The Investment Column: Rexam

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The Independent Online
CONGRATULATIONS TO investors who piled into Rexam as it hit its low in December. Not only has the share price since doubled, yesterday's interim figures show they probably spotted its bottom ahead of a sustainable recovery.

In the past three years, chief executive Rolf Borjesson has jettisoned a plethora of unpromising businesses to focus on consumer products packaging. True, that's never been a sector to fire investor sentiment. But Rexam is positioning itself in growth markets, drinks packaging in particular, following the acquisition of PLM this year. Another big deal is forthcoming. PLM operates in a concentrated marketplace so it's easy to identify target companies. Viag's Schmalbach-Lubeca, PLM's European rival, is one candidate now that Viag is merging with Veba to focus on electronics.

Meanwhile, Rexam is eyeing up other opportunities to bolt-on businesses to lift its share of the fast-growing beauty products packaging industry.

Admittedly, the present portfolio has its challenges. The coated films and papers division took a pounds 12m charge - another pounds 10m hit is to come this half - as profits fell a third. Rexam lost pounds 2m because of the downturn in Russia. It meanwhile remains at the mercy of falling raw material prices because that benefit is passed on to customers. This factor offset volume growth in the period, so underlying operating profits were flat on a 4 per cent sales increase. An upturn in Rexam's raw materials' cycle is expected shortly, however.

WestLB Panmure expects pre-tax profits of pounds 185m and 31p per share. That gives the shares, at 310p, a forward p/e of just 10. The anticipated corporate activity and the absence of significant bad news in yesterday's numbers make the shares a buy.

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