Can volumes stagnant, closures decline but profit on target, says Rexam

By Rory Harrington

- Last updated on GMT

Related tags Coffee North america Bottle

Rexam said demand for beverage cans continues to fall in Europe and North America but was confident of meeting market expectations for the full-year as cost reductions and currency gains had offset weak sales.

The company said today in an interim statement that its volume trends were unchanged since the first half of the year and it saw no signs of a recovery.

It also highlighted a decline in demand for closures in what it said could be a longer term trend.

Beverage can volumes

European beverage can volumes remained “soft”​ and echoed conditions in the first half of 2009, Rexam’s Richard Mountain told FoodProductionDaily.com. This means the company’s volumes remained 10 per cent down year-on-year – due in particular to difficult market conditions in Russian where volume had fallen by almost one third. Specialty can volumes were still down around 13 per cent on 2008 due to fewer product launches combined with the impact of the recession on more premium priced products such as energy drinks.

Rexam said its North American volumes “were in line with the market”​ which saw a decline of between 3-5 per cent.

Cost reductions in the division of £40m by 2010 are on schedule and would help underpin future profitability. The company announced three plant closure in the US, Russia and France in July and August.

Volume growth continued to increase in South America although at a slower rate.

Packaging

A series of cost cutting actions partly offset continued weak demand in plastic packaging said the company.

“The cost reduction initiatives to close and consolidate six plants and reduce the workforce by approximately 10 per are on track to deliver the expected £30m savings by 2010, and support profitability in the face of future volume uncertainty​,” said a Rexam statement.

But the company pinpointed a continued decline in closures for some beverages in “what may now be a more enduring trend”.

“One issue seems to be a move by consumers towards a larger size format for bottled water and carbonated drinks,” ​said Mountain.

Larger formats mean fewer bottles and fewer closures, he explained.

“The worst recession in living memory could well be affecting purchasing habits and that is a trend that may continue throughout the recession”,​ added Mountain.

However, CEO Leslie Van de Walle said the company expected to meet market expectations with the consensus for pre-tax profit forecast at around £275m.

“Despite continued volume weakness our strong focus on reducing cost, increasing efficiencies and improving cash flow, give us confidence that we will meet market expectations for the full year,”​ said the Rexam chief. “We remain cautious about the trading outlook, but will continue to focus on cash and costs to ensure we are well placed to participate fully in the upturn when it comes.”

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