Reckitt sales boost to shares
Shares in Reckitt Benckiser rose after the consumer goods group posted higher-than-expected sales growth, helped by improvements in both its health and home and hygiene businesses.
Reckitt, once seen as a pacemaker for growth in the packaged goods industry, has experienced setbacks in the last three years, including a safety scandal in South Korea, a failed product launch, a cyber attack and the temporary shutdown of a baby milk factory in the Netherlands.
But the Durex-to-Gaviscon firm ended 2018 on a more positive note, achieving a 4% rise in like-for-like sales in the fourth quarter, topping analysts’ average age estimate of 3.3%.
The stronger sales overshadowed a forecast for flat operating margins in 2019, which was anyway better than some investors had feared.
Asked about Reckitt’s medium-term target for “moderate” margin growth, outgoing chief executive Rakesh Kapoor told reporters that having a medium-term target did not mean it was valid for every financial year.
Reckitt shares rose almost 5% but are still well below their level of October amid concerns about its performance and a potential pull-back of margins under whoever takes over from Mr Kapoor when he departs later this year.
“Whoever ends up taking the reins from Rakesh Kapoor will of course still have their work cut out,” said analyst Fiona Cincotta at City Index, noting Reckitt faces a far more competitive environment as rivals GlaxoSmithKline and Pfizer are merging their consumer healthcare units.
Reckitt forecast 2019 like-for-like growth of between 3% and 4%, compared with 3% in 2018 and analysts’ estimate of 3.5%.
The group plans to invest cost and efficiency savings into areas such as branding and new products.
It said it was on track to complete a new organisational structure by mid-2020, under which it will operate as two standalone units, one focused on health and the other on home and hygiene, but under the same parent company.
“I can assure you, if this was a tradable company, it would be the best performing company in the next 25 years,” Mr Kapoor said about the hygiene-home unit, citing opportunities to sell dishwashing tablets in new markets as an example.
Reuters
