Rexam revival plans win City backing

Plans to revive the flagging fortunes of Rexam, the paper and packaging group formerly known as Bowater and under new management, received a warm welcome in the City yesterday, even though profits continued to shrink in the first half.

The shares rose 14p to 408.5p after Rolf Borjesson, the Swedish chief executive who replaced David Lyon in July, announced a programme of disposals aimed at businesses with sales of up to pounds 300m a year. "We need a flatter organisation to implement changes and increase our focus," he said.

Disposals in five of Rexam's seven sectors were expected in the next 12-18 months, he added, noting that businesses with annual turnover of pounds 200m had already been sold.

Analysts reckoned the disposals are likely to see Rexam concentrating on its core packaging activities at the expense of peripheral operations such as building and engineering.

"Whole divisions could be sold off," said Francesca Raleigh at brokers Panmure Gordon. "It's not difficult to make good money from packaging but there is a lot to do."

The news came as Rexam reported pre-tax profits in the six months to June of pounds 77m, down from pounds 112m a year ago, and warned that it was cautious about the outlook for the second half of the year despite a better July and August than the corresponding period in 1995.

Jeremy Lancaster, the new chairman, blamed "generally flat" industrial demand, particularly in the UK and Continental Europe.

Rexam has been out of favour with investors since it issued two warnings in three months last year as profits were hit by volatile raw material costs and customer de-stocking.

In July Rexam was ejected from the FT-SE 100 index.