Reckitt Benckiser unveils new cost cuts to sustain growth

It will mainly seek to clamp down on so-called indirect spending such as travel budgets and office supplies

Matthew Boyle
Published11 Feb 2015, 06:35 PM IST
In his fourth year as CEO, Rakesh Kapoor is seeking to nail down improvements in profit margins.  <br />
In his fourth year as CEO, Rakesh Kapoor is seeking to nail down improvements in profit margins.

London: Reckitt Benckiser Group Plc., the maker of Vanish laundry detergents, unveiled a plan to cut costs by as much as $229 million a year as CEO Rakesh Kapoor seeks to maintain growth amid tough market conditions.

Dubbed Supercharge, the project will save at least 100 million pounds a year at a one-time cost of 200 million pounds, the company said on Wednesday. Reckitt Benckiser also reported quarterly sales that beat estimates and set goals for increased revenue and profitability in 2015.

In his fourth year as CEO, Kapoor is seeking to nail down improvements in profit margins brought about by a shift toward more-profitable products, price increases and cost reductions. The Supercharge program will mainly seek to clamp down on so-called indirect spending such as travel budgets and office supplies, and will help the company towards a target of “moderate to nice” margin expansion this year, he said.

“An impressive showing,” Jeff Stent, an analyst at Exane BNP Paribas, said of the earnings report. “We suspect that consensus will likely increase by around 3%.”

Reckitt Benckiser rose as much as 5.3% in early London trading, the steepest intraday gain since October 2013. The shares were up 4.5% at 5,840 pence as of 8:10am.

Supercharge will target 15 areas of indirect spending, according to Kapoor, who from now on will fly coach on any flight under six hours. The program will include an unspecified amount of job cuts, the CEO said on a conference call, but won’t affect the marketing budget, which last year declined when measured as a percentage of net revenue to 12.9%.

‘Leaner, Faster’

The project will also consolidate the company from three to two geographic units, with Russia, Israel and Australia joining the Europe and North America segment and all emerging markets grouped together into a new entity dubbed “DVM.” Kapoor said the changes will produce a “leaner, faster” company where “decisions are made once, not twice.”

Reckitt Benckiser reported a 5% increase in fourth-quarter sales on a so-called like-for-like basis, excluding pharmaceutical sales, beating the 4% median estimate of 15 surveyed analysts surveyed. Bloomberg

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