Bart Becht blames weak performance in important market for group's first ever quarter-on-quarter sales slump
Chief executive Bart Becht said sales growth had evaporated in this important region, which generates more than 40% of sales: "Six months ago we were seeing 4% growth in our markets in Europe, now it is below 1% ... In Europe there is now virtually no market growth".
Reckitt said demand for laundry products such as Vanish and Woolite had waned in the second quarter as new products were launched by rival Procter & Gamble (P&G). That was on the back of flat sales of cold remedies such as Nurofen and Strepsils in the first three months of the year as fewer bugs did the winter rounds. As a result, like-for-like sales in Europe were down 1% in the six months to 30 June. Total sales in the region were also down 1% at £1.75bn.
Becht said the company had broadly held its market share in Europe but had ceded ground in the fabric care category as Vanish was pitted against P&G's new Actilift stain remover. To win customers back, the group is ploughing more cash into advertising.
Concerns about the weak European performance weighed on the shares which closed 3p lower at £33.21. Despite the problems in its largest market, Reckitt reiterated its annual sales and profit growth targets of 5% and 10% respectively. It pointed to "excellent" growth in developing markets as well as the success of new product variants such as Lysol No Touch and Air Wick Aqua Mist.
Reckitt said cost-saving measures as well as falling raw material costs had helped lift profit margins during the period. "The group is confident of delivering another year of good growth in 2010," said Becht.
The Guardian
