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Rexam faces uncertain 2015

The can manufacturer warns that rising aluminium prices and energy costs in Brazil could add £45m to its bill.
November 14, 2014

Shares in can manufacturer Rexam (REX) fell more than 7 per cent after the company issued a profit warning concerning aluminium prices and energy costs in Brazil.

IC TIP: Hold at 453p

In a trading statement, the world’s second-biggest producer of cans reported that the rising price of aluminium could cost it £30m in the coming year. Aluminium premiums – the cost of getting the metal out of storage warehouses – have risen to record levels recently due to rising demand and restricted access, which could have a direct impact on the company’s margins.

To make matters worse, Rexam also expressed concerns over the ongoing drought in Brazil, home to some of its major manufacturing operations. As things stand its electricity bill is expected to rise by £15m as the drought has increased the price of hydroelectrically-generated power.

Rexam said overall can volumes rose by 4 per cent in the third quarter, thanks mainly to strong performances in Egypt and India. Growth in Europe is reported to have eased, while South America has slowed post-World Cup and overall performance in the US is down.

The company expects margins for certain sizes of US speciality cans to reduce next year and plans to review its cost base further.