Reckitt Benckiser Forecasts Sales Will Advance as Much as 6%
Reckitt Benckiser Group Plc, the maker of Nurofen painkillers and Dettol handwash, reported the strongest quarterly sales increase since 2009 and forecast growth this year, helped in part by acquisitions.
Revenue will increase 5 percent to 6 percent at constant rates of exchange, excluding the pharmaceuticals unit and withdrawal from private-label products, the Slough, England- based company said today in a statement. Fourth-quarter sales gained 6 percent on a like-for-like basis, also excluding pharmaceutical revenue, topping the 4.7 percent average estimate of nine analysts polled by Bloomberg.
Chief Executive Officer Rakesh Kapoor has put acquisitions at the forefront of a push into health care, while seeking to boost emerging-market revenue to combat weakening economies in Europe. The company yesterday inked a $482 million licensing pact with Bristol-Myers Squibb Co. for Latin American over-the- counter remedies, and today said it has paid an undisclosed sum for China’s Golong Medicine, which makes a sore-throat remedy.
The sales beat “represents the strongest quarterly performance through 2012 and compares well against the 5 percent reported for the year,” Darren Shirley, an analyst at Shore Capital, said in a note. The 2013 forecast “may prove a little underwhelming to some in the market given the strength of the fourth-quarter performance, which suggests to us the quarter was exceptional in nature.”
Reckitt Benckiser rose 0.9 percent to 4,400 pence at 9:44 a.m. in London. The stock has gained 13 percent in 2013, extending last year’s 22 percent advance.
Fourth-quarter sales were helped by a 3 percent increase in like-for-like revenue for Europe and North America -- which are reported as one region and account for 56 percent of non- pharmaceutical revenue -- thanks to higher sales of cough-and- cold remedies such as Mucinex and Strepsils. According to the U.S. Centers for Disease Control, widespread influenza activity was reported in 38 U.S. states in the week ended Feb. 2, compared with only one state in the comparable week in 2012.
Kapoor said in an interview today that the flu season has been a “good one,” and provided a “tailwind” for the quarter. Economic conditions in Europe remain “difficult,” the company said in the statement.
Eamonn Ferry, an analyst at Exane BNP Paribas, said sales of more profitable flu-fighting products also helped widen margins. In 2012, the adjusted operating margin expanded by 0.7 percentage point to 26.9 percent, exceeding the company’s earlier forecast for an unchanged margin. Reckitt Benckiser expects to maintain operating profit as a percentage of sales this year, excluding the pharmaceutical business, it said today.
Revenue increased 11 percent in Latin America and Asia in the quarter, fueled by brands such as Durex condoms in China and Paras brands in India. Sales rose 7 percent in Russia, the Middle East and Africa, helped by consumers buying more Durex and Dettol. The company also said it expects to achieve its target of 50 percent of non-pharmaceutical sales from emerging markets by the end of 2015, one year earlier than the forecast it gave last year.
Net revenue at the pharmaceuticals division, which Reckitt Benckiser considers a “non-core” activity, rose 22 percent. The company said in September it will cease production of the Suboxone opioid-dependency drug in tablet form as it weans patients onto a film-strip version that’s less likely to be taken accidentally by children.
Reckitt Benckiser said the film version of Suboxone that dissolves under the tongue has now captured a 64 percent volume share in the U.S., up from 48 percent at the end of 2011.
“We are laying the foundations for RB to succeed in a world where health and hygiene play an increasingly important role,” Kapoor said in the statement. “We enhanced our focus on our 16 Powermarkets, many of which are in the emerging-market areas that now represent 44 percent of our core net revenue.”
Adjusted net income for 2012 climbed 7 percent to 1.94 billion pounds ($3.04 billion), the company said. The average estimate of 20 analysts surveyed by Bloomberg was for profit on that basis of 1.83 billion pounds.
Shareholders will receive a final dividend of 78 pence a share, up 11 percent on the previous year.
“It’s a strong set of results for the fourth quarter and the full year,” Investec analyst Martin Deboo said in an interview.
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