Reckitt Benckiser cuts sales outlook after ‘disappointing’ quarter
The group has cut its expectations for 2019 like-for-like sales growth to between zero and 2%.
Household goods giant Reckitt Benckiser has slashed its annual sales outlook for the second time this year after a “disappointing” third quarter.
Shares in the Durex-to-Vanish group dropped 5% as it said sales fell 0.3% across its health division in the three months to September 30, leaving revenues overall growing by a muted 1.6% to £3.3 billion.
Reckitt cut its expectations for full-year like-for-like sales growth to between zero and 2% due to the poor third quarter and “seasonal uncertainty” in the final three months.
Profit margins are also expected to see a “modest” fall in 2019, it cautioned.
This performance is a reflection of an extended period of significant change and disruption in the company Laxman Narasimhan, Reckitt Benckiser CEO
It comes after Reckitt lowered its revenue guidance in July amid a slowdown in demand for baby formula in China.
New chief executive Laxman Narasimhan, who took over from long-serving boss Rakesh Kapoor in September, said: “Reckitt Benckiser’s performance in the third quarter was disappointing.”
He added: “This performance is a reflection of an extended period of significant change and disruption in the company.
“I am prioritising execution and operational performance as a matter of urgency.
“I have made it clear within the organisation that any activities that detract focus and attention from improving our operational performance, be paused.”
The group has been hit by a slowdown in demand for baby formula in China – its biggest market – as birth rates have slowed over the past two years.
Its infant formula business – which took over Mead Johnson Nutrition in 2017 and is part of its health business – saw sales rise 7.2% in the third quarter.
But Mr Narasimhan said the division continued to face “challenging” market conditions in China.
The group’s baby formula business was also knocked by supply problems at its European baby formula factory, which left it unable to meet demand at the end of last year, although its supply has since returned to more normal levels.
Reckitt also blamed the recent sales woes on cautious retailer demand of its Mucinex and Delsym cold and flu products in the US ahead of the flu season.
Over-the-counter health sales dropped 6.8% on a like-for-like basis in the third quarter as a result, while overall revenues in North America tumbled 12.3%
Martin Deboo, an analyst at Jefferies, said the figures “testify to the challenges ahead for the new CEO”.
He added the path ahead to recovery was set to be “slow and rocky”.