Reckitt sees good 2010 growth as Q4 meets forecasts

Reckitt sees good 2010 growth as Q4 meets forecasts
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First Published: Wed, Feb 10 2010. 03 00 PM IST
Updated: Wed, Feb 10 2010. 03 00 PM IST
London: Consumer goods group Reckitt Benckiser expects good growth in its core business this year to compensate for an expected loss of earnings from its Suboxone drug, after fourth quarter profits rose as expected.
The British firm said it expected sales to rise 5% and operating profit 10% this year, excluding the pharmaceuticals unit whose main revenue generator is Suboxone, after what chief executive Bart Becht called a very good" 2009.
Core sales at the group, which makes Finish dishwash products, Cillit Bang cleaners and Nurofen painkillers, grew 6% in 2009, driven by growth in developing markets, North America, Australia and New Zealand while Europe will remain difficult.
“Our 5% target is still challenging given the level of consumer confidence, but we believe this is achievable. Based on the current market outlook, we are confident of achieving continued good growth in 2010,” Becht told a conference call.
Reckitt shares rose 2.1% to £32 by 0925 GMT, having marginally underperformed rivals so far in 2010 on concerns about Suboxone, a heroin substitute drug for which the firm lost its exclusive licence in October.
“With forecasts already reflecting the Suboxone hit, and with good progress likely to continue in the underlying business we reiterate our buy recommendation,” said analyst Graham Jones at brokers Panmure Gordon.
The group reported fourth-quarter net profit of £448 million ($698 million), in line with consensus forecasts.
Underlying sales rose 10% at constant currencies compared with a consensus of 6.3%.
Outperformance
Reckitt has outperformed its rivals Unilever and Procter & Gamble over the 10 years since its creation in December 1999 due to a string of innovative products backed by heavy marketing and supported by heavy cost-cutting, and Suboxone has helped boosted that growth.
Reckitt now expects generic rivals to the drug to emerge and has warned 80% of Suboxone’s US profits — which make up 18% of group profits — will be lost following the launch of competition.
Becht said there was no news on generics, but when launched the effect would be seen within weeks. Its less prominent Subutex drug — also a heroin substitute — saw sales fall 60% three months after a generic launch.
Reckitt, which also makes Lysol disinfectants, Vanish and Woolite fabric cleaners and Airwick air fresheners, said its 2009 dividend rose 25% to 100 pence a share as it moved to pay 50% of its 194.7p of earnings back to shareholders.
Reckitt shares trade on 16.4-times forecast 2010 earnings, well ahead of Unilever on 14.7 and Procter & Gamble on 14.7, but close to third rival Colgate Palmolive on 16.3.
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First Published: Wed, Feb 10 2010. 03 00 PM IST