The new boss of consumer goods firm Reckitt Benckiser (RB) has cut its revenue guidance for the second time this year and ordered a focus on “operational performance.”
In his first set of financial results since succeeding Rakesh Kapoor as chief executive last month, Laxman Narasimhan admitted its third quarter sales had proved “disappointing” amid continuing struggles in key markets.
The health side of the business continued to be the main drag on performance – with like-for-like sales declining 0.3% over the three months and by 0.6% in the year to date.
It said it had seen cautious demand for flu season products and baby feeds in the US.
RB said “challenging” market conditions in China – currently fighting a damaging trade war with the US – were also taking a toll.
It pointed to lower birth rates in the world’s second-largest economy and warned that like-for-like sales growth of 3.9% in the year to date for its infant food products was behind its ambition of up to 5%.
Total revenue for the quarter came in just shy of £2bn – 0.3% down on the same period last year.
Mr Narasimhan said he was reducing RB’s net revenue growth target for the year to 0-2%.
It had been cut to 2-3% by Mr Kapoor in July before he left the company amid criticism over his pay, a cyber attack on the firm and supply disruption in 2018.
Shares, down almost 3% in the year to date ahead of Tuesday’s open, fell 6% in early deals.
The new chief executive told investors: “This performance is a reflection of an extended period of significant change and disruption in the company.
“I am prioritising execution and operational performance as a matter of urgency.
“I have made it clear within the organisation that any activities that detract focus and attention from improving our
operational performance, be paused.
“I have lowered our revenue outlook for the full year 2019 to reflect the combination of a weak Health performance in Q3 and inherent seasonal uncertainty in Q4.”
Analysts at Jefferies Equity Research noted: “Q3 (third quarter) has missed and FY (full year) guidance has been downgraded.
“The reality and candour is welcome but the metrics, notably a 7% decline in OTC (over the counter medicines) and weakness in China Baby, testify to the challenges ahead for new CEO Narasimhan and new CFO (Jeff) Carr.”