Reckitt Benckiser Shares Plunge on Slow Sales, Falling Margins -- Update
20 February 2018 - 2:53AM
Dow Jones News
(Adds share price movements, forecasts and analyst note.)
By Carlo Martuscelli
Shares of Reckitt Benckiser Group PLC (RB.LN) suffered their
biggest percentage-point drop in nearly seven years after the
company reported sluggish sales growth and falling margins in
2017.
The consumer goods company said like-for-like sales were flat
for the year. Its hygiene business grew 2% in the fourth quarter
and the home division contracted 3%, both on a like-for-like basis.
This compares unfavorably with forecasts of 3.5% like-for-like
growth at the hygiene unit and flat comparable sales at the home
division, said Accendo Markets analyst Henry Croft.
The group's adjusted operating margin narrowed 70 basis points
to 27.1%, impacted by its acquisition of Mead Johnson Nutrition.
Reckitt warned that it sees some "specific factors" affecting
margins in 2018, but that it is targeting moderate operating-margin
growth in the medium term.
The company said that pretax profit increased 11% to 2.50
billion pounds ($3.51 billion) in 2017 from GBP2.25 billion the
year before. Revenue grew 21% to GBP11.51 billion, while net profit
reached GBP6.17 billion after being buoyed by the Mead acquisition,
up markedly from 2016 net profit of GBP1.83 billion.
Reckitt said revenue was positively impacted by weaker sterling,
as well as mergers-and-acquisition activity.
It guided for revenue growth of between 13% and 14% in 2018,
translating to growth of 2% to 3% on a like-for-like basis.
"Reckitt has managed to crawl over the line and make its target
of flat sales for the year, thanks to more positive final-quarter
trading," said Hargreaves Lansdown's analyst Laith Khalaf.
"However, flat sales and falling margins are not a combination that
will win many stock-market supporters."
Reckitt raised its dividend to 97.7 pence a share from 95 pence
in 2016.
Shares of Reckitt at 1519 GMT were down 6.6% to 6,132 pence.
Write to Carlo Martuscelli at carlo.martuscelli@dowjones.com
(END) Dow Jones Newswires
February 19, 2018 10:38 ET (15:38 GMT)
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