Reckitt Benckiser has upgraded forecasts for its annual sales growth as the drive to simplify the health, hygiene and nutrition multinational showed early results.
The FTSE 100 group this morning said it now expected like-for-like net revenue growth to be above 4% for core ‘powerbrands’ such as Dettol, Durex, Finish and Nurofen, compared to previous guidance of 3%.
A year ago, Reckitt unveiled a plan to offload its cleaning products portfolio and baby formula business and focus on its more lucrative brands.
On Friday, the group revealed a $4.8bn (£3.6bn) deal to sell the Essential Home business, which includes the likes of Cillit Bang, Calgon and Air Wick, to PE firm Advent International.
Reckitt, which will retain a 30% stake in the business, insisted the move was a “significant step forward” in its strategic turnaround plan.
“While there is still much work to do, the journey to fundamentally reshape Reckitt into a more efficient, world-class health and hygiene company is well underway,” said CEO Kris Licht today.
The core portfolio increased like-for-like net revenues by 4.2% to £5bn in the six months to 30 June, while the offloaded Essential Home business registered a 6.5% decline to £911m and the Mead Johnson baby formula business fell 3.3% to £1.1bn.
“This is a strong first-half performance with core Reckitt growing like-for-like net revenues 4.2%, demonstrating the strength of our power brands and the positive impact of the strategy we launched a year ago,” Licht added.
“We have taken a significant step to unlocking value with the announced divestment of Essential Home. Our new operating structure has sharpened our focus, delivering improved execution with continued market share gains and volume momentum.
“We delivered excellent growth in emerging markets and navigated a challenging consumer environment in our developed markets.
“Our ‘Fuel for Growth’ programme is ahead of plan, reducing fixed costs, fuelling brand investments and expanding our platform for sustained margin and earnings growth.”
Adjusted operating profits increased 1.8% to £1.7bn in the half, but after currency headwinds of 5.2% and one-off costs for its restructuring programme, operating profits were down 10.7% to £1.5bn.
In the second quarter, core Reckitt volumes jumped 2%, up from 0.3% growth in Q1, while group volumes improved from a 1.9% decline in the first three months of the year to down just 0.2% in Q2.
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