LONDON (Alliance News) - Rexam PLC on Thursday said its pretax profit fell in 2015 amid a tough trading environment and writedowns it booked on the value of its assets and said it expects a similarly difficult set of conditions to prevail in 2016, leaving it focused on keeping costs under control as it progresses its takeover by US rival Ball Corp.
The beverage can maker, which re-entered the FTSE 100 on Monday following the completion of Royal Dutch Shell PLC's acquisition of BG Group PLC, is itself in the process of being acquired in a GBP4.3 billion deal by Ball, the Colorado-based metal and plastic packaging manufacturer.
Rexam expects the takeover by Ball to be completed by the end of the first half of 2016. The deal was agreed in February last year, but the pair have been navigating numerous competition enquiries across their global operations, particularly in Europe where the pair will have to sell a total of ten plants to get the deal through.
On Thursday, Rexam said its pretax profit for the year to the end of December was GBP250.0 million, down from GBP343.0 million in 2014, hit by higher exceptional items and a loss on the fair value changes in certain operating derivatives. Rexam said it will pay a final dividend of 11.9 pence per share, leaving its total dividend for the year flat at 17.7p, in line with the guidance given as part of the Ball takeover.
Sales for the year edged higher, up to GBP3.93 billion from GBP3.83 billion, as total beverage can volumes rose 2.0% organically and were up 4.0% including the contribution from United Arab Can Manufacturing Ltd. This growth was offset partially, however, by currency translation effects across the business and lower pricing.
The volume growth was driven by a good organic performance across Rexam's international business, except in North America, which was hit by the commoditisation of a certain specialty size can in the market, and in Brazil, which suffered from higher energy costs.
In Europe, trading for both solid and specialty cans started the year well but slowed over the course of 2015. Standard cans volumes in the region were flat, while specialty cans grew thanks to a continued good performance in the energy drinks segment. Africa, Middle East and Asia volumes were up more than half, thanks to the UAC Manufacturing acquisition, though its export business in the Middle East suffered due to the ongoing, widespread political instability in the region.
For North America, volumes were lower overall thanks to Rexam's high exposure to the slowing carbonated soft drinks market, though this was partially offset by specialty cans growth. In South America, volumes grew, despite tough comparatives from the FIFA World Cup having taken place in Brazil a year earlier, again driven by outperformance by specialty cans.
Turning to 2016, Rexam said its trading environment remains challenging, but it continues to expect low-single-digit volume growth globally. In Europe, customer pressure and competition is dragging on market prices, and Rexam is cutting its costs in order to mitigate the pressures.
Margins may also face some downward momentum from new capacity the group is building in its Widnau plant in Switzerland and in its Indian business, plus foreign exchange losses in Brazil due to the plunging value of the real. Rexam may offset some of this with a tailwind from aluminium premium rates, though the benefit from this remains uncertain.
Rexam said it will be keeping a close watch on costs to try and navigate through the tough market.
"We expect 2016 to present a tough trading environment but with continued volume growth. The expected premium benefit will be offset by pricing pressures in Europe and the savings from restructuring will be partially offset by cost headwinds. However, as ever, we continue to focus on tight cost management and the elements that we know we can control," said Chief Executive Graham Chipchase.
Shares in Rexam were down 0.3% to 600.00p on Thursday.
By Sam Unsted; samunsted@alliancenews.com; @SamUAtAlliance
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