2nd UPDATE:Reckitt Benckiser Profit Up, Global Market In Decline
09 Februar 2011 - 11:34AM
Dow Jones News
Reckitt Benckiser PLC (RB.LN) Wednesday posted a rise in
fourth-quarter profit on higher sales, boosted by surging demand
for household and personal care products in emerging economies, but
the consumer goods and healthcare giant warned of a global market
in decline and escalating cost pressures.
Purchases in Asia Pacific, Latin America and Africa more than
offset weakness in Europe and North America, but Chief Executive
Bart Becht cautioned that worldwide growth overall is falling. The
company faces a challenging outlook in mature markets where, in
addition to cut-throat promotional competition from suppliers and
supermarkets, the discretionary spending power of cash-strapped
shoppers is being squeezed by government-backed austerity measures
such as tax hikes and public spending cuts.
It is targeting further earnings growth this year, although at a
reduced pace due to the tough economic backdrop. "There is no
global growth at the moment. It is a two-world picture. Europe and
North America are not doing well, while developing markets are
doing well," Becht said.
The Slough, U.K.-based maker of Lysol disinfectants, Clearasil
spot cream and Finish dishwasher powder, as well as French's Yellow
Mustard, is also being hit by inflationary commodity prices as the
cost of oil, palm oil and plastics soar. To combat these effects,
the company is ramping up savings by streamlining packaging, paring
logistics, sourcing and purchasing costs and selectively increasing
prices to claw back profit margin losses, which fell 80 basis
points on a gross level in the quarter.
Earlier this month, rival Unilever (ULVR.LN) said commodity
costs would hit fiscal year margins by 400 basis points, while U.S.
counterpart Procter & Gamble Co. (PG) said its yearly commodity
bill will be double expectations at $1 billion.
"(Costs) are a concern and a challenge for all companies in the
industry. We have key raw materials that are going up. (Costs) will
not be eliminated, but we have programs to neutralize the impact,"
Becht said. Still, the CEO said the marketing budget this year
would not be cut as investment in its narrow portfolio of 'power
brands' stays central to strategy.
Becht said it continues to scan for bolt-on acquisitions in
emerging markets, but declined to comment on the likelihood of any
major consolidation moves, including a play for U.S.-based
Colgate-Palmolive Co.
The group, which recommended a 15% increase in the total
dividend to 115 pence from 100 pence, also said the progress it has
made on patented-protected Suboxone film is above expectations and
"very encouraging", with 25% volume share in the U.S. recorded by
the end of 2010. Suboxone tablets are exposed to potential generic
competition, after the heroin dependency treatment's exclusivity in
the U.S. expired in October last year.
Earlier, the company said operating profit excluding exceptional
items rose 16% year-on-year to GBP703 million. Sales rose 10% to
GBP2.28 billion from GBP2.06 billion, but below market
expectations. Stripping out the effect of currency movements,
fourth-quarter sales were up 9%, compared with a 7% rise in the
previous three months.
The result underwhelmed investors. At 0953 GMT, Reckitt
Benckiser shares were down 146 pence, or 4.2%, at 3299 pence, the
biggest faller on the FTSE 100 Index. Liberum Capital analysts said
the below-forecast top line performance raises concerns about the
growth of over-the-counter sales and intense competition in some
categories, like fabrics. Hargreaves Lansdown analyst Keith Bowman
added, "The group's faultless execution record is being slowly
overshadowed by building uncertainties."
Net profit fell 8% to GBP414 million from GBP448 million, hit by
an exceptional pre-tax charge of GBP104 million relating to the
acquisition of SSL International PLC, which owns the Durex and
Scholl brands.
The group met its own full year forecasts with 7% growth in
sales, 6% on a like-for-like basis, and 15% growth in adjusted net
profit at constant exchange rates. But the company has a history of
raising guidance throughout the year and then beating it once it is
complete.
In the current year, it targets industry-beating growth with a
12% increase in sales, 4% on a like-for-like basis, and a 10% lift
in net profit adjusted for exceptionals, both at constant exchange
rates and excluding the potential impact of generic competition to
Suboxone tablets.
Recently-appointed Chief Financial Officer Liz Doherty will
start the role with immediate effect, following the resignation of
Colin Day, who will remain with the business until the end of
March.
By Simon Zekaria, Dow Jones Newswires; +44 207 842-9410;
simon.zekaria@dowjones.com
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