The global consumer packaging company said sales volumes in Russia had been poor and that to address the situation, it has decided to close its Dmitrov plant near Moscow.
Rostar acquisition
The factory was bought as recently as January last year as part of the acquisition of drinks can maker Rostar, and despite the closure, Rexam said the investment has been positive for the company.
“Despite poor volumes in Russia, the Rostar acquisition is delivering good returns on our investment, and long term growth prospects remain very attractive,” said Rexam CEO Leslie Van de Walle.
Following the closure of the Russian factory, annual active capacity in Russia will drop by some 1.3 billion cans and the end line will be relocated within the country to meet remaining demand.
The line will then eventually be redeployed as market conditions improve.
Cost saving plan
As well as being a response to the weakness of the Russian market, the closure of the factory in Dmitrov is also part of broader cost saving plan put in place to defend Rexam from the recession.
The move forms part of the capacity reduction programme in its European beverage can operations, which is expected to save £20m in 2010.
In itself the closure will result in annual savings of £6m from 2010 and cost the company £16m in one off charges this year, of which £8m will be cash costs.
Financial results
Last week Rexam published its first half financial results. Favourable exchange rates helped the company to sales of £2.5bn, a 15 per cent increase on last year, but operating profit remained flat.
The packaging company also reported a £30m pre-tax loss, compared to a £141m profit in the same period last year. Restructuring, goodwill and other exceptional costs dragged the figure down £165m and so excluding these charges, profits came in 15 per cent lower than last year.
Rexam also announced a £351m cash call designed to protect its credit rating from junk status as the company fights to reduce its £2.1bn debt burden.