Reckitt cuts costs to halt profit fall

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The Independent Online
RECKITT & COLMAN, the troubled household products company, yesterday launched a worldwide cost-cutting exercise in an effort to halt a dramatic fall in profits which has wiped half the value from its shares in the last year.

The Lemsip-to-lavatory cleaner group, still searching for a chief executive after last month's departure of Vernon Sankey, will slash between pounds 30m and pounds 40m from its overheads by cutting an unspecified number of jobs and ordering plant closures.

Reckitt's executives yesterday bared their soul to the City, admitting to mistakes caused by "taking our eye off the ball" in North America. Operating profit fell by 16 per cent to pounds 319.7m, excluding a pounds 31m hit for Y2k problems.

"We are unhappy with our performance in North America and necessarily we must get it right," said Michael Tuller, acting chief executive and a candidate for the permanent post.

Reckitt was trounced in the US by its arch-rival Clorox, which launched an innovative spray-cleaner for shower units and a fragrant all-purpose cleaner. "We were just too slow with our new products - particularly in the bathroom and all-purpose cleaner segments," Mr Tuller added.

Profit margins in the US, where Reckitt had prided itself on being a brand leader, fell from 17.2 to 15 per cent. Reckitt was also caught out by massive destocking, caused by a new trend to ordering goods electronically as they are sold.

Dividends rose 5.4 per cent to 15.8p but shares plunged 5 per cent to 732.5p.