LONDON (Alliance News) – Reckitt Benckiser Group PLC on Friday said it expects its growth trajectory to improve, and is on track to meet its revenue growth target for 2017, as it delivered a first quarter in line with expectations.
But, shares in Reckitt were trading down 1.9% at 7,138.00 pence on Friday, the worst performer in the FTSE 100, as like-for-like sales remained flat and it warned on persisting headwinds.
The consumer goods giant – which owns brands including Dettol, Airwick and Vanish – reported total revenue of GBP2.64 billion for the first quarter of 2017, up 15% at actual exchange rates. This included a 15% rise for its Health unit, 18% for the Hygiene unit, and 11% for the Home unit.
Reckitt’s portfolio brands, including its Food unit, delivered 7% revenue growth in the quarter.
On a like-for-like basis, which adjusts for acquisitions, disposals and is at constant currency, revenue was flat. This included 3% like-for-like growth in Hygiene, a flat performance in Health, but a 4% decline in Home and 6% decline from the portfolio brands including Food.
Within Health, cold & flu product Mucinex grew strongly, Reckitt said, due to a higher incidence of cold and flu and a good performance from the launch of its Cool & Clear Fast Max and Sinus Max ranges. Condom brand Durex, heartburn product Gaviscon, and sore throat tablets Strepsils also saw good growth.
Within Hygiene, growth was led by Dettol antibacterial cleaning products, Veet hair removal products, and Finish dishwasher tablets.
Within Home, air freshener Air Wick achieved growth outside of the US, but this was offset on a like-for-like basis by weakness in the US due to “challenging market conditions”, Reckitt said. Vanish stain remover grew in markets excluding Korea, but declined overall due to issues Reckitt is having in Korea.
Reckitt’s Korean business has been suffering since 2011 when it was discovered that its Humidifier Guard product contained ingredients linked to lung and respiratory injuries and deaths. Last year, the situation was worsened when a number of Korean supermarket chains stopped stocking Reckitt products in protest.
This also contributed to the like-for-like decline in the portfolio brands in the quarter.
Geographically, total revenue in Europe, North America and Australasia rose by 12%, while growing by 21% in the Middle East, Turkey, Africa, Asia and Latin America.
On a like-for-like basis, revenue in the former fell by 2% as revenue in the latter grew by 4%.
Reckitt said the weaker performance in Europe, North America and Australasia was due to a “significant” decline in foot care brand Amope in the US as well declines in Germany, Italy, Australia and New Zealand as they faced a strong comparative period which included the launch last year of the Wet & Dry Express pedi.
The company said it remains “on track” to achieve its full-year net revenue target of 3% like-for-like growth, adding that while the headwinds faced in the first quarter will persist throughout the first half, it expects its growth trajectory to improve as the year progresses.
“Our first-quarter results are in line with expectations as macro conditions remain challenging. Against this backdrop our underlying business remains strong,” said Chief Executive Officer Rakesh Kapoor in a statement.
“We remain very confident that the strategic direction we are pursuing will continue to drive shareholder value,” Kapoor added.
Elsewhere, the company said that its acquisition in the US of baby food maker Mead Johnson is progressing well, and it continues to expect this to be completed by the end of the third quarter.
Reckitt reiterated that it is exploring a range of options in its strategic review of its Food business, noting the business is “high-performance” but “nevertheless non-core”.
The group launched the review earlier this month, which excludes the possibility of selling the Food business, and which could help fund its USD18.00 billion takeover of Mead Johnson.
Reckitt’s Food business includes US mustard brand French’s and Frank’s Red Hot sauces.
Reckitt also noted that the Indian government is planning to implement a goods & services tax from the beginning of July, which it expects to result in a GBP40 million hit to net revenue in its full-year accounts.
It intends to adjust for this in its like-for-like net revenue reporting, and said the ongoing impact on profit is expected to be small, but noted the implementation of the tax is likely to cause “some short-term disruption” for the industry and its India business.
By Hana Stewart-Smith; firstname.lastname@example.org; @HanaSSAllNews and Karolina Kaminska; email@example.com; @KarolinaAllNews
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