Reckitt Benckiser Unveils New Cost Program to Sustain GrowthMatthew Boyle
Reckitt Benckiser Group Plc, the maker of Vanish laundry detergents, unveiled a plan to cut costs by as much as 150 million pounds ($229 million) a year as Chief Executive Officer Rakesh Kapoor seeks to maintain growth amid difficult market conditions.
Dubbed Supercharge, the project will save at least 100 million pounds a year at a one-time cost of 200 million pounds, the Slough, England-based company said Wednesday. Reckitt Benckiser also reported quarterly sales that beat estimates and set goals for increased revenue and profitability in 2015.
In his fourth year as CEO, Kapoor is seeking to nail down improvements in profit margins brought about by a shift toward more-profitable products, price increases and cost reductions. The Supercharge program will mainly seek to curb so-called indirect spending such as travel budgets and office supplies, and will help the company towards a target of “moderate to nice” margin expansion this year, he said in a statement.
“There is a plethora of good news to be found” in the results statement, Harold Thompson, an analyst at Deutsche Bank AG, said in a note. “At a time when many question RB’s margin level, the RB culture has responded by a redoubling of efforts to drive costs out of the organization.”
Reckitt Benckiser rose as much as 5.3 percent in London trading, the steepest intraday gain since October 2013. The shares were up 3.3 percent at 5,775 pence as of 11:28 a.m.
Supercharge will target 15 areas of indirect spending, according to Kapoor, who from now on will fly coach on any flight under six hours. The program will include an unspecified number of job cuts, the CEO said on a conference call, though won’t affect the marketing budget, which last year declined when measured as a percentage of net revenue to 12.9 percent.
The project will also consolidate the company from three to two geographic units, with Russia, Israel and Australia joining the Europe and North America segment and all emerging markets grouped together into a new entity dubbed “DVM.” Kapoor said the changes will produce a “leaner, faster” company where “decisions are made once, not twice.”
Reckitt Benckiser reported a 5 percent increase in fourth-quarter sales on a so-called like-for-like basis, excluding pharmaceutical sales, beating the 4 percent median estimate of 15 analysts surveyed by Bloomberg.
The company forecasts that revenue on that basis will rise by 4 percent in 2015. That excludes the negative impact from the acquisition of the K-Y brand and discontinued businesses, Kapoor said in an analyst presentation.
While the CEO’s search for acquisitions was stymied last year when Bayer AG proved willing to pay more for Merck & Co.’s consumer unit, Kapoor said he still sees an active role for the company in consumer healthcare deals.
“Opportunity still exists,” Kapoor said. “We have to make sure that we do a good job in finding those opportunities, in paying the right price, and then doing a good job with those acquisitions.”