Reckitt Earnings: Management Sets Out Transformation Plan, but Execution and Timing Will Be Key

Along with its first-half 2024 earnings release, wide-moat Reckitt announced it's embarking on a transformation journey to streamline its portfolio. As part of this process, Reckitt plans to exit some noncore brands in its hygiene segment and determine the best course for its ailing infant nutrition business. The turnover of the noncore hygiene brands slated for disposal amounted to GBP 1.9 billion in 2023, or 13% of group net revenue. The infant nutrition business—which will be reported as Mead Johnson nutrition in future to highlight its strong heritage—represented about 16% of 2023 net revenue and is undergoing litigation in the US related to alleged health risks to preterm babies consuming Enfamil Premature 24 infant formula. Any rushed decision regarding its ownership might result in shareholder value destruction, which makes timing a key factor in determining its separation plans. As a result of these actions management hopes to refocus the portfolio on core, powerhouse brands—a set of category-leading brands with global scale, high gross margins, and revenue growth potential spanning consumer health and hygiene products.