TIDMRB.
RNS Number : 9198C
Reckitt Benckiser Group PLC
21 April 2017
21 April 2017
In line with expectations
Trading Update
Q1 2017 GBP'm Like-for-like* Net M&A Exchange Reported
--------------- ------ --------------- -------- --------- ---------
North America 631 - - +16% +16%
Rest of
ENA 1,038 -3% - +13% +9%
------ --------------- -------- --------- ---------
Total ENA 1,669 -2% - +14% +12%
DvM 869 +4% +1% +16% +21%
Food 105 +3% - +16% +19%
--------------- ------ --------------- -------- --------- ---------
Total 2,643 - - +15% +15%
--------------- ------ --------------- -------- --------- ---------
Health 904 - +1% +14% +15%
Hygiene 1,124 +3% - +15% +18%
Home 458 -4% - +15% +11%
Portfolio
(incl Food) 157 -6% - +13% +7%
--------------- ------ --------------- -------- --------- ---------
Total 2,643 - - +15% +15%
--------------- ------ --------------- -------- --------- ---------
Highlights: Q1 (at constant rates)
-- Q1 in line with expectations.
-- Continued strong performance in Health led by Mucinex and
Durex. Growth was offset by headwind in Scholl / Amopé, which also
impacted ENA performance.
-- Home and Portfolio categories, and DvM, negatively impacted by Korea HS issue.
-- Growth rates set to improve through the year, and we are on
track for our full year net revenue target of +3% LFL*.
-- Mead Johnson acquisition remains on track for completion by
the end of Q3. Strategic review of the Food business commenced.
Commenting on these results, Rakesh Kapoor, Chief Executive
Officer, said:
"Our Q1 results are in line with expectations as macro
conditions remain challenging. Against this backdrop our underlying
business remains strong. We delivered continued outperformance in
consumer health and good growth in DvM, offset by previously
flagged headwinds, which will persist during the first half. I
expect our growth trajectory to improve as we progress through the
year and we remain on track to achieve our full year net revenue
target of +3% LFL growth*.
The acquisition of Mead Johnson, to create a global leader in
consumer health, is progressing well and we expect completion by
the end of Q3. We have commenced a strategic review of our Food
business as we continue our focus on portfolio optimisation. We
remain very confident that the strategic direction we are pursuing
will continue to drive shareholder value."
* Like-for-like ("LFL") growth excludes the impact of changes in
exchange rates, acquisitions, and disposals.
Operating Segment Review
ENA -2% LFL (63% of net revenue)
-- In the US, strong performances from Mucinex and our VMS
portfolio due to a combination of seasonal factors and innovation
led growth such as our Cool & Clear initiative across the
Mucinex Fast Max and Sinus Max range, and MegaRed 4in1 innovation.
Growth was offset by a significant decline in Amopé as we lap
strong sell-in of the Wet & Dry initiative in Q1 2016. Air Wick
had a weaker quarter due to market challenges.
-- Other ENA markets delivered a mixed performance. Russia
returned to modest growth. France, and the UK also saw positive
momentum. This growth was more than offset by declines in Germany,
Italy and ANZ predominantly due to the impact of the Wet & Dry
Express pedi.
DvM +4% LFL (33% of net revenue)
-- India delivered strong growth behind penetration gains in the
Dettol franchise and Harpic. Demonitisation had a similar negative
effect on the growth rates in India as Q4 2016.
-- China growth led by strong performance in Durex and Guilong
OTC. Africa experienced good growth, led by Dettol. Turkey and
Korea saw continued weakness due to respective geopolitical and HS
issues.
-- LATAM performance was in line with expectations. Mexico had a
good performance. Market conditions in Brazil remain
challenging.
Food +3% LFL (4% of net revenue)
-- Continued good growth, demonstrating the strength of our brands and commitment of our people.
Category Review
Health 0% LFL (34% of net revenue)
-- Strong, broad-based growth continues across our consumer
health portfolio, offset by Scholl / Amopé.
-- Scholl / Amopé franchise continues to develop with launches
in compression hosiery and gelActiv insoles. The negative impact
from lapping the Wet & Dry Express pedi sell-in and launch last
year had a meaningful impact on the Health category's performance
in the quarter.
-- Strong growth in Mucinex due to a combination of higher
incidence of cold and flu, and good performance from the recent
launch of our Cool & Clear innovation across the Fast Max and
Sinus Max range.
-- Good growth in the Durex / K-Y franchise driven by innovation
(K-Y Duration spray and Durex Invisible in China). Gaviscon and
Strepsils also saw good growth.
-- Strong growth in our health nutrition VMS brands, led by a
combination of innovations such as Megared 4in1, in-store
initiatives, and Move Free sales in China.
Hygiene +3% LFL (43% of net revenue)
-- Growth was led by our hygiene health brand of Dettol. In DvM
we had the successful launch of our new Dettol Deep Cleanse soap.
We also saw continued penetration gains from the Banega Swachh
initiative in India, and similar programmes in parts of Africa.
-- Veet had an excellent performance in ENA with the continued
success of our recent innovation, the Sensitive Precision Hair
Trimmer.
-- Finish grew in the quarter with our Quantum relaunch
(improved cleaning performance) and continued investment in
penetration programs in emerging markets. Veja in Brazil and Harpic
in a number of emerging markets also performed well.
-- The pest category had a meaningful decline as we lapped
strong pest growth in Brazil (due to the Zika virus) from the prior
year.
Home -4% LFL (17% of net revenue)
-- AirWick saw growth in the "Rest of ENA", driven by our
recently launched Freshmatic Pure initiative, building on the
initial success of the Pure aerosol. This growth was more than
offset by weakness in the US due to challenging market
conditions.
-- Vanish grew in the "Rest of ENA" behind our recently launched
Platinum powder and gel innovation in the UK. However overall
Vanish declined in the quarter, due mainly to Korea HS issue.
Portfolio -6% LFL (6% of net revenue)
Brands
-- Solid performance in laundry detergents in ENA, in what
continues to be a challenging category. Significant declines in
Korean portfolio brands.
-- Food growth driven by both French's and Frank's Red Hot.
Other Items
Mead Johnson Acquisition
The Mead Johnson acquisition is progressing well and we continue
to expect completion by the end of Q3.
Strategic Review of the Food Division
As previously announced, we are undertaking a strategic review
of our Food business. Although it is a high-performance business
with great brands and people, it is nevertheless non-core to RB. We
will explore a range of options before reaching any decision and
will update the market when appropriate.
India GST
The Indian government is planning to implement a Goods and
Services Tax (GST) from 1 July 2017, subject to approval by the
Indian legislature. The GST will be deducted from the sales value
invoiced to customers, and replaces the multiple taxes currently
levied throughout the supply chain, which are accounted for in cost
of sales. The full year accounting impact of the move to a GST is
expected to be a reduction of c.GBP40m in Net Revenue - which we
will adjust for in our LFL Net Revenue reporting. The ongoing
impact on profit is expected to be small, though this is subject to
the detailed product classifications which are yet to be released.
In addition to these ongoing largely accounting impacts, the
implementation of GST is likely to cause some short term disruption
for the industry and for our India business as the trade adjust
their infrastructure and systems to the new GST rules.
Financial Position
There has been no material change to the financial position of
the Company since the published 2016 Annual Report and
Accounts.
Contingent Liabilities
Korea HS Issue
There have been no material changes to our expectations
surrounding the tragic HS issue in South Korea since 10 February
and up to 20 April 2017.
- Three tranches of Round 3 applicants have now been assessed by
the Korean authorities with respect to the link between the use of
HS and lung injury. 60% of round 3 applicants have now been
categorized. The status to date is set out in the table below:
- Round 4 remains open and the applicant numbers are reported on
the Korea Environmental Industry & Technology Institute (KEITI)
website. The number of applicants as at 31 March is 4,259.
The status of the four rounds of applications established to
date is therefore as follows:
Round Total Applicants Category Cat I&II RB Oxy Assessment
applicants Assessed I & II percentage users completion
- Category (expected)
I & II**
------ ------------ ----------- --------- ------------ ------------ ------------
1 361 361 172 48% 139 Completed
------ ------------ ----------- --------- ------------ ------------ ------------
2 169 169 51 30% 44 Completed
------ ------------ ----------- --------- ------------ ------------ ------------
3 752 452 57 13% 52 Dec 17
------ ------------ ----------- --------- ------------ ------------ ------------
3.1 165 35 21% 32
------ ------------ ----------- --------- ------------ ------------ ------------
3.2 188 19 10% 18
------ ------------ ----------- --------- ------------ ------------ ------------
3.3 99 3 3% 2
------ ------------ ----------- --------- ------------ ------------ ------------
4 4,259* 0 TBD TBD TBD Dec 17
------ ------------ ----------- --------- ------------ ------------ ------------
* round 4 remains open to applicants. The number of applicants
shown in the table are the applicants set out on the KEITI website
as at 31 March 2017.
** both sole Oxy RB users and users of multiple manufacturers' products, including Oxy RB.
In 2016 provision was made for certain costs arising as a result
of the HS issue, including costs arising from compensating Oxy HS
category I and II victims classified within Rounds 1, 2 and 3 of
the Korean Centre for Disease Control (KCDC) classification
process.
There are in addition a number of further costs / income
relating to the HS issue that are either not able to be estimated
or quantified or are considered not probable at the current time,
including those relating to Round 4 applicants and costs associated
with the wider HS issue. Further details of these contingent
liabilities are set out in our 2016 Annual Report.
Indivior / RB Pharma related matters:
We noted in our 2016 Annual Report that the Group was involved
in ongoing investigations by the US Department of Justice (DOJ) and
the US Federal Trade Commission and related litigation proceedings
arising from certain matters relating to the RB Pharmaceuticals
business prior to its demerger in December 2014 to form Indivior
PLC and may incur liabilities in relation to such matters. These
investigations and related proceedings are continuing and we are in
active discussions with the DOJ. The Group is cooperating with the
relevant agencies and remains committed to ensuring that these
investigations and related proceedings are concluded or resolved
satisfactorily. The outcome for the Group in relation to ultimate
resolution and/or cost at this stage remains uncertain.
2017 Net Revenue Target
The Group is on track to achieve its FY 2017 Net Revenue target
of +3% LFL growth*.
* Like-for-like ("LFL") growth excludes the impact of changes in
exchange rates, acquisitions, and disposals.
For further information, please contact:
Reckitt Benckiser
Richard Joyce
SVP, Investor Relations
Patty O'Hayer
Director, External Relations
and Government Affairs +44 (0)1753 217800
Brunswick (Financial PR) +44 (0)20 7404
David Litterick 5959
Cautionary note concerning forward-looking statements
This announcement contains statements with respect to the
financial condition, results of operations and business of RB (the
"Group") and certain of the plans and objectives of the Group that
are forward-looking statements. Words such as "intends', 'targets',
or the negative of these terms and other similar expressions of
future performance or results, and their negatives, are intended to
identify such forward-looking statements. In particular, all
statements that express forecasts, expectations and projections
with respect to future matters, including targets for net revenue,
operating margin and cost efficiency, are forward-looking
statements. Such statements are not historical facts, nor are they
guarantees of future performance.
By their nature, forward-looking statements involve risk and
uncertainty because they relate to events and depend on
circumstances that will occur in the future. There are a number of
factors that could cause actual results and developments to differ
materially from those expressed or implied by these forward-looking
statements, including many factors outside the Group's control.
Among other risks and uncertainties, the material or principal
factors which could cause actual results to differ materially are:
the general economic, business, political and social conditions in
the key markets in which the Group operates; the ability of the
Group to manage regulatory, tax and legal matters, including
changes thereto; the reliability of the Group's technological
infrastructure or that of third parties on which the Group relies;
interruptions in the Group's supply chain and disruptions to its
production facilities; the reputation of the Group's global brands;
and the recruitment and retention of key management.
These forward-looking statements speak only as of the date of
this announcement. Except as required by any applicable law or
regulation, the Group expressly disclaims any obligation or
undertaking to release publicly any updates or revisions to any
forward-looking statements contained herein to reflect any change
in the Group's expectations with regard thereto or any change in
events, conditions or circumstances on which any such statement is
based.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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