UK: Reckitt Benckiser H1 food earnings climb

By Michelle Russell | 30 July 2012

Food operating profit increases 6.1%
Sales climb 4%

The profit increase was boosted by continued growth from its French’s Mustard and Frank’s Red Hot Sauce brands

UK consumer goods group Reckitt Benckiser has recorded an increase in profits from its foods division in the first half of the year.

In the six months to the end of June, the owner of French's mustard brand booked a 6.1% increase in operating profit from its foods unit to GBP36m (US$56.5m). The increase was boosted by "continued growth" from its French's Mustard and Frank's Red Hot Sauce brands.

Operating margins, however, fell by 70 basis points to 23.1% due to pricing benefits being more than offset by adverse mix and input costs, the company said.

Sales for the division increased 4% to GBP156m.

Food is a small part of Reckitt Benckiser's business. Group net income amounted to GBP779m, an increase of 3% on last year, while net sales edged up 1.1% to GBP4.67bn. Operating profits climbed 1.9% to GBP1.07bn.

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Highlights: Half Year (HY)
• LFL growth +4% (+4% ex-RBP) driven by strong Emerging Market (EM) growth.
• Q2 LFL growth +4% (+4% ex RBP). Similar trends to Q1.
• Gross margin -60bps to 56.3%: adjusted operating margin +10bps to 24.0%.
• Increased brand equity investment (BEI), ex RBP, of £40m* (+60bps) and within this media +40bps.
• Adjusted net income +2% (+4% constant): adjusted diluted EPS of 111.1p (+2%).
• Net working capital of minus £752m, reflecting a £51m improvement versus year end 2011.
• Net debt of £1,846m (31 December 2011: £1,795m), with strong free cash flow generation offset by final 2011 dividend payment and share repurchases.
• The Board declares a +2% increase in the interim dividend to 56p per share.
Commenting on these results, Rakesh Kapoor, Chief Executive Officer, said:

"Six months into our Purpose driven strategy, Reckitt Benckiser has delivered revenue growth well ahead of our market. On a LFL basis (ex RBP), Net revenue growth of 4% was driven by continued excellent performance from Emerging Market Areas and Hygiene Brands such as Dettol, Lysol and Finish. While the consumer and competitive environment in Europe and North America remains challenging, we are doing the right things for the long term by increasing our Brand Equity Investment.

"Our H1 margins are in line with expectations with higher input costs and increased
investment being partially offset by cost savings programmes. The new organisation
structure is fully in place and we are seeing early benefits of increased operational focus: speed, scale and consistency of our execution. RBP continues to make very good progress with the Suboxone sublingual film now at 56% market volume share.

Original source: Reckitt Benckiser

Sectors: Condiments, dressings & sauces, Financials