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UK's Reckitt Benckiser Sales Hurt By Manufacturing Disruption

Published on Oct 30 2018 9:31 AM

UK's Reckitt Benckiser Sales Hurt By Manufacturing Disruption

British consumer goods maker Reckitt Benckiser Group reported a smaller-than-expected rise in underlying quarterly sales on Tuesday due to a manufacturing disruption at a European baby formula factory.

The setback comes as the maker of Durex condoms, Enfamil formula, and Lysol disinfectant had begun to gather momentum in its business after two years of disappointing results, hurt by a series of other one-off issues including a failed product launch, a cyber attack and a safety scandal in South Korea.

Shares in Reckitt Benckiser traded 3.9% lower shortly after the market opened in London on Tuesday.

Disruption

Like-for-like sales rose 2 percent in the third quarter, ended in September. Reported sales for the quarter fell 2% to £3.12 billion ($3.98 billion).

Excluding the disruption, which reduced sales by £70 million, like-for-like sales growth would have been 4%, in line with analysts' average estimates, according to a consensus supplied by the company.

"Reckitt has been unfortunately prone to one-offs in recent years ... that means we are less inclined than we would otherwise be to dismiss this as a one-off that should be ignored," RBC Capital Markets analyst James Edwardes Jones said in a note.

Reckitt said its European baby formula plant experienced disruption that affected sales to a number of markets during a period of unusually high market growth, and before new facilities in Australia were operational.

Reckitt got into the infant nutrition market last year through its $17 billion acquisition of Mead Johnson.

It said the disruption was resolved and supply was restored before the end of the quarter, although it said it expected some lingering impact in the current fourth quarter and into 2019.

Sales

Reckitt affirmed its full-year growth target for total net revenue growth of 14 to 15% at constant currency rates and like-for-like growth at the upper end of the 2 to 3% range.

Because of the disruption, the baby formula unit's quarterly like-for-like sales fell 6%, whereas analysts had been expecting growth of 5.3%.

Aside from that, the remaining health business grew 4%, helped by growth in over-the-counter medicines and improving trends in its wellness brands.

Since January Reckitt has been operating as two units. Its health unit, run directly by CEO Rakesh Kapoor, and its hygiene and home unit, which includes brands such as Airwick and Lysol.

News by Reuters, edited by Checkout. Click subscribe to sign up for the Checkout print edition.

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