LONDON (Aug. 18, 4 p.m. ET) — Packaging firm Rexam plc is making sizable investments in its Asian plastics business, building one new plant and enlarging another in India to meet demand in medical, at the same time as it downsizes a Shanghai cosmetics factory to tackle rising costs and a tougher business environment.
While sales and profits in its plastics business globally have been hit by rising resin prices, London-based Rexam said it plans to expand in India, building a plastics factory in western India to make generic drug-delivery devices for an unidentified Indian company and doubling the capacity of an existing healthcare packaging factory in Bangalore.
“We have a strong product pipeline for future growth in healthcare and we are investing to capture growth in India,” the company said in an Aug. 3 earnings announcement.
The company declined to provide additional details beyond earnings announcements. In 2006, it bought Bangalore pharmaceutical plastic container maker Truepack Ltd.
In contrast to the Indian investments, the firm said business conditions in China's cosmetics industry are getting more difficult, and said it would relocate an existing Shanghai packaging factory to a smaller facility and redesign the operation to use more automation.
Wages for Chinese factory workers are rising at more than 10 percent a year.
“In Shanghai, we're going to downsize our cosmetics business, move it to a smaller plant for two reasons,” said Rexam CEO Graham Chipchase. “It will allow us to focus on the high-end, high-value product lines in China. Not everything we do there today… is profitable, some of it is not.”
“It will [also] allow us to take out labor costs, which will be a key factor in improving the performance of that business,” Chipchase said, speaking in an Aug. 3 analyst briefing.
The company said 65 percent of its sales in the Chinese cosmetics market are now to domestic Chinese customers.
“We are also taking a series of medium-term actions to address the strategic challenges faced by our China-based business,” the company said. “Measures include the relocation, scaling down and substantial automation of our make-up business in China.”