(Bloomberg) -- Reckitt Benckiser Group Plc plans to sell some homecare brands and review options for its infant formula business as the consumer company seeks to revive growth after a period of poor performance.
Slower-growing homecare products, including Cillit Bang cleaners and Airwick air fresheners, generated almost £2 billion ($2.6 billion) in revenue last year, the UK-based company said in a statement, and a sale will help streamline the business.
The beleaguered consumer giant said it’s also considering all options for its infant formula unit, which has been hammered by legal woes in the US and a recent tornado in Indiana that damaged a warehouse. One of its biggest shareholders, Flossbach von Storch, called for the divestments to happen quickly.
“The communicated changes today lead in the right direction but need to be implemented timely and efficiently,” Simon Jäger, a portfolio manager at the fund, said in an email.
Reckitt cut its sales growth outlook for this year to between 1% and 3%, down from between 2% and 4%, after delivering flat comparable sales growth in the second quarter. Its shares rose 1% as of 11:43 a.m. Wednesday in London after losing 19% this year through Tuesday’s close.
‘New Reckitt’
“The new Reckitt will be slightly smaller but much faster growing,” Chief Executive Officer Kris Licht said in an interview. “It will not take us very long to be back at the size and scale that we are today, but we will do so with a vastly better portfolio and earnings model.”
Licht, who was president of Reckitt’s health unit before taking the top job, said the company wants to focus on “powerbrands” like Strepsils lozenges, the Mucinex cold remedy, Gaviscon for heartburn and Durex condoms, along with some disinfectants like Harpic, Vanish, Dettol and Lysol that boomed during the pandemic.
After high inflation rates ate into profitability, consumer goods groups are under pressure to boost growth and justify having a variety of businesses under one roof.
The strategic changes should be “quite well-received,” said James Edwardes-Jones, an analyst at RBC Capital Markets. “It’s evidence of management getting a grip.”
Formula Business
Reckitt is in no rush to sell its formula business, which is currently fighting a string of state and federal lawsuits in the US, Licht said. In March, Reckitt shares plunged 15% in one day after a jury said that one of the company’s Enfamil products led to the death of a premature baby, awarding an Illinois mother $60 million in damages.
Licht acknowledged that Reckitt’s infant formula unit, created by the expensive purchase of rival Mead Johnson, hasn’t always fit naturally within the group.
“Do I think that nutrition was a neat fit? No I don’t,” he said on a media call. “But that was in the past. I don’t think we will dwell on that any further.”
Disposing of select homecare brands rather than an entire category is at odds with the breakup recommended by Bluebell Capital Partners. In June, the activist investor said it recommended that Reckitt separate its hygiene unit from the rest of the group. But Licht denied that Eminence Capital, which had taken a stake, was taking an activist stance: “I can assure you they’re not, they’re excellent long-term constructive investors,” he said.
--With assistance from Joel Leon.
(Updates with CEO, investor comments, starting in second section.)
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