Reckitt sales hit by cyber infection
• UK consumer goods manufacturer cuts forecast in light of disruption caused by recent global attack that crippled its computers
British consumer goods maker Reckitt Benckiser trimmed its sales forecasts on Thursday, becoming one of the first companies to put a cost on a global cyberattack that disrupted its manufacturing and distribution.
British consumer goods maker Reckitt Benckiser trimmed its sales forecasts on Thursday, becoming one of the first companies to put a cost on a global cyberattack that disrupted its manufacturing and distribution.
Several major companies, along with Russia’s biggest oil firm and Ukrainian banks, were hit by a virus on June 27 that crippled computers, disrupting ports from Mumbai to Los Angeles and halting production at factories.
Reckitt Benckiser, which makes Dettol and Lysol disinfectants, Nurofen tablets and Durex condoms, said it estimated likefor-like revenue in the second quarter would fall 2% from a year earlier because of the attack, which hit three days before the quarter ended.
The virus significantly hit output at many of the company’s more than 60 factories and hurt a global supply chain by affecting systems that manage orders, billing and shipping.
Excluding that impact, and tax changes in India that hurt sales to a lesser extent, secondquarter sales would have been flat, the company said. Reckitt’s shares fell as much as 3.2% on Thursday to their lowest since May 19.
The cyber blindside came at a bad time for Reckitt Benckiser after its weakest performance in 15 years in the first quarter, when a collapse of its business in South Korea and a failed Scholl product innovation left sales unchanged..
Reckitt Benckiser has described 2017 as a “tale of two halves”, saying the second half would improve as comparisons with the same period a year earlier got easier. But it said on Thursday that like-for-like annual sales would now increase only 2%, instead of 3%.
Liberum analysts said Reckitt needed 5% growth in the second half to hit that target, which “may still prove ambitious in light of lingering effects from the cyberattack, Indian tax and competitive end markets”.
Reckitt has a reputation for acquiring businesses and boosting sales by launching new products. But several sluggish quarters and June’s acquisition of baby formula maker Mead Johnson have raised questions about its strategy.
“We remain negative on the acquisition of Mead Johnson from a strategic, operational and financial point of view whereas organically we see signs of innovation fatigue, meaning that there isn’t anything obvious to offset the slowdown of the failed Scholl Express Pedi innovation,” said analysts at RBC, affirming their underperform rating.
Prior to the takeover, Mead Johnson’s shares had fallen by a third over two years, as it lost market share in China.
Security experts say the NotPetya virus hit a popular accounting software used in Ukraine, which is probably where multinationals such as Reckitt were first infected before it spread globally through their networks.
Reckitt could not confirm the virus’s starting point — only that it spread around the world in just 45 minutes. A company spokeswoman said there was no evidence to suggest Reckitt had any particular vulnerability in its system. She also noted that Darrell Stein, its head of information services, was a member of the 10-person executive committee that runs the company.
Reckitt employees were able to conduct some business through phones and other personal devices during the disruption, but not manufacturing.
Reckitt said some of the lost revenue would be made up in the third quarter, which runs to September.
“However, the continued production difficulties in some factories mean that we also expect to lose some further revenue permanently,” it said.
The spokeswoman said she anticipated that all factories would be running at some level by the end of the week.
Reckitt plans to do a full study of its information technology processes, but did not detail any effect to profits.
It said generally that its operating margin continued to make satisfactory progress.
“We expect an impact both on top line, through disruption to production, order handling and logistics, and margin, through the need to upgrade systems and recover data,” Investec analysts said of the harm caused by the virus.