This week I am looking at Reckitt Benckiser, the consumer goods company known for its health, hygiene and home products, following its full year results last week. The results were disappointing after a turbulent 2017 with the company reporting flat net revenue growth and a decline in profit margins.
The results did not come as a surprise to investors as the company suffered a series of “one-off” problems during the first 3 quarters of 2017. Reckitt was one of several multinational companies to be affected by the global cyber attack in June last year, which disrupted its ability to manufacture and distribute products to customers in multiple markets. The company has also struggled with the failed product launch of a new Scholl pedicure product, ongoing fallout from a South Korean safety scandal, and volatility in India due to the implementation of goods and services tax.
Despite the poor performance, Chief Executive Rakesh Kapoor is determined that the business can recover, and this was shown in Q4, reporting 2% net revenue growth. The recent acquisition of Mead Johnson, the global baby formula company, has contributed to Reckitt becoming a major player in the consumer healthcare segment, and as a result Kapoor has made the decision split the company into two units - one focused on healthcare and the other on home and hygiene products. However, the new organisation structure is likely to be costly and the company has declined to give a margin target for 2018, admitting that it will be affected by the reorganisation.
Kapoor remains confident that the company can make a comeback after a difficult year, and strong performance of previous years stands him in good stead. However, only time will tell if the reorganisation within the company has come at the right time and if management are more prepared for any future issues that may occur.