Rexam says it is prepared to divest its personal care division

By Simon Pitman

- Last updated on GMT

Related tags Board of directors

UK-based packaging player Rexam says that a continued weak performance in its personal care division means that it is now considering divestment of the division.

Speaking at an interim management meeting, company chief executive Graham Chipchase stated that the company would be looking at all options, while making a specific reference to divestment, in an attempt to improve returns.

The company 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.

Personal care is the weakest link

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.

“Looking into next year we will have to contend with lower GDP growth in several of our major markets and as previously indicated, some specific challenges as we absorb £20m (€23m) of higher metal conversion costs in European Beverage Cans and the impact of a key Healthcare production coming off patent,”​ said Chipchase.

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.

Half-year profits up, revenue down on weak plastics performance

Rexam’s half-year 2011 results showed profit before tax was up by 19 per cent on 2010. The growth was driven largely by the packaging company’s beverage can business in Europe, which saw operating profits rise by 12 per cent.

However, total sales were flat at £2,496m but total underlying operating profit [after tax] rose 5 per cent to £280m, mainly owing to improved volumes in the European beverage can division and improved cost efficiencies.

The weakest area was the company’s personal care division, which served to drag down revenues in the company’s plastics packaging division, causing organic sales to register a 1 per cent fall over the six month period.

Executive reshuffle

The company has also announced two executive changes in the past two weeks, Carl Symon has this week resigned from the executive board, a position he has held since 2006, while Sir Peter Ellwood, chairman of the board, has officially announced his retirement date for February 2012.

Sir Ellwood will be succeeded by Stuart Chambers, who will join the executive board as a non executive director and chairman designate from February 2012. Chambers was previously the CEO of Tokyo-based glass company NSG.

Related topics Packaging & Design

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