July 27, 2018 / 6:28 AM / 2 months ago

Reckitt lifts full-year revenue target as Mead Johnson deal pays off

(Reuters) - British consumer goods maker Reckitt Benckiser (RB.L) bumped up revenue targets for the year, as the Dettol-maker benefited from its 13 billion pound deal to buy Mead Johnson, sending its shares up more than 8 percent.

FILE PHOTO: Products produced by Reckitt Benckiser; Vanish, Finish, Dettol and Harpic, are seen in London February 12, 2008. REUTERS/Stephen Hird/File Photo

The maker of Durex condoms and Lysol disinfectant raised its annual net revenue growth expectations to between 14 to 15 percent, higher than its previous target of 13 to 14 percent.

Full year like-for-like sales growth is also expected to come in at the higher end of its 2 to 3 percent range, Reckitt said, as it also signalled a recovery at its Scholl footcare brand, which has struggled for the last two years.

The company said its infant and child nutrition division, the acquired Mead Johnson business, was experiencing strong growth above medium-term expectations, led by China, the world’s largest market for the products.

Reckitt bought the U.S. firm, which makes baby formulas Enfamil and Nutramigen, in 2017, to expand into developing markets and new product ranges.

The higher forecast comes as Reckitt and other consumer goods companies struggle to raise prices in an ultra-competitive retail marketplace. However, the recent rise in commodities costs have forced some companies to pass these along to customers.

The company, once a pace-setter for the industry’s sales growth, has been through hard times lately with Scholl dragging on sales for two years after the failure of electronic foot file that cost upwards of $40 to smooth dry heels.

However, the company said on Friday that it did not expect a material drag on its second-half results from Scholl.

The company posted total net revenue growth of 4 percent on a like-for-like basis, while pro-forma revenue rose 5 percent to 3.02 billion pounds for the three months ended June 30.

The maker of Mucinex cold medicine said the pro-forma growth was helped by 3 percent volume growth and a 1 percent boost from pricing mix in the second quarter.

“Still plenty to do to get back to the Reckitt Benckiser of old but after 8 disappointing quarters in a row, this is an important step in the right direction,” Morgan Stanley analysts said in a note.

French food group Danone (DANO.PA), which posted a 7.9 percent rise in first-half operating profit on Friday, also reported solid demand in China for baby food.

Nestle’s (NESN.S) improved performance in the second quarter was driven by a recovery in the sluggish U.S. market and in China as well as in infant nutrition.

Since January, Reckitt has been operating two units. Its health-related products, which make up most of the business, saw like-for-like sales up 3 percent, while its home and hygiene business that offers products like Harpic and Lysol rose 4 percent.

Shares of the company, which topped the UK bluechip index, were up 7.6 percent at 67.90 pounds at 0813 GMT.

Reporting by Martinne Geller in London and Sangameswaran S in Bengaluru; editing by Jason Neely and Adrian Croft

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