In a recent announcement, Reckitt Benckiser revealed its plans to reevaluate its current business portfolio, with a focus on divesting its troubled nutrition business and a selection of homecare brands by the end of 2025. The British consumer goods company, known for household names like Air Wick air fresheners and Cillit Bang cleaner, reported sales of approximately 1.9 billion pounds ($2.5 billion) in the home care segment last year but now considers it non-core to its operations.
Additionally, Reckitt has faced mounting pressure from shareholders to review the future of its Mead Johnson nutrition business, which specializes in baby formula products. The company made headlines earlier this year when an Illinois jury ordered Mead Johnson to pay $60 million in a lawsuit related to the death of a premature baby who consumed the Enfamil Premature 24 baby formula. Although Reckitt clarified that multiple cases have been filed against various baby formula manufacturers, the incident underscored concerns about the nutrition business.
Upon the news of Reckitt’s strategic review, investors responded positively, causing the company’s shares to rise by over 4% in early trading. Market analysts and portfolio managers expressed optimism about the potential divestment, believing it could alleviate challenges associated with the troubled segments.
Reckitt CEO Kris Licht indicated openness to exploring a sale of the nutrition business, contingent on ongoing litigation outcomes. The company’s primary focus remains on strengthening its core healthcare and hygiene segments, emphasizing iconic brands such as Strepsils, Nurofen, Dettol, Finish, and Durex.
In light of the planned divestments, investment manager Jack Martin praised Reckitt’s decision to streamline its portfolio and redirect resources towards brands with greater growth potential. The company’s strategy to concentrate on its „powerbrands“ is seen as a prudent move by industry experts, aligning with long-term growth objectives.
Despite the positive news of the portfolio reshuffle, Reckitt also unveiled a downward revision in its 2024 sales growth forecast due to supply disruptions at its infant formula business. Following a tornado incident that damaged a third-party warehouse in the United States, the company reported lower-than-expected like-for-like revenue growth for the second quarter.
To support shareholders and maintain financial stability, Reckitt announced plans for a share buyback program of up to 1 billion pounds and an increase in its interim dividend. These measures aim to provide additional value to investors amidst the ongoing business transformation.
In conclusion, Reckitt Benckiser’s strategic realignment underscores its commitment to refocus on core healthcare and hygiene segments, while addressing challenges in underperforming businesses. The company’s proactive approach to portfolio management and capital allocation reflects a prudent strategy to drive sustained growth and profitability in the competitive consumer goods industry.
