UK: Rexam posts H1 profits jump but Brazil trouble ahead
- H1 net profits (for continued operations) up 30% to GBP122m (US$205m)
- Net sales in six months to end of June down 4.5% to GBP1.88bn
- Operating profits fall 9% to GBP197m
- South America volumes jump 22%
Rexam released its H1 results on Friday
Beverage can maker Rexam has praised strong first-half volumes in South America driven by the FIFA World Cup, but has warned of a coming slowdown in Brazil.
Figures released on Friday for continued operations, discounting Rexam's healthcare unit that was sold in June, show net profits in the six months to the end of June were up 30% to GBP122m (US$205m). However, net sales declined 4.5% to GBP1.88bn, while operating profits were down 9% to GBP197m as currency exchange headwinds and rising aluminium prices cost the company a combined GBP27m.
South America increased volumes by 22% as good weather and Carnival boosted the first quarter and the World Cup impacted on the second. However, Rexam warned that the beverage can market in Brazil will “slow significantly” in the second half of the year because of an expected tax rise on beer and soda. The tax, which officials delayed until after the World Cup, will see Rexam's clients “revert to prioritising speciality cans to provide attractive price points with different can sizes”.
This trend can already be seen in the US, where a weakening CSD market has led manufactures such as The Coca-Cola Co and PepsiCo to offer smaller can formats.
Rexam said standard can volumes in North America were down 3% in its first half while speciality can volumes were up 1% driven by smaller sizes. Rexam added that the growth came in the beer and energy drinks categories as well as in CSDs.
Rexam said it is now solely focussed on beverage can manufacturing after divesting its healthcare business. The company said it made a GBP75m first-half gain on the sale and has returned about GBP450m from the proceeds of the divestment to shareholders.
To read the company's full results, click here.
The Coca-Cola Co has said smaller pack sizes are driving "a tremendous amount of positive growth" in the US as it looks to drive performance through improving price/mix....
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