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Rexam buoyed by beverage can performance

By Hamish Champ
Posted 22 February 2012

Rexam, the stock market-listed packaging giant, saw it shares rise nearly 5% today after reporting annual pre-tax profits up 15% to £450m, boosted by better than expected growth in its beverage can business.

Reporting sales of £4.7m, up 2%, and underlying operating profits up 7% at £549m, chief executive Graham Chipchase said he was “delighted with the continued progress of the business in 2011”.

However he warned that while the market for Rexam’s beverage can business remained robust he did not anticipate any turnaround in the performance of plastic packaging “in the near term”.

Rexam said its plastics business had a mixed year, with organic sales up 2% - otherwise flat when taking resin price pass-ons into account - and underlying profits were down 13% on an organic basis. Total turnover rose 0.6% to £948m, with underlying operating profits down 14.3% at £102m.

Its healthcare division saw strong growth in pharmaceutical packaging offset by weakness in sales of inhalers “following a quiet flu season”. Demand was weak in North America, Rexam said.

The group added that sales in 2012 would be impacted by one of its drug delivery devices coming off patent, although it said it had a strong product pipeline “to fuel future growth”, noting that 2011 saw the roll out of new products, including pumps and airless dispensing tubes

Volumes in Rexam’s personal care operation were generally flat and following a recent strategic review the group said it has decided to sell off the business, which accounted for approximately half of the plastic packaging operation’s total turnover.

Said Chipchase: “While personal care is an attractive, well run business and given that we can generate better returns elsewhere in the group, it is likely to be of greater value to another owner.

Chipchase said Rexam’s healthcare business would remain a key component of the group. “It is a business with good growth prospects, well established customer relationships and long term contracts, as well as high barriers to entry and a strong return profile,” he added.

Looking ahead, Chipchase said he expected 2012 to be “another year of progress as we continue to focus on cash, costs and return on capital employed”.

Rexam reported its underlying earnings per share rose 15% to 36.1p, while its total dividend for the year would come in at 14.4p, up 20%.

At the time of writing Rexam's shares were up 17p at 401p.

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