New Chairman at Rexam, Strategy to Remain Steady

We believe Rexam will look to grow specialty can capacity in the developed world and add new capacity throughout the emerging markets

Thomas Mullarkey, CFA 21 November, 2011 | 12:25PM
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Rexam's (REX) interim management statement revealed third-quarter performance that is in line with our expectations. Consequently, we are maintaining our fair value estimate on Rexam shares. Additionally, Rexam announced that Sir Peter Ellwood will be retiring as chairman of the board effective February 2012.

Sir Peter Ellwood will be replaced as chairman of the board by Stuart Chambers on February 1, 2012. Chambers is currently a director of Tesco (TSCO) and The Manchester Airport Group, and he previously served as Group CEO for NSG Group, a Japan-based global glass company. He also held senior positions at Mars, Inc. and Royal Dutch Shell (RDSB). We believe that the company strategy will remain steady following Ellwood's departure and that Rexam will look to grow specialty can capacity in the developed world and add new capacity throughout the emerging markets.

Rexam is one the world's largest producers of metal beverage containers. These cans account for about 75% of the company's revenue, with plastic packaging products making up the remainder. The North American, European, and Brazilian metal container markets are predominantly oligopolistic, with just three or four major players, while the Chinese beverage can market is much more fragmented. We believe this highly concentrated market structure promotes rational pricing behavior and permits Rexam and its peers to exert some supplier power on its highly concentrated customer base.

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Thomas Mullarkey, CFA  is an equity analyst at Morningstar.