Record Year as Rexam Completes Transformation to Consumer Packaging
Press release from the issuing company
LONDON---March 7, 2002--Rexam PLC, the global consumer packaging company, announces its full year audited results for the year ended December 31, 2001.
* Record level of operating profit, benefiting from higher volumes, acquisitions and continued efficiency programs
* Free cash flow increased to (pound)200 million, well up on last year
* Integration of American National Can yields synergies of (pound)29 million - now targeting (pound)35 million
* Sales and operating profit in Beverage Packaging increased 9% and 15% respectively on pro forma basis
* Turn around in Plastic Packaging with operating profit up 28% on a pro forma basis
* US based fragrance pumps business acquired for (pound)75 million
* Total value of disposals now at (pound)738 million (of (pound)800 million target)
Commenting on the results, Jeremy Lancaster, Chairman of Rexam, said:
"Rexam is today a company with a clear focus on Consumer Packaging. We have returned a record year. Now we must concentrate on maximizing the opportunity that we have created and on delivering increased levels of shareholder value. 2002 has started on course. A better pricing environment in the US beverage can market gives added encouragement for the year ahead and leaves us confident of the Group's future. ''
A clear focus on Consumer Packaging
Since 1996 my annual letter to the shareholders has dealt largely with change, which is not surprising as only about a quarter of our original Rexam businesses remain with us today. Now, however, our strategic transformation is essentially complete. Today we are a company with a clear focus on Consumer Packaging. Last year I reported on the successful integration of PLM. This year the spotlight was on the American National Can (ANC) operations which we acquired in mid 2000.
We estimated that synergies from the ANC acquisition would reach (pound)30 million by the end of 2002. We are well ahead of our original goal having achieved (pound)23 million in 2001 to add to the (pound)6 million reported in 2000. We are confident that there is more to come and are now projecting (pound)35 million. The acquisition has met its earnings enhancing target before goodwill in year one, as predicted, and is expected to cover the cost of capital next year. The beverage can business is now a genuine global leader in its sector. The transformation is a credit to the management team and, indeed, the whole beverage can organization.
Rexam's earnings performance in 2001 was in the main very satisfactory. Our Beverage Packaging business reported good figures, while the Plastic Packaging business made an encouraging comeback after a weak 2000. The tragic events of September 11 had a marginal overall effect on Group figures, although the beauty market did experience a sudden slowdown in the US, and to a lesser extent in Europe. The effect was compounded by a marked fall off in duty free sales.
Group sales improved to (pound)3,488 million from (pound)2,784 million. Adjusted for the effect of acquisitions and foreign exchange movements this represents an increase of 5%. Profit before tax and before goodwill amortization and exceptional items rose by 8% to (pound)218 million from (pound)202 million, attributable mainly to higher volumes and improved efficiencies. Earnings per share before goodwill amortization and exceptional items was up 8% to 36.6 pence compared with 33.9 pence last year. The Group generated strong free cash flow. This year's (pound)200 million is well up on the figure for 2000, due to exceptionally good working capital performance.
I am pleased to report exceptional gains from the sale of businesses, although the final exceptionals total was reduced by restructuring charges and a write down of fixed assets.
Sales in Beverage Packaging increased to (pound)2,306 million from (pound)1,229 million in 2000, while operating profit rose to (pound)214 million from (pound)107 million coming mainly from the full year effect of the ANC acquisition, increased volumes and synergies. A strong performance in beverage cans in the Americas, especially Brazil, was supported by good returns in Europe. The ANC acquisition gave us access to growth markets in southern Europe. Russia, where we have the world's most modern can making plant, showed signs of improvement after three difficult years.
Glass experienced another tough year but our focus on cost containment and added value products mitigated the effects. Overcapacity continues to affect our sales prices in continental Europe, while the strength of sterling favored low price imports into the UK with a subsequent effect on our sales.
We group our products for the beauty, healthcare and food packaging markets under the Plastic Packaging banner. After a poor performance in 2000, especially by our UK operations, we started the turnaround of the business. Sales were up 7% at (pound)725 million, compared with last year's (pound)677 million and profit advanced to (pound)50 million from (pound)38 million, attributable to pricing, volume and improved efficiencies. The fact that one of the Plastic Packaging businesses was singled out for Rexam's own Best Performance Award 2001 is indicative of the change that is taking place. The actions that we have taken and our strong positions in our various market segments should see this positive trend continue.
Focus on cost
As in past years, we continued our aggressive and far reaching programs to establish leaner structures and improve efficiencies in all our businesses. There were exceptional charges of (pound)35 million covering the ANC integration as well as capacity reductions chiefly in our Glass and Plastic Packaging operations.
Non packaging businesses
Two non-packaging businesses remain within Rexam and both are in the process of being divested. Combined they provided little return in 2001. Rexam Image Products had a very poor year as a result of the sharp downturn in the US electronics and media businesses. We have provided an exceptional (pound)4 million for restructuring costs and taken a fixed asset impairment charge of (pound)63 million. TBS Engineering, which manufactures battery assembly machines, returned another excellent year.
Disposals and acquisitions
In line with our strategy to focus on Consumer Packaging and niche markets where we can attain leading positions, we divested a number of businesses during 2001. Rexam DSI and Rexam Release were sold in the first half of the year for (pound)181 million and MiTek in July for (pound)256 million. Later in the year, our flexible plastic business in Lakeville, Minnesota, was sold for (pound)8 million. Pursuant to our undertakings to the European Commission on the acquisition of ANC, we divested three beverage can making plants for a total of (pound)85 million, of which (pound)40 million is deferred consideration. In addition we also sold our joint ventures in Japan and the US for a total of (pound)33 million.
We took the opportunity to consolidate our European position in plastic containers and beverage cans. In September we acquired a Danish plastic packaging operation for (pound)16 million. In October we acquired a beverage can plant in the Czech Republic near Prague for (pound)16 million.
New placing finances acquisitions
In December we announced the acquisition of a US based fragrance pumps business for (pound)75 million, which was completed in January 2002. It was financed through a placing of 31 million new ordinary shares, representing 7.8% of Rexam's then issued ordinary share capital, which raised (pound)107million after costs. It was the first public equity issue made by the Group since 1993. The balance of the funds raised was used to finance the acquisitions of the Danish and Czech businesses.
Significant debt reduction
Debt reduction was one of management's principal objectives in 2001. We have now divested the vast majority of the businesses earmarked for sale for a total value of (pound)738 million of the (pound)800 million that we estimated for the period 2000 and 2001. The proceeds from the disposals, together with the strong underlying cash flow, have been used to pay down Rexam's borrowings. Debt at the year-end was appreciably lower than projected at (pound)1,361 million. Gearing, which was over 300% at the end of 2000 dropped to138% at the end of 2001. Although debt increased by (pound)75 million in January 2002, following the completion of the US fragrance pumps acquisition, we anticipate a reduction later in the year as further disposals are completed.
For the year 2001, the Board is proposing a final dividend payment of 9.2 pence. This will mean 15.9 pence for the year, which is an increase of 5.3% on last year. Subject to shareholder approval at the 2002 Annual General Meeting, the dividend will be paid on June 5, 2002 to holders of ordinary shares registered on May 10, 2002.
We shall continue to focus on cash generation, paying down debt and improving the performance of the Group as a whole. In the last six years we have set down some solid roots in Consumer Packaging. Now we must concentrate on maximizing the opportunity that we have created and on delivering increased levels of shareholder value. 2002 has started on course. A better pricing environment in the US beverage can market gives added encouragement for the year ahead and leaves us confident of the Group's future.
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