Reckitt Benckiser shares jump as infant formula business lifts sales
The company has benefited from last year’s takeover of Mead Johnson Nutrition.
Reckitt Benckiser shares have surged as the household goods giant said its infant formula business boosted sales, helping raise revenue forecasts for the full year.
The company, which owns a suite of household brands including Dettol, Durex, Clearasil and Gaviscon, said second-quarter revenues came in at £3 billion, marking a 23% rise at actual exchange rates or 29% when stripped of currency effects.
But all eyes were on like-for-like sales growth, which came in at 4% and was ahead of analyst forecasts for a 2.9% rise.
Its Infant Formula and Child Nutrition division (IFCN) – which took over Mead Johnson Nutrition (MJN) last year and is part of its health business – grew more than the company expected over the period, with sales driven by demand in China.
The hygiene business meanwhile saw strong growth in North America, helping make up for a weaker performance in Europe where the company continues to suffer from pricing pressures.
It helped pre-tax profits for the half-year to June 30 rise 9.5% to £1.1 billion.
Reckitt has now raised its revenue growth targets to 14-15% at constant exchange rates – up from previous expectations for 13-14%.
It expects like-for-like revenue growth to come in at the upper end of 2-3%.
Delivering growth and the successful integration of MJN (Mead Johnson Nutrition) remain our key priorities Chief executive Rakesh Kapoor
The results were cheered by investors, who sent Reckitt Benckiser shares up as much as 9.3% in morning trading, making it the best performing stock on the FTSE 100.
Chief executive Rakesh Kapoor said: “Delivering growth and the successful integration of MJN (Mead Johnson Nutrition) remain our key priorities. Q2 was a quarter of progress against both of these priorities.
“MJN integration is well on track, with IFCN performance exceeding expectations and synergies being delivered.”
He said that the restructuring plan, which is reorganising the business into two business units – Health and Hygiene Home – was driving “greater focus and energy” at the company.
“I am confident that as we fully realise the benefits of RB 2.0, we will deliver outperformance in both business units.”
Steve Clayton, of Hargreaves Lansdown, called it a strong set of results for the household goods giant, which he said should be “well received” after a few tough quarters.
He said the Mead Johnson Nutrition deal, which took the group into the infant formula market in China and the US, “is looking increasingly promising”.
“The business had been struggling when RB acquired it, but sales are now moving apace, led by renewed strength in China,” he added.
While Reckitt suffered a damaging cyber attack last year Mr Clayton said the business appears to have regained its composure.
“With earnings growth poised to accelerate and the stock offering a yield fast approaching 3% the prospects for RB are improving,” he said.