2007-12-13 Manufacturing News

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Plastics to deliver expected synergies in 2008 for Rexam

The integration of O-I Plastics by Rexam, acquired in July 2007, is proceeding well and is set to deliver the expected synergies from 2008 onwards.

The Rexam Pre Close trading statement, underlying trading for the second half of 2007 is anticipated to be broadly in line with management's expectations. At the time of Rexam's Interim Results, the announcement excluded the impact of foreign exchange and a one-off fair value inventory adjustment arising from the acquisition of O-I Plastics.

Beverage Cans is performing well, driven by strong volume growth in Europe and South America, with good pricing and improved mix in Europe. Volume growth in Brazil has been mitigated by the Brazilian Real which has strengthened against the US dollar by approximately 10% in the second half, which increased local currency costs on translation. The North American business is recovering from the effects of the strike in the first half. The growth capex program is well on track, despite start up delays in the new end manufacturing plant in Manaus, Brazil.

Plastics Packaging is seeing a continuation of the trends experienced in the first half. Growth in Pharma is driving performance in the Healthcare division. In Personal Care, the strong performance in Dispensing Systems and the recovery of Make Up partially offset softer volumes in Home and Personal Care. Lower demand in North America is affecting trading in the Closures division.

In the second half, the US dollar has continued to weaken against sterling, and this will affect their reported results due to the translation impact on our US dollar earnings. In addition, energy and freight costs have been affected by the higher price of oil and this is expected to continue into 2008.

The O-I Plastics acquisition is set to deliver expected synergies from 2008 and forward, however the 2007 operating profit for O-I Plastics will be affected by an estimated additional £5m fair value inventory accounting charge arising on acquisition. Following the acquisition of O-I Plastics, Rexam's sales from ongoing operations are approximately £3.7 billion.

Rexam will announce its preliminary results for the year ending 31 December 2007 on 20 February 2008.

Rexam is one of the world's leading consumer packaging groups, offering state of the art primary plastics packaging systems, and the world's leading beverage can maker, serving a number of markets including the beverage, personal care, healthcare and food markets.

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