Reckitt sees sales slide after £100m tornado hit to baby formula
The Nurofen-to-Dettol maker saw revenues dragged lower by a 17.4% tumble in sales at its nutrition division caused by tornado damage to a warehouse.
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Household goods giant Reckitt Benckiser has revealed falling third-quarter revenues after a £100 million hit to Mead Johnson baby formula powder sales following tornado damage to a key warehouse in the US.
The Nurofen-to-Dettol maker said like-for-like net revenues fell 0.5% in its third quarter, dragged lower by a 17.4% tumble in sales at its nutrition division due to the tornado impact.
It said the third-quarter performance in the division was knocked by around £100 million of supply-related challenges from the tornado in July, though it said this was lower than initially feared.
Chief executive Kris Licht also said the group is “moving at pace” with a restructure and signalled an impact on its workforce from the overhaul.
He said: “We are making changes to our organisation.
“Clearly that will result in staffing level changes and organisational structures will change.
“We have no significant announcement on that but we’re reviewing our organisation and will continue to do that.”
Earlier this year, Mr Licht unveiled a plan to sell off the group’s slower-growing divisions while keeping what it calls its “power brands”, such as Durex condoms, Gaviscon antacid, Strepsils lozenges and some of its hygiene brands, including Vanish and Dettol.
It said on Wednesday that it is progressing with the sale of its essential home products division – including the Cillit Bang range – with “separation work under way” and aims to offload the business by the end of next year.
We are moving at pace on the execution of reshaping Reckitt through sharpening our portfolio, simplifying the organisation and improving shareholder returns
Mr Licht said: “We are moving at pace on the execution of reshaping Reckitt through sharpening our portfolio, simplifying the organisation and improving shareholder returns.”
On the third-quarter performance, he added: “Nutrition was impacted by the Mount Vernon tornado in July, which impacted sales to customers in the quarter, but to a lesser extent than we initially expected.”
The group said it had been able to offset much of the tornado sales impact by switching to an alternative warehouse in Singapore.
Reckitt said in July that the third-party warehouse in Mount Vernon, Indiana, suffered “significant damage” from a tornado.
It confirmed at the time that all employees were safe, but said there would be a short-term hit to sales given the importance of the warehouse for the Mead Johnson Nutrition business, which makes baby formula.
The group is also reviewing options for its baby formula business as part of the overhaul.
But this is being held back as it faces lawsuits in the US over its formula for premature babies.
Reckitt and rival Abbott Laboratories are defending more than 1,000 lawsuits alleging a connection between their milk-based formulas and a life-threatening bowel illness – called necrotising enterocolitis – in premature babies.
Both Abbott and Reckitt dispute this alleged link to the disease.