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Reckitt takes £5bn hit as baby formula takeover turns sour

Ben Woods

Nurofen owner Reckitt Benckiser posted a £3.7 billion loss today as it took a £5 billion charge on its takeover of baby formula maker Mead Johnson.

The company said its infant formula and child nutrition arm had missed forecasts as it suffered in China from stiff competition, lower birth rates and disruption to trade in Hong Kong.

The Durex-to-Finish maker has struggled to integrate Mead following a £13 billion takeover three years ago.

The huge loss for 2019 contrasts with a £2.2 billion profit in 2018.

The company also took a hit from a $1.4 billion settlement with the US Department of Justice last year over a probe into sales opioid addiction treatment by its former drugs business Indivior.

Reckitt’s sales grew 2% to £12.8 billion and chief executive Laxman Narasimhan said the company would invest £2 billion over the next three years as he revealed plans to overhaul the business.

Narasimhan, who joined in September from food giant PepsiCo, said margins would take a temporary hit as he rolled out a three-phase plan to boost earnings.

He said: “Reckitt Benckiser is a good house in a great neighbourhood, with the position to be a great house again.”

Reckitt has faced pressure from shareholders to offload fringe business to boost growth.

Narasimhan stopped short of carving out any businesses from the group, but said he would aim to find £1.3 billion worth of productivity savings.

Investors appeared to welcome the plan, with shares up 2% at 6225p. Narasimhan said the company’s brands would be organised under three categories, hygiene, health and nutrition, while sharpening its focus on China.

Reckitt said there had been a spike in demand for Dettol as a result of the coronavirus but the outbreak could also hit its supply chain.