Reckitt plunges 15pc after baby formula payout

BILLIONS of pounds were wiped off the value of Reckitt Benckiser after it was ordered to pay £50m to the mother of a premature baby who died after being fed its Enfamil baby formula.

Shares in the consumer goods giant, which also owns brands such as Nurofen, Dettol and Durex, tumbled 14.6pc to their lowest level since 2014 following the judgment from an Illinois court.

This wiped £5bn off the FTSE 100 company’s value amid fears it could face a wave of costly payouts relating to Enfamil.

A jury found Mead Johnson, the Reckitt arm responsible for baby formula, negligent and of failing to warn of the risk of intestinal disease known as necrotising enterocolitis (NEC).

Following the decision, the business will need to pay £50m which includes compensation to Jasmine Watson, the baby’s mother. Mead Johnson has said it plans to appeal the decision. But Ben Whiting, partner at Keller Postman, the law firm that represented the mother, said: ‘This verdict confirms what Mead Johnson has known for years: cow’s milk-based baby formula causes NEC in pre-term infants, often with fatal consequences.’

The verdict is the first trial of more than 400 lawsuits in the US against Reckitt and its competitor Abbott claiming that they caused NEC with their formulas.

Susannah Streeter, head of money at broker Hargreaves Lansdown, said: ‘This ruling has come at a bad time for Reckitt which had already been struggling with falling volumes across its household goods and hygiene ranges.

‘It’s not simply the size of this payout which has caused nervousness, but the fact a long line of other lawsuits is pending, which could mount up to be huge sum for the company.’

The reputational damage caused by the lawsuit is problematic for the group, Streeter added.

The judgment comes less than a month after profits hit £2.5bn for 2023, down 22pc compared to the year before.