Reckitt Benckiser half-yearly operating profit and net income declines despite increase in revenues

Reckitt Benckiser has reported a decline in reported operating profit and net income for the year to 30 June. This was despite the British consumer goods company witnessing a 5% on-year increase in its revenues to £4.58bn (€5.45bn; $6.04bn) for the same period.

Reported operating profit came in at £762m, down 19% on-year when calculated at actual currency terms. Half-yearly reported net income for the same period was down 26% to £528m.

The company explained in its press release that this decline was because of exceptional charges of £319m for the half-year period. It said that this was mainly relating to the humidifier sterilisers issue it is facing in South Korea. Since 2011, around 530 people have submitted claims that this product, which was marketed by Reckitt, was linked to deadly lung injuries.

Reckitt, which owns brands from Dettol to Durex, said, "These charges relate to our best estimate of currently quantifiable costs associated with the HS issue, including an estimate of compensation expected to be paid to RB related, potential Category I&II victims from rounds 1-3 of the South Korean government's HS application process."

The Slough, UK-headquartered company also revealed its revenues for the second quarter at £2.27bn. This marked a 6% increase from the same period last year, on actual currency terms. Also, for the full-year, the company reaffirmed its net revenue target.

Commenting on these results, Rakesh Kapoor, chief executive officer, said, "We have delivered a strong, HY performance with balanced and broad based growth across both markets, and categories, and delivered further margin expansion. These results reflect our continued focus on our power markets, power brands and our virtuous earnings model. Growth was underpinned by a combination of innovations, such as Dettol Gold and Durex Invisible, and penetration building initiatives, particularly in emerging markets.

"Our strategic focus on structurally attractive health and hygiene categories and exciting innovation pipeline positions us well for another year of growth and margin expansion, despite the uncertain macro environment and softening consumer demand. Our global footprint means we expect no tangible impact from uncertainty over Brexit. We therefore reaffirm our full year LFL net revenue target which, given the impact of the HS issue, is at the lower end of the +4-5%. We are also targeting moderate adjusted operating margin expansion in H2, following the excellent +180bps achieved in H1."