Reckitt Benckiser launches restructuring plan and cuts forecast as sales remain weak

Courtney Goldsmith
Follow Courtney
Sperm men who work for British condom ma
Reckitt Benckiser is shaking up its business structure (Source: Getty)

Reckitt Benckiser (RB) has reduced its full-year sales outlook as it unveiled a plan to restructure its business into two units to help fuel growth in a challenging market.

In a trading update for the third quarter, the consumer goods company said its net revenue fell one per cent to £3.2bn in the three months to the end of September compared with the previous year due to "known issues" and a continued tough market environment.

RB is now expecting sales to be flat in the full year, down from a previous target of two per cent growth.

Shares in the company edged 1.45 per cent lower to 6,933p at the market open.

Total continuing revenue growth was up 30 per cent thanks to the £13bn acquisition of US baby formula maker Mead Johnson and a positive impact from currency movements.

RB, which is behind household names like Durex, Nurofen and Dettol, said it would implement a new operating structure from the first quarter of 2018

"We have made great progress over the last five years, as we have transformed our group into one where consumer health now represents more than half of our business," said Rakesh Kapoor, chief executive of RB.

MJN [Mead Johnson] provides us with both critical mass in consumer health and a fantastic opportunity to look at RB not just today, but where we want it to be in ten years time.

Kapoor said RB would split into RB health, incorporating Mead Johnson, and RB hygiene home next year. Kapoor will lead the new health business directly while Rob De Groot, currently head of Europe and North America, will become president of the hygiene home business.

RB has struggled with weak sales in recent months. In June, the firm was one of the victims of the Petya ransomware attack which hit the company's ability to make and ship products to some markets, and shares have fallen around 12 per cent since July.

Investors perk up over possible hygiene sale

Charlie Huggins, manager of two Hargreaves Lansdown funds that hold shares in RB, said even after one-off events like the cyber attack, there was underlying weakness in RB's core markets, and volume growth was clearly weaker than hoped.

Huggins added RB's plan to split into two units raised questions in the market about whether the next step will be a full sale or demerger of the home and hygiene arm.

He said:

That could free up resources to bulk up further in consumer health and given RB’s track record in creating value through deal making, investors look to be giving the group the green light to proceed.

Going forwards, RB has the benefits of integrating MJN into its health portfolio, whilst restructuring itself to raise the focus on its faster growing, most valuable businesses.

Near term trading might be tougher than expected, but there is still plenty left to keep investors interested, given the structural changes afoot at the group.

Read more: Bang! And the board is gone: Reckitt Benckiser shakes up top team

Related articles