Rexam's Future Growth to Come from South America

Demand growth in Brazil is robust, by Rexam is not the only can maker adding fresh supply in South America

Thomas Mullarkey, CFA 16 November, 2010 | 5:55PM
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Rexam (REX), which reports semiannual financial results, recently released its third-quarter interim management statement. Rexam's operations continue to perform as expected, and the company is gearing up to add new beverage can capacity in the Americas to drive growth.

Most of Rexam's future growth will be coming from South America. The company is planning on increasing its South American beverage can capacity from 11 billion per year in 2009 to 14 billion per year by 2012. However, Rexam is not the only can maker adding fresh supply in South America; both Crown Holdings (CCK) and Ball Corporation (BLL) are expanding their footprint south of the equator. Demand growth in Brazil appears to be robust, and the country's growing middle class is consuming greater amounts of packaged goods. In fact, Rexam has been importing cans from North America in order to meet Brazil's robust demand. Once the new South American lines are up and running, we believe the company's North American export volume will be dedicated to producing 400 million 24-ounce beverage cans per year. This will increase the firm's North American 24-ounce capacity by 13% by 2012.

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Thomas Mullarkey, CFA  is an equity analyst at Morningstar.

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