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Reckitt Benckiser’s New Finance Chief Signals Strategic Shift

Reckitt Benckiser Group Plc said finance chief Liz Doherty will be replaced by a veteran of the health care industry, signaling Chief Executive Officer Rakesh Kapoor’s increasing emphasis on more profitable consumer-health and pharmaceutical products over traditional household goods.

Adrian Hennah, the 54-year-old chief financial officer of Smith & Nephew Plc who earlier spent nearly two decades at GlaxoSmithKline Plc, will join Slough, England-based Reckitt Benckiser from the end of December. Doherty, whose management style was not “well matched” to that of the Nurofen maker, will stay on until March 2013, the company said today.

The choice of Hennah boosted Reckitt Benckiser shares and embodies the new strategy Kapoor unveiled to analysts in February. Kapoor expects 72 percent of sales in its main units to come from so-called health and hygiene brands such as Durex condoms and Veet hair-removers by 2016, up from 67 percent today. Slower-growing brands like Vanish laundry detergents, under pressure from competitors like Procter & Gamble Co., will account for a smaller share of total sales in the years ahead.

“His experience in the health care industry seems to be crucial to the appointment,” Eamonn Ferry, an analyst at Exane BNP Paribas, said in a note to clients today.

Reckitt Benckiser was unchanged at 3,572 pence at 12:56 p.m. in London. The shares have gained 12 percent this year.


Among the company’s so-called Powerbrands, which generate the highest profit margins and fastest sales growth, only four are in the home-care segment, which had sales of 2 billion pounds last year. The similarly-sized health unit has six, including Strepsils and Mucinex cold remedies, while the 3.6 billion-pound hygiene business has eight, such as Dettol and Lysol cleansers and Finish dishwashing products.

The company’s hygiene brands should post like-for-like sales growth of 7.1 percent this year, nearly double last year’s clip, while sales at the health unit will increase 5.2 percent, according to Sanford C. Bernstein analysts. That’s faster than the 0.9 percent growth estimated for the home-care business.

Reckitt Benckiser’s laundry-care brands in southern Europe have faced a “competitive onslaught” as rival products from P&G and Unilever have grabbed market share over the past several years, according to Pedro Gil, an analyst at Grupo Santander. In July, Kapoor said the company’s market-share losses in southern Europe continued in the first half of this year.

‘Global Experience’

In contrast, RB’s health-focused brands such as Gaviscon and Mucinex match up against brands owned by pharmaceutical companies and face less competition from consumer-product giants like Unilever and P&G. Hennah spent 18 years at GlaxoSmithKline, the U.K.’s largest drugmaker, whose products include the Avandia diabetes drug. He’s also a non-executive director of Reed Elsevier Plc, the publisher of the “Gray’s Anatomy” textbook.

“His global experience, especially in the health care industry, will be very valuable as we execute our strategy of extending our health and hygiene Powerbrands internationally, with a particular focus on emerging markets,” Kapoor said.

Hennah’s experience will also benefit Reckitt Benckiser’s pharmaceutical business, which consists mainly of the Suboxone opioid-dependency drug and now generates nearly 10 percent of total sales and more than a fifth of operating profit, according to Bernstein. In February, Kapoor said the pharmaceutical unit was not “core” to the company, raising speculation among analysts such as Morgan Stanley’s Erik Sjogren that it might be sold once a generic competitor to Suboxone tablets emerges.

“We hold a positive view on Adrian Hennah and expect Reckitt to be more effectively and cohesively led as a result,” Investec Securities analyst Martin Deboo said in a note.

Doherty, who joined in February 2011, less than a year before Kapoor succeeded Bart Becht as CEO, had “struggled to win acceptance in the investor community,” Deboo said.

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