Reckitt Benckiser Shares Slide on Disappointing Q4 Sales

The consumer goods stock behind Dettol and Nurofen fell almost 10% as Reckitt missed forecasts

Alliance News 28 February, 2024 | 12:28PM
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Shares in Reckitt Benckiser (RKT) on Wednesday tumbled after it reported a surprise fall in sales in what the CEO called an "unsatisfactory" fourth quarter.

The stock price slumped 9.8% to £52.67 in London on Wednesday morning.

The consumer goods and hygiene products maker which owns brands such as painkiller Nurofen and disinfectant Dettol said like-for-like sales in the three months to December 31 fell 1.2%, compared to growth of 5.6% in the same quarter a year ago. This was below the market consensus, which had expected growth of 1.8%.

Revenue in the period declined 7.0% to £3.56 billion from £3.83 billion a year ago. For 2023 as a whole, revenue edged up by 1.1% to £14.61 billion from £14.45 billion. This reflected like-for-like sales growth of 3.5% compared to 2022.

Pretax profit fell 25% to £2.40 billion from £3.01 billion and diluted earnings per share from continuing operations slid to 227.4p from 325.7p in 2022.

For the full year, growth was broad-based, and hygiene and health categories grew at 5.1% combined. Nutrition sales declined by 4.0%.

Reckitt revealed that the strong performance in the first three quarters was partially offset by a weaker fourth quarter, where price increases of 3.1% were offset by volumes declines of 4.3%.

Hygiene sales grew 5.3% but health volumes declined by 2.2% and nutrition volumes slipped 14.3%, due to the rebasing of its US business, and category-led volume declines in developing markets. Sales in its hygiene global business unit grew 5.2%, led by Lysol and Finish.

Reckitt's Middle East Market - Spend Was Higher

Reckitt also disclosed an understatement of trade spend in two Middle Eastern markets related to the fourth quarter and prior quarters of 2023. As a result, full year net revenue performance was £55 million lower than previously expected with an adjusted operating profit impact of £35 million.

The company is however confident this was "an isolated incident" specific to these two markets and does not impact 2024 outlook and medium-term goals.

Looking ahead, Reckitt Benckiser’s CEO Kris Licht says: "While our performance in Q4 was unsatisfactory, we look to 2024 and beyond with confidence.

"We target another year of mid-single-digit growth in health and hygiene, driven by a more balanced contribution from price, mix and volume. We expect nutrition to return to growth late in the year."

Reckitt predicted like-for-like net revenue growth of 2% to 4% for the group, with mid-single-digit growth for the health and hygiene portfolios.

It expects a mid-to high-single-digit decline for the nutrition business. It forecast adjusted operating profit to grow ahead of net revenue growth. Reckitt said revenue and profit growth will be second-half weighted.

Licht also pledges increased cash returns to shareholders, "aiming to double what we returned in 2019".

Reckitt paid a final dividend of 115.9p per share, rising from 110.3p last year, making the total payout 192.5p, 5.0% higher than 2022's 183.3p payment.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
Reckitt Benckiser Group PLC4,167.00 GBX0.68Rating

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