Rexam seeks to capitalise on emerging market growth

The UK-based company declared it would continue to pump funds into increasing both beverage can capacity in South America and specialty cans in North American, in a bid to meet burgeoning demand in those regions.

Rexam chief executive Graham Chipchase unveiled plans to raise its capacity in Brazil by a further 1.7bn cans. This jump in output would be realised by building a second can line in its Pouso Alegre plant that would produce an extra 800m units, with the rest coming from increasing production speeds on existing lines in Jacarei and Recife.

The company said these increases would contribute towards boosting South American beverage can capacity from 11bn in 2009 to 14bn in 2012 – an increase of more than 27 per cent.

In North America, capacity of 24oz speciality cans would climb by 400m – or 13 per cent - by 2012, it added. Gains in the sector had been driven by growth in the iced-tea and beer segments.

Chipchase also highlighted the need to improve results for its beverage closures which were underperforming compared to high barrier and specialty closures.

Russian potential​

He said European growth in specialty cans had been slower compared to the previous year as the benefits of 2009 restocking had “tapered off”. ​

In Russia, can sale volumes continued to fall – although there had been “less of a decline”​ with Q3 volumes better than the previous quarter.

But the Rexam chief said he still saw Russia as a long-term growth market thanks to projected rises in GDP and the continued emergence of an affluent middle class who would spend more on consumer packaged goods.

Contract negotiations​

Customer contract negotiations in North America were “progressing well”,​ said the company – although Chipchase acknowledged today that none had yet been signed. Around 1bn cans had previously been exported from North to South America but the company said it was not economically feasible to continue this practice – which was one reason behind the plan to ramp up capacity in Brazil.

But Rexam said it was “increasingly confidant​” that next year’s overall operating profits in North America would be comparable to those in 2010. Improved pricing, new customer volumes and continued growth in specialty cans would offset the impact of falling net 12oz volumes, said the company.

It added that results for both beverage and plastic packaging were in line with the firm’s forecasts – with performance in H2 expected to match the first six months of 2010.

“We are investing in carefully selected, high return projects in emerging markets and higher growth segments that will improve our overall growth prospects while keeping capital expenditure under tight control,”​ said Chipchase.