LONDON (Alliance News) - Drinks can maker Rexam PLC Thursday reported higher pretax profit and revenues for 2013, as higher volumes in North America offset disappointing volumes in Western Europe and South America and as it continued to cut costs.
However, the company's shares fell as analysts pointed out that revenues were only higher thanks to a lift from exchange rate movements.
The company reported a pretax profit of GBP339 million for 2013, up from GBP319 million in 2012, as revenues rose to GBP3.94 billion, from GBP3.89 billion. Its net profit, however, slipped to GBP95 million, from GBP206 million, as it booked GBP158 million of losses from discontinued operations, up from a GBP36 million loss in 2012.
The company is focused on managing its costs, optimising its cash and improving its return on capital employed. It had set a return on capital employed target of 15% by the end of 2013, and hit its target. It said it has generated almost GBP940 million of free cash flow since 2010, and made efficiency savings of about GBP195 million over the same period.
Return on capital employed hit 15.5% in 2013, up from 14.5% in 2012.
It has also been focused on returning cash to shareholders, returning proceeds from asset sales to its investors. It raised its total dividend for 2013 to 17.4 pence, up from 15.2 pence in 2012, which it said was a signal of its confidence going forward.
"In 2014, despite an uncertain macroeconomic environment and some continued cost volatility, we expect to make further progress on a constant currency basis. We remain committed to managing what we can control and focusing on cash, cost and return on capital employed as we pursue our strategy of balancing growth and returns," Chief Executive Graham Chipcase said in a statement.
The company is now a focused beverage can maker after selling business including a personal care packaging business and a healthcare packaging business in the past two years. It has pledged to return GBP450 million of the USD805 million proceeds from the sale of the healthcare unit to shareholders. Earlier this month, it bought a 51% stake in Saudi Arabian can maker United Arab Can Manufacturing Ltd for USD122 million, a deal it expects to complete in the third quarter.
Operationally, it said global can volumes rose 1% over 2013, although organic sales, which are measured at constant currency rates, were down 1% as volume growth was offset by the pass through of lower aluminium prices.
That news sent its shares down. The stock was down 4.2% at 502.71 pence Thursday afternoon, the second-biggest decline on the FTSE 100, although somewhat recovered from the two-month low of 475.10 pence it hit earlier in the day. The stock had been performing well in the run up to the results.
Jefferies analyst Sandy Morris said recent comments from some of Rexam's major customers and rivals about demand in North America during the second-half of 2013 imply that beverage can demand in the area is likely to continue its downward trend in 2014, "possibly at around the minus 4% pace seen in the first half of 2013".
Rexam said the overall North American beverage can market declined a further 3% in 2013, but its own volumes grew 7% as it continued to regain market share. The overall North American market has been slowly declining since hitting a peak of over 100 billion cans in 1994. Rexam has over 20% of the market. It lost share in 2010 after contract negotiations, but has now regained that over the past three years.
By Steve McGrath; stevemcgrath@alliancenews.com; @SteveMcGrath1
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