12th Feb 2014 08:44
LONDON (Alliance News) - Household goods producer Reckitt Benckiser Wednesday reported lower 2013 profits as it booked higher charges for legal provisions and restructuring and acquisition costs, but revenues and adjusted operating profits increased, driven by growth for its health and hygiene products.
The maker of products including Cillit Bank cleaning fluids, Dettol disinfectants, Durex condoms and Nurofen and Strepsils cold and flu remedies echoed rivals in warning that market conditions at the start of 2014 are tougher than they were a year ago, particularly in emerging markets, but said it is confident it can still grow.
"Market conditions are more challenging now than at the beginning of last year, particularly in some emerging markets. However, we have confidence that our pipeline of innovations, Powerbrand roll-outs and brand investments will deliver another year of high quality growth," Chief Executive Rakesh Kapoor said in a statement.
Its so-called Powerbrands are the brands it is focusing on because it thinks they have the greatest growth potential.
Reckitt reported a net profit of GBP1.74 billion for the whole of 2013, down from GBP1.82 billion in 2012, as exceptional charges rose to GBP271 million, from GBP135 million. Adjusted operating profit, which excludes those charges and therefore gives a better indication of operating peformance, rose to GBP2.62 billion, from GBP2.58 billion as revenues rose to GBP10.14 billion, from GBP9.57 billion.
It said revenue growth of 7%, at constant currencies and excluding the pharmaceuticals business it is reviewing options for, exceeded its targets. Its like-for-like revenues on the same measure rose 5%.
Its fourth quarter revenues were GBP2.50 billion, up 1% on the year, or 5% at constant exchange rates. Excluding the pharmaceutical business and at constant currencies, growth was 7%, or 4% on a like-for-like basis.
"Our strategy for growth and outperformance through driving Health and Hygiene Powerbrands together with our focus on 16 Powermarkets is delivering results. We are pleased with the continued strength of our Europe and North America performance. And while emerging markets continue to slow, we delivered very strong results in India and China," Kapoor said.
It said sales of Durex, Mucinex, Strepsils, Dettol, Lysol, Harpic and Finish were particularly strong in the year as a whole, while in the fourth quarter Nurofen, Scholl footcare, Durex, Gaviscon, Veet, Dettol, Lysol and Vanish all performed well.
It performed well in China and India in the fourth quarter, but was hit by a further slowdown in Russia. Europe and North America performed well against tough comparatives, it said.
Reckitt's gross margin increased 150 basis points to 59.4%in 2013, driven by high prices, cost cutting, and higher sales of higher margin products.
The company is targeting net revenue growth of 4% to 5% at constant exchange rates and excluding the pharmaceutical business in 2014 and flat or slightly higher operating margin.
It said recent acquisitions like Schiff, BMS and Guilong were making "excellent" progress.
Reckitt raised investment in its brands in 2013 by 30 basis points to 13.0% of net revenue excluding the pharmaceuticals business. That equated to an extra GBP100 million in investments over 2012 at constant currencies. The investments were focused on its Powerbrands, newly acquired brands and its highest growth markets.
It said the strategic review of its struggling pharmaceutical business is continuing and it will provide an update during 2014. Revenues in the business were down 8% in 2013 at constant currencies, although that was ahead of expectations as it managed to maintain its US film share.
Reckitt has recommended a final dividend of 77 pence a share, down from 78 pence in 2012, although its total dividend for 2013 came to 137 pence, up from 134 pence in 2012.
The charges that weighed on the company's reported profits in 2013 include acquisition integration costs, restructuring costs and a provision for liabilities to cover what it describes as historic regulatory issues, mainly competition law. It had previously flagged the latter, which made up GBP225 million of the total GBP271 million charge.
Its shares were up 1.4% at 4,893 pence early Wednesday, one of the top gainers on the FTSE 100.
By Steve McGrath; [email protected]; @SteveMcGrath1
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