Company Reports

Wide-moat Haleon reported solid second-quarter earnings and delivered better-than-anticipated results. Total sales of GBP 2.8 billion were up slightly, 0.8% year over year, and we had expected a slight decline in the top line. Despite pain relief and respiratory health segments facing volume challenges from lapping last year's unusually high volume thanks to inventory stocking in China, the other three product groups enjoyed nice organic growth. This was thanks to core brands like Sensodyne and Centrum touting their brand intangibles and winning shares. At the firm-wide level, price gain of 3.4% and volume/mix of 0.7% puts Haleon at the top among other consumer packaged goods players. We think new product launches, including Sensodyne Clinical White and continued investment behind advertising and promotion through partnerships with healthcare professionals are paying off. These helped the firm combat pressures from difficult macro environment and price-wary consumers. After mildly ticking up our near-term assumptions, accounting for time value of money impacts, and a slightly more favorable foreign exchange rate, we raise our fair value estimate to $9.50 (GBX 372) per share from $8.80 (GBX 352).

Haleon is one of the largest consumer healthcare companies in the world. Over the last few years, Haleon has achieved a more rationalized operation by divesting multiple non-strategic brands, slimming down its manufacturing footprint, and dialing back the number of warehouses and distribution centers. We appreciate the company’s efforts to optimize its business and believe it is well established to enjoy long-term industry trends, including an aging population, premiumization of consumer healthcare products, and growing emerging markets, that should fuel its top line.

Wide-moat Haleon announced on June 26 that it entered into an agreement to divest its smoking cessation business outside the US to no-moat Dr. Reddy’s for GBP 500 million (GBP 458 million upfront plus performance-based payments of up to GBP 42 million). The portfolio includes brands like Nicotinell, Nicabate, and Habitrol. The deal is expected to close during the last quarter of 2024 at the earliest. We do not expect material changes to our model from this deal and maintain our fair value estimate of $8.80, or GBX 352, per share for Haleon and $60 per share for Dr. Reddy’s.

Wide-moat Haleon reported first-quarter earnings that came in largely as we expected. Total sales of GBP 2.9 billion were down 2.2% year over year, with price and volume/mix contributing 5% and negative 2%, respectively. Unfavorable foreign exchange, which we estimate pulled back growth by a midsingle digit, proved to be a significant headwind but solid demand among key brands helped deliver decent results. After adjusting our near-term assumptions and accounting for time value of money impacts, we slightly tick up our fair value estimate to $8.80 per share from $8.70.

Haleon is one of the largest consumer healthcare companies in the world. Over the last few years, Haleon has achieved a more rationalized operation by divesting multiple non-strategic brands, slimming down its manufacturing footprint, and dialing back the number of warehouses and distribution centers. We appreciate the company’s efforts to optimize its business and believe it is well established to enjoy long-term industry trends, including an aging population, premiumization of consumer healthcare products, and growing emerging markets, that should fuel its top line.

Wide-moat Haleon reported on April 24 that its chief financial officer, Tobias Hestler, will be stepping down due to long-term health conditions and will be replaced by Dawn Allen. Allen is currently serving as the CFO of Tate & Lyle, a food and beverage products supplier, and has previously worked at Mars for over 20 years tackling various roles, including vice president and global CFO, global transformation at Mars Inc. Allen will join Haleon on Oct. 28, 2024, and we think she brings in decades of knowledge and relevant experience in the consumer industry to help the management team steer the company in the right direction.

Haleon is one of the largest consumer healthcare companies in the world. Over the last few years, Haleon has achieved a more rationalized operation by divesting multiple non-strategic brands, slimming down its manufacturing footprint, and dialing back the number of warehouses and distribution centers. We appreciate the company’s efforts to optimize its business and believe it is well established to enjoy long-term industry trends, including an aging population, premiumization of consumer healthcare products, and growing emerging markets, that should fuel its top line.

Wide-moat Haleon reported fourth-quarter earnings that were largely in line with our expectations. Total sales of GBP 2.8 billion were down 0.4% year over year, but organic growth remained resilient with 6.4% from price and 0.3% from volume. We maintain our fair value estimate of $8.70 per share, or GBX 347, as our slightly trimmed near-term assumptions were offset by time value of money impacts.

Haleon is one of the largest consumer healthcare companies in the world. Over the last few years, Haleon has achieved a more rationalized operation by divesting multiple non-strategic brands, slimming down its manufacturing footprint, and dialing back the number of warehouses and distribution centers. We appreciate the company’s efforts to optimize its business and believe it is well established to enjoy long-term industry trends, including an aging population, premiumization of consumer healthcare products, and growing emerging markets, that should fuel its top line.