Reckitt Benckiser Sales Miss Expectations, Profit Drops — Update

By Michael Susin

Reckitt Benckiser profit fell while sales missed market expectations after the consumer-goods company booked one-off impairments at its infant formula business.

Shares at 0923 GMT were down 8.6% to 5,334.0 pence, which would be their lowest closing price in 21 years.

The London-listed company--which houses Dettol, Harpic and Durex among its brands--on Wednesday reported pretax profit for 2023 of 2.40 billion pounds ($3.04 billion) compared with GBP3.07 billion a year earlier.

Adjusted operating profit--which strips out exceptional and other one-off items--slipped to GBP3.37 billion from GBP3.44 billion. Revenue rose to GBP14.61 billion from GBP14.45 billion, falling short of the GBP14.75 billion estimated by 15 brokers polled by FactSet.

Net revenue growth on a like-for-like basis was 3.5%, in line with the company's guidance range of 3% to 5%. The increase was driven by growth of 5.2% across its hygiene business, it said.

However, fourth-quarter net revenue declined by 2.0%, while volumes fell 2.2%. On a like-for-like basis, revenue slipped by 1.2%, dragged by a 15% fall in nutrition revenue due to the North America business lapping the prior year, when sales of infant formula were particularly strong amid a widespread shortage, as well as the recent recall of its Nutramigen formula.

For the year, the company booked an impairment of GBP810 million at its infant formula and child nutrition business, reflecting higher interest rates and tighter regulations in the U.S., which is expected to increase business and production costs.

"While our performance in the fourth quarter was unsatisfactory, we look to 2024 and beyond with confidence," Chief Executive Kris Licht said.

Meanwhile, the group said it had found an understatement of trade spending in two Middle Eastern markets, which unexpectedly dented net revenue by GBP55 million. "Following investigation, we concluded a small group of employees had acted inappropriately and we are taking necessary disciplinary action. We are confident this is an isolated incident specific to these two markets and does not impact our 2024 outlook and medium-term goals," it said.

For 2024, Reckitt expects mid-single-digit growth in its health and hygiene divisions, driven by a more balanced contribution from price, mix and volume. Nutrition is expected to return to growth late in the year.

"We will advance our fixed cost optimization program, and we will further increase cash returns to shareholders, aiming to double what we returned in 2019," it said.

The board declared an interim dividend of 192.5 pence a share, compared with 183.3 pence declared the previous year.

Write to Michael Susin at michael.susin@wsj.com

(END) Dow Jones Newswires

February 28, 2024 04:47 ET (09:47 GMT)

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