By Martinne Geller
LONDON, Oct 18 (Reuters) – Reckitt Benckiser has decided to split its business into two units – consumer healthcare and home and hygiene products – the British consumer goods company said on Wednesday, after warning that there would be no growth in sales this year.
The maker of a wide range of products, including Durex condoms and Lysol disinfectants, is on track for uncharacteristically poor results this year and has blamed slowing markets, changing consumer habits, a cyber attack, a failed product launch and a safety scandal in South Korea.
Reckitt said to help boost performance it would operate from two business units from the start of 2018. Chief Executive Rakesh Kapoor told Reuters the restructuring decision was made after the acquisition in June of baby milk maker Mead Johnson, its biggest ever acquisition.
Kapoor also denied the move was a precursor to exiting any business, even though analysts have speculated that Reckitt could sell its home products brands to help fund a purchase of Pfizer’s consumer healthcare business, which the U.S. pharmaceutical company has said it may sell.
Reckitt is no stranger to selling off businesses. It spun off the drug addiction treatment company Indivior in late 2014 and sold its food business for $4.2 billion in August. .
Kapoor told Reuters that if Pfizer goes ahead with a sale, he would look at the business, which may be worth some $15 billion. Analysts have questioned whether Reckitt has the financial and managerial capacity for such a big deal so soon after the $16 billion purchase of Mead Johnson.
“They have said they will look at many different options under a strategic review. If one of those options is going to be a sale, we are going to look at that. But we should not try and pre-guess,” he said.
German drugs firm Merck is also considering a sale of its consumer healthcare products business, and Kapoor declined to comment on potential interest there.
FALLING SALES
Reckitt’s shares were down 0.1 percent at 7,029 pence at 0858 GMT, having dropped as much as 2.7 percent earlier in the session as investors digested weaker than expected quarterly sales and a bigger than expected cut to its sales forecast for the full year.
Reckitt said third-quarter sales were down 1 percent on a like-for-like basis at 3.21 billion pounds ($4.23 billion), short of the average of analysts’ forecasts of 0.6 percent growth but in line with a first-half decline of 1 percent.
Reckitt said it was now targeting flat like-for-like sales for the full year in its base business, down from its target for growth of 2 percent. It had previously forecast 3 percent, but reduced it in July after a June cyber attack hobbled its operations, leading to lost sales.
“Management credibility will take yet another blow with a second LFL sales warning in 2017,” Bernstein analysts said, adding that the new forecast for zero growth was below expectations for a cut to 1 percent growth.
“We are also perturbed by the new business structure which will likely further reduce already poor disclosure,” they said.
Investec analysts said the new structure reflected the growing importance of the consumer health unit, which will make up two thirds of group revenue and be run by Kapoor.
“But also perhaps growing concern on Mr. Kapoor’s part that it needs a firm hand on the tiller in the current turbulence,” they said.
Quarterly sales at Mead Johnson rose 1 percent in the third quarter, boosted by growth in China. Rival Danone on Tuesday reported a 50 percent jump in Chinese baby food sales in the quarter.
Reckitt said it still expected Mead Johnson’s full-year like-for-like sales to range from flat to down 2 percent. ($1 = 0.7588 pounds) (Reporting by Martinne Geller; editing by Jason Neely, Greg Mahlich)
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