Rexam to sell personal care unit

Europe’s largest drinks can maker Rexam  put its underperforming personal care business up for sale and said it would look to return cash to shareholders, sending its shares to their highest level in nearly four years. The British firm, which also reported full-year profits largely in line with expectations on Wednesday, said strength in its core beverage cans business offset continued weakness at plastic packaging, which includes the personal care and healthcare operations. Rexam, which makes PepsiCo cans as well as packaging for food, healthcare and cosmetic products, said it had decided to hive off the underperforming personal care unit as it did not expect a turnaround in the near term. The unit has been hit by rising costs and lower volumes. The firm plans, however, to retain the healthcare unit. Chief Executive Graham Chipchase declined to say how much the business could be sold for, or give a timeframe. Analysts have said the personal care unit could fetch up to 350 million pounds ($554 million). Full-year operating profit at the company’s plastic packaging unit was down 14 per cent at 102 million pounds, with the business accounting for 19 per cent of group underlying operating profit, down from 23 per cent the year before. “Current trading is weak, but we expect it (personal care) to be sold,” BofA-Merrill Lynch analyst Ross Gilardi said. “We think most of the potential proceeds will go back to holders in the form of share buybacks and dividends.” The analyst pointed to Rexam’s US-based peer, packaging products maker Ball Corporation, whose stock hit an all-time high earlier this month after the company instituted a share buyback and raised its dividend 43 per cent. Shares in Rexam climbed 4.7 per cent to 402.8 pence, their highest levels since May 2008, and were the top per centage risers on Britain’s blue-chip FTSE index. “Over the last two years, we have succeeded in strengthening the balance sheet and protecting our credit rating,” the company said in a statement. “We will maintain an appropriate financial position but will shift focus to a combination of reinvestment in the business and cash returns to shareholders.”