Shares fall in Durex and Gaviscon owner Reckitt Benckiser as it warns on challenging conditions

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The Durex brand continued with strong performance, Reckitt Benckiser reported (Source: Getty)

Reckitt Benckiser said economic conditions around the world are challenging as it reported a fall in European sales in the first quarter of 2017.

Shares fell 1.43 per cent at the open as like-for-like sales missed consensus estimates.

The figures

Like-for-like sales in North America were flat at £631m, while sales in Europe fell three per cent, totaling £1.04bn, it said today.

Sales in the business's health sector were flat, despite the strong performance of Durex condoms. Reckitt reported growth was offset by headwinds in its Scholl/Amopé brands. Other health products include Neurofen and Gaviscon.

Sales in hygiene, which includes brands like Dettol, rose three per cent, while the home range, including the Airwick brand, fell by four per cent.

However, revenues benefited strongly from a positive currency effect: total revenues rose 15 per cent, with European revenues rising nine per cent.

Why it's interesting

Reckitt Benckiser is at a crossroads, with the British conglomerate looking to pivot its portfolio towards consumer healthcare.

The FTSE 100-listed consumer goods giant has started a strategic review of its food business, with plans to sell off brands such as French's mustard and Frank's Red Hot sauce to fund its acquisition of baby milk maker Mead Johnson and reduce its debt pile.

Investors looked positively on that deal, which remains on track for the end of the third quarter, the company said, with shares rising after it was announced. However, flatter like-for-like performance in Reckitt's main markets has given investors pause for thought.

What Reckitt Benckiser said

Rakesh Kapoor, Reckitt Benckiser chief executive, said:

Our first-quarter results are in line with expectations as macro conditions remain challenging. Against this backdrop our underlying business remains strong.

We delivered continued outperformance in consumer health and good growth in DvM, offset by previously flagged headwinds, which will persist during the first half. I expect our growth trajectory to improve as we progress through the year and we remain on track to achieve our full year net revenue target of three per cent like-for-like growth.

He added:

The acquisition of Mead Johnson, to create a global leader in consumer health, is progressing well and we expect completion by the end of the third quarter. We have commenced a strategic review of our Food business as we continue our focus on portfolio optimisation. We remain very confident that the strategic direction we are pursuing will continue to drive shareholder value.

In short

Despite a big boost from the fall in the pound, Reckitt Benckiser's investors will be more interested in stalling sales growth in Europe and North America – although reports the Mead Johnson acquisition is on track will give some succour as it pursues the consumer sector more strongly.

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