Rise in profits blows lid off Rexam shares

 
City A.M. Reporter
EUROPE’S largest drinks can maker Rexam has beaten forecasts with a 19 per cent rise in first-half profit, helped by demand for energy and ice tea drinks and a growing trend among cash-strapped shoppers to consume at home.

The UK firm, which makes Red Bull and PepsiCo cans as well as packaging for food, healthcare and cosmetic products, said yesterday lower financing costs also helped to boost profit before tax and one-off items to £236m, despite flat sales.

That beat analysts’ consensus profit forecast of £217m, according to a poll provided by the company.

“We are pleased with the first half... Looking ahead, we expect continued good performance for the rest of the year,” chief executive Graham Chipchase said.

Rexam, whose beverage packaging unit makes around 80 per cent of its sales, producing 60bn cans each year, said trading in that division had been better than expected with sales up five per cent to £1.8bn.

In Europe, volumes were up seven per cent as home consumption increased and demand for speciality cans for energy drinks grew.

Standard can volumes in North America fell a fifth due to lost contracts and an overall decline in the US soft drinks market, but was offset by speciality can growth of 24 per cent.

Last month Rexam’s US rival Ball Corp posted lower-than-expected second-quarter results due to weaker can demand in North and South America.

Chipchase said the US soft drinks slowdown was expected and would be offset by growth elsewhere, as well as still healthy demand for speciality ice tea and beer cans in America.

“We have 32 per cent of our sales in emerging markets... over the medium term they will achieve better returns and growth than the developed markets, so we are pretty comfortable with what we are seeing,” he said.

Rexam led the FTSE 100’s biggest risers yesterday, climbing four per cent to close at 368p, valuing the company at £3.1bn.