TIDMRB.
RNS Number : 5946F
Reckitt Benckiser Group PLC
30 October 2018
30 October 2018
ON TRACK FOR FULL-YEAR TARGETS
Q3 2018 Trading Update
Q3 YTD 2018
GBPm LFL(1) Reported GBPm Pro-forma(1) LFL(1) Reported
IFCN 659 -6% -8% 2,100 +3% -5% n/m
Rest of Health 1,232 +4% 0% 3,594 +2% +2% -3%
---------------- ------ ------- --------- ------ ------------- ------- ---------
Total Health 1,891 0% -3% 5,694 +3% +1% +25%
Hygiene Home 1,229 +4% 0% 3,564 +4% +4% -2%
------ ------- --------- ------ ------------- ------- ---------
Total 3,120 +2% -2% 9,258 +3% +2% +13%
------ ------- --------- ------ ------------- ------- ---------
Highlights
* LFL growth in Q3 of +2%. Continued momentum under RB
2.0, with growth in base Health and Hygiene Home
businesses of +4% LFL. Total growth was negatively
impacted by -2% (GBP70m) from a temporary
manufacturing disruption at our European IFCN plant.
* LFL performance in Total Health was flat, comprising
IFCN of -6% and Rest of Health of +4% driven by
continued strong growth in OTC and improving trends
in Wellness and Health Hygiene brands.
* LFL growth in Hygiene Home of +4%. Continued momentum
with strong performances from Finish, Air Wick and
Lysol in ENA and Harpic in DvM.
* We remain on track for the full year net revenue
target of +14-15% (total constant), implying LFL
revenue growth at the upper end of +2-3%.
Commenting on these results, Rakesh Kapoor, Chief Executive
Officer, said:
"Q3 was another quarter of progress, with continued momentum and
growth under our new RB 2.0 organisational structure. Our base
Health and Hygiene Home businesses each delivered +4% LFL growth in
the quarter, against a backdrop of mixed market conditions,
demonstrating the strength of our brands, innovation success and
early signs of RB 2.0 benefits. Although encouraging, we remain
focused on further improving our growth trajectory.
Our IFCN business delivered a strong performance in North
America, with the launch of our recent innovation, Enfamil
NeuroPro, and progress in new channels. We also remain firmly on
track to deliver the medium-term targets we communicated at the
time of the MJN acquisition.
The quarter was impacted by a temporary manufacturing disruption
at our European IFCN plant. This affected sales to a number of
markets, occurred during a period of unusually high market growth
and before our new facilities in Australia were operational and
able to diversify our supply chain. The disruption was resolved and
supply restored before the end of the quarter, although we do
expect some residual impact in Q4 and into 2019.
We have sufficient momentum and progress in our business to
absorb this temporary manufacturing disruption. We therefore
reiterate our 2018 target of +14-15% total net revenue growth at
constant rates."
1. Refer to basis of preparation on P6. Unless otherwise stated,
all growth rates are expressed in constant currency. Composition of
geographic regions within Appendix unchanged from Q2.
Operating Segment Review
Health 62% of Net revenue
By Category Q3 YTD 2018
GBPm LFL(1) Reported GBPm Pro-forma(1) LFL(1) Reported
IFCN 659 -6% -8% 2,100 +3% -5% n/m
OTC 515 +6% +2% 1,426 +6% +6% +2%
Other 717 +2% -2% 2,168 0% 0% -5%
Total 1,891 0% -3% 5,694 +3% +1% +25%
By Geography Q3 YTD 2018
GBPm LFL(1) Reported GBPm Pro-forma(1) LFL(1) Reported
North America 498 +6% +5% 1,347 +4% +4% +38%
Europe /
ANZ 490 -4% -7% 1,509 -3% -3% -2%
DvM 903 -1% -6% 2,838 +5% +2% +40%
Total 1,891 0% -3% 5,694 +3% +1% +25%
-- Growth in the consumer health markets we serve remains in the
upper half of our +3-5% medium term expectations. As previously
flagged, we have more to do to deliver sustained, top of market
level financial performance.
-- Q3 total Net Revenue was GBP1,891m, with LFL growth of +4% in
the base health business with growth coming equally from volume and
price mix. LFL growth was flat for the BU as a whole due to the
impact of the IFCN temporary manufacturing disruption. Volume was
-1% and +1% price/mix.
IFCN (Infant Nutrition)
-- The IFCN segment delivered a -6% LFL decline in Q3, and a YTD pro-forma growth of +3%.
-- During the quarter we experienced a temporary disruption in
manufacturing at our European IFCN plant. This impacted the supply
of certain products to a number of our markets outside North
America, resulting in approximately GBP70m lower revenue than
expected in the quarter.
-- The IFCN business currently operates through a concentrated
supply chain, with markets relying on a small number of
manufacturing facilities that are licensed to produce for that
market. Significant investment has been made to increase capacity
within our supply chain, including new facilities in Australia,
which will become fully operational before the end of 2018. The
current sourcing arrangements, combined with strong market growth
in parts of Asia, has caused us to operate with unusually low
levels of inventory at our warehouses. This confluence of events
has led to a material impact to the IFCN revenue from the
manufacturing disruption.
-- Sales to consumers were less impacted in the quarter, as
inventory within the channel helped mitigate the supply disruption
from the factory. We expect, however, that some consumers will not
be able to purchase some MJN products beyond Q3 while channel
restocking takes place. We are working to minimize this impact as
on-shelf availability is restored.
-- Underlying trends in the category and in-market performance
remain strong. YTD market growth is at the upper end of +3-5%
although we see growth moderating in China due to the reduction in
birth rates.
-- North America revenue continues to improve. We are seeing
better share performance with innovation (Enfamil NeuroPro) and
success in new channels.
-- We see significant value-creation opportunities within this
category and remain firmly on track to deliver the synergies and
other objectives which we communicated at the time of our
acquisition of MJN.
OTC (Over the Counter / health relief products)
-- The OTC segment delivered LFL growth of +6% in the quarter
and a YTD LFL performance of +6%.
-- We saw broad-based growth across our powerbrands. Recent
innovations like our Nurofen medicated plaster, providing 24-hour
relief in a single patch, are performing well. Many regional brands
such as Lemsip (UK), Delsym (US), Tempra (Mexico) also saw good
growth.
-- Mucinex had a solid quarter driven by sell-in ahead of the
cold and flu season in the Northern Hemisphere in Q4, with the
recent Mucinex Fast Max Cold & Flu "All in One" innovation
helping to mitigate the impact of share loss in our 12-hour cough
and congestion range from the re-entry of private label
variants.
Other Health (Wellness and Health Hygiene brands)
-- Our VMS brands delivered strong growth in the quarter, behind
Airborne - new formats, improved in-store execution and channel
expansion, and Move Free following the launch of Move Free Ultra
2in1 for faster comfort and long term joint support.
-- Dettol had a strong quarter in India with the Clean India
campaign continuing to drive penetration. Growth was also strong in
China. However the Middle East, whilst no longer a significant
drag, remains weak.
-- Durex in China delivered strong growth behind the relaunch of
our Featherlite ultra-thin condoms and pleasure gels.
Geographic
-- North America delivered a strong quarter due in particular to
the good performances of IFCN, Mucinex and our VMS brands.
-- Europe remains weak due in particular to the IFCN temporary production disruption.
-- DvM delivered strong, high-single-digit growth in the base
health business in Q3, which was more than offset by declines in
IFCN, particularly in Asia.
Hygiene Home 38% of Net revenue
By Geography Q3 YTD 2018
GBPm LFL(1) Reported GBPm LFL(1) Reported
North America 406 +5% +4% 1,102 +6% 0%
Europe /
ANZ 538 0% -4% 1,589 0% -1%
DvM 285 +12% -1% 873 +8% -5%
Total 1,229 +4% 0% 3,564 +4% -2%
-- Category growth remains at the lower end of our medium-term
expectations of +2-3% with a continued challenging pricing
environment in developed markets. We have made modest share
gains.
-- Q3 total Net Revenue was GBP1,229m, with LFL growth of +4%,
comprising +2% volume and +2% price/mix. Pricing in developed
markets remains tough, although with some slight signs of
improvement during the quarter. We continue to see pricing in
emerging markets.
-- Our performance in the quarter reflected some slight
outperformance versus the market with improved focus and execution
under the RB 2.0 operating structure, and a small positive impact
from lapping last year's cyber-attack.
-- North America delivered +5% LFL growth in the quarter, with
strong performances from Lysol as well as innovation-led growth in
Finish and Air Wick.
-- The performance in Europe reflects the difficult pricing
environment across the continent and also macro challenges in
Turkey.
-- DvM delivered another quarter of double-digit growth. Brazil
had a good quarter with strong growth in both Veja and Vanish.
India also had a strong quarter with Harpic following the
introduction of our Harpic Swachh Bharat (Clean India) pack. This
new format is aimed at making Harpic affordable to every Indian
household.
Financial Position
There has been no material change to the financial position of
the Group since the published Annual Report and Financial
Statements 2017.
Other Matters
Korea HS Issue
The HS issue in South Korea is a tragic event, with many parties
involved. We continue to make both public and personal apologies to
victims.
In August 2018, Oxy RB extended its compensation plan for the
Oxy RB Category I & II users categorised to date in Round 4.
The South Korean government opened Round 4 to new applicants on 25
April 2016 for an indefinite period and continues to receive
applications. Since our July release a further 152 applications
have been received, but no further HS lung injury categorisations
have been made. The South Korean government's lung injury
categorisation is outlined in the table below.
Round Total Applicants Category Cat I&II Oxy RB Oxy RB Assessment
applicants Assessed I & II percentage users single completion
- Category users - (expected)
I & II(2) Category
I & II(3)
1 361 361 174 48% 140 57 Completed
------------ ----------- --------- ------------ ------------ ----------- ------------
2 169 169 53 31% 46 24 Completed
------------ ----------- --------- ------------ ------------ ----------- ------------
3 752 669 84 13% 76 27 Completed
------------ ----------- --------- ------------ ------------ ----------- ------------
December
4 4,897(1) 4,054 157 4% 143 93 18
------------ ----------- --------- ------------ ------------ ----------- ------------
1. Round 4 remains open to applicants. The number of applicants
shown in the table are the applicants set out on the KEITI website
as at 26 October 2018. This includes a number of asthma-only
applicants.
2. Both sole Oxy RB users and users of multiple manufacturers' products, including Oxy RB.
3. Sole Oxy RB users.
From 23 July, the South Korean Ministry of Environment allowed
HS users to apply for asthma-only categorisation as part of Round
4. This applies to HS users who think they have suffered from
asthma only as a result of HS exposure. Of the 4,329 HS users
assessed for asthma to date, 195 have been categorised as
victims.
Indivior / RB Pharma-related matters
The Group remains involved in ongoing investigations by the US
Department of Justice ("DoJ") and the US Federal Trade commission
and related litigation proceedings in the US arising from certain
matters relating to the RB Pharmaceuticals ("RBP") business prior
to its demerger in December 2014 to form Indivior PLC and may incur
liabilities in relation to such matters.
There have been no material changes since the 2018 interim
statement. Details of existing provisions and contingent
liabilities relating to the both the HS issue and Indivior / RB
Pharma related matters can be found in our Annual Report and
Financial Statements 2017.
2018 Net Revenue Target
We reiterate our 2018 Net revenue target of +14-15% total net
revenue growth at constant rates, implying LFL revenue growth at
the upper end of +2-3%.
Basis of preparation and reconciliation of LFL and Pro-forma
measures
Basis of preparation and definitions
Like-for-Like ("LFL") growth excludes the impact on Net Revenue
of changes in exchange rates, acquisitions, disposals and
discontinued operations. MJN was acquired on 15 June 2017 and
therefore the results of IFCN are included within RB's LFL results
from 15 June 2018. For Q3, this means that IFCN is included for a
full quarter in both 2018 and 2017 and pro-forma measures are not
applicable for Q3 2018. LFL growth also excludes Venezuela.
Pro-forma growth, which is only relevant for YTD measures
included herein, excludes the impact of changes in exchange rates,
acquisitions, disposals and discontinued operations. It includes
the results of MJN for the entire comparative period. Pro-forma
growth also excludes Venezuela.
Constant exchange rate adjusts the actual consolidated results
such that the foreign currency conversion uses the same exchange
rates as were applied in the prior year.
On 1 January 2018, the Group adopted IFRS 15 Revenue from
Contracts with Customers and has restated Q3 2017 comparatives
accordingly. The impact of adopting IFRS 15 reduced reported Q3
2017 net revenue by GBP17m.
There is no impact from net M&A or from India GST in Q3.
Bridge from Q3 LFL to Reported growth
Q3 2018 LFL % Exchange Reported
% %
IFCN -6% -2% -8%
Rest of Health +4% -4% 0%
---------------- ------ --------- ---------
Total Health 0% -3% -3%
Hygiene Home +4% -5% 0%
------ --------- ---------
Total +2% -4% -2%
------ --------- ---------
Bridge from YTD pro-forma growth to Reported growth
YTD Pro-forma LFL GST Net M&A Exchange Reported
(all growth rate %)
IFCN +3% -5% 0% +162% -9% +148%
Rest of Health +2% +2% 0% 0% -5% -3%
---------------------- ---------- ---- ---- -------- --------- ---------
Total Health +3% +1% 0% +30% -6% +25%
Hygiene Home +4% +4% 0% 0% -6% -2%
Total +3% +2% 0% +17% -6% +13%
Note: due to rounding, the tables above will not always
cast.
For further information, please contact:
RB +44 (0)1753 217800
Richard Joyce
SVP, Investor Relations
Patty O'Hayer
Director, External Relations and Government Affairs
Finsbury +44 (0)20 7404 5959
Faeth Birch
Cautionary note concerning forward-looking statements
This announcement contains statements with respect to the
financial condition, results of operations and business of RB (the
"Group") and certain of the plans and objectives of the Group that
are forward-looking statements. Words such as "intends', 'targets',
or the negative of these terms and other similar expressions of
future performance or results, and their negatives, are intended to
identify such forward-looking statements. In particular, all
statements that express forecasts, expectations and projections
with respect to future matters, including targets for net revenue,
operating margin and cost efficiency, are forward-looking
statements. Such statements are not historical facts, nor are they
guarantees of future performance.
By their nature, forward-looking statements involve risk and
uncertainty because they relate to events and depend on
circumstances that will occur in the future. There are a number of
factors that could cause actual results and developments to differ
materially from those expressed or implied by these forward-looking
statements, including many factors outside the Group's control.
Among other risks and uncertainties, the material or principal
factors which could cause actual results to differ materially are:
the general economic, business, political and social conditions in
the key markets in which the Group operates; the ability of the
Group to manage regulatory, tax and legal matters, including
changes thereto; the reliability of the Group's technological
infrastructure or that of third parties on which the Group relies;
interruptions in the Group's supply chain and disruptions to its
production facilities; the reputation of the Group's global brands;
and the recruitment and retention of key management.
These forward-looking statements speak only as of the date of
this announcement. Except as required by any applicable law or
regulation, the Group expressly disclaims any obligation or
undertaking to release publicly any updates or revisions to any
forward-looking statements contained herein to reflect any change
in the Group's expectations with regard thereto or any change in
events, conditions or circumstances on which any such statement is
based.
LEI: 5493003JFSMOJG48V108
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END
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