Reckitt Takes $6.5 Billion Charge on Baby-Food Deal -- WSJ
February 28 2020 - 3:02AM
Dow Jones News
By Matteo Castia
This article is being republished as part of our daily
reproduction of WSJ.com 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)
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