Reckitt Benckiser share price little changed as group launches restructuring plan


Fast-moving consumer goods company Reckitt Benckiser Group (LSE: RB) updated the market this morning with third-quarter trading, and it's been a busy period.

British consumer goods group Reckitt Benckiser said on October 18 that it plans to restructure its business into two units, one for health, the other for its home and hygiene products, as part of its efforts to improve sales growth.

"We are working to create two focused, agile and fully accountable Business Units - RB Health (incorporating MJN) and RB Hygiene Home, effective from Q1 2018".

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.

RB is now expecting sales to be flat in the full year, down from a previous target of two per cent growth.

Reckitt, whose profit margins are among the sector's best, had for years enjoyed a reputation for setting the pace for sales growth. I will lead the new Health business directly and Rob De Groot, who is now our head of ENA, will become president of the Hygiene Home business, reporting to me. The Nurofen owner, however, also posted a drop in third-quarter revenue after a cyber-attack disrupted the company's operations earlier this year.

The British consumer giant is now integrating Mead Johnson which it bought for $16.6 billion in June.

Some analysts saw the restructuring as a precursor to parting with home and hygiene, as Reckitt did with its pharmaceutical business in 2014 and when it sold its North American food business in August.

"If one of those options (being considered) is going to be a sale, we are going to look at that. But we should not try and pre-guess, because that is disrespectful", he said.

Chief Executive Rakesh Kapoor will run the health unit.

Kapoor said he was still interested in Pfizer's consumer health business, as he has said publicly in the past. 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.

The fall in the third quarter was only a slight improvement on the second quarter, when it recorded its weakest quarterly performance ever with a 2 per cent decline in comparable sales.

"We are also perturbed by the new business structure which will likely further reduce already poor disclosure", they said.

Kapoor said Reckitt has made "great progress" in its transformation programme over the past five years.