Reckitt sees growth in the new markets

Reckitt recently completed the acquisition of Durex condom-maker SSL for 2.54bn, and said it is looking for annual sales growth of six per cent and net profits growth of 16 per cent, even before the effects of the deal.

In total the group reported net third-quarter revenue up seven per cent at 2.1bn, with operating profits of 564m. "The consumer environment overall continues to be challenging, certainly in Western Europe and North America, with little to no growth," said chief executive Bart Becht.

"I don't think there will be much change from here until the year-end. We continue to see very good growth conditions in developing markets, and both of these facts... are clearly reflected in the results."

These developing markets, which include India, Brazil and east Asia, account for nearly a quarter of Reckitt's sales.

They saw third-quarter revenue up 18 per cent to 481m, led by strong growth of its Dettol liquid and bar soaps, Strepsil throat lozenges, Vanish stain removers, Airwick Aqua Mist air freshener and Mortein pest control aerosol sprays.

North America and Australia, which make up 27 per cent of group sales, saw more sedate like-for-like growth of three per cent during the quarter, rising to 593m.

In north America, Mr Becht said Reckitt is outperforming a shrinking market, by gaining market share from competitors. Its Lysol soaps and cleaning products helped drive health and personal care sales in the territory.

However, Europe is showing "barely any growth", said Mr Becht, with flat third quarter sales of 843m. The division, which accounts for 42 per cent of group sales, is seeing increased competition, particularly in fabric care, where rivals such as Procter and Gamble are expanding into new territories.

"The competitive environment is definitely intense, but it is largely in Europe and it's largely focused on fabric care," said Mr Becht.

Reckitt employs about 1,300 in Hull at its manufacturing and research and development sites, part of a workforce of almost 25,000 globally.

The Lemsip-to-Dettol company also hailed the performance of its 17 'Powerbrands', where it continues to invest in new product innovation. In Europe, where growth came mainly from health and personal care, home care and dishwashing, it grew its Dettol brand with the launch of a no-touch hand soap system.

Reckitt was last month slapped with a 10.2m fine by the Office of Fair Trading for abusing its dominant market position in relation to its Gaviscon heartburn treatment.

"We don't think that... there will be any knock-on effects or further claims," said finance director Colin Day.

Shares yesterday ticked up 0.9 per cent to 3,557p. The results prompted upgrades from brokers. Shore Capital reiterated its 'buy' recommendation and said it expects to upgrade its current earnings per share forecast of 215p, with an initial estimate of a move to between 225p and 230p.

"Reckitt Benckiser continues to deliver sales and volume growth at the top end of its peer group range, growth which will be supported by bolt-on acquisitions and strong cash generation," said Shore Capital analysts in a note.

Excluding its phmarmaceuticals division, Reckitt is not changing its 2010 targets. It is looking for a five per cent rise in underlying sales and 10 per cent increase in operating profits, after stripping out its high-growth Suboxone pharmaceuticals unit and taken at constant currency.

Reckitt sets targets for its core business, excluding its drugs arm whose main revenue generator is heroin substitute Suboxone.

Reckitt lost its exclusive licence for this in October 2009 and expects generic competition to eventually emerge and hit its profit.

"The third quarter beat and continued lack of generic entry for Suboxone means we raise our full-year earnings forecasts from 215.3p to 229.2p," said analyst Graham Jones.

bart becht: 'The consumer environment overall continues to be challenging.'