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Emerging Markets Help Reckitt Benckiser Make Gains

Posted: July 30, 2012

Reckitt Benckiser (RB) announced its second quarter and half year 2012 financial results, reporting strong growth in emerging markets and reiterating its full year financial targets. Total second quarter net revenue, at constant rates, increased 3% (up 4% like-for-like) to £2,312 million. Growth trends in both developed and emerging markets were similar to those in the first quarter of 2012. On a category basis, there was an improving trend in health, while the hygiene power brands of Dettol, Lysol, Cillit Bang, Harpic, Finish and Veet all performed well.

For the half year, total net revenue, at constant rates, increased 4% (also 4% like-for-like) to £4,669 million. Growth was driven by a very strong performance in both LAPAC (Latin America, North Asia, South and Southeast Asia) and RUMEA (Russia, the Middle East and Africa) areas, with a stable, albeit still subdued results in Europe/North America where weak market conditions and consumer sentiment continues. The company’s health and hygiene divisions underpinned the performance from a category perspective with particularly strong performance from RB’s major nonseasonal health power brands and from hygiene power brands such as Dettol, Lysol, Finish and Harpic.

Additionally, the company’s newly defined brand equity investment (BEI) metric increased by £40 million (constant) or 60 bps to 13.6% of net revenue (ex RBP). Within this, pure media increased by 40bps to 12.5% of net revenue (ex RBP). BEI measures investment behind longer-term equity-building initiatives and includes TV and print, digital and social media, medical professional programs and consumer educational programs. The increase in equity investment is focused on power brands, power markets and new initiatives. We are on track to invest the additional £100m in BEI planned for 2012.

Operating profit as reported was £1,072 million, up 2% versus half year 2011 (+4% constant), reflecting the impact of an exceptional pre-tax charge of £48 million. On an adjusted basis, operating profit was ahead 2% (4% constant) to £1,120 million.

Commenting on these results, Rakesh Kapoor, Reckitt Benckiser CEO, said, "Six months into our purpose-driven strategy, Reckitt Benckiser has delivered revenue growth well ahead of our market. On a LFL basis (ex RBP), net revenue growth of 4% was driven by continued excellent performance from emerging market areas and hygiene brands such as Dettol, Lysol and Finish. While the consumer and competitive environment in Europe and North America remains challenging, we are doing the right things for the long term by increasing our brand equity investment.

“Our H1 margins are in line with expectations with higher input costs and increased investment being partially offset by cost savings programs. The new organization structure is fully in place, and we are seeing early benefits of increased operational focus: speed, scale and consistency of our execution. RBP continues to make very good progress with the Suboxone sublingual film now at 56% market volume share.

“These results and our exciting innovations for H2, backed by further increased brand equity investment underpins our confidence in our FY 2012 target of 200bps above our market growth rate of 1-2%," he concluded

Specifically for the company’s hygiene division, which include brands such as Veet and Clearasil, net revenue increased 7% on both a constant and like-for-like basis to £1,879 million, largely driven by strong growth in the Dettol/Lysol franchise in all the company’s three areas. New initiatives such as Dettol Daily care and Re-energize in emerging markets and the Lysol No-Touch Kitchen System in Europe/North America underpinned this strong performance. Finish continues to perform well in a number of markets globally, and particularly in the US where Quantum and All-In-1 tablets and gel packs continue to gain market share. Veet delivered good growth behind initiatives such as the Veet Easy Wax Electrical Roll-On. Harpic enjoyed very strong growth in LAPAC and RUMEA by driving category penetration via consumer education and increased distribution, backed by the continued success of Harpic Powerplus and Harpic Hygienic blocks in all geographies.

Learn more about this report here.