Reckitt on track despite struggles in US nutrition business

Reckitt Benckiser reported marginal like-for-like net revenue growth of 0.4% for the first three quarters of 2024 on Wednesday, though it faced a slight decline of 0.5% in the third quarter.

The FTSE 100 consumer products giant said growth in the health and hygiene segments, which posted like-for-like increases of 2.8% for the year-to-date and 2.6% in the third quarter, was offset by challenges in the US nutrition business.

It said that business was affected by the continued recovery from a historic competitor supply issue, as well as the impact of a tornado at its Mount Vernon facility in July, resulting in a 17.4% drop in third quarter nutrition revenue.

Reported group net revenue fell by 3.8% for the year-to-date, impacted by foreign exchange headwinds of 3.9% and a small net impact from mergers and acquisitions.

Despite the challenges, the company said it maintained volume momentum in both its hygiene and health divisions, with sequential improvement in market share across both segments.

Hygiene, in particular, saw like-for-like revenue growth of 3.7% for the year-to-date, driven by innovation in brands such as Lysol and Finish.

Meanwhile, health revenue grew by 1.9% over the year thus far, bolstered by strong performances from brands like Durex, Dettol, and Nurofen, despite a weaker season for over-the-counter (OTC) brands due to challenging comparatives from last year’s cold and flu season.

Reckitt said its nutrition division had seen an 11.6% year-to-date revenue decline, but added that the recovery of inventories was reportedly better than expected.

Strategically, Reckitt said its refreshed global executive committee was now fully operational, adding that it was preparing for the rollout of a new operating model in January.

Progress on the divestment of the essential home business was advancing, with a leadership team in place and the company targeting an exit by the end of 2025.

Additionally, Reckitt’s £1bn share buyback programme was progressing, with £321m in shares repurchased as of mid-October.

The company said it remained on track to meet its full-year targets, expecting strong like-for-like revenue growth in the final quarter.

“Our third quarter delivery is in line with our guidance at the half year,” said chief executive officer Kris Licht.

“Health delivered sequential improvement in the quarter and hygiene delivered a solid quarter of growth despite a more competitive market backdrop in developed markets.

“Nutrition was impacted by the Mount Vernon tornado in July, which impacted sales to customers in the quarter, but to a lesser extent than we initially expected.”

Licht said the company’s categories were “resilient”, its brands “strong”, adding that it was now seeing a more balanced algorithm for growth.

“We are on track to deliver our net revenue and profit targets for 2024, with increased investment across our more competitive categories and markets, improving market share performance across our health and hygiene portfolios, and a normalising market environment in US nutrition.

“We are moving at pace on the execution of reshaping Reckitt through sharpening our portfolio, simplifying the organisation and improving shareholder returns.”

Reporting by Josh White for Sharecast.com.