Reckitt Benckiser: Nutrition arm bruised amid baby formula litigation case
A slump in earnings at its nutrition arm weighed on Reckitt Benckiser’s earnings in the first quarter.
The maker of Durex and Nurofen reported like-for-like revenue growth of 1.5 per cent across the group in the three months to the end of March. Overall volume declined 0.5 per cent as higher prices offset the decline in volume. Group revenue reached £3.7bn.
Like-for-like sales at its nutrition arm fell by 9.9 per cent to £591m, which more than offset growth of 7.1 per cent at its hygiene arm and one per cent at its health arm.
Investors have watched the group closely in recent months following concerns about its baby formula business.
“We continue to believe that the allegations from the plaintiff’s lawyers in this case were not supported by the science or experts in the medical community,” Mead Johnson said last month.
Reckitt said: “The Group faces contingent liabilities in respect of product liability actions filed against Mead Johnson entities relating to Necrotizing Enterocolitis [a serious condition that can affect newborn babies], A trial in one of these actions is currently scheduled to begin on 30 September 2024 in St. Louis, Missouri.”
Reckitt acquired Mead Johnson in June 2017.
Although this could prove to be a costly issue for the business, management said the troubles at its nutrition arm during the quarter were due to the recovery of a competitor from a supply shortage. Volume slid by 9.4 per cent. The company said the decline was due to “rebasing from temporary market share gains from the competitor supply issue in prior years.”.
Kris Licht, chief executive officer, said: “We have delivered a good first quarter. Following a period of price-led growth, we are now returning to a more balanced contribution from price, mix and volume.
“We grew volumes in many of our powerbrands in the quarter, including Lysol, Dettol, Durex and Finish, as well as our non-seasonal OTC portfolio. In addition, we continue to benefit from carryover pricing and consumers trading up to our premium innovations.
He added: The net revenue performance in the quarter is in line with our expectations. Hygiene delivered broad-based growth. Health saw good growth across many brands, reduced by a tough comparator in our cold & flu OTC brands. Nutrition continues to normalise in the US as expected, and we have maintained our value market share leadership.”