LONDON (Alliance News) - Drinks can maker Rexam PLC Thursday said it is expecting the global beverage can market to grow in 2015 even though the environment will remain challenging, but a recent rise in aluminium prices could add about GBP30 million to its costs next year if they are sustained.
It also said its reviewing its costs because it expects margins on some US specialty cans to fall next year.
The company said its results since July 1 are in line with its plans and it expects to "make further progress" for the full year on a constant currency basis. It said overall global beverage can volumes were up 4% since the start of July.
It said volumes grew in Europe in line with the first half, there was an improvement in Russian volumes, and it reported a strong performance in India and Egypt after its recent investments there. It said the market recovered well in Turkey.
Rexam added that standard volumes were down in line with the market in North America, but specialty volumes continued to grow in the region driven by energy drinks. It said it performed strongly in South America, although volumes slowed towards the end of the third quarter after the football World Cup ended, as it had expected.
"We are also benefiting from our improved manufacturing footprint in Brazil which has increased our capacity in specialty cans," it said.
However, it cautioned that Brazilian energy costs are expected to rise by GBP15 million in 2015 after a drought raised the cost of hydroelectric power in the country.
It also warned that the overall aluminium premium has risen further to USD500 a tonne, which if sustained, would represent an additional cost of some GBP30m for 2015 compared with 2014.
"In terms of the trading environment, we are planning for margins on certain sizes of US specialty cans to reduce next year and, additionally, for the trend towards global procurement contracts by our customers to continue. In light of these developments, we are reviewing our cost base further and will provide an update at the full year results in February," it also warned.
"Whilst European market growth slowed somewhat in quarter three, we saw a strong Nordic summer and an improvement in Russia. Looking at the rest of the world, volumes grew strongly in all three regions and we started to supply 25cl cans in India," Chief Executive Graham Chipchase said.
"Despite ongoing foreign exchange translation headwinds and metal premium cost at an all-time high, the business is in good shape operationally and we continue to expect to make further progress in 2014 on a constant currency basis," he added.
By Steve McGrath; stevemcgrath@alliancenews.com; @stevemcgrath1
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