Rexam to axe 1,200 staff

Rexam, the packaging group formerly known as Bowater, yesterday announced 1,200 job cuts alongside record losses of pounds 190m as new management attempted to draw a line under past mistakes. Around 500 jobs are to go in the UK, including the loss of 100 places at a factory at Fishponds in Bristol, which is to be closed, with smaller numbers going from most parts of Rexam's British businesses.

Jeremy Lancaster, who took over as chairman last year, said the job cuts and exceptional charges totalling pounds 358m resulted from the decision announced in September to "clear the decks by taking action over our under-performing businesses, by making disposals, removing excess capacity and making our historic capital expenditure work for us."

Twenty businesses earmarked for sale have been grouped in a new Octagon division. Together with operations to be closed and disposals already completed, these account for a pounds 254m goodwill write-off in last year's figures. Restructuring and rationalising the businesses to be retained will cost a further pounds 73m, after tax, Mr Lancaster said, with the axe falling most heavily on the food and beverage packaging and coated films and papers divisions. Cost savings are expected to total pounds 20m on an annualised basis.

Most of the businesses being sold came as a result of a buying spree conducted by previous management at Rexam, many coming as part of the acquisition of Norton Opax in 1989 and DRG Packaging and Cape Allman Packaging in 1992. The company admitted yesterday that, "with the benefit of perfect hindsight", it was clear it overpaid with some of the acquisitions.

The weight of the charges turned pre-tax profits of pounds 180m into losses of pounds 190m last year, but Rexam is holding the final dividend at 8p to make an unchanged total of 14.1p for the year. Sales were flat at pounds 2.28bn.

Rolf Borjesson, the chief executive who moved over from Swedish packaging group PLM last year, said: "I believe we can move this group from pounds 2bn of sales to pounds 3bn of sales over the next three to four years." This included raising food and beverages from pounds 400m to pounds 600m of sales and healthcare from pounds 200m to pounds 400m.

Rexam conceded that market growth alone would take turnover to pounds 2.5bn, but Mr Borjesson said the rest would be made up through acquisitions. The shares rose 3.5p to 332p.