Reckitt will consider options for its troubled nutrition business and offload a portfolio of homecare brands by the end of 2025, the company said on Wednesday.
The strategic update overshadowed Reckitt’s decision to lower its 2024 sales growth forecast.
Reckitt missed like-for-like net sales growth expectations for the second quarter, and now expects like-for-like revenue growth of 1-3% for the full year, down from its previous forecast of a 2-4% rise.
The company blamed supply disruptions at its infant formula business after a tornado damaged a third-party warehouse in the United States.
Reckitt’s like-for-like revenue in the quarter was flat, against the 0.1% growth analysts had expected in a company-provided consensus.
Sales volumes declined 2.2% – more than the 1.5% drop expected.
Reckitt will launch a share buyback of up to £1 billion and increase its interim dividend, it said.
Mead Johnson
The Air Wick owner’s homecare portfolio achieved sales of around £1.9 billion last year, but the company no longer considers it a core business.
The British consumer goods firm had also been under pressure from shareholders to consider a sale of its Mead Johnson nutrition business, which sells baby formula products.
In March, an Illinois jury ordered Mead Johnson to pay $60 million to the mother of a premature baby who died of an intestinal disease after being fed the company’s Enfamil baby formula.
The company subsequently said that many cases had been filed against baby formula makers in general, and it was unclear how many directly related to its Enfamil product.
Investors
Investors reacted positively to the news that Reckitt is considering options for the business, sending its shares up more than 4% in early trading.
The stock was last up 0.6%.
Richard Saldanha, a portfolio manager at Aviva, said, “This could potentially remove another overhang given this has been a rather problematic part of the business.”
The chief executive of Reckitt Kris Licht did not rule out a sale of the nutrition business while litigation is ongoing.
In a call with investors to discuss the company’s first half earnings, Licht said, “I would not rule that our as a possibility.
“I would also not say that there’s any certainty in that.”
Jack Martin, an investment manager at Oberon Investments, welcomed the decision to sell the homecare brands department.
Martin said, “The issue now turns to whether they can do that at an attractive valuation and whether the proceeds can be reinvested into brands that offer long term growth opportunities effectively.”
Reckitt wants to focus on what it calls its powerbrands, including Strepsils throat lozenges, Nurofen pain relief products, Dettol disinfectant, Finish dishwater tablets and Durex condoms.
Saldanha backed that plan, saying, “It certainly makes sense in our view for them to focus on allocating capital to these brands to continue to drive further growth.”
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