Reckitt Takes $6.5 Billion Charge on Baby-Food Deal -- WSJ

Date : 02/28/2020 @ 8:02AM
Source : Dow Jones News
Stock : Reckitt Benckiser PLC (PK) (RBGLY)
Quote : 15.77  0.09 (0.57%) @ 6:57PM

Reckitt Takes $6.5 Billion Charge on Baby-Food Deal -- WSJ

Reckitt Benckiser (PK) (USOTC:RBGLY)
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By Matteo Castia 

This article is being republished as part of our daily reproduction of articles that also appeared in the U.S. print edition of The Wall Street Journal (February 28, 2020).

Consumer goods giant Reckitt Benckiser Group PLC said Thursday it is taking a GBP5.04 billion, or roughly $6.5 billion, impairment related to a 2017 deal to buy baby formula producer Mead Johnson, after weak sales and lower prospects for the unit in China.

Reckitt, which sells Scholl foot-care products and Durex condoms, also recorded a charge of $1.4 billion related to its opioid-drug settlement last year with the U.S. Department of Justice.

The company posted a net loss of GBP3.68 billion for 2019, compared with a profit of GBP2.16 billion a year earlier. Results also included an GBP898 million charge from discontinuing operations.

Shares were up more than 2% after the company projected healthy profit margins and revenue growth going forward. RBC Capital Markets said that the group's plan for margins in the mid-20s and revenue growth in the mid-single digits, over the medium term, seems optimistic. "On balance, though, we think the plan looks sensible," said analyst James Edwardes Jones.

Revenue for the year rose 2% year-over-year to GBP12.85 billion, while on a like-for-like basis sales were up 0.8%. This compares with guidance of zero to 2% growth given last October.

"We ended 2019 broadly in line with our expectations for net revenue growth and adjusted operating profit from October," Chief Executive Laxman Narasimhan said.

In 2017, Reckitt agreed to buy Mead Johnson for $16.6 billion, greatly expanding its footprint in China. Reckitt said at the time of the acquisition it expected medium-term growth for the business of between 3% and 5%. But on Thursday, the company said the Chinese market disappointed, especially over the past year. It cited what it believes will be a sustained lower birthrate that would impact further growth. It also cited new regulatory barriers and competitors there.

Last year, Reckitt agreed to pay up to $1.4 billion to settle a U.S. investigation into whether its former pharmaceuticals unit organized a multibillion-dollar fraud to drive up sales of an opioid-addiction treatment.

Reckitt struck a deal with the Justice Department and the Federal Trade Commission to resolve long-running probes into the sales and marketing of Suboxone Film, a prescription medicine that dissolves in the mouth. It is made by Indivior PLC, a former Reckitt unit that became a stand-alone company in 2014. Suboxone, whose active ingredient is an opioid, is used to treat addiction to other drugs such as heroin.

--Philip Waller contributed to this article.


(END) Dow Jones Newswires

February 28, 2020 02:47 ET (07:47 GMT)

Copyright (c) 2020 Dow Jones & Company, Inc.

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