Rexam impresses despite rise in aluminium prices

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The Independent Online

The world's biggest maker of drink cans, Rexam, yesterday delivered reassuring results in trying times for the first half of this year.

Underlying profits before tax may have eased 3 per cent to £137m, amid record prices for the aluminium with which it makes 50 billion cans a year, but the City was impressed by increasing sales. On a like-for-like basis, they were 9 per cent ahead on this time last year. Taking into account the benefit of acquisitions, sales were 20 per cent better.

The London-based company, which employs 25,000 workers across 20 countries, made 11 per cent more cans in the first half of this year than last for Cadbury Schweppes, Carlsberg, Heineken, PepsiCo and Coca-Cola among others.

They should expect Rexam to raise prices to offset higher aluminium prices, which peaked in May and pared interim profits by 3 per cent. Renegotiation of an aluminium supply contract added £14m of profits in the first half.

Rexam spent more than £1bn on the metal last year, its biggest cost, but has no plans to switch to another material.

At £100m, energy costs were also 20 per cent greater between January and June.

Rolf Borjesson, Rexam's chairman, said: "During the first half of 2006, Rexam delivered strong top-line growth, good cash flow, significant market share gains and a solid performance." Investors agreed and Rexam shares advanced 38.5p to 549.5p in the best performance by any constituent of the FTSE 100 index.

Analysts at Evolution urged clients to buy the shares, while Credit Suisse recommended clients add to their holdings.

Rexam benefited from a one-off gain from a reduction of medical bills for retired American workers.

Mr Borejesson promised more acquisitions would follow in the cosmetics, food and pharmaceuticals sectors, particularly across emerging markets.

Rexam unveiled plans to build can plants in Russia and Brazil, one of its fastest-growing markets.

The company - the sole supplier of Red Bull cans - is to open a further plant in Austria to cope with burgeoning global demand for energy drinks.

Rexam will pay an interim dividend of 7.9p, 5 per cent more than last year.