Reckitt Benckiser profits slump on sales slowdown and Middle East accounting issue
By Louis Goss
Reckitt's underwhelming results follow a dip in European stock markets on Wednesday
Lysol seller Reckitt Benckiser Group on Wednesday posted a sharp drop in its profits for the full-year 2023, as higher prices failed to offset lower sales, in a "grim" set of results that put the company on course for its sharpest share price drop in years.
The Durex owner said lower sales of cold and flu medicines and its decision to recall batches of its Nutramigen baby formula saw its operating profits drop 22.1% to GBP2.53 billion ($3.2 billion) and company CEO Kris Licht called Reckitt's performance "unsatisfactory."
The Clearasil seller also recorded a GBP55 million hit to its revenues due to an accounting anomaly relating to results posted by its Middle East segment, which raised investors fears about wider problems in the firm, despite Reckitt's insistence the problems were an "isolated incident."
Shares in Reckitt Benckiser (UK:RKT) fell 10% on Wednesday with stock in the Slough headquartered company having previously advanced by 8% in 2024 so far.
The consumer goods company, which was formed through a merger between British company Reckitt & Colman and Dutch company Benckiser in 1999, sold 4.3% fewer goods throughout 2023 with sales volume falling across all business segments.
Reckitt's lower sales volume followed its push to raise its prices by 7.8% throughout 2023, though the increases failed to successfully bolster its revenues, as customers instead simply bought fewer of the company's products.
All segments of Reckitt's business fell short of analysts' revenue growth forecasts, as it reported a 0.3% drop in volume sales from its health segment, a 6% drop in volume sales of its hygiene products and a 10% fall in sales from its nutrition segment.
The Strepsil seller said it now expects its net revenue growth to hit 2-4% in 2024, rates that are lower than its 3-5% medium term targets, as it said it expects a "mid-to-high single digit decline" in sales from its nutrition segment.
RBC analysts led by James Jones described Reckitt's results as "grim rather than just poor" as they said their "expectations were subdued and Reckitt has undershot them."
Reckitt's underwhelming results followed a dip in European stock markets on Wednesday driven by a 9% drop in shares in payments processor Worldline and a 4% drop in shares in U.K. housebuilder Taylor Wimpey.
Shares in Worldline (UK:0QVI) fell sharply on Wednesday after the company forecast a slowdown in its revenue caused by a slump in consumer spending, as it vowed to cut its costs to boost its profitability.
Taylor Wimpey (UK:TW) saw its operating profits fall 49% over 2023, as it sold 24% fewer homes, with higher interest rates hindering demand by pushing up the costs of U.K. mortgages.
The poor results follow a report from the U.K.'s Competition and Markets Authority that raised concerns about possible collusion between Britain's top house builders including Taylor Wimpey.
-Louis Goss
This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
02-28-24 0450ET
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