Reckitt Benckiser, the renowned consumer-goods company associated with brands like Dettol, Harpic, and Durex, experienced a downturn in both profit and sales. The company attributed this setback to one-off impairments within its infant formula business.

Financial Performance Overview

At 0923 GMT, shares took a significant hit, dropping by 8.6% to 5,334.0 pence, marking a 21-year low in closing price. Despite this, Reckitt Benckiser reported a pretax profit of 2.40 billion pounds for 2023, down from GBP3.07 billion the previous year. Adjusted operating profit also decreased to GBP3.37 billion, compared to GBP3.44 billion. Although revenue increased slightly to GBP14.61 billion from GBP14.45 billion, it fell short of the expected GBP14.75 billion as estimated by 15 brokers polled by FactSet.

Growth Insights

Notably, net revenue witnessed a like-for-like growth of 3.5%, aligning with the company's initial guidance ranging from 3% to 5%. This uptick was primarily fueled by a 5.2% surge in the hygiene business segment.

However, the fourth quarter saw a contrasting decline in net revenue by 2.0%, accompanied by a 2.2% drop in volumes. On a like-for-like basis, revenue dipped by 1.2%, mainly due to a sharp 15% decrease in nutrition revenue - attributed to the slowdown in North America following a remarkable surge in infant formula sales in the previous year. This decline was further exacerbated by the recent recall of their Nutramigen formula.

Company Performance Overview

In the fiscal year, the company recorded an impairment of GBP810 million at its infant formula and child nutrition business due to increased interest rates and stricter regulations in the U.S., leading to anticipated rises in business and production expenses.

Future Outlook and Strategy

Although the fourth-quarter performance was deemed unsatisfactory, Chief Executive Kris Licht remains optimistic about the future beyond 2024. The company aims for growth and development despite recent setbacks.

Uncovering Challenges

Revealing previously unnoticed trade spending errors in two Middle Eastern markets resulted in a GBP55 million reduction in net revenue. Following an investigation, misconduct by a small group of employees was identified, prompting necessary disciplinary measures. The situation is believed to be limited to these specific markets and is not expected to impact the company's long-term goals.

Growth Projections

For 2024, Reckitt anticipates mid-single-digit growth in its health and hygiene segments, driven by improved contributions from pricing, product mix, and volume. Nutrition is projected to resume growth towards the end of the year.

Strategic Initiatives

The company will continue its fixed cost optimization efforts and plans to enhance cash returns to shareholders, with the goal of doubling the returns made in 2019.

Dividend Declaration

The board has approved an interim dividend of 192.5 pence per share, signaling growth from the 183.3 pence declared in the previous year.

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