Rexam in Brazil - Day 1

rexam

Rexam in Brazil - Day 1

Analyst Visit

Brazil

5-7 7 December, 2004

1

Lars Emilson

Chief Executive


Sharpening our focus on emerging markets

3

Packaging spend per

capita US$

Source: PIRA

500

450

400

350

300

250

200

150

100

50

China

Chile

Argentina

Br a zil

Mexico

Packaging spend vs. GDP

France

Spain

Germany

0

Russia

India

0 10 20 30 40

UK

GDP per capita US$ ‘000

Denmark

Ja pan

USA

4


Europe: 50%

Our positions in mature and emerging markets

2003 pro forma sales

N America: 37%

Emerging markets : 13%

5

Stepping up the pace in 2004

• Bought out our JV partners in Mexico and China

– Mexico

• 6.5bn can market

• 11th most populated country

• 63 cans per head in 2003

– China

• 6.7bn can market

• Biggest population in the world

• 5 cans per head in 2003

• Established agreement in India

• To provide technical assistance to greenfield can plant

• Option to acquire equity

• Second most populated country in the world

• 50 m cans consumed; all of them imported

• 0.05 cans per head in 2003

6


Brazil is very important to us

• 5th largest country in the

world with 180m population

• 3rd largest can market with

c10bn units

• Substantial beauty market,

US$8bn

7

Top packaging growth markets

Average Growth

2001-2005

Brazil

13.0

India

11.0

Ireland

10.8

Chile

10.2

Poland

9.1

China

9.0

Mexico

6.5

Czech

6.4

Argentina

5.6

Greece

5.3

Norway

5.0

Spain

4.8

Portugal

4.8

Source: Pira International

Brazil - a fast growing market

Brazil’s Packaging Market by Volume

Duplex/triplex

6%

Flexibles

7%

Glass

14%

Metal

16%

The Brazilian packaging industry was

valued at US$8.2bn in 2002.

Source: Datamark

Paper

4%

Corrugated

34%

Plastics

19%

8


• Cans are the preferred pack

for supermarkets

• Cans are the low cost

solution for single serve

CSD

Cans are well-placed in Brazil

9

Filled cans (m)

12000

10000

8000

6000

4000

2000

0

Source: Radar, Rexam

Beverage cans - rapid growth in the 1990s

CAGR 43%

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

Can consumption in Brazil

CAGR 3%

10


Latasa – a successful acquisition

Brazil’s No1 beverage can maker

• Acquired in November 2003

– Bought out the minority shareholders in May 2004

– Received unconditional regulatory approval in July

2004

• Integration well under way

– Synergies expected to be US$15m in 2004

• Synergies to reach US$30m p.a. by 2006

11

Source: Rexam

Rexam (Brasília)

Ball (Jacareí)

Crown Cork (Cabreúva) ( Cabreúva)

Rexam (Viamao)

Manufacturing in Brazil

Metalic (Fortaleza)

Crown Cork (Aracaju)

Ball (Aratu)

Rexam (Extrema)

Rexam (Santa Cruz)

Rexam (Recife)

Can plant End plant Can & end plant

12


A great fit

Rexam Extrema and Latasa No. 1

in Brazil

• Complementary customer base

• Extended geographic reach

• Balance in supply and demand

– Jacarei plant closed

• Improved production logistics

• Synergies higher than expected

13

• No 1 in Europe

• No 2 in the Americas

• No 1 globally

Global position reinforced

14


• Platform for growth

• Great opportunity to develop

the South American market

• Means for improving Rexam’s

operating margins

• Further opportunity to deliver

more value

Helping to make our vision a reality

15

Latasa deal - financial key points

Earnings enhancing 2004

Beats WACC 2004

Cash payback c. 6 years

WACC adjusted to reflect Brazilian risk

16


Beauty

GLOBAL BEAUTY PLASTIC PACKAGING

MARKET SHARES

64%

9%

8%

5%

8%

6%

APTAR ALCAN YOSHINO

REXAM CROWN OTHERS

The world of Beauty Packaging

Unique technology and know how

Market Size £4bn

Market Growth 4-5% pa

No 1 in sampler sprays

No 1 in lipstick cases

No 2 in compacts

18


Brazilian Beauty

Brazil has more “Avon Ladies”

(900,000) than it has men and

women in its army and navy.

The Economist, 22 May 2003

19

• Plant built in 1999

• Relocated in 2004

• Services domestic and

export markets

• Expanding product lines

– Make-up

– Closures

– Dispensing

• Expanding technologies

Expanding in a growth market

20


Rexam Overview

• Organic growth

– New products

– New markets

• Acquisitions in high-growth markets

– Specialist plastics

– Emerging markets

Driving Rexam’s future growth

• Acquisitions in mature markets

– Exploit further consolidation opportunities

22


19%

30%

Europe

7%

44%

Global players in beverage can market

26%

17%

USA

34%

23%

15%

17%

REXAM BALL CROWN

OTHERS METAL CONTAINERS METALIC

Brazil

4%

64%

23

12%

22%

13%

NORTHERN EUROPEAN

VOLUME SHARE*

O-I/BSN REXAM ST GOBAIN

ARDAGH

OTHER

25%

Number two in northern European Glass

28%

*UK/Eire, Germany, Benelux, Poland, Scandinavia

Market value £1.6 bn

Top 3 76%

•Consolidating market

•Economies of scale

•Synergy potential

24


64%

Consolidation potential in fragmented markets

9%

8%

5%

8%

6%

Global Beauty Plastic Packaging

market shares

APTAR ALCAN

REXAM

YOSHINO

65%

12%

9%

8%

6%

European Pharmaceutical Plastic

Packaging market shares

CROWN

OTHERS

BESPAK

Sales £m

500

450

400

350

300

250

200

150

100

50

0

Our recent acquisition track record

Omnium

Medical

• 7 acquisitions

completed in the last 3

years

• Over £460 million of

sales added

• Successful integration

• Synergies above

expectations

WILDEN 25

26

Polglas

M oerdijk

Glass

La ta sa

Risdon

Pharma

Luner Glass

N ienburger

Glass


£m

300

250

200

150

100

Our PBT* growth record

1996 1997 1998 1999 2000 2001 2002 2003

ROIC

12%

2002

2003

Our ROIC development

Transformation CAGR 5% Focus CAGR 11%

Defined as underlying operating profit divided by the average of opening and closing of each of net

borrowings, shareholders’ funds and minority interests after adding back retirement benefits (net of

*Profit before tax, retirement benefits net finance cost, goodwill amortisation, exceptional items

and excluding SSAP24 credit 27

deferred tax) and goodwill previously written off against reserves. Underlying operating profit is

annualised by doubling the underlying operating profit for the six-month period.

28

2001

H104

Rexam

WACC

(internal)


Well positioned in consumer packaging market

Acquisitions integrating well and enhancing value

Delivering consistently strong PBT growth and cash

flow

Significant opportunities for future growth

Beverages Beauty Food Pharmaceuticals


Yves Dominioni

Sector Director, Beauty & Pharma

1 2


1996:

small pumps & cosmetics company

c. US$200m

Clear strategy definition

Enlarged product portfolio

+

Full geographic coverage

=

Background

Sustained profitable growth

through organic growth & selective acquisitions

3

• Sustained organic sales growth: 6% p.a.

• Five major acquisitions in Asia,

USA and Brazil

“To be the worldwide leader

in Beauty Plastic Packaging

and a major player

in Regulated Closures

and Pharma Devices.”

Clear and consistent strategy

$m 200

1996

$m 660

2003

4


• 6 businesses

• Global and decentralised

• 20 plants

• 8,500 talents

Today we are ...

Beauty* Pharma

>14% market share

>5% market share

N°3 worldwide

among top five

worldwide

* Segments of Beauty Plastic Packaging that Rexam operates in

Best profitability among our peers:

double digit ROS

5

Beauty market Pharma market

$100 bn

$410 bn

$14 BN

$13 BN

$7 BN

Our environment

Average annual growth: 3 to 8% p.a.*

$39 BN

$30 BN

$22 BN

* Depending on sub-segments

6


Worldwide

growth rates

2004

10%

9%

8%

7%

6%

5%

4%

3%

2%

1%

0%

3% to

5%

2% to

3%

8% to

10%

4% to

6%

Cosmetic Perfume Samplers Personal

care

Our market trends

3% to

7%

Pharma

7

Our market characteristics

• New product launches = 20% of revenue

• Globalisation

• Interdependence

• Highly fragmented competition

Complex &

fast moving market

8


Our key customers

9

BEAUTY

10


North

America

30%

Latin

America

7%

World Beauty market 2003

Distribution of spending in a market worth US$100 bn

Europe

32%

2003 Estimate – Colour Cosmetics / Fragrance / Skin Care / Suncare

Asia

25%

Africa, Middle East,

Asia Oceania

6%

11

Our key products

12


Dispensing Systems

• Consolidation well started

• 4 key players

• Aptar, Rexam, Calmar, Coster

Cosmetic Closures

• Fragmented market

• Entry Barriers with

state-of-the art expertise

Personal Care

(deo & shampoo bottles)

• Consolidation by

continents achieved

Our markets at a glance

Samplers

(fragrance & lotion)

• Heavy consolidation

• Big leaders by technology:

Schotte, Wheaton : Vials

Cebal : Tubes

Rexam : Spray samplers

Make-Up

(lipsticks, mascaras, compacts)

• Very fragmented, no consolidation started

• Low-cost countries interfering more & more

• Asia: 2 new-comers with Western expertise

• 3 key players (market share < 35%):

Alcan, Crown, Rexam

13

Beauty market

The Beauty market enjoys sustained growth

• Need for well being

• Search for ever-lasting youth

• Ethnic products for new customers

But, search for « value for money »

The packaging industry enhances these needs

• More technical applications

• Need for new features

• Market differentiation

Market opportunities for companies that have

innovation capabilities and global operations

14


Our businesses: summary & opportunities

A market which has very complex trends …

• wide range of market segments

• wide spectrum of end-user reaction

• acceleration of obsolescence process

• multiplication of distribution channels

But an attractive market…

• 4% to 7% of average growth in 2004

• same trend expected for following years

… for which Rexam has outsanding assets

• Wide product portfolio

• Modern R&D centres

• Worldwide coverage

• Operational excellence

15

PHARMA

16


Distribution of spending in a market worth US$410 bn (ex-factory price)

Source: Rexam Pharma

North

America

51%

World Pharmaceutical Market 2003

Latin

America

4%

Europe

25%

Africa

Middle East

Asia

Oceania

8%

Japan

12%

Pharmaceutical primary packaging market = US$8 bn

17

1O.4%

7%

5%

4.6%

4.5%

Worldwide market shares of pharmaceutical companies

A fragmented market

4.1%

3.6%

3.6%

3.1%

2.9%

Top ten = 50%

18


Pharmaceuticals

The Pharma market enjoys sustained growth

• Need for improved health conditions

• Increased ageing population

But pressure on costs mainly for basic treatments

The packaging industry enhances these needs

• More technical applications

• Need for improved production environment

• Market differentiation

Market opportunities for companies that have innovation

capabilities and global operations

19

2 businesses

6 plants

Pharma

Rexam Pharma

Rexam Pharma

Regulated Closures

20


5 markets

UNIQUE products

Pharma business

Pumps

Valves

Eye droppers

Pill jars

Medical devices

Added value products

Strong R&D

Strong pharma

environment

To better serve our demanding but loyal

customers

21

2 key markets

UNIQUE offer

US operations

Regulated Closures Business

Healthcare & neutritionals

Child-resistant closures

Child-resistant closures

Standard range

Customised finishing

Best in class

Clean environment

A regional business but with the most demanding

worldwide market

22


S Q U E E Z A B L E

Dispensing systems

23

MDPI: Inhalation device

Medical devices

N°4 in Europe, 15% of sales 2003

24


Mirena: “pill” inserter for contraception

Drug implanter for cancer treatment

Lens implanter for cataract surgery

Medical devices

N°4 in Europe, 15% of sales 2003

25

A revolutionary approach

From a packaging company

to a packaging solutions company

26


Teeth whitening: new solution

Refillable & hygienic

27

& E V E N B E A U T I F U L !


Just a compact ?

29

• Innovation

• Technology

• Marketing expertise

• Alliances with wipes formulators

• Capability to fill

• Delivery of a finished product

to the customer

Not just a compact

30


A new and valuable solution

+

31

• What is happening globally & locally

• Peter Pan-ism: Baby boomers refuse to grow-up

• Post-Nuclear Family: Same sex or single parents shop too

• Pills-R-Us: Consumer propensity to take pills will grow

• Utilitarian chic: Think « up scale », embrace « down scale »

• Instant obsolescence: 18 months today, 6 months within a decade

• Opposites attract: Strategic alliances create new channels with less risk

• Death of demographics: Think « mass-personalization »

Market dynamics

32


$10 million

revenue

And also … think out of the cosmetics bag

33

Our future looks strong

• Sustained organic sales growth: +6% p.a.

• External growth

In chosen segments

- Dispensing systems for household, food ….

- Regulated closures for chemical, personal care, etc.

- Pharma devices and added value systems

- Niche make up products

In emerging countries

China, Thailand, Korea, India, Russia, Poland,

emerging Eastern European countries...

34


A beautiful and exciting story

. . . to share with our stakeholders:

employees, customers, shareholders

35

It’s now time to speed up the

widening the circle:

from product...

to customer...

to end user

Not only the 5th packaging group in

the world, but also:

“The packaging solutions company”

36


1

Beauty in South America


Fábio Salik

Head of Beauty Brazil

R$ bn

12

10

8

6

4

2

0

CAGR 13% p.a.

Brazilian beauty market

1998 1999 2000 2001 2002 2003

Net sales of cosmetics, toiletries and fragrance based on ex-factory prices

4


18%

16%

14%

12%

10%

8%

6%

4%

2%

0%

-2%

1998 1999 2000 2001 2002 2003

CT&F Market growth Brazilian GDP growth

Growth in the beauty market

• Growth rate

exceeds that of

GDP

• Growth of beauty

market

accelerating

5

Annual sales

US$ 700m

Products and customers

6


Annual sales

US$ 800m

Products and customers

7

Annual sales

US$ 700m

Products and customers

8


New Factory (2004)

Old Factory (1999-2004)

9

Rexam Beauty sales in Brazil

1999 2000 2001 2002 2003 2004

(in R$)

CAGR 66% p.a.

10


Rexam Beauty operating profit in Brazil

CAGR 74% p.a.

1999 2000 2001 2002 2003 2004

(in R$)

11

• High precision

moulding (lipstick

mechanism)

• High speed

moulding

(4 sec/cycle)

• PETG, Surlyn, ABS,

PP, PE, SAN, PS,

POM, etc

World class moulding facilities

12


• Clear (hard)

coating

• Metallic coating

• Metameric coating

• 2 spraying booths

• UV curing

World class UV lacquering

13

• Ultrasonic welding

• Hot melt

• High speed

assembly

• Hot stamping

• Heat transfer

• Silk screen (end

2004)

World class assembly and decoration

14


• 2 vacuum chambers

• UV metallisation

– Starting in Q105

Metallisation adds further value

15

Number of lines

/equipment

Moulding

UV

lacquering

Metallisation

Production

area (000m 2 )

Developing resources to meet market demand

1999

5

1

0

2,3

2000

6

1

0

2,3

2001

8

1

0

2,3

2002

10

1

0

2,3

2003

14

1

0

4,0

2004

22

2

2

10,0

2005

30

3

2

15,0

2006

36

3

2

15,0

16


Make Up

Closures

Dispensing

1999

2000

Improving our product range

2001

2002

2003

2004

2005

17

• Growth in Dispensing and

Closures

• Export to Mexico and

other Latin American

countries

• Further export to USA

• Increasing Lean

Enterprise initiatives

Closures

30%

Dispensing

33%

Dispensing

4%

Closures

22%

Make up

66%

Make up

45%

Future

2004

2005

18

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