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Rexam, Ball face antitrust issues

Rexam and Ball Corp now face greater scrutiny on their proposed union
August 4, 2015

Rexam's (REX) reported half-year profits took a beating from higher aluminium premiums and energy costs, together with hefty exceptional restructuring charges - while all of this was overshadowed by the proposed acquisition of the beverage can giant by US rival Ball Corp.

IC TIP: Accept at 556p

Underlying operating profits were 9 per cent down on the 2014 half-year to £179m, due partly to a fall-away in soft drink volumes in the Americas. Rising energy costs in Brazil were also an issue. It's worth remembering that comparable sales metrics for Latin America's largest economy aren't wholly illustrative, given the country hosted the World Cup in 2014. Aluminium costs - a key input for Rexam - have come down appreciably from the half year. Management now expects a neutral cost effect over the whole financial year, compared with the £30m headwind it expected in February.

Rexam continues to pursue its growth strategy regardless of the ongoing Ball Corp regulatory process. During the period, the group acquired a controlling stake in Saudi beverage can maker United Arab Can Manufacturing Limited, while lucrative long-term supply agreements have been secured with SABMiller and Florida Ice & Farm Company.

REXAM (REX)
ORD PRICE:556pMARKET VALUE:£3.9bn
TOUCH:555-557p12-MONTH HIGH:593pLOW: 425p
DIVIDEND YIELD:3.2%PE RATIO:20
NET ASSET VALUE:187pNET DEBT:95%

Half-year to 30 JuneTurnover (£bn)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20141.8816415.85.8
20151.9782.07.85.8
% change+5-50-51-

Ex-div: 27 Aug

Payment: 24 Sep

*Includes intangible assets of £1.29bn, or 183p a share.