Reckitt Benckiser Repeats 2013 Targets as Sales Rise on Flu

Reckitt Benckiser Group Plc, the maker of Dettol handwash, said it remains confident of achieving full-year goals after sales of cold and flu medicines helped it post the strongest first-quarter revenue growth in four years.

Non-pharmaceutical sales advanced 6 percent, excluding acquisitions, disposals and currency moves, the Slough, England-based company said today in a statement. The average estimate of nine analysts surveyed by Bloomberg was for a 6.3 percent gain. Total sales rose 7 percent to 2.52 billion pounds ($3.8 billion), compared with the 2.46 billion-pound average estimate.

“It’s a solid result,” Martin Deboo, an analyst at Investec Securities, said in an interview. “The bearish point is how solid is the developed-market performance outside of cough and cold? That business was weak last year, so it was a phenomenally easy comparison for them.”

Chief Executive Officer Rakesh Kapoor, faced with weakening economies in the U.K. and across Europe, plans to boost emerging-market revenue and push into health care through acquisitions and new product development. Kapoor said in February that developing regions such as China will account for half of revenue by 2015, a year earlier than expected. That compares with 42 percent at the beginning of last year.

“We expect continued challenging market conditions, but nonetheless, we remain confident that we can achieve our full-year targets” Kapoor said in the statement. The company expects revenue growth of 5 percent to 6 percent, excluding the pharmaceutical unit, and stable operating margins.

Shares Gain

The shares rose 1 percent to 4,757 pence at 8:20 a.m. in London, extending their gain so far this year to 23 percent.

First-quarter sales were boosted by a 13 percent increase from the health division, which includes cough-and-cold remedies such as Mucinex and Strepsils. Health sales were little changed in the same period last year. There were more than 10,700 flu-related hospitalizations between Oct. 1 and March 2, compared with 593 cases in the same period last winter, according to data from the U.S. Centers for Disease Control.

Increased sales of cough-and-cold products also helped boost revenue 3 percent across Europe and North America, which are reported as one unit and account for 56 percent of revenue. Mucinex, Strepsils, and painkiller Nurofen all fueled the increase, the company said.

“This has been one of the stronger cold and flu seasons in recent U.S. history,” Deboo said. “Crucially, the season has been later and longer in duration than average and has persisted well into the first quarter.”

Schiff Acquisition

Over the past six months, Reckitt Benckiser has broadened its health-care portfolio through the $1.4 billion acquisition of Schiff Nutrition International Inc., which expanded its business into vitamins and nutritional supplements, and a $482 million deal with pharmaceutical maker Bristol-Myers Squibb Co. to license a number of Latin American over-the-counter remedies.

Revenue at the company’s hygiene unit rose 9 percent, driven by Dettol and Lysol disinfectants, as well as new versions of its Finish dishwashing detergent. That unit contributes nearly half of company revenue.

“Although the flu season undeniably helped RB’s first-quarter sales performance, it is the non-flu related areas of the portfolio that were more impressive,” Harold Thompson, an analyst at Deutsche Bank AG, said in a note to clients.

Revenue at the pharmaceuticals division rose 19 percent, aided by “strong” growth in prescriptions and new variants. Two generic copies of the tablet version of Reckitt Benckiser’s Suboxone heroin-dependency drug emerged in March, and eroded the product’s U.S. prescription volume by 67 percent in their first five weeks on the market, Symphony Health data show.

Suboxone Competition

The company said the generics have gained 10 percent volume share of the total buprenorphine market, taken “mainly from” Suboxone tablets, which it stopped selling in March. A newer film-strip version of Suboxone has captured 69 percent volume share in the U.S., the company said. Reckitt Benckiser said it does expect “some” loss of film revenue over time.

Sales rose 11 percent in Latin America and Asia-Pacific, helped by Dettol and Durex condoms in China and India, and added 7 percent in Russia, the Middle East and Africa. Last week, the company named Frederic Larmuseau as the new head of the latter region.

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