Consumer goods giant Reckitt swings to H1 loss
Consumer goods giant Reckitt said on Tuesday that it swung to a loss in the first half of the year as it wrote down the value of its IFCN business and pointed to mounting cost pressures.
In the six months to 30 June, the company swung to a pre-tax loss of £1.94bn from a profit of £1.44bn in the same period a year ago, with net revenues down 4.5% to £6.6bn.
The Dettol owner said the loss was due in part to writing down the value of its Infant Formula and China Nutrition assets, which it agreed to sell to investment firm Primavera Capital last month.
Reckitt recognised a near-£3bn loss on the IFCN disposal against fair value, and an additional £165m from the sale of its Scholl business.
Chief executive officer Laxman Narasimhan said: "Against a challenging environment, I am encouraged by the progress we have made in the first half of the year. Around 70% of our revenue, excluding IFCN China, is from brands growing by mid-single digits in the period, in line with our strategic vision.
"The remaining 30% includes our disinfection brands, which are structurally rebasing, as well as our cold and flu brands, which are now starting to show positive momentum. Overall demand in the disinfectant category remains significantly higher than pre-Covid levels and the two-year stacked growth of our hygiene portfolio is up 34.1%, compared to a normal growth rate, pre-Covid, of around 4%."
Narasimhan also cautioned that cost inflation had accelerated in the second quarter and said it will take time to offset this headwind with productivity and pricing actions being implemented in the back half of the year and early next year.
"This will largely offset the margin accretion in 2021 from the disposal of IFCN China," he said. As a result, the company's guidance, which excludes IFCN, is for adjusted operating margin of between 22.7% and 23.2%, down 40 to 90 basis points compared to FY2020.
At 1010 BST, the shares were down 8.3% at 5,704p.