Reckitt Benckiser says Mead Johnson takeover on track

Image source, Reckitt

Consumer goods giant Reckitt Benckiser has confirmed its acquisition of baby formula firm Mead Johnson should be completed by the end of September.

The announcement came as the company, whose brands include Dettol, Durex, and French's ketchup and mustard, reported flat first quarter sales.

But it said it was on track to hit its full year sales growth target of 3%.

Earlier this month Reckitt announced a "strategic review" of its food business.

At the time the group said it was considering "all options" for the unit, which includes French's mustard and sauce products.

This could lead to the sale of the food division to fund the $17bn (£13.2bn) acquisition of Mead Johnson, the world's second biggest baby formula firm.

Developing markets

Baby milk formula is big business. Globally sales were worth $41bn in 2014, according to Euromonitor, with Asia the fastest growing region.

Getting more sales in that region was a major reason Reckitt gave for its bid for Mead Johnson.

Reckitt products also include Cillit Bang cleaning goods and painkiller Nurofen.

Friday's trading update for the first three months of 2017 showed once currency fluctuations, acquisitions and disposals were taken into account, sales were flat at £2.6bn.

A good performance in developing markets and the hygiene business failed to offset declines in Europe and in the home products business.

Reckitt was also hurt by the ongoing fallout from weak markets in Europe and North America, a South Korean safety scandal and a failed new Scholl product.

However, reported sales were up by 15%.

'Fundamental appeal'

Hargreaves Lansdown fund manager Charlie Huggins said this was the first quarter he could remember where the group had failed to increase its like-for-like sales.

However, he said the "headwinds" should ease as the year progressed and that he was "encouraged" to see Reckitt sticking to its full year target of 3% growth.

"We don't think for one minute that Reckitt's brands are losing their fundamental appeal, or that the company has lost its ability to innovate.

"We expect this brand strength, supported by the company's huge marketing clout, to drive growth in the longer term," he added.

Reckitt's shares fell by nearly 2% in early trading in London.

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