UPDATE: Reckitt Benckiser Leaves Full-Year Targets Unchanged

26th Jul 2010 08:39

(Adds comment from the CEO, CFO and an analyst) By Michael Carolan Of DOW JONES NEWSWIRES LONDON (Dow Jones)--Reckitt Benckiser PLC (RB.LN) posted further growth in both sales and profit Monday, despite declining sales in Europe, but failed to issue its customary upgrade to full-year guidance. The household and personal care products group said its operating profit in the three months to June 30 was GBP503 million, up from GBP414 million a year ago and slightly ahead of market expectations. The company reiterated its full-year targets for the core business of 5% sales growth and 10% operating profit growth. The targets assume no change in current market conditions. In recent years, Reckitt has regularly beaten its sales and profit targets and raised its full-year guidance in quarterly reports. The lack of upgrades and a poor performance in Europe disappointed the market and by 0722 GMT, the company's shares were down 36 pence, or 1.1%, at 3300 pence in a higher London market. The company's shares have risen more than 15% in the last year as it continued to shrug off the effects of the consumer downturn. Second-quarter sales grew 6% to GBP2.06 billion. Stripping out acquisitions, and the contribution of the group's pharmaceutical division, core organic sales were up 5%, in line with its full-year target. The company now treats its pharma division as non-core following the expiry of the U.S. orphan drug status for its heroin dependency treatment Suboxone in October last year. Suboxone's sales are expected to plummet once a generic competitor is eventually launched. Becht said he was a little surprised at how long it was taking for generic competition to Suboxone to hit the market. He said this was a result of general delays at the U.S. Food & Drug Administration in granting approval. Until a generic does appear, Becht said he "clearly would expect some more growth" from Suboxone. Stripping out the pharma division, operating profit was 10% higher than last year. "For the total group, we are confident of delivering another year of good growth in 2010, notwithstanding potential generic competition to Suboxone in the U.S," the company said. The slight outperformance of the core business was driven by emerging markets, with sales in Europe falling 1% and profit remaining flat. Shore Capital analyst Darren Shirley said the company is suffering from increased competition in Europe, particularly from U.S. rival Proctor & Gamble Co. (PG). Chief Executive Bart Becht said on a conference call with reporters however that the poor European performance was not a result of lost market share but was rather due to a "substantial slowdown" of the market in Europe over the last six months. "The main issue in Europe is that there is practically no market growth," he said. When Reckitt set its targets six months ago, the European market was growing at 4%, he said, "it's now closer to 1%." Market share is only "very marginally down" in areas like fabric care, where P&G has boosted its presence. Last week, Reckitt launched a GBP2.54 billion recommended bid for Durex condom maker SSL International PLC (SSL.LN). Becht refused to comment on any aspect of the SSL deal, despite criticism among analysts of the high price paid. Finance Director Colin Day did say however that the SSL deal did not mark the end of Reckitt's acquisitions and that plenty more finance could be raised if the right deal were available. -By Michael Carolan, Dow Jones Newswires; 44-20-7842-9278; [email protected] (END) Dow Jones Newswires July 26, 2010 03:39 ET (07:39 GMT)