* CEO pauses other projects to focus on better performance
* 2019 sales growth seen at 0-2% vs 2-3% previously
* Q3 sales 3.29 bln stg vs forecast 3.32 bln
* Shares fall as much as 5.5% to 1-1/2 year low
(Adds details on new CEO's plans, CFO comment; updates shares)
By Siddharth Cavale
LONDON, Oct 22 (Reuters) - Reckitt Benckiser's new
chief executive promised on Tuesday to step up spending on its
brands and improve performance after the British household goods
maker cut its full-year sales forecast for a second time.
Shares of the Durex condom and Lysol disinfectant maker fell
as much as 5.5% to 55.10 pounds, the lowest since May last year.
"We are not pleased with where we are and we must
consistently deliver," Laxman Narasimhan, who took over from
long-time CEO Rakesh Kapoor in September, said on his first call
with the investment community.
He said his top priorities were to improve operational
performance and build a resilient business model after a series
of one-off setbacks kept a lid on growth in recent years.
Narasimhan particularly lamented the performance of the
firm's Health business, its largest, where a failed product
launch, the nearly $17 billion acquisition of Mead Johnson, and
a temporary baby milk factory shutdown in the Netherlands, have
all caused significant disruption, some lasting to this day.
To fix these issues, he promised to invest more in Reckitt's
brands, hire more talent and improve relationships with
retailers, distributors and trade partners to head off problems
such as inventory destocking, which hit third quarter results.
Narasimhan said the company would pause any activities that
might take attention away from improving operational
performance, but added its ongoing RB 2.0 plan, which seeks to
split the group into two business units, would not be affected.
The new CEO said he would provide a more detailed long-term
strategy at the company's annual results in February.
'SACKCLOTH AND ASHES'
Reckitt said it now expected like for like sales growth
between flat and up 2% this year, down from its previous target
of 2-3%. That was the second cut this year from an initial
target of 3-4% growth.
Reported sales rose 5.3% in the third quarter to 3.29
billion pounds ($4.3 billion), missing analysts' forecast of
3.32 billion pounds, according to a company supplied consensus.
Reckitt blamed a drop in retail orders for flu products such
as Mucinex in the United States and weak demand for its Enfamil
baby products in China on the back of intense competition and
declining birth rates.
"What has happened this year and it is abundantly clear is
we were not close enough to (the thinking) of those retailers to
get a good reading of what was going happen," outgoing finance
chief Adrian Hennah told analysts on a call.
Reckitt said on Monday Hennah would be replaced by
Ahold-Delhaize executive Jeff Carr.
Overall, Reckitt's like for like sales growth came in at
1.6% in the third quarter, missing analysts' forecast of 3.2%.
The company also said it would now see a modest decline in
adjusted operating margins for the year as it reinvests in its
brands. The company had earlier expected margins to be around
the same level as last year.
"New CEO Laxman Narasimhan's debut commentary reflects a big
helping of sackcloth and ashes tempered by a dose of optimism,"
Jefferies analyst Martin Deboo said.
"The lowered outlook will create some room for manoeuvre, at
inevitable cost to the share price."
Reckitt's shares were down 2.3% at 5,732 pence at 1040 GMT.
($1=0.7710 pounds)
(Reporting by Siddharth Cavale in London; Editing by David
Holmes and Mark Potter)
