Reckitt Benckiser Sees Sales Beating Market
Feb. 8 (Bloomberg) -- Simon Marshall-Lockyer, an analyst at Jefferies International, discusses Reckitt Benckiser Group Plc's fourth-quarter profit reported today and the company's planned increase in brand investment. He speaks with Mark Barton on Bloomberg Television's "On the Move." (Source: Bloomberg)
Reckitt Benckiser Group Plc, the maker of Nurofen painkillers and Dettol handwash, said sales growth will exceed the industry in 2012 as new Chief Executive Officer Rakesh Kapoor ramps up investment in its main products.
Non-pharmaceutical revenue will gain 3 percent to 4 percent this year, compared with growth of 1 percent to 2 percent in the broader market, the Slough, England-based company said today, adding that it aims to maintain profitability. Reckitt Benckiser also reported fourth-quarter earnings that beat estimates.
Kapoor said he plans to invest an additional 100 million pounds ($159 million) in brands such as Harpic cleaners as he tries to uphold the growth record established by his predecessor Bart Becht, who stepped down in September. Under Becht, who had led the business since it was formed by a merger in 1999, the company’s market value increased more than sixfold.
“Specific guidance for 2012 was welcome, although in typical RB fashion, we sense it is overly prudent and ripe to be increased,” Andrew Wood, an analyst at Sanford C. Bernstein, said in a note. The company’s forecast for growth in the household-goods market “seems very low,” he said.
Reckitt Benckiser rose as much as 4.2 percent in London trading, the steepest intraday gain since April 13. The stock was up 3.3 percent at 3,495 pence as of 9:31 a.m.
The planned increase in brand investment will be funded partly by savings of 50 million pounds this year from improved production and transportation efficiency, Kapoor said.
Emerging Markets
Slowing market growth and increased competition mean the company needs to “reshape our strategy to enable us to continue our track record of outperformance,” the CEO said.
Kapoor is contending with weakening economies across Europe, which accounts for more than 40 percent of sales.
Reckitt Benckiser aims to boost sales from emerging markets to half of revenue by 2016, from 42 percent today, he said today. The target doesn’t include the food and pharmaceutical units, which the company said it now considers “non-core.”
The company will take a 75 million-pound charge for restructuring, splitting the emerging-market unit into two separate groups, and merging North America and Europe into a single reporting entity based in Amsterdam, the CEO said. In a teleconference with reporters, Kapoor declined to say whether the shift would result in layoffs in North America or Europe.
Suboxone Strip
Adjusted net income, which excludes one-time items, rose 8 percent to 546 million pounds in the fourth quarter. The average estimate of eight analysts surveyed by Bloomberg was for profit on that basis of 531 million pounds. Full-year adjusted profit climbed 11 percent at constant exchange rates, compared with the company’s forecast of 10 percent.
Sales at the healthcare unit fell 17 percent in the quarter due to higher rebates paid to the U.S. government and a price increase for Suboxone heroin-dependency tablets. In October, the company said those events would cause sales to drop “by a mid- teens percentage, with profit down by a higher percentage.”
The healthcare unit may lose as much as 80 percent of revenue in the U.S. as generic drugs enter the market after the loss of the company’s exclusive rights to make Suboxone in October 2009. Reckitt Benckiser has created a Suboxone film- strip that dissolves under the tongue, which has captured a 48 percent volume share of the U.S. market, it said today, up from about 25 percent at this time last year.
Kapoor declined to set sales or profit targets for the pharmaceuticals unit, due to the potential introduction of generic versions of Suboxone, which analysts anticipate are likely to hit the market in the second half of this year.
Generic Suboxone could take as much as 90 percent of revenue in the U.S., the CEO said. A generic could also lead to about a 20 percent decline in Suboxone film sales, he said.
Group revenue increased 4 percent in 2011 on a so-called like-for-like basis, according to the statement. Sales rose 13 percent in developing markets and fell 1 percent in Europe.
To contact the reporter on this story: Matthew Boyle in London at mboyle20@bloomberg.net
To contact the editor responsible for this story: Sara Marley at smarley1@bloomberg.net
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