Reckitt opts to split business units as group sales dry up

Consumer goods company Reckitt Benckiser has decided to split its business into two units after warning there would be no growth in sales this year.

Reckitt opts to split business units as group sales dry up

The new divisions are consumer healthcare and home and hygiene products.

The maker of a wide range of branded products including Dettol, Cillit Bang, Harpic and Durex is on track for uncharacteristically poor results this year and has blamed slowing markets, changing consumer habits, a cyber attack, a failed product launch and a safety scandal in South Korea.

Reckitt said to help boost performance it would operate from two business units from the start of 2018. Chief executive Rakesh Kapoor said the restructuring decision was made after the acquisition in June of baby milk maker Mead Johnson, its biggest ever acquisition.

Kapoor also denied the move was a precursor to exiting any business, even though analysts have speculated that Reckitt could sell its home products brands to help fund a purchase of Pfizer’s consumer healthcare business, which the US pharmaceutical company has said it may sell.

Reckitt is no stranger to selling off businesses. It spun off the drug-addiction treatment company Indivior in late 2014 and sold its food business for $4.2bn (€3.5m) in August.

Kapoor said if Pfizer goes ahead with a sale, he would look at the business, which may be worth $15bn.

Analysts have questioned whether Reckitt has the financial and managerial capacity for such a big deal so soon after the $16bn purchase of Mead Johnson.

Reckitt said third-quarter sales were down 1% on a like-for-like basis at €3.6bn, short of the average of analysts’ forecasts of 0.6% growth but in line with a first-half decline of 1%. Reckitt said it was now targeting flat like-for-like sales for the full year in its base business, down from its target for growth of 2%. It had previously forecast 3%, but reduced it in July after a June cyber attack hobbled its operations.

“Management credibility will take yet another blow with a second like-for-like sales warning in 2017. We are also perturbed by the new business structure which will likely further reduce already poor disclosure,” Bernstein analysts said.

Investec analysts said the new structure reflected the growing importance of the consumer health unit, which will make up two thirds of group revenue.

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