UPDATE 2-Can maker Rexam tops profit estimates as volumes rise

Fri Aug 1, 2014 7:36am EDT

* H1 sales 1.88 bln stg vs analysts' estimate of 1.85 bln stg

* Underlying pretax profit 166 mln stg vs estimate of 156 mln stg

* Beverage can volumes up 4 pct

* Shares rise as much as 3.7 pct (Adds CEO comment, details)

By Aashika Jain

Aug 1 (Reuters) - Rexam Plc, the world's No. 2 drinks can maker by revenue, posted a better-than-expected underlying pretax profit for the first half as increased volumes softened the effect of surging aluminium premiums and a stronger pound.

The company's shares rose as much as 3.7 percent on Friday, making the stock one of the top gainers on the FTSE-100 Index .

Rexam, which competes with U.S.-listed Ball Corp and Crown Holdings, reported a 4 percent rise in beverage can volumes, driven mostly by strong growth in Europe.

"When compared to its U.S. peers, Rexam is showing better dividend yield, better EBIT margin, better EPS growth and lower net debt/EBITDA," BofA Merrill Lynch analysts wrote in a note to clients, reiterating their "buy" rating on the stock.

Aluminium premiums, or the cost to get metal out of storage, have soared to all-time highs in Europe and North America due to strong demand and restricted access to the metal.

The surge in premiums pushed up the company's net additional costs to 7 million pounds ($11.78 million) in the first half.

"Aluminium premiums ... traditionally $100-150 per tonne, have seen a big rise this year, starting from about $300 at the beginning of the year to about $460 at the moment," Chief Executive Graham Chipchase told Reuters.

The company said it expected the jump in aluminium premiums to lower its full-year earnings by 30 million pounds.

Rexam makes 20 percent of the world's cans for beverages such as soft drinks, beer and juices and supplies to Coca-Cola , Pepsi, AB InBev and others.

It gets more than 90 percent of its revenue from outside the UK, making it vulnerable to a stronger pound.

In the first half, the pound rose against all three of Rexam's main trading currencies. It gained 3.3 percent against the U.S. dollar, 3.7 percent against the euro and 6.7 percent against the Russian rouble in the six months ended June 30.

Still, Rexam topped both earnings and sales estimates as volumes were strong across Europe and the Americas.

The company's underlying pretax profit of 166 million pounds for the six months ended June 30 topped the average analyst estimate of 156.6 million pounds.

Revenue fell 5 percent to 1.88 billion pounds, but was higher than analysts' average expectation of 1.85 billion pounds.

The company said geopolitical tensions between Russia and Ukraine had not hurt its business in the region.

In terms of volumes, Rexam generates 5-6 percent of its business from Russia, and currently has a 70 percent share of the beverage can market in that country.

Shares in the company were up 0.3 percent at 502.5 pence at 1033 GMT on the London Stock Exchange. ($1 = 0.5941 British Pounds) (Reporting by Aashika Jain in Bangalore; Editing by Robin Paxton and Simon Jennings)

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