EXTRA: Reckitt Benckiser To Restructure After Another Sales Warning

LONDON (Alliance News) - Reckitt Benckiser Group PLC on Wednesday issued a second sales warning ...

Alliance News 18 October, 2017 | 1:15PM
Email Form

LONDON (Alliance News) - Reckitt Benckiser Group PLC on Wednesday issued a second sales warning and said that it will restructure its business into two separate divisions - health and hygiene - following its USD16.6 billion deal to acquire US baby foods maker Mead Johnson Nutrition.

The consumer goods giant will create a new operating structure and split its business in the first quarter of next year.

The health division, RB Health, will be managed by the company's current Chief Executive Rakesh Kapoor, who will retain the group CEO role. The division will represent 60% of annual revenue and will includes brands like Strepsils sore throat lozenges, Dettol antiseptic liquid, Nurofen pain relief tablets, and Durex condoms.

RB Hygiene Home will headed by the company's current Europe and North America Executive Vice President Rob de Groot. It will represent the remaining 40% of group annual revenue and comprise of Air Wick air freshener and stain removal brands like Vanish and Cillit Bang.

Shares in the FTSE100 listed company were trading down 2.0% at 6,891.00 pence, the worst performer in the blue-chip index.

The restructuring move came as the company revealed a 1% drop in comparable sales for its third quarter to September-end. The drop was blamed on a cyber-attack in June, failure of the company's new Scholl pedicure product, a health and safety scandal in South Korea and implementation of new tax laws in India.

The company's health division recorded a 2% drop in like-for-like revenue, and its home division posted 4% drop. Comparable sales at the hygiene division grew 1% and portfolio brands, which include laundry detergent and fabric softeners, logged in 8% growth.

Total revenue for the three months jumped 30% to GBP3.21 billion on the back of the Mead Johnson acquisition and positive currency movements.

Reckitt Benckiser now expects flat like-for-like sales growth for 2017. It previously was anticipating 2% growth in comparable sales, which was downgraded from 3% on the back of a cyber attack. In June, the company revealed a cyber-attack on its operations which resulted in disruptions to manufacturing and distribution of products.

"[The third quarter] was a soft quarter as we experienced both the tail-end of known issues, and the impact of a continuing challenging market environment. Our underlying performance was in line with current market growth of around 2%. MJN had a better quarter, in particular in Greater China. Given these moving parts, we are now targeting flat full year like for like net revenue for the RB base business. MJN is progressing well against our reiterated second half target of minus 2% to flat," said Chief Executive Rakesh Kapoor.

"We expect strong growth trends in the broader consumer health category in the medium term, and our new organizational structure will provide us with a platform for growth and outperformance," Kapoor said.

Reckitt said it remains on track on delivering the GBP200 million fixed cost synergies in respect of Mead Johnson and the GBP450 million integration costs. It, however, expects its new business structure to lead to higher fixed costs.

The company intends to provide further details of its restructuring in its full-year results, slated for February next year.

By Tapan Panchal; tapanpanchal@alliancenews.com

Copyright 2017 Alliance News Limited. All Rights Reserved.

Email Form
Securities Mentioned in Article
Security Name Price Change (%) Morningstar Rating
Reckitt Benckiser Group PLC 6,547.00 GBX 0.32
About Author Alliance News

Alliance News provides Morningstar with continuously updating coverage of news affecting listed companies.