Reckitt Benckiser plans to reorganise its business into two distinct units, one for health and the other for hygiene and home products, as it tries to improve its flagging performance.
The maker of Durex condoms, Nurofen tablets and Dettol cleaners announced the restructuring on Wednesday, along with its third-quarter sales figures. The company, once seen as an industry pacesetter due to its strong revenue and profit growth, is having a very tough year, reporting its weakest quarter ever in July, hurt by a series of issues including a collapse of its South Korean business after a safety scandal, a failed product launch and a cyber attack that hobbled its global operations.
The British company made the decision to restructure after its June acquisition of US baby formula maker Mead Johnson, which will account for roughly half of the larger health unit's sales. "Here is the perfect opportunity for us to be able to create a proper leader in consumer health with the expertise and the focus that is needed to drive true leadership ... while at the same time unleash the potential of our hygiene/home portfolio by providing focus and accountability," chief executive Rakesh Kapoor told Reuters. Kapoor said the move was not a precursor to an eventual exit of the hygiene and home businesses, even though analysts have speculated that Reckitt could sell its home business to help fund a potential acquisition of Pfizer's consumer health unit, which the US pharmaceutical company has said it is considering selling.
Kapoor said he was still interested in Pfizer’s consumer health business, as he has said publicly in the past. “They have said they will look at many different options under a strategic review. If one of those options is going to be a sale, we are going to look at that. But we should not try and pre-guess, because that is disrepectful,” he said. At present, Reckitt is organised geographically, which Kapoor said has contributed to the home and hygiene brands underperforming their potential.
“When you think about the quality and geographic spread of this portfolio, we should be doing better,” he said. “The fact is we have not given the same level of focus and there hasn’t been the same level of accountability.”
Kapoor will run the health unit, in addition to his role as CEO. Rob de Groot, current head of Europe and North America, will run the health and hygiene business. The new structure should be in place by the first quarter of 2018, Kapoor said. He declined to quantify the costs involved, though admitted there may be extra costs associated with the two units.
“I do expect that we will have better performance from these two business units in totality versus what it would’ve been if we did not do it, there is no question,” Kapoor said.
Reuters
