Reckitt Benckiser upbeat despite emerging markets sales slowdown

Maker of brands including Dettol and Nurofen expects revenues to rise as firm increases sales of its 19 'powerbrands'

Reckitt Benckiser, the maker of Cillit Bang, Dettol and Nurofen, said it expected revenue to rise this year despite a slowdown in sales in emerging markets.

Announcing its full-year results for 2013, Reckitt posted like-for-like sales, excluding drugs, up 4% in the fourth quarter, slightly less than the 4.2% rise forecast by analysts. Including revenue from acquisitions, sales were up 7% - ahead of the company's target.

Chief executive Rakesh Kapoor said he expected revenues, excluding drugs sales, to rise between 4% and 5% in the current year as the company increases sales of its 19 so-called powerbrands such as Harpic, Vanish and Strepsils.

He added: "Market conditions are more challenging now than at the beginning of last year, particularly in some emerging markets. However, we have confidence that our pipeline of innovations, powerbrand roll-outs and brand investments will deliver another year of high quality growth."

For the year ended 31 December, revenues including currency movements rose 7% in Europe and North America, which makes up more than half the company's income. Revenue rose 8% in Latin America and Asia, powered by sales of Durex and Dettol, and 1% in Russia, Middle East and Africa. But while European and American sales held up in the fourth quarter, in Latin American and Asia they slowed to 3% and sales fell 6% in Russia, Middle East and Africa.

UK companies have expanded in emerging markets to tap growing armies of middle class consumers and economic expansion that has outstripped developed markets hit by the financial crisis.

But a slowdown in economic activity and falling currencies have hit sales of consumer goods. Reckitt Benckiser's rival Unilever reported a bounceback in emerging market sales in the fourth quarter after issuing a profit warning last year but second-half sales slowed at Diageo, the drinks giant.

Full-year operating profit fell 4% to £2.35bn but excluding exceptional items it rose 2% to £2.62bn. The annual dividend will rise 2% to 137p a share.

The consumer goods company also named drugs industry veteran Howard Pien as chairman of its ailing pharmaceuticals arm to work on a strategic review. Analysts at Credit Suisse said his appointment could lead to a sale of the business.

Slowdown hits profit forecasts

Consumer goods companies with strong positions in China, India, Brazil and other emerging markets have been stock market darlings in recent years as those economies boomed while developed economies were stricken by the financial crisis. But a slowdown in economic growth and falling currencies in the emerging markets have now forced a number of companies to warn about their prospects:

• Turbulence in emerging markets forced Unilever to issue its first profit warning for almost a decade in October. Business picked up in the fourth quarter of 2013 but the consumer goods giant said those markets had continued to slow and it expected "ongoing volatility in the external environment".

• Mulberry published a profit warning at the end of January, blaming a retail price war for handbags and a big cancelled wholesale order from Korea, a country that was not mentioned in its first-half results the month before.

• In the US, the consumer goods Procter & Gamble cut its full-year outlook on 11 February, blaming falling currencies in developing economies including Argentina, Turkey and Brazil. The warning followed upbeat remarks from the company about emerging markets only last month.


Sean Farrell

The GuardianTramp

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