Reckitt Benckiser Confident of Goals as Sales Meet Estimates

Reckitt Benckiser Group Plc, (RB/) the maker of Dettol handwash, reported first-quarter revenue growth that met analysts’ estimates and said it’s confident of meeting full- year goals amid gains in emerging markets.

Non-pharmaceutical sales rose 4 percent, excluding acquisitions, disposals and currency moves, the Slough, England- based company said today in a statement. The average estimate of 18 analysts surveyed by the company was for a 3.8 percent gain. Total sales increased 3 percent to 2.36 billion pounds ($3.8 billion), compared with the 2.35 billion-pound average estimate.

Reckitt Benckiser, faced with weakening economies in the U.K. and across Europe, has merged North America and Europe into a single reporting entity and split its emerging-markets unit into two groups. Chief Executive Officer Rakesh Kapoor plans to boost sales from emerging markets to half of revenue by 2016.

Reckitt Benckiser rose 0.9 percent to 3,620 pence at the close of London trading after earlier climbing as much as 2.8 percent, the steepest intraday gain in almost three months.

“The only surprise to me is the share price reaction,” Martin Deboo, an analyst at Investec, said by telephone. “Otherwise, it was entirely in line with consensus.”

The maker of Lysol and Cillit Bang cleaners reiterated its February forecast for growth of 3 percent to 4 percent in non- pharmaceutical revenue this year at constant exchange rates, and unchanged operating profit margins.

Product Innovation

First-quarter sales growth was driven by “continued excellent performance” in emerging markets and product innovations such as Veet Easy Wax Roll-On and the Lysol No-Touch Kitchen System, Kapoor said in the statement.

Like-for-like revenue fell 1 percent in Europe and North America, which make up 55 percent of revenue excluding food and pharmaceuticals, hurt by a “poor” flu season in the U.S., which hampered sales of the Mucinex cough and cold remedy. Analysts had estimated a 0.9 percent drop.

Procter & Gamble (PG), the world’s largest consumer-products company, cut its full-year profit forecast last week amid slowing sales shipments in some developed markets. In contrast, Unilever, the maker of Dove soap, said first-quarter underlying sales rose 8.4 percent, boosted by higher prices and better- than-expected sales in Europe and North America.

Emerging Markets

Reckitt Benckiser’s sales increased 11 percent in Latin America and Asia, fueled by brands such as Nurofen painkillers, Airwick air fresheners, and Finish dishwashing detergents. Revenue rose 9 percent in Russia, the Middle East and Africa, helped by consumers buying more Durex condoms and new products such as Dettol Daily Care.

Kapoor plans to boost sales from emerging markets from 42 percent at the beginning of this year, by introducing existing brands to faster-growing regions and shifting more senior managers, capital spending, and marketing to developing regions.

Revenue at the pharmaceuticals division, which Reckitt Benckiser considers a “non-core” activity, rose 6 percent. The company has said it could lose as much as 90 percent of U.S. tablet revenue as generic drugs enter the market to compete with its Suboxone heroin-dependency treatment. Analysts at Jefferies International and Bernstein & Co. have said that a generic version of Suboxone could emerge as soon as July.

Reckitt Benckiser said a film-strip version of Suboxone that dissolves under the tongue has now captured a 53 percent volume share in the U.S., up from 48 percent at the end of 2011.

Revenue from the company’s food business, which includes Frank’s RedHot sauce and is also no longer a core unit, rose 6 percent in the quarter.

To lift sales, Reckitt Benckiser is investing an additional 100 million pounds in main brands such as Harpic cleaners, and shifting more of its marketing spending from television ads to digital media and consumer education campaigns.

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

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.