Reckitt Benckiser cuts full year guidance, makes further pharma provision
After bearing the brunt of a "soft" third quarter Reckitt Benckiser has downgraded its full year guidance, with the Vanish-to-Durex maker confident that it can overcome the continued challenging market.
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The FTSE 100 group also made a further £318m charge to its accounts in June as a consequence of discussions with US authorities and related litigation proceedings over its former pharmaceuticals division, which was spun off as Indivior in late 2014, while stressing that the final cost for the group "may be materially higher than this reserve".
For the continuing businesses, group like-for-like net revenue fell 1% in the quarter, with Europe and North America down 3% year-on-year to £1.7bn while developing markets provided growth of 3% to £793m.
The acquisition of Mead Johnson, which completed in June, added a new Infant Formula and Child Nutrition segment that contributed £720m of net revenue.
The major Health and much smaller Home product categories were down 2% and 4%, with 1% growth from Hygiene area.
So for the year to date, group net revenues were down 1% at £8.2bn.
For the full year chief executive Rakesh Kapoor said the base RB business is now expected to be "flat", cut from his previous guidance of +2%, but he kept his guidance for Mead Johnson was kept at "-2% to flat" as the business was "progressing well".
"Q3 was a soft quarter as we experienced both the tail end of known issues, and the impact of a continuing challenging market environment," he said.
He said the underlying performance was "in line with current market growth of around 2%", helped by Mead Johnson having a better quarter, in particular in Greater China.
From the first quarter of next year, the group will be divided into two "focused, agile and fully accountable" business units: RB Health, incorporating Mead Johnson and led by Kapoor, and RB Hygiene Home, led by Europe and North America chief Rob De Groot.
"I am very excited about our medium and long-term prospects," said Kapoor.
"We expect strong growth trends in the broader consumer health category in the medium term, and our new organisational structure will provide us with a platform for growth and outperformance."
Since the period end, the group has expanded its compensation plan and made a payment of around £45m to the South Korean government's special relief fund set up to help victims of RB's faulty Humidifier Sanitiser.
RB shares were down 1.1% to 6,957p in early trading on Wednesday morning, meaning they have fallen around 14% since June.