Shares in packaging group Rexam fell after it flagged a £10m restructuring hit and warned of flat second half profits for plastic packaging versus the first six months.

The world's top drinks can maker says in an update that the majority of its plastic packaging operations continue to trade in line with our expectations. However, customer product launches that had been anticipated by the make-up business at the August half-year results stage have not materialised.

The business specialises in the supply of casings for beauty products, including lipsticks and mascara.

As a result of make-up's woes, the group now expects flat profits for plastic packaging in the second half versus the first half. It assured, however, that this will not have a material effect on group profits for the year as whole.

The group has launched cost cutting initiatives for its make-up operation, largely in South East Asia, and warned this will result in a restructuring charge for the current year of approximately £10m.

Ahead of today's statement, analysts on a consensus basis were anticipating 2006 pretax profits of £324m, giving earnings earnings per share of 41.4p, and a total payout of 19p.

In August, Rexam reported a 2.8% fall in underlying pretax profit to £137m, in line with expectations, as it counted the cost of higher aluminium and energy prices.

Rexam shares suffered a very sharp fall during May's global equity pullack but subsequently mounted a strong recovery. Over calendar 2006 they have risen 13% to yesterday's close of 577.5p.

Today's disappointing statement however led to Rexham Plc being out of favour as they fell 4.5% or 26p to 551 by early afternoon. That implies a forward PER of 13.3 and a prospective yield of 3.4%.

Source