Tag Archives: Reckitt Benckiser

Stocks in Focus: Reckitt Benckiser

This week I am looking at Reckitt Benckiser, a British multinational consumer goods company.  The company, known for brands such as Dettol, Nurofen and Durex, released its first quarter trading update on 20th April, quoting a 2 per cent like-for-like sales growth against the same period last year. Whilst the results appeared reasonable, they narrowly missed analyst expectations and the share price fell on the back of this.

Management has been enthusiastically engaging in M&A activity in an attempt to promote growth in the current economic environment. The purchase in February 2017 of Mead Johnson, an international baby formula manufacturer, continues to integrate well. There have been reported cost-saving synergies of $25m so far and an expectation of $300m over the next three years. Following the acquisition, 50% of group revenue now comes from higher margin consumer healthcare brands. In an attempt to streamline the business the company also restructured itself into two separate divisions in January: health and home hygiene. With health clearly the growth driver of the business, management are now reviewing the lower margin home hygiene division.

Furthermore, following a strategic review of its food businesses, Reckitt Benckiser finalised a deal in the summer to sell its “French’s Food” brands to McCormick & Company Inc. The deal was completed for a cash sum of $4.2 billion and received well by investors. The company stated the cash would be used to reduce debt from the aforementioned Mead Johnson acquisition and continue to consolidate the business into more defined divisions.

Despite the recent setbacks, management remain confident that the steps taken to focus the business will continue to drive long term growth.  With its portfolio of power brands enabling the company to enjoy comparably high operating margins, it will be important to see whether this can be maintained under growing pressures from global competitors.



Stocks in Focus: Reckitt Benckiser

This week I’m looking at Reckitt Benckiser, the consumer goods company known for its health, hygiene and home products, following its full year results last week.  The results were disappointing after a turbulent 2017 with the company reporting flat net revenue growth and a decline in profit margins.

The results did not come as a surprise to investors as the company suffered a series of “one-off” problems during the first 3 quarters of 2017. Reckitt was one of several multinational companies to be affected by the global cyber attack in June last year, which disrupted its ability to manufacture and distribute products to customers in multiple markets.  The company has also struggled with the failed product launch of a new Scholl pedicure product, ongoing fallout from a South Korean safety scandal, and volatility in India due to the implementation of goods and services tax.

Despite the poor performance, Chief Executive Rakesh Kapoor is determined that the business can recover, and this was shown in Q4, reporting 2% net revenue growth. The recent acquisition of Mead Johnson, the global baby formula company, has contributed to Reckitt becoming a major player in the consumer healthcare segment, and as a result Kapoor has made the decision split the company into two units – one focused on healthcare and the other on home and hygiene products.  However, the new organisation structure is likely to be costly and the company has declined to give a margin target for 2018, admitting that it will be affected by the reorganisation.

Kapoor remains confident that the company can make a comeback after a difficult year, and strong performance of previous years stands him in good stead. However, only time will tell if the reorganisation within the company has come at the right time and if management are more prepared for any future issues that may occur.


Stocks in Focus: Reckitt Benckiser

This week I am revisiting Reckitt Benckiser, the global consumer goods company. In November of last year I mentioned how the company had a good start to 2016, supported by a successful cost savings programme and sales figures beating expectations. This year however, things have turned a little sour for the company with the news of a cyberattack taking its toll on operations and revenue.

The global cyberattack on multinational companies last month disrupted Reckitt’s ability to manufacture and distribute products to customers in multiple markets. Some of its factories are currently still not functioning normally but plans are in place to return them to full operation. Management stated that while it expects some of the sales lost in the past 3 months to be recouped in the current quarter, continuing supply chain disruptions mean that they could lose customers. As a result of these problems, Reckitt now forecasts a 2% revenue growth instead of the 3% originally expected.

Acquisition speculation is also in the news for Reckitt Benckiser as Unilever and Hormel Foods are believed to be bidding to acquire its £2.2 billion food division known for brands such as French’s Mustard and Worcestershire sauce. All three companies involved have not commented about the speculation, but we will surely find out more in the coming weeks.

Although Reckitt Benckiser is facing a tough period at a time when its shares are valued relatively highly, the company has historically shown resilience in difficult periods and consistent growth over the long run. Furthermore, its non-cyclical nature continues to be attractive to the long term investor.


Stocks in Focus: Reckitt Benckiser

Reckitt Benckiser (RB) has been in the spotlight this week following the company’s announcement that it will be spinning off its pharmaceutical division, which once accounted for a fifth of the group’s earnings. The fate of RB Pharma has been the subject of lengthy speculation as it sits at odds with the rest of the group’s focus on cleaning and hygiene goods. The division derives almost all of its £780m million of revenue from Suboxone, a market leader in drugs to treat addiction to opioids, including heroin. However, it has become the group’s problem child of late as patents on the drug have expired and cheaper generic rivals are entering the market. Indeed, CEO Rakesh Kapoor had already made it clear that addiction treatment is not “a space they want to be in” following the reclassification of RB Pharma as a non-core division of the group.

The demerger is expected to complete on December 23 and the new company, named Indivior, is estimated to be worth around £2.7bn. Its strategy will be to push through the development of new products (the likes of an injectable Suboxone, a nasal spray to treat opioid overdoses, and drugs for alcohol, cocaine and cannabis addiction are in the pipeline) and to expand beyond the United States, which currently accounts for 80% of revenue.

Ultimately, the aim of demerger appears twofold; to create a cleaner investment case for RB’s remaining consumer goods business, and to help attract a buyer for the standalone Indivior.