press release

18 October 2017

Reckitt Benckiser announces business restructure following disappointing results

The owner of Nurofen delivers second disappointing trading update of the year Like for like sales fell by 1% despite an expected increase The Share Centre recommends Benckiser as a ‘buy’ for investors seeking long term growth

As Reckitt Benckiser reports its Q3 trading update, Helal Miah investment research analyst at The Share Centre, explains what it means for investors:

“This morning, Reckitt Benckiser, one of the world’s largest producers of household goods and cleaning products, delivered the second disappointing trading update this year. The like for like sales for the owner of brands including Nurofen, and for Q3 fell short of consensus expectations, falling by 1% instead of the expected 0.7% rise. The root cause of the disappointment seems to be similar to the group’s last update with the management describing tough market conditions in Q3 and the firm’s finely tuned supply network still has not fully overcome the cyber-attack it was victim to earlier in the year. Furthermore, it seems the lack of supply led its products to lose valuable shelving space with retailers in some countries.

“Although it saw sales in Europe and North America fall by 3% there were much better trading conditions experienced in its emerging market regions, where sales were up by 3%. Encouragingly, the group’s recent acquisition, Nutrition performed well especially in China. Notably, the good performance of its acquisitions resulted in an increase in group revenues of 30%.

“The disappointing performance has led to management deciding to restructure the business going forward. From Q1 2018 the company will be run as two separate entities, RB Health to be led by current CEO Rakesh Kapoor and RB Hygiene Home, to be led by Rob De Groot, currently head of Europe and North America. This has been partly forced upon them as its acquisition of Mead John led to effectively two management teams across many geographic regions. We understand the need to streamline management after a major acquisition but we question the merits of running the business as two separate entities and the cost associated with doing so.

“The forward guidance was also disappointing as management expect flat like for like sales growth in the current year. While the last two trading updates have been underwhelming, we continue with our ‘Buy’ recommendation due to the longer term growth potential, especially from the group’s increased penetration into the emerging markets where significant growth opportunities remain.”

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