Reckitt Exceeds Quarterly Sales Estimates, Driven by Healthcare Growth

Photo : Reuters

Reckitt reported a smaller-than-expected decline in its third-quarter underlying sales, buoyed by increased consumer demand for its health products, including Nurofen painkillers and Strepsils lozenges. The consumer goods company’s shares rose by 2% in morning trading, reflecting investor optimism about improving sales volumes following a challenging year.

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Earlier in the year, Reckitt's stock price had dropped significantly due to an internal investigation into its Middle Eastern operations and ongoing litigation related to an infant nutrition product from its U.S.-based subsidiary, Mead Johnson. In July, Reckitt announced it was exploring options for its nutrition division and planned to divest a range of homecare brands by the end of 2025. This strategic pivot aims to refocus the company's efforts on healthcare and hygiene products.

During a recent call with journalists, CEO Kris Licht indicated that a review of the organization is underway, which may lead to changes in staffing levels and adjustments to organizational structures. He stated, "Surely that will result in changes to staffing levels, and certain organization structures will change."

Despite these challenges, Reckitt reported that it remains on track to meet its full-year targets. Its quarterly like-for-like net sales fell by 0.5%, outperforming analysts' predictions of a 1.7% decline, as noted in a company-supplied poll. Additionally, the price/mix—a metric that measures how much Reckitt charges for its products—rose by 0.9%, while volumes experienced a 1.4% decline, largely due to setbacks in the nutrition business.

The nutrition segment faced a significant 14% drop in sales volume, attributed to the company’s previous high market shares during a U.S. competitor's supply shortage and the impact of a tornado that struck a third-party warehouse in Mount Vernon. This tornado resulted in damage to both finished products and raw materials, affecting the short-term supply to customers in the third quarter.

Investment analysts noted that Reckitt's performance was "less bad than feared." However, concerns remain regarding ongoing litigation and the uncertain outcomes of the corporate restructuring expected to be finalized by the end of 2025.

Oct. 23, 2024 2:34 p.m. 461

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