Reckitt Surges as Baby Formula Strength Lifts Sales Outlook

(Bloomberg) -- Reckitt Benckiser Group Plc shares surged after the company raised its full-year sales outlook on a stronger performance in its infant-formula business, especially in China.

The Slough, England-based maker of Nurofen painkillers and Enfamil infant nutrition products said it expects comparable sales growth at the upper end of its previous 2 percent to 3 percent range. That came after a first half in which it recovered from a year marked by setbacks across its health, home- and personal-care businesses. The shares rose as much as 8.3 percent early Friday in London, the most in 9 years.

The company last year expanded into baby formula with a $16.6 billion takeover of Mead Johnson Nutrition Co., which Chief Executive Officer Rakesh Kapoor has said is an “inflection point” for Reckitt Benckiser. It has also appointed Kapoor as president of its consumer-health brands to sharpen its focus on its historically fastest-growing division.

Performance in the first half was boosted by increased shipments to the U.S. for the Enfamil NeuroPro product launch as well as an inventory buildup in China, the company said in a statement Friday.

Delivering growth and a successful integration of the Mead Johnson business “remain our key priorities,” Kapoor said in the statement. Performance in the three months through June “was a quarter of progress against both of these priorities.”

The company is seeking to move past a series of hardships, including a cyberattack and a failed product launch in the Scholl foot-care line. In March, Reckitt’s shares rose from lows not seen since 2015 after the company withdrew from a bidding process for part of Pfizer Inc.’s consumer-health brands, which include ChapStick and Advil.

Sales Target

Like-for-like sales rose 4 percent in the second quarter overall, but leaped 7 percent for the infant-formula business, almost 3 percentage points above the company-compiled estimate. In addition to lifting the outlook for comparable sales, Reckitt Benckiser raised its target for net revenue growth by 1 percentage point, to a range of 14 percent to 15 percent.

“Sales guidance has been nudged up, although consensus seems to be already there,” Jefferies analysts led by Martin Deboo wrote in a note to investors. “But this still reads as a decent and reassuring set of numbers to us, judged against the vigorous debates that continue around RB.”

Reckitt Benckiser said earlier this year that it expected a return to sales growth but it has joined rivals in warning that deflationary conditions in the consumer-goods industry will curtail profitability.

©2018 Bloomberg L.P.