percent.
Cott, the world’s largest maker of private-label soft drinks, said its adjusted operating profit target for 2008 was now in a range of between 28 percent below and 5 percent above last year’s profit of $36.3 million.
In its latest quarterly report, Cott had repeated its target of boosting operating profit by between 50 percent and 70 percent.
The company also withdrew its previously stated adjusted operating profit target for 2009.
“The disappointing results we have seen over the past few weeks, at the beginning of our most critical quarter, indicate we will fall substantially short of our expectations for 2008,” interim Chief Executive David Gibbons said in a statement.
“Our focus for the remainder of 2008 is to implement our plans to refocus Cott on its private label business,” he said.
“We believe this remains the best path to improved profitability,” Gibbons said.
Cott’s shares were down 15.5 percent at C$2.18 on the Toronto Stock Exchange on Tuesday afternoon, after falling by as much as 19.8 percent. In New York, the stock was down 15.4 percent at $2.09.
Cott said sales volumes in North America were declining at a higher rate than expected, while packaging costs were rising.
Higher start-up costs and shipment delays associated with its North American water project have also reduced the expected profit contribution from this segment for the rest of the year, the company said.
An analyst who asked not to be named said that the timing of Cott’s announcement, coming not long after it reported second-quarter results, was surprising, as was the size of the revision.
Mississauga, Ontario-based Cott is attempting to turn itself around by returning its focus to its private-label soft drinks and away from the expansion effort into higher-profit energy drinks, teas and vitamin-enriched water led by former CEO Brent Willis.
“The real impact here is the impact on their attempt or their ability to rebuild their sales momentum,” the analyst said.
“That clearly is the key part of the thesis here, and in this environment, rebuilding that momentum is going to be all the more challenging.”
Cott’s shares have dived about 80 percent from the year high reached last August. The stock has battered in February when key retail customer Wal-Mart Stores (WMT.N), which accounts for about 40 percent of Cott’s sales, trimmed U.S. shelf space for the company’s drinks.
Reporting by Leah Schnurr; editing by Rob Wilson