Cott Corp.

The stable outlook reflects our expectation that Cott will grow at low-to-mid-single digits from its existing operations and tuck-in acquisitions. Absent any debt-funded acquisitions, we expect the company's adjusted debt-to-EBITDA ratio to be in the mid-to-high 4x area and EBITDA interest coverage at more than 3x. Our stable outlook also incorporates the possibility of leverage increasing up to 6x temporarily due to debt-funded acquisitions. We could lower the rating if the company's debt-to-EBITDA weakens to 7x and EBITDA interest coverage approaches 2x due to a sizable debt-funded acquisition or underperformance in the existing or acquired businesses. We believe such a scenario would be precipitated by a high single-digit revenue decline and more than 500 basis points of margin pressure. We

...Good position in a relatively fragmented and competitive environment. Cott Corp. maintains a leading market share in home and office water delivery service by volume in North America (30%) and Europe (20%). Cott mainly competes with larger, well-capitalized Nestle S.A., which has about similar market position in the home and office water-delivery service, in North America. In Europe, Cott faces competition from local and regional home and office bottled water businesses. Improved earnings stability due to a shift in product focus. S&P Global Ratings views Cott's 2018 transition to "better for you" product categories, such as water and coffee, from volatile carbonated soft drinks, as providing better earnings stability. In addition, we consider this shift in product mix and reduced exposure to big box retailers as a key driver in improving S&P Global Ratings' EBITDA margins to about 14% from the company's historical 12%....

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