Reckitt Benckiser Shares Plunge on Slow Sales, Falling Margins -- Update

(Adds share price movements, forecasts and analyst note.)

By Carlo Martuscelli

Shares of Reckitt Benckiser Group PLC (RB.LN) suffered their biggest percentage-point drop in nearly seven years after the company reported sluggish sales growth and falling margins in 2017.

The consumer goods company said like-for-like sales were flat for the year. Its hygiene business grew 2% in the fourth quarter and the home division contracted 3%, both on a like-for-like basis. This compares unfavorably with forecasts of 3.5% like-for-like growth at the hygiene unit and flat comparable sales at the home division, said Accendo Markets analyst Henry Croft.

The group's adjusted operating margin narrowed 70 basis points to 27.1%, impacted by its acquisition of Mead Johnson Nutrition. Reckitt warned that it sees some "specific factors" affecting margins in 2018, but that it is targeting moderate operating-margin growth in the medium term.

The company said that pretax profit increased 11% to 2.50 billion pounds ($3.51 billion) in 2017 from GBP2.25 billion the year before. Revenue grew 21% to GBP11.51 billion, while net profit reached GBP6.17 billion after being buoyed by the Mead acquisition, up markedly from 2016 net profit of GBP1.83 billion.

Reckitt said revenue was positively impacted by weaker sterling, as well as mergers-and-acquisition activity.

It guided for revenue growth of between 13% and 14% in 2018, translating to growth of 2% to 3% on a like-for-like basis.

"Reckitt has managed to crawl over the line and make its target of flat sales for the year, thanks to more positive final-quarter trading," said Hargreaves Lansdown's analyst Laith Khalaf. "However, flat sales and falling margins are not a combination that will win many stock-market supporters."

Reckitt raised its dividend to 97.7 pence a share from 95 pence in 2016.

Shares of Reckitt at 1519 GMT were down 6.6% to 6,132 pence.

Write to Carlo Martuscelli at [e-mail]

(END) Dow Jones Newswires

February 19, 2018 10:38 ET (15:38 GMT)

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