Reckitt Benckiser shares dive on profits warning

Lucy Baker
Sunday 23 October 2011 06:01

RECKITT BENCKISER, the newly merged consumer products giant, yesterday issued a profits warning for its UK division, the former Reckitt & Colman, sending its shares sharply lower.

The company, which last week became the world's biggest cleaning products group, saw shares plunge 128.5p to 593.5p after it said full-year profits for Reckitt & Colman would not meet expectations. Pre-tax, pre-exceptional profits for the unit are expected to fall to around pounds 165m for the year to December, against forecasts of about pounds 180m.

Susanne Siebel, of Merrill Lynch, said: "We had expected a bad statement from Reckitt & Colman, but not as bad as that."

Reckitt said temporary supply problems in Europe, soft trading conditions in Latin America, parts of the Middle East and Africa, and delays in restructuring savings, would contribute to the downturn. But it added that conditions in the third quarter had improved and sales were up 5 per cent compared with a drop of 2.6 per cent for the past nine months.

Iain Daly, an analyst at Charles Stanley, said the City's reaction in marking down Reckitt Benckiser shares by 18 per cent was "a bit overdone".

Bart Becht, chief executive of the enlarged group, said: "The Reckitt & Colman brands are fundamentally strong, but have been significantly undernourished ... We aim to free up resources quickly to invest in new initiatives and brand building." Mr Daly said: "If anyone can turn Reckitt & Colman around, it's Bart Becht and his gang ... But they can't do it straight away."

In contrast to Reckitt & Colman's performance, Benckiser said it was well-positioned to exceed its target of 15 per cent income growth for the year.

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