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Rexam has the fizz

RESULTS: Strong growth in North America and a boom in energy drinks elsewhere is good news for Rexam
February 20, 2013

Better-than-expected profits propelled shares in drinks can maker Rexam (REX) back to pre-crash levels. Growth forecasts for this year are bullish, too, and heavy investment in fast-growing energy drinks is a smart move.

IC TIP: Buy at 500p

Strip out one-off costs and pre-tax profit grew 1 per cent to £418m compared with broker expectations of just £411m. Core beverage cans volume grew 6 per cent, driven by a 10 per cent leap in higher-margin speciality cans. Winning back share in the US was a big fillip and volumes were up 12 per cent, as Americans guzzled more beer and iced tea from non-standard cans and double-digit growth is likely in North America this year, too. The performance helped underlying operating profit at the core can division rise 2 per cent to £456m.

Elsewhere, Brazil is tipped to grow 4 to 5 per cent in 2013 and in Europe, where Rexam is bringing on extra capacity - a £115m plant in Switzerland that will open in 2015 will eventually be churning out over 2.2bn cans of energy drink cans a year - low-to-mid single-digit growth is expected. What's more, the new Belém plant in Brazil opens next month, just in time to feed an anticipated spike in demand as customer build inventory ahead of next year's World Cup and the Olympics in 2016.

Bank of America Merrill Lynch expects adjusted pre-tax profit of 40.6p in 2013, up from 35.5p last year.

REXAM (REX)

ORD PRICE:500pMARKET VALUE:£3.95bn
TOUCH:499-500p12-MONTH HIGH:507pLOW: 381p    
DIVIDEND YIELD:3.0%PE RATIO:17
NET ASSET VALUE 289p*NET DEBT:34%

Year to 31 DecTurnover (£bn)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20084.2522122.218.7
20094.5313411.48.0
20104.6233827.112.0
20114.2340233.114.4
20124.3135430.315.2
% change+2-12-8+6

Ex-div: 24 Apr

Payment: 22 May

*Includes intangible assets of £1.8bn, or 229p a share