Reckitt Benckiser cuts sales outlook
HOUSEHOLD GOODS giant Reckitt Benckiser, the firm behind brands such as Vanish, Dettol, Durex and Gaviscon, has slashed its annual sales outlook for the second time this year after a disappointing third quarter.
The firm, which employs 1,200 employees at its Hull operations, said sales fell 0.3 per cent at its health division in the three months to September 30, which meant revenues overall grew by just 1.6 per cent to £3.3bn.
Reckitt cut its expectations for full year like-for-like sales growth to between zero and 2 per cent due to the poor third quarter and seasonal uncertainty in the final three months.
It warned that profit margins are also expected to see a modest fall in 2019.
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.
“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.”
Analyst Alex Smith at Shore Capital said: “Reckitt has de
livered third quarter like-forlike growth below expectations and once again lowered its full year sales guidance, whilst the margin outlook for the year has now also been modestly trimmed.
“We expect downgrades for this year could equate to 2 to 3 per cent with this news today also potentially weighing on the multiple. The market will keenly await the first presentation from the new CEO, although any news on a turnaround strategy is not anticipated until February.
”Reckitt 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.”