Jason Butler of NW Brown: Reckitt Benckiser revival begins to bear fruit with encouraging first-half figures
PUBLISHED: 11:03 31 July 2018 | UPDATED: 11:24 31 July 2018
Reckitt Benckiser reported better-than-expected figures last week, helped by good performance in its consumer healthcare division.
Profits for the first half of 2018 rose by 9% compared to the first half of 2017. Revenue growth is estimated to be 14-15% this year, up from previous guidance of 13-14%.
A major contributor was strong sales of infant nutrition products in China after the company expanded into baby formula last year with a $16.6bn takeover of Mead Johnson. The acquisition increased sales by double digits in China as the country experienced high birth rates following the end of its one-child policy in 2016. Growth is expected to normalise as birth rates in China stabilise.
The group restructured into two standalone lines of business earlier this year: one focusing on Reckitt’s better-performing consumer healthcare brands and the other on household consumer goods such as detergents and cleaning products.
In consumer goods, prices are being pushed down by Amazon’s rise, a decline in brand loyalty as consumers shop around online, and the growing popularity of discount retailers. Reckitt has joined rivals in warning that this competitive retail marketplace is affecting profitability.
Broadly, the interim update brings a breath of fresh air to the group after a series of tough quarters that included a cyber-attack and a failed product launch in the Scholl foot-care line.
Reckitt now looks to be recovering its poise as Mead Johnson synergies start to materialise and earnings growth starts to improve. Chief executive Rakesh Kapoor believes the company is well on track.
• Jason Butler of NW Brown is a columnist for EDP Business.