UPDATE 3-Reckitt to offload homecare brands, consider options for nutrition business

Reckitt's home care business, which includes Air Wick air fresheners and Cillit Bang cleaner, achieved sales of around 1.9 billion pounds ($2.5 billion) last year, but the company no longer considers it a core business. Its Mead Johnson nutrition business is the subject of litigation in the United States.

British consumer goods group Reckitt Benckiser will consider options for its infant formula business and offload its portfolio of homecare brands by the end of 2025, it said on Wednesday, as it planned to refocus on healthcare products. Reckitt's home care business, which includes Air Wick air fresheners and Cillit Bang cleaner, achieved sales of around 1.9 billion pounds ($2.5 billion) last year, but the company no longer considers it a core business.

Its Mead Johnson nutrition business is the subject of litigation in the United States. In March, an Illinois jury ordered Mead Johnson to pay $60 million to the mother of a premature baby who died of an intestinal disease after being fed the company's Enfamil baby formula. Top shareholders and analysts subsequently urged the company to offload the business.

Investors reacted positively to the news that Reckitt is considering its options, sending shares up more than 4% in early trading. A sale was possible while litigation is ongoing, according to Reckitt CEO Kris Licht.

"I would not rule that out as a possibility. I would also not say that there's any certainty in that," he told investors on a call to discuss the company's first half earnings. The strategic update overshadowed Reckitt's decision to lower its full-year sales growth forecast for 2024.

'LACK OF STRATEGIC RATIONALE' Reckitt appears to be addressing a lack of strategic rationale in its portfolio, said Bernstein analyst Bruno Monteyne.

"Today is a day when the numbers don't really matter for Reckitt," he said. Reckitt, which also makes Durex condoms, missed like-for-like net sales growth expectations for the second quarter. It now expects like-for-like revenue growth of 1-3% for the full year, down from its previous forecast of a 2-4% rise.

The company blamed supply disruptions at its infant formula business after a tornado damaged a third-party warehouse in the United States. The Mount Vernon warehouse in Indiana, out of action since the tornado struck on July 9, is an important site for the nutrition business, containing both raw materials and finished products. Reckitt's revenue for the quarter was flat, slightly lagging the 0.1% growth analysts had expected in a company-provided consensus. Sales volumes declined 2.2%, more than the 1.5% drop expected.

Reckitt will launch a share buyback of up to 1 billion pounds and increase its interim dividend, it said. ($1 = 0.7763 pounds)

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