Cott Corp., one of the world's largest soft drink and juice producers, expects the cost of apple juice concentrate and resin used to coat pop cans to stay high in 2012, affecting sales and prices.
Apple juice is a big part of Cott's juice business in the United States and lower sales volumes have a substantial impact, chief executive officer Jerry Fowden told a conference call Friday after Cott reported it lost $12-million (U.S.) in its latest quarter.
"As the consumer stays under pressure in these difficult economic times, it's hard to see a quick rebound in juice sales, which are likely to stay pressured for some time given pricing is likely to remain at elevated levels," Mr. Fowden told analysts.
Higher costs for resin, which coats aluminum cans, cost Cott almost $50-million in unbudgeted costs in 2011 and hit its second-, third- and fourth-quarter results, Mr. Fowden said.
"We believe resin costs will continue to stay at a similar high level in 2012," he said.
The main task for Cott this year will be to manage higher commodity prices and pricing to cover the increases, he said.
Cott said it will focus on gross margins – the difference between the cost of raw materials and revenue from product sales – which have been eroding largely due to the higher than expected commodity costs.
Mr. Fowden said dealing with the issue will take more than this year, adding "we'll need commodities to soften somewhat to get to a position we are truly happy with."
He noted that pressure on gross margins affects Cott "all the way through to the bottom line."
The Toronto-based company reported it lost $12-million, or 12 cents a share, for the three months ended Dec. 31 as the company faced higher costs for raw materials used to make its bottled and canned pop, juices and other beverages.
That compared with a net profit of profit of $15-million, or 16 cents per share, in the year-earlier quarter.
Cott warned late last fall that it faced higher input costs for things like energy, along with rising prices for commodities like corn syrup, sugar and certain fruits and has already raised prices to offset some of those costs.
Cott said revenue increased 4 per cent to $549-million from $529-million, falling short of analysts' expectations.
Analysts, on average, had expected earnings of 5 cents per share on $552-million in revenue, according to those surveyed by Thomson Reuters.
For the full year, Cott's profits dropped to $38-million from $55-million, while annual revenue rose 29 per cent to more than $2.3-billion from $1.8-billion, reflecting the $500-million acquisition of Cliffstar Corp., a privately owned U.S. juice producer.
Cott is the world's largest distributor of store-brand beverages, with about 4,000 employees and soft drink, juice, water and other beverage bottling plants in the United States, Canada, the United Kingdom and Mexico.