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Reckitt Benckiser predicts rosy outlook after record 2020

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·3 min read
FILE PHOTO: Products produced by Reckitt Benckiser are seen in London
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By Siddharth Cavale

(Reuters) - British consumer goods group Reckitt Benckiser expects to maintain strong sales this year, it said on Wednesday as it posted record pandemic-driven sales in 2020 and announced the disposal of its Scholl footcare business.

Reckitt boss Laxman Narasimhan described 2020 as a turning point for the maker of cleaning products such as Lysol and Dettol, creating a much larger market even though sales are likely to dip from levels reached at the height of the COVID-19 pandemic.

The company said it expects 2021 sales growth between flat and 2%, beating the 0.4% decline forecast in a company-supplied poll of analysts. It forecast medium-term growth of 4-6%.

Reckitt shares, which have lost 7% over the past year, were down 0.4% at 59.46 pounds at 1102 GMT.

The Slough-based company reported an 11.8% rise in like-for-like sales growth last year to almost 14 billion pounds ($19.8 billion), the largest increase since Reckitt's formation in 1999, but slightly less than the 11.9% analysts had expected.

In contrast, Dove soap maker Unilever achieved 1.9% sales growth for the year, while Aptamil baby formula maker Danone's sales dropped 1.5%.

For Reckitt, its outperformance has mainly come from its bigger hygiene business, previously expected to be spun off from the group, with like-for-like annual sales rising by more than a quarter last year.

Chief Executive Narasimhan said that, while he expects some of this hygiene demand to moderate over the long term, it would still be a "substantially larger underlying market" than before the pandemic.

EXPANSION

The former Pepsico executive, who joined Reckitt in 2019, has expanded distribution of hygiene products to more than 40 new markets in 2020 and expects to reach 30 more by the end of 2021.

He also established a global business solutions unit in mid-2020, signing bespoke supply and sanitation deals with hotels, travel companies and public transport, including London Underground and British Airways.

Narasimhan said the business would grow to contribute 1% of group sales in 2021.

Overall, the company spent about 745 million pounds ($1.1 billion) last year to spur what has been stubbornly slow growth in recent years.

Separately, Reckitt announced that it would sell its Scholl footcare products business to private equity firm Yellow Wood Partners and acquire Biofreeze pain relief gel from rehabilitation and sports drug manufacturer Performance Health.

Reckitt acquired Scholl as part of its acquisition of SSL International in 2010 for 2.54 billion pounds. Wednesday's proposed sale also includes the Amope, Krack and Eulactol footcare brands, the company said.

Brokerage Jefferies estimate Scholl had sales of about 250 million pounds in 2020, representing about 2% of group revenue.

Financial details of both transactions were not disclosed, but the company said deals would initially be earnings-neutral.

Reckitt also said it had started a strategic review of its infant formula business in Greater China, which represents 6% of group sales, saying multiple options were being explored.

Like rival Danone and Nestle, Reckitt has been facing intense competition from Chinese baby formula brands that have regained the consumer trust since a 2008 baby milk scandal.

(Reporting by Siddharth Cavale in Bengaluru; Additional reporting by Indranil Sarkar; Editing by Sherry Jacob-Phillips and David Goodman)