Thirst for beverage cans drives Rexam profit growth
The UK-based packaging company said its beverage unit accounted for £447m of the firm’s £549m underlying profits – offsetting what it described as a “mixed performance” in its plastic packaging division, which focuses primarily on health and personal care but also food.
The headline figures did not include exceptional items costs – such as plant closures and restructuring – totalling £19m.
“Our strong profit growth was achieved by a better than expected performance in our Beverage Cans business, primarily in Europe, and a continued focus on cost management,” said company chief executive Graham Chipchase.
Beverage can exceed expectations
Rexam’s European volumes climbed 6%, which means it now has a 40% market share of the region’s 57bn cans. It highlighted the growth of specialty cans that now account for almost 30% of cans sold, pack mix changes and an uptick in home consumption as key drivers.
Russia was singled out as a strong market for specialty can although the trend spans the whole of Europe. The firm’s own specialty volumes rose 10% in 2011.
Russian can growth as a whole was well above the regional average and Rexam revealed it is now seeking to invest in the eastern part of the country to tap growing demand and reduce shipping costs.
A new £68m two line plant is also planned for Finland for the beginning of 2013. A £20m cash injection into its Ludesch plant in Austria to meet booming demand in energy drinks has also been earmarked. The investment will boost capacity by 700m cans and is expected to come on stream by Q3 2013.
In Asia, the company said it would make a £30m investment in its Mumbai plant that would more than double capacity to 950m cans annually by the end of 2012.
North America rebound?
Rexam confirmed that its overall volumes in North America dropped 14% in 2011 after a string of previously announced contract losses. The firm struck a bullish note, declaring that it expected to recover most of this loss with new deals by 2013.
The company said it is currently the second largest can maker there with a 20% market share of the 95bn can sector.
Growth in specialty cans was again highlighted. Rexam said its specialty volumes rose by 16% in 2011, which means these now account for almost a quarter of is US output. This has been driven by an upsurge in demand for energy drinks, iced-tea, and beer.
Overall profit in its North American unit was said to be significantly higher that start-of-year estimates but no figures were provided
South America – Brazilian slowdown
The firm’s performance in the dominant regional market of Brazil was flat following a strong 2010. A shrinking national GDP, price increases by Rexam’s customers and unfavourable weather all slowed demand, it said.
The company was also hit by direct imports by its rivals and loss of volume share as customers sought to cut freight costs.
Rexam said it has a 60% share of Brazil’s beverage can market but recognized that growth would not always be constant. Opening of a new plant in Belem has been delayed to the second half of 2012.
Outlook
Chipchase said the company remained cautious about the global economy. He expected beverage can to remain robust but said he did not envisage “any turnaround in the performance of Plastic Packaging in the near term”.
