Reckitt Benckiser Group plans to sell some home care brands and review options for its infant formula business as the consumer company seeks to revive growth after a period of underperformance.
Slower-growing home care products, including Cillit Bang cleaners and Airwick air fresheners, generated almost £2 billion ($2.6 billion). in revenue last year, the U.K.-based company said in a statement, and a sale will help rationalize the business.
The embattled consumer giant has said it is also considering all options for its infant formula unit.which has been hit by legal problems in the US and a tornado that damaged a warehouse in Indiana. One of its largest shareholders, Flossbach von Storch, called for the divestments to take place quickly. “The changes announced today are going in the right direction, but they must be implemented quickly and effectively,” Simon Jäger, the fund’s portfolio manager, said by email.
Reckitt cut its sales growth outlook for this year to between 1% and 3%, down from between 2% and 4%after posting flat comparable sales growth in the second quarter. Its shares rose 1% in London on Wednesday, after losing 19% this year through Tuesday’s close. “The new Reckitt will be slightly smaller, but it will grow much faster,” Chief Executive Kris Licht said in an interview. “It won’t be long before we get back to the size and scale we have today, but we’ll do it with a much better portfolio and earnings model.”
Licht, who was president of Reckitt’s healthcare unit before taking over, said the company wants to focus on “power brands” such as Strepsils lozenges, Mucinex cold remedy, Gaviscon for heartburn and Durex condoms, along with some disinfectants such as Harpic, Vanish, Dettol and Lysol, which have seen huge growth during the pandemic.
After high inflation rates dented profitability, consumer goods groups are under pressure to boost growth and justify having a variety of businesses under one roof. The strategic changes should be “quite welcomed,” said James Edwardes-Jones, an analyst at RBC Capital Markets. “It’s evidence that management is taking the reins.”
