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Business News/ Companies / Reckitt Q4 misses forecasts as growth slows
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Reckitt Q4 misses forecasts as growth slows

Reckitt Q4 misses forecasts as growth slows

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London: Britain’s Reckitt Benckiser missed fourth-quarter earnings forecasts on Wednesday as market growth in the consumer goods industry declined and price competition sharpened, sending its shares lower in early trade.

Reckitt, which took over Durex condoms and Scholl sandals maker SSL late in 2010, said it was looking to outperform in an industry that lacks growth.

Chief executive Bart Becht was confident about 2011 saying his group would offset hefty input price rises with selective price rises and cost savings, but he is facing tough markets in Europe and North America.

“We are facing two worlds, Western Europe and North America are not showing much growth while Eastern Europe and other developing areas are growing well," he told a briefing.

The group also faces the threat of generic competition emerging for its heroin substitute drug Suboxone, the main revenue generator for its pharmaceuticals division, which accounts for nearly one quarter of group profits.

Reckitt shares fell 3.5% to 33.24 pound by 0900 GMT, to be the worst performer in the FTSE 100, after being one of the best performers in the index over the last decade.

Analyst Graham Jones at brokers Panmure Gordon described the results as mixed with pharma growth strong helped by good growth of a sublingual film version of Suboxone, offsetting a weaker than expected base business.

“24% of group operating profits in 2010 was pharma, and there obviously remains a significant risk of generic entry," Jones added.

The group, which makes Finish dishwash products, Cillit Bang cleaners and Nurofen painkillers, said fourth-quarter earnings rose 14% to 69.0p a share, below a company-compiled consensus of 73.7p and Thomson Reuters I/B/E/S consensus of 72.2p.

Its 2010 dividend rose 15% to 115 pence, in line with paying out 50% of its annual earnings to shareholders.

Reckitt expected sales to rise 4% this year and operating profit growth above that from its businesses, excluding SSL but including pharmaceuticals.

Becht said input price inflation for crude oil, plastics, palm oil and rubber was a concern and challenge but expects margins to rise in 2011 as it raises prices and cuts costs.

Becht was the best-paid chief executive in the FTSE 100 in 2009, walking away with 92 million pounds in salary and bonus thanks in large part to the strong performance of his stock options over past years.

During his 10-year tenure, the company’s shares have outperformed the FTSE 100 by over three times as well as beating its peer group.

Reckitt bought SSL in early November for 4.1 billion and then agreed to buy India’s Paras Pharmaceuticals the following month for $726 million to expand its fast-growing health and personal care business.

Reckitt’s competitors said they were suffering from commodity price rises such as Unilever last week, and earlier this week British group McBride, Europe’s biggest maker of own-brand household cleaning products for retailers.

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Published: 09 Feb 2011, 06:26 PM IST
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