Healthier times hit income at Reckitt Benckiser

The company behind Durex condoms and cleaning product Dettol saw revenues in the transatlantic region drop one per cent to £2.3bn in the six months to June 30 as weak consumer sentiment hit performance. A strong period for heartburn relief Gaviscon was offset by weak sales of decongestant Mucinex, Strepsils lozenges and certain products within the Nurofen range due to “lower incidence” of colds and flu.

Reckitt, which has research and development and healthcare manufacturing operations in Hull, where it employs 1,000 people, reported a one per cent increase in group revenues to £4.7bn and a two per cent rise in underlying operating profits to £1.1bn due to a strong performance in emerging markets, driven by sales of Durex, Dettol and cleaning brands Finish and Harpic.

The comoany, which has 32,000 employees worldwide, said market conditions were particularly weak in southern Europe, which is being impacted by the eurozone crisis and weak economic growth. “Southern Europe is significantly worse than other markets, and although there is a flattening of the decline, we see no near-term sign of recovery,” chief executive Rakesh Kapoor told a conference call yesterday.

The group hailed the strong growth in its Latin America and Asia-Pacific (Lapac) region and Russia, the Middle East and Africa (Lumea).

In Lapac, sales of Durex in China were ahead of expectations, while Dettol, Finish and Harpic also performed well.

Hygiene products make up some 46 per cent of revenues, Reckitt said, with Dettol and Lysol leading sales across the world. Health products make up 22 per cent of revenues.

Looking ahead, Reckitt has a number of new products launching in the second half of the financial year including Nurofen Express Period Pain capsules, sore throat relief Cepacol and condom range Durex B Closer, which is marketed at younger people.

Mr Kapoor said: “While the consumer and competitive environment in Europe and North America remains challenging, we are doing the right things for the long term.”

Mr Kapoor, who took up the top job last September after Bart Becht’s shock decision to retire, previously said the company will focus on emerging markets and merged the European and North American divisions to reflect the slowdown in consumer spending in the regions.

Graham Jones, analyst at broker Panmure Gordon, said the results were in line with expectations but rival Unilever was a preferred stock option due to its higher exposure to emerging markets.

Hull is home to Reckitt Benckiser’s global centre of excellence for research and development of health and personal care products, and also houses the New Technology group, which develops longer-term new products. Recent years have seen further investment in Hull, as Reckitt Benckiser has acquired a series of businesses, including SSL, the maker of Durex condoms.

The company has recruited more than 100 graduate and doctorate-level scientists from outside the Hull area – in many cases from outside the UK - into the city. It has also invested in its Hull R&D facilities and extended its laboratories.

Hull also has one of the company’s major healthcare manufacturing operations.

Reckitt Benckiser said recenly that Hull is “an important site” for the company, “one of our key global manufacturing sites as well as being our centre of excellence for our research and development operations”.

It said: “Reckitt Benckiser is proud to be an important part of the business community in Hull and continues to invest strongly in both the business and its employees.”

Yesterday, Reckitt maintained its 2012 targets to increase underlying sales by three to four percent and hold margins steady, in contrast to competitor Procter and Gamble which warned on profits, but the results were seen as dull and the shares dipped.

“It should remember that four per cent growth is still lacklustre compared to that being reported by Unilever and Colgate,” said analyst Andrew Wood at Bernstein Research.

Shares in Reckitt have risen nearly 10 percent this year, but fell two per cent after the half-yearly results were published yesterday morning. The group’s share price closed last night at XX.