UN Unilever NV

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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