Reckitt to simplify by dropping home products and troubled infant-formula unit
By Louis Goss
Reckitt Benckiser Group on Wednesday said it plans to refocus its business on its top-selling brands including Durex and Gaviscon by pulling away from its more troubled and less profitable segments in a bid to boost its dwindling share price by creating a "simpler, more effective firm."
The FTSE-100 company outlined plans to sell its portfolio of home care brands -- which owns products including Air Wick and Cillit Bang and had 2023 revenue worth GBP1.9 billion -- and also exit its Mead Johnson Nutrition business which owns brands including Enfamil and Nutramigen.
Reckitt's plans come as its share price has crashed this year on the back of an Illinois court's March decision that the company should pay $60 million to a mother whose baby died after being given Mead Johnson Nutirtion's Enfamil infant formula.
Shares in Reckitt Benckiser Group (UK:RKT), listed on the London Stock Exchange, jumped 4% on Wednesday, having lost 22% of their value over the previous 12 months following a sharp drop in the wake of the U.S. court's ruling.
Reckitt said the plans would let it invest more heavily in its highest margin "Powerbrands" - including Lysol, Veet, and Nurofen - that together saw their sales grow at rates of 7% each year between 2018 and 2023. The company also vowed to cut management layers to boost efficiency.
"Today we announce an important step forward to firmly establish Reckitt as a world-class consumer health and hygiene company, with one of the strongest growth and margin profiles in the industry," Reckitt CEO Kris Licht said.
The Slough, England-headquartered company said it will now "consider all strategic options" to exit its Mead Johnson business after it first acquired the company for $16.6 billion in 2017.
Reckitt's announcement came as the company posted first half results in which it cut its outlook for the rest of 2024 in predicting a "low double-digit decline" in sales from its nutrition business due to disruption caused by the Mount Vernon tornado earlier this month.
The Mount Vernon tornado hit a warehouse used by Mead Johnson Nutrition causing "significant damage" to the facility which held both raw materials and finished products.
Reckitt also said sales growth from its health and hygiene segments would be at the lower end of its "mid-single-digit" growth guidance due to the competitive environment in its developed markets.
The conglomerate's results saw it perform in-line with expectations, in reporting a 2.8% drop in its sales, to GBP3.43 billion ($4.42 billion), versus the GBP3.46 billion previously forecast by three analysts, according to FactSet data.
Analysts at Citi, led by Cedric Besnard, noted Reckitt may struggle to sell its Mead Johnson Nutrition unit "without more visibility on potential liability" in relation to the U.S. infant formula case.
-Louis Goss
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