Feb. 12 (Bloomberg) -- Reckitt Benckiser Group Plc, the maker of Nurofen painkillers and Dettol handwash, predicted slower sales growth this year amid more difficult conditions in some of the world’s developing regions.
Revenue will increase 4 percent to 5 percent at constant currency rates, excluding the pharmaceuticals unit that is under strategic review, the Slough, England-based company said today in a statement. That compares with a 7 percent gain last year, which included a 2 percentage-point boost from acquisitions.
The maker of Lysol cleaners and Finish detergent joins consumer companies from Unilever to Diageo Plc that have pointed to political uncertainty and slowing growth in some key developing economies. A further weakening of market conditions in Russia weighed on growth in the fourth quarter, Chief Executive Officer Rakesh Kapoor said in an interview. So-called like-for-like sales rose 4 percent in the quarter and full-year revenue surpassed 10 billion pounds for the first time.
The performance was “overall better than market expectations,” even as emerging markets “disappointed slightly,” Chris Wickham, an analyst at Oriel Securities, said in a note to clients.
Fourth-quarter sales growth decelerated to 3 percent in the region that includes Russia, from 5 percent in the prior quarter, and profit margins narrowed due to branding expenses. “I am not happy with Russia,” Kapoor said on a conference call. “It’s not very good.”
Sales in Latin America and Asia rose 9 percent in the period, compared with 10 percent in the third quarter, the company said, as India, Brazil and Thailand dragged on growth despite “strong” sales of brands like Durex condoms in China.
“Market conditions are more challenging now than at the beginning of last year, particularly in some emerging markets,” Kapoor said in the statement. Still, he said “the long-term story in emerging markets remains good.”
Also today, the company forecast “flat to moderate” expansion in operating profit margins this year, excluding the drug business, after margins on that basis widened by 0.2 percentage points to 23.6 percent last year.
The stock rose less than 1 percent to 4,864 pence at 9:56 a.m. in London. Before today, it had gained 0.7 percent this year.
‘Sale or Spin’
Kapoor is considering selling the drug business -- which gets its sales from opioid-addiction treatment Suboxone -- to focus on health-care brands including Durex and Mucinex cold remedies. He did not provide an update on the strategic review today. Suboxone sales declined 18 percent in the quarter, in line with analysts’ estimates, as the drug’s newer film-strip format ended the year with 68 percent market share, unchanged from the end of the third quarter.
“We continue to expect sale or spin to be the outcomes of this review, which we believe would be well received by investors,” Andrew Wood, an analyst at Sanford C. Bernstein, said in a note.
The company picked a new chairman for the unit, who will “play an important part in the next stage of RBP’s evolution,” it said today without disclosing a name.
Valuations for RB Pharma were as high as 6.3 billion pounds ($10.3 billion) three years ago, yet have declined now that the business faces threats from generic and branded competition after several years of dominating the $1.9 billion opioid-dependency treatment market. Estimates now range between 1 billion and 4 billion pounds, according to Exane BNP Paribas.
The company has acquired consumer-health assets in China, Latin America and the U.S. over the past two years and is interested in buying Merck & Co.’s over-the-counter drugs business, people with knowledge of the matter said last week. Asked about acquisitions, Kapoor said only that the company plans to be an “aggregator” as the consumer-health sector consolidates.
Reckitt Benckiser is making “excellent progress” with acquisitions, Kapoor said, including vitamin-maker Schiff Nutrition, whose MegaRed Omega-3 supplement is being introduced in 20 countries. Acquisitions like Schiff helped the company’s health unit -- which makes up 29 percent of revenue -- post a 7 percent sales increase in the quarter, topping estimates from analysts like Bernstein’s Wood.
The hygiene unit that includes brands like Dettol and Finish diswasher detergents saw a 6 percent sales lift, helped by new products like the Harpic Hygiene Max toilet cleaners.
Adjusted net income climbed 2 percent to 1.97 billion pounds ($3.2 billion) for 2013, the company said. The average estimate of 19 analysts surveyed by Bloomberg was for profit of 1.94 billion pounds on that basis.
To contact the reporter on this story: Matthew Boyle in London at firstname.lastname@example.org
To contact the editor responsible for this story: Celeste Perri at email@example.com