23 October 2024
If you are covering Reckitt Benckiser’s latest financial results, please find below a comment from Chris Beckett, head of equity research at Quilter Cheviot:
“Reckitt has reported a better than expected set of sales numbers in the third quarter, as the impact of a US tornado in July had less impact on their nutrition business than feared. Overall full year guidance was reiterated and operational separation of the business remains on track.
“While the numbers were better than expected, sales still fell 0.5% as a result of less volume. Management is keen to stress that this is carry over and innovation led pricing rather than general inflation. Meanwhile sales are growing well in developing markets (+5%) with contributions from Greater China, Latin America and South Asia. The core health and hygiene business combined are broadly performing in line with expectations. The Finish dishwasher brand in Europe is benefiting from consumers trading up to more expensive variants, while key health brands, such as Nurofen, Dettol and Gaviscon performed strongly offsetting a slow end to the cold and flu season.
“The operational separation of the business (on track for the end of the year) and the potential sale of the Nutrition and non-core brands continues to make Reckitt an uncertain investment and contributes some of the discount to peers. However, the larger overhang is due to ongoing Necrotising Enterocolitis (NEC) litigation. The company is appealing the initial award against them and a second trial in St Louis is ongoing. Management cite support from three US Federal agencies for the continued use of infant formula for premature infants.
“While Reckitt currently trades at a fairly discounted valuation compared to history and peers, much of this is deserved given the litigation uncertainty raises the risk profile of the stock, along with the transition currently being undertaken.”
