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Rexam a World Cup winner

RESULTS: Rising raw material costs and the strength of sterling are weighing on Rexam's numbers, but the group continues to build its position in the global beverage can market.
August 4, 2014

The big hike in reported earnings at drinks can manufacturer Rexam (REX) is misleading, reflecting the fluctuating value of derivatives. Strip that out and pre-tax profit was down 2 per cent to £166m. It sold 4 per cent more cans than last year, but that was offset by the impact of rising aluminium costs and currency movements, which hit first-half operating profits to the tune of £20m.

IC TIP: Buy at 505p

Demand levels from the UK, Benelux and Spanish markets were on the up. But management was particularly pleased by South American volumes, which rose by over a fifth on the back of World Cup fever. First-quarter activity in the region was also helped along by glorious weather and this year’s timing of Brazil’s Carnival, which extended the normally hectic summer season.

During the first half, Rexam completed the sale of its healthcare containers and closures business for $135m (£80m). That brought to an end the group's "portfolio transformation" strategy, which saw it return about £450m to shareholders in June. Rexam, which numbers both Coca-Cola and PepsiCo among its customer base, is now focused solely on the drinks can market. As such, it is intent on securing market share, and recently expanded its geographic catchment through the acquisition of a majority stake in a Saudi Arabian can business.

BoA/Merrill Lynch anticipates adjusted 2014 EPS of 35.3p, rising to 42.9p next year.

REXAM (REX)
ORD PRICE:505pMARKET VALUE:£3.6bn
TOUCH:505-506p12-MONTH HIGH:550pLOW: 474p
DIVIDEND YIELD:3.5%PE RATIO:14
NET ASSET VALUE:188p*NET DEBT:83%

Half-year to 30 JunTurnover (£bn)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20131.9712811.85.7
20141.8816415.85.8
% change-5+28+34+2

Ex-div: 20 Aug

Payment: 18 Sep

*Includes intangible assets of £1.2bn, or 174p a share