UK-based packaging firm Rexam announced today that it is to close its aluminium can end manufacturing plant in California, USA. The company claims that the move is designed to bring its beverage can and end making capacity into line with market demand.
The San Leandro end plant, which employs 80 people and manufactures 5.5 billion ends per year, will officially close on 8 February 2004.
"We are in constant discussion with our customers and suppliers to determine the best ways to deliver the highest quality products, services and innovation," said Rexam chief executive Rolf Borjesson. "Our continuous focus on quality has resulted in increased efficiency throughout our operations.
"Thanks to these improvements in productivity and the streamlining of our distribution chain, customers can be assured that we will be able to meet their requirements following the closure of this plant."
This move follows significant restructuring to Rexam's global operations. At the end of October 2003, the group acquired Latasa, Brazil's largest beverage can maker. The deal, valued at €396 million, is designed to give the world's largest drinks can manufacturer a key foothold in the Latin American market.
On paper, the agreement certainly makes sense. Latasa is the leading producer and supplier of aluminium beverage cans in Brazil, Argentina and Chile, generating sales of €347.2 million. The acquisition will position Rexam as the top can maker in Brazil, complement the company's existing customer base and extend the firm's geographical reach.
In addition, the company believes that the acquisition will create significant value for Rexam shareholders. The acquisition, in the first full year of ownership, is expected to be earnings enhancing before goodwill amortisation and produce a return on investment exceeding Rexam's weighted average cost of capital by an amount sufficient to offset the country-specific risk premium of the acquisition.
The takeover also goes some way to consolidating Rexam's position as the world leader in beverage cans, with a global market share of 23 per cent, equivalent to nearly 50 billion cans.
In line with Rexam's single brand strategy, Latasa will now operate under the name of Rexam Beverage Can South America. It will continue to be run as a separate entity from Rexam's existing plant in Brazil until the anti-trust position has been clarified. The relevant filings were made to the Brazilian anti-trust authority, CADE, on 20 November 2003.