Reckitt Shareholders Should Prepare for Slower Growth

Pricing power was again evident in Reckitt Benckiser's consumer health segment in the full year results, but Reckitt's outstanding organic growth rate will slow in the future

Philip Gorham 16 February, 2016 | 8:42AM
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Reckitt Benckiser's (RB.) full-year results were almost exactly in line with our above-consensus forecasts, and guidance for 2016 is consistent with our existing forecasts. Therefore, we are unlikely to make material changes to our £59 fair value estimate beyond the impact of the time value of money. Pricing power was again evident in the consumer health segment; this is one of the key sources of our retained narrow moat rating. Nevertheless, we reiterate our thesis that some of the drivers of Reckitt's short-term organic growth rate may be unsustainable in the medium term.

Several consumer product manufacturers have highlighted the rebound in Southern Europe over the past six months

Organic fourth-quarter net sales increased by 7%, significantly more than the 4%-5% growth that larger, more-diversified competitors are achieving. Developing markets, up 12% on a like-for-like basis in the fourth quarter and up 9% in the full year, and consumer health, up 14% in both the fourth quarter and full year, remain the drivers of consolidated sales growth. Several consumer product manufacturers have highlighted the rebound in Southern Europe over the past six months, but Reckitt's performance in Eastern Europe, where it delivered "strong growth", was particularly impressive.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Reckitt Benckiser Group PLC5,519.00 GBX-3.18Rating

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Philip Gorham  

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