Consumer slowdown in the US takes toll on Reckitt Benckiser

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The Independent Online

Reckitt Benckiser yesterday joined its rival Unilever in admitting it's been tough to do business in North America. The Anglo-Dutch household products group blamed a weak US market for a dip in profits from the region in its second quarter, taking the shine off strong sales elsewhere.

The company, which makes Finish dishwasher products and Vanish soap, disappointed the City by not raising its full-year targets in a trading update issued ahead of its interim results. Shares in Reckitt, which has been tipped as a frontrunner to buy Durex maker SSL International, fell 3 per cent to 1,121p, while Unilever's shares dipped 3.5p to 489p.

Despite the blip in North America, the group's chief executive, Bart Becht, said Reckitt was "firmly on track" to meet its full-year targets. It is aiming for net revenues to rise by 4 to 6 per cent and for net income to increase by low double digits.

Analysts said that as with Unilever, the market is more used to Reckitt raising its forecasts than just meeting them. A year ago, Reckitt said it would review its profit targets at the end of August, when it went on to raise them.

"There's been no discussion or decisions regarding any upgrading of any targets at this stage of the game," Mr Becht said.

He added that activities in North America for the second half had already been adjusted "with the aim of re-establishing profitable growth".

He said market growth during the second quarter, which spanned the Iraq war, had "slowed to zero". Combined with higher marketing investment, that had resulted in lower profits, he added.

The company said total net revenue growth at constant exchange in the second quarter is expected to be around 7 per cent. This would bring net revenue growth for the half year to more than 6 per cent at constant exchange, the top end of its current target, it added.

Last month Unilever, the company behind Magnum ice cream and Hellmann's mayonnaise, warned investors it expected annual sales growth for its main brands of 4 per cent for the year against earlier predictions of between 5 and 6 per cent.

For the second quarter, Unilever forecast growth of just 3 per cent.

Reckitt said that after a fall in sales of more than 10 per cent in April in North America, trading had picked up. "It looks like the worst is over," a spokesman added.

One analyst said: "North America was a bit of a hiccup but the business is going very strongly everywhere else."

Reckitt, which declined to comment on its interest in buying SSL, has pledged to return cash to shareholders this year unless it finds a suitable acquisition.