EXTRA: Reckitt Benckiser "On Track" But Like-For-Likes Fall Flat

Frederick Owens
April 21, 2017

While the company maintained its full-year outlook for growth of 3 percent in like-for-like sales, its flat result in the quarter marks the worst performance since the company was formed through a 1999 merger, Sanford C. Berstein analyst Andrew Wood wrote in a note to investors.

The food and household brands group, which is acquiring Mead Johnson (MJN) for just under $18 billion, said revenues for the three months ending in March rose 15% on a reported basis to £2.64 billion ($3.38 billion). Other health products include Neurofen and Gaviscon.

Analysts had expected the first quarter to be weak across the consumer goods sector, due to economic uncertainties and the timing of Easter. Like-for-like sales exclude acquisitions, disposals and currency shifts.

Like-for-like sales in North America were flat at £631m, while sales in Europe fell by three per cent, totaling £1.04bn.

FTSE 100-listed Reckitt Benckiser has started a strategic review of its food business, with plans to sell off brands such as French's mustard and Frank's Red Hot sauce to fund its acquisition of baby milk maker Mead Johnson and reduce its debt pile.

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The update comes two months after the firm revealed plans for a $16.6 billion (£13 billion) takeover of U.S. baby formula maker Mead Johnson.

Reckitt said the weaker performance in Europe, North America and Australasia was due to a "significant" decline in foot care brand Amope in the U.S. as well declines in Germany, Italy, Australia and New Zealand as they faced a strong comparative period which included the launch previous year of the Wet & Dry Express pedi.

"We just have to go through this, knowing our underlying business is performing well", he said.

Aside from the failed foot file, which Chief Executive Rakesh Kapoor said was too expensive and too innovative, its business has suffered a collapse in South Korea.

Reckitt also noted that the Indian government is planning to implement a goods & services tax from the beginning of July, which it expects to result in a GBP40 million hit to net revenue in its full-year accounts.

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