Consumer-goods company faces challenges with infant formula business
- Reckitt Benckiser profit falls and sales miss expectations
- Shares drop 8.6% to lowest closing price in 21 years
- Pretax profit for 2023 is £2.40 billion, down from £3.07 billion in the previous year
- Adjusted operating profit slips to £3.37 billion from £3.44 billion
- Revenue rises to £14.61 billion, falling short of estimated £14.75 billion
- Net revenue growth on a like-for-like basis is 3.5%
- Fourth-quarter net revenue declines by 2.0%
- Impairment of £810 million booked at infant formula and child nutrition business
- Understatement of trade spending in two Middle Eastern markets dents net revenue by £55 million
- Reckitt expects mid-single-digit growth in health and hygiene divisions for 2024
Reckitt Benckiser, the consumer-goods company known for brands like Dettol, Harpic, and Durex, reported a decline in profit and missed market expectations for sales. The company attributed this to one-off impairments at its infant formula business. Shares dropped 8.6%, reaching their lowest closing price in 21 years. In 2023, Reckitt Benckiser’s pretax profit was £2.40 billion, down from £3.07 billion the previous year. Adjusted operating profit also slipped to £3.37 billion from £3.44 billion. Although revenue rose to £14.61 billion, it fell short of the estimated £14.75 billion. Net revenue growth on a like-for-like basis was 3.5%, in line with the company’s guidance range of 3% to 5%. However, fourth-quarter net revenue declined by 2.0%, with volumes falling 2.2%. This was mainly due to a 15% decrease in nutrition revenue, caused by the North America business lapping the previous year’s strong sales of infant formula and the recent recall of its Nutramigen formula. Reckitt Benckiser also booked an impairment of £810 million at its infant formula and child nutrition business. This was a result of higher interest rates and tighter regulations in the U.S., which are expected to increase business and production costs. The company faced another setback with an understatement of trade spending in two Middle Eastern markets, which unexpectedly reduced net revenue by £55 million. Reckitt Benckiser has taken disciplinary action against a small group of employees who acted inappropriately, and it believes this incident is isolated and will not impact its 2024 outlook and medium-term goals. Looking ahead, Reckitt Benckiser expects mid-single-digit growth in its health and hygiene divisions for 2024, driven by a more balanced contribution from price, mix, and volume. It also anticipates that nutrition will return to growth later in the year. The company plans to advance its fixed cost optimization program and increase cash returns to shareholders, aiming to double the amount returned in 2019. In summary, Reckitt Benckiser’s sales fell short of expectations, and its profit declined due to impairments in its infant formula business. The company is taking steps to address these challenges and is confident about its outlook for 2024 and beyond.
Factuality Level: 8
Factuality Justification: The article provides a detailed overview of Reckitt Benckiser’s financial performance, including profit, revenue, and impairments. It also includes statements from the company’s CEO and outlines future expectations. The information is presented in a straightforward and factual manner without sensationalism or bias.
Noise Level: 3
Noise Justification: The article provides a detailed overview of Reckitt Benckiser’s financial performance, including profit, revenue, and impairments. It also mentions specific reasons for the decline in profit and sales, such as one-off impairments in the infant formula business, decline in fourth-quarter net revenue, and an understatement of trade spending in two Middle Eastern markets. The article includes quotes from the company’s Chief Executive regarding the performance and outlook for 2024. Overall, the article stays on topic, supports its claims with data, and provides insights into the company’s future plans.
Financial Relevance: Yes
Financial Markets Impacted: Reckitt Benckiser
Presence Of Extreme Event: No
Nature Of Extreme Event: No
Impact Rating Of The Extreme Event: No
Rating Justification: The article pertains to financial topics as it discusses the financial performance of Reckitt Benckiser, a consumer-goods company. The company’s profit fell and sales missed market expectations, leading to a decrease in share price. However, there is no mention of any extreme event.
Public Companies: Reckitt Benckiser (N/A)
Key People: Kris Licht (Chief Executive)
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