Firm is right to can healthcare arm

 
Elizabeth Fournier

SLOW and steady Rexam – the FTSE 100 stalwart that has been quietly getting on with making Coke cans and growing its market cap for the past couple of years ­– gave investors quite a shock yesterday.

After unveiling a profit warning and being hit by slow growth in western Europe and South America – a key market in the lead up to next year’s World Cup – shareholders quickly took fright, wiping 6.5 per cent off the shares during early trading and adding to the heavy losses the stock has incurred since early April. But among the downbeat sales projections was one plan that makes a lot of strategic sense – Rexam is finally selling its healthcare arm, a disposal that’s been on analysts’ wishlists for a while. The unit only makes up 10 per cent of sales, and taking it off the books leaves management free to concentrate on the beverage division – as well as continuing with the much-needed cost cuts that weren’t quite enough to reassure this time around.

The recovery in Rexam’s shares towards the end of yesterday implies investors aren’t ready to can the firm just yet. In such a volatile market, they’re right to stick around.