The multinational consumer goods company, Reckitt Benckiser Group, headquartered in the UK, could abandon its portfolio of home care brands by the end of 2025. At the same time, the company is facing shareholder pressure to sell its US-based infant formula manufacturer, Mead Johnson Nutrition.
“Reckitt will move to a simpler and more effective organization with fewer management layers and reduced duplication to accelerate speed of decision making and improve efficiency,” the company shares.
The reorganization aims for a “sharper, simpler Reckitt” by shifting focus on its highest-margin brands in the consumer health and hygiene space, including Veet, Strepsils, Gaviscon, Nurofen, Dettol, Finish and Durex.
Mead Johnson Nutrition includes brands Enfamil and Nutramigen and constitutes 16% of the company’s annual sales.
Reckitt’s home care portfolio includes Air Wick and Cillit Bang cleaners.
Restructuring
The disposal of businesses could include the divestment of around 30% of all of its operations by 2025, accounting for £1.9 billion (almost US $2.5 billion) in revenue in the last financial year.
The Financial Times Stock Exchange 100-listed company’s newly published results for the first half of the year reveal that its revenues fell by 3.7% year on year, leading to operating profit margins tightening by 20 basis points.
Management-level job cuts are also foreseen as part of the restructuring, with its Global Business Unit being removed entirely.
The restructuring aims to reduce annual fixed costs from the current 22% to 19% by 2027. However, a one-off £1 billion (US$1.3 billion) restructuring and transformation cost is also expected.
UBS has a positive outlook on Reckitt’s reorganization plans. The bank restates its buy rating and 12-month share price target of £71.70 (US$92.40), with optimistic prospects for the company on the markets as well. Share prices were pushed 1.3% higher to £44.64 (US$57.53) this week.
Last year, Reckitt and Mead Johnson Nutrition received a warning letter from the FDA for violating infant formula regulations, as the company was forced to recall 145,000 cans of contaminated early childhood formula.
Source: nutritioninsights.com
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