Packaging supplier Rexam has announced it is now ‘actively marketing’ its Personal Care business for sale following the release of the company’s 2011 results.
The UK-headquartered firm posted a 15 per cent increase in underlying profit, with operating profit rising by 7 per cent from £513m (€ 607m) to £549m.
"Looking ahead, we remain cautious about the global economy and, as previously indicated, we face certain cost challenges in 2012 together with the impact of a key Healthcare product coming off patent,” said chief executive Graham Chipchase.
The Rexam boss explained that he expects 2012 to be another year of progress as Rexam continues to focus on cash, costs and return on capital employed; some of the reasons driving the decision to sell the personal care business.
Downturn takes its toll
The personal care division, which provides packaging for cosmetics and fragrances, was hit hard due to the faltering economic environment, as consumers became more wary of their purchases.
The group’s plastic packaging unit reported mixed results for the year, with organic sales rising by two per cent but underlying operating profit falling to £102m, despite personal care sales up two per cent also.
In Europe, Rexam saw good growth in dispensing systems for fragrances but continuing weakness in North America offset this.
Rexam sold its closures business last year in an attempt to cut its debt and save costs, and it will look to do the same with its personal care business.
During the company’s results presentation, Chipchase explained that although he sees opportunities in what he describes as an ‘attractive’ business, it is not one Rexam wish to pursue and he feels it may be better served by someone else.
Writing was on the wall
The decision will not come as a massive shock, as continued weak performance in the personal care division has led the company to consider divesting the business over the last few months.
Rexam wants to put itself in a stronger position, given that there are continued pressures and economic uncertainty in the developed market; conditions that are likely to remain in the short- to mid-term future.
The performance of the personal care division has been weak in recent years, and has failed to make any significant recovery since the economic downturn impacted the marketed in 2009.
The Beverage Cans unit is the company’s mainstay, and this division has been performing ahead of the company’s forecasts, mainly due to tight cost control, but also thanks to significant growth in the Russia market.