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Reckitt Benckiser sales hurt by sluggish markets

Published 21/10/2014, 11:18
© Reuters Products produced by Reckitt Benckiser; Harpic, Vanish, Dettol and Finish, are seen in London
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By Martinne Geller

LONDON (Reuters) - Sales growth at consumer goods maker Reckitt Benckiser (L:RB) slowed more sharply than expected in the third quarter, hit by sluggish Western economies and cooling emerging markets.

The maker of Mucinex cold remedies, Durex condoms and Dettol cleaners said on Tuesday it now expected full-year revenue growth at the low end of its 4 to 5 percent target range, although profit margins were still forecast to rise.

"Growth has not yet returned to developed markets and emerging markets in aggregate are weaker," Chief Executive Rakesh Kapoor said, citing places such as Thailand, Indonesia, India and Brazil, where sales of home and personal care products were sidelined as retailers focussed on selling beer and soft drinks for this summer's football World Cup.

"We were hoping it would bounce back in the third quarter, but we haven't seen that," Kapoor said about Brazil. "I don't know if I can say today that it will correct any time soon."

Excluding Reckitt's pharmaceuticals business, which it expects to spin off by the end of the year, Reckitt said like-for-like sales rose 3 percent. That was down from 4 percent in the second quarter and below analysts' average estimate of 3.7 percent, according to a consensus compiled by the company.

Swiss food group Nestle (VX:NESN) also toned down expectations for full-year sales after slower third-quarter growth, although France's Danone (PA:DANO) said improving baby food revenues in Asia helped it deliver better-than-expected sales for the period.

Reckitt's closest European rival, Unilever (L:ULVR), reports quarterly figures on Thursday.

"The third quarter testifies to the decelerating world," Jefferies analyst Martin Deboo said of Reckitt's performance.

At 0945 GMT (10.45 a.m. BST), Reckitt shares were down 1.6 percent at 5,030 pence, lagging a European blue-chip index up 1.2 percent (FTEU3).

SLOWDOWN ALL AROUND

In Europe and North America, which together account for 57 percent of revenue, Reckitt's like-for-like sales rose 1 percent. It said there had been a slowdown in sales of its Mucinex cold remedy after a long, strong flu season last year.

The company also said that, so far, U.S. retailers were stocking up more cautiously ahead of this year's flu season.

Weak Mucinex sales hurt Reckitt's health division, which has been boosted by recent acquisitions. The division saw like-for-like sales rise 6 percent in the quarter, down from a 10 percent rise in the first half.

The company's pharmaceuticals division saw sales fall 9 percent, worse than the 7.5 percent decline analysts expected.

The company said in July it expected to spin the business off in the next 12 months as sales of its main product, a heroin addiction treatment called Suboxone, slide under pressure from cheaper generic versions. It said on Tuesday the spin off would be completed this year.

Due to uncertainty over the long-term impact of such competition, analysts' valuations for the business range from about 2 billion pounds to 5.5 billion pounds. Bernstein's Andrew Wood said the latest disappointing sales required a reassessment of the value.

© Reuters. Products produced by Reckitt Benckiser; Harpic, Vanish, Dettol and Finish, are seen in London

When asked whether the company was open to selling or spinning off other brands not central to its core focus of "health, home and hygiene," namely French's Mustard and Frank's Red Hot Sauce, company executives said they were always looking at the best way to maximize value, but did not say whether any such moves were on the cards.

(Editing by David Clarke and Mark Potter)

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