By David Eldridge

A poor performance in its first-half results has led packaging giant Rexam into a series of actions which include a £351m rights issue and the sale of assets at its Deeside plastics business in the UK.

 

The UK company made a pre-tax loss of £30m in the first six months of 2009, compared with £141m profit in the same period of 2008. It said its organic underlying operating profit was down by 20% due to weak volumes in its plastics packaging business and parts of its European beverage cans business.

 

Sales in plastics packaging rose by £22m to £639m, but underlying operating profit fell by £14m to £66m.

 

Rexam’s assessment of its plastics business was sufficiently bad that it took the decision to write off £113m of goodwill arising from the acquisition of OI Plastics in 2007, saying its view was that some of this year’s decline in US beverage closures demand is “unlikely to return”.

 

Rexam cancelled its dividend to shareholders and announced a rights issue designed to raise £351m that will be used to pay down its net debt to £1.8bn from its current level of £2.1bn. The company is taking action to avoid its credit rating being cut to a sub-investment grade which it said would be “detrimental to the group”.

 

Sharp Interpack (Sharpak) separately announced it has acquired the assets and order book of Rexam’s Deeside thermoforming business. This business will be transferred to Sharpak’s Yate operation near Bristol.

 

Sharpak said: “This is a logical step following the 2006 acquisition of the Yate business from Rexam and underlines the company’s position as the user and developer of the proprietary RTF [rotary thermoforming] technology.”

 

Rexam did not make any comment on the transaction, and no transaction price has been revealed.

 

The group has embarked on a reorganization of its plastic packaging business, which it said is on track to produce annualized savings of £30m from 2010 onwards.