Reckitt Restructure Sees Revenue Growth And Focus On Core Brands

Reckitt Benckiser, the FTSE 100 consumer healthcare group behind well-known brands like Dettol and Strepsils, has issued a sales outlook that falls below City forecasts. The company, headquartered in Slough, is undergoing a complex restructuring as it shifts focus towards its high-growth, high-margin powerbrands. These include prominent names such as Durex, Gaviscon, and Mucinex.

The group expects a 2 to 4 per cent like-for-like revenue growth this year from its remaining core business, with projections rising consistently to around 4 to 5 per cent from next year. Shares in the company closed up 2.1 per cent at £52.94, marking a 5 per cent increase over the past 12 months. Reckitt’s adjusted operating profit also rose 3 per cent to £3.5 billion, with group revenues climbing 1.4 per cent on a like-for-like basis, reaching £14.2 billion in 2024.

As part of its restructuring, Reckitt aims to sell its non-core homecare brands, which include household names like Cillit Bang, Mr Sheen, and Air Wick. These products represent 14 per cent of the company’s net revenue. The sale process is expected to conclude by the end of this year. Meanwhile, Reckitt is exploring opportunities for its Mead Johnson infant nutrition business, which accounts for 15 per cent of group revenue. However, potential liabilities from ongoing safety lawsuits regarding the Enfamil premature infant formula brand in the United States add complications to the process.

The company faced challenges last year from a high-profile lawsuit in Illinois. The case involved claims that Reckitt’s specialised formula caused a newborn’s death, resulting in $60 million in damages being awarded. On appeal, Reckitt awaits further outcomes but saw positive developments with a favourable verdict in a separate Missouri trial. Additionally, three U.S. public health agencies issued a joint statement asserting no definitive link between preterm formulas and necrotising enterocolitis, the disease cited in these cases.

Reckitt acquired Mead Johnson for $18 billion in 2017, forming the group’s largest and most expensive purchase. Challenges with this segment have coincided with tornado damage to a warehouse in Indiana and reduced market share following a temporary boost during shortages from rival Abbott Laboratories. This drove a 7.3 per cent year-on-year decline in the nutrition business for 2024, though Reckitt’s hygiene and health divisions saw respective growth of 4.2 per cent and 2.1 per cent over the same period.

The strategic review of Mead Johnson and planned divestment of homecare brands are steps aimed at streamlining the company towards its consumer health and hygiene portfolio. Executives believe resolving litigation issues could ease the planned exit from the underperforming nutrition division while laying stronger foundations for growth in the remaining business areas.