LONDON — Shares in Reckitt Benckiser Group Plc (LON:RB) lifted this morning following the group’s positive fourth-quarter and full-year earnings release, with management declaring that its strategy is “well on track.”
The earnings release also reported a three-year collaboration agreement with U.S. biopharmaceutical company Bristol Myers Squibb Co. (NYSE:BMY), for a number of market-leading over-the-counter consumer health-care brands in Latin America, including Brazil and Mexico.
The arrangement includes personnel, supply contracts, and an option to acquire legal title to the related intellectual property at the end of the collaboration period for a multiple of earnings.
Like-for-like growth increased 7% in the fourth quarter, and 5% across the full year — well ahead of its market growth, driven by emerging-market areas and Europe/North America (ENA). Additionally, the company’s sales were boosted by “higher incidences of cold and flu.”
Health and hygiene led Reckitt’s growth, with a broad range of products, including Durex, Gaviscon, Strepsils, Dettol, Lysol, Harpic, and Finish. Chief Executive Officer Rakesh Kapoor commented, “We are laying the foundations for RB to succeed in a world where health and hygiene play an increasingly important role in terms of both economic and social development.”
Kapoor continued:
We enhanced our focus on our 16 power markets, many of which are in the emerging-market areas that now represent 44% of our core net revenue. I am very pleased that our 2012 achievements demonstrate the strength of this strategy and its ability to create sustainable value for all of our stakeholders.
While much has yet to be done and markets remain challenging, we approach 2013 with the confidence that we have the right strategic focus, the right organization and culture, and with the right innovation platforms. We are particularly excited by our entry into the vitamins, minerals, and supplements market with the acquisition of Schiff. We are supporting our brands with more and better-quality brand equity investment to deliver further growth in an increasingly competitive consumer environment.
We remain committed to our goal of net revenue growth on average +200bps per annum above our market growth, and moderate operating margin expansion (ex RBP). For 2013, we are targeting net revenue growth of +5-6% including acquisitions and disposals announced to date. Given the early achievement of cost savings in 2012, we expect to maintain operating margins in 2013. These targets exclude RBP.
This will allow us to further accelerate the shape of our core business in line with our strategy. We are now setting the target of health and hygiene categories to become 72%, and our emerging market areas to become 50%, of our core business net revenue by 2015. This is a year earlier than previously targeted.
It’s not surprising to see Reckitt focus on emerging markets, after many of its FTSE peers — including Unilever plc (ADR) (NYSE:UL) and Diageo plc (ADR) (NYSE:DEO) — have released similar statements in recent weeks. It’s positive news for shareholders, too, as the entry into new markets can drive significant growth.
The article Reckitt Benckiser Reveals 300 Million Pound Latin America Tie-In originally appeared on Fool.com and is written by Sam Robson.
Sam Robson owns shares in Diageo but no other company mentioned in this article. The Motley Fool has recommended shares in Unilever and recommends Diageo, Reckitt Benckiser Group, and Unilever.
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