After a cyber attack and a botched product launch spoiled Reckitt Benckiser’s 2017, a pricing squeeze threatens to make this year almost as tough.
The maker of Durex condoms and Nurofen painkillers said comparable sales will rise only 2% to 3% in 2018, and profitability will be curtailed by deflationary conditions in the consumer-goods business. That followed the worst year in its history, during which sales stagnated. The shares fell up to 6.6%, their biggest intraday decline since 2011.
“I know we’ve had a tough 12 months from a share-price point of view,” said chief executive Rakesh Kapoor. “As I look forward to 2018, I think it’s going to be a better year for Reckitt Benckiser and that’s how we are guiding the market.” he said.
The company says it expects higher commodity costs and downward pressure on prices of its products to continue in the near term, which is a problem faced by companies across the consumer-goods landscape, from food seller Nestle to household and personal-care company Procter & Gamble.
That’s making it harder for Reckitt Benckiser to recover from last year’s cyber attack and a failed product launch in the Scholl foot-care business. Unilever, the owner of Dove soap and Hellmann’s mayonnaise, said underlying prices rose 0.7% in the fourth quarter, held back by deflationary pressure.
Nestle posted the weakest annual sales growth in more than 20 years. In an effort to sharpen Reckitt Benckiser’s focus on brands such as Strepsils and Mucinex cold remedies, Kapoor has moved to separate the company’s homecare and health interests. Reckitt also became a leader in infant nutrition with the acquisition of Mead Johnson Nutrition last year.
Reckitt Benckiser says it sees 4% to 6% mid-term growth in consumer health, which has been expanding more rapidly than the home-care operations. It’s one of two remaining bidders vying to acquire Pfizer’s consumer-health business, which includes brands such as Advil and ChapStick lip balm, according to sources.
GlaxoSmithKline is the other. A takeover could fetch up to €16bn. It would be the company’s largest since the Mead Johnson deal.