Household goods giant slams laundry door on any mega-merger

HOUSEHOLD goods giant Reckitt Benckiser said an industry mega-merger was "extremely remote" despite yesterday cleaning up with a 23 per cent leap in pre-tax profits to £1.89 billion.

Reckitt said well-known brands including Nurofen and Strepsils performed strongly after it increased media spending to 11.1 per cent of all revenues.

Easing input prices and cost reduction programmes also helped group profits during a "very good year", according to chief executive Bart Becht.

"Industry consolidation is extremely remote in our space," he said, declining to comment specifically about rumours of a tie-up with Colgate-Palmolive.

"From time to time we will look at add-on acquisitions, but the focus is still on organic growth."

Although the group has been given a tailwind by the effects of a weaker pound, Reckitt has traded strongly through the downturn and achieved an 8 per cent rise in net revenues at constant exchange rates to 7.75bn.

Excluding its pharmaceuticals business, the figure rose 6 per cent in 2009 and should increase by 5 per cent in the current financial year, Reckitt said.

Underlying sales rose 10 per cent on a constant currency basis, beating analysts' consensus forecasts of 6.3 per cent.

The company also raised its dividend by 25 per cent to 100p.

Highlights of the year for Reckitt included strong sales of Dettol as swine flu fears caused a surge in demand for anti-bacterial and virus products – helped by the marketing drive as the firm also benefited from cheaper advertising rates during the recession.

Revenues across the health and personal care division increased by 14 per cent to 2.08bn. Reckitt is hoping for further growth though product launches this year, including the introduction of Strepsils in tube packaging and its Lysol no-touch hand soap system.

The group said its strong showing reflected good performances across its 17 so-called "powerbrands", which also include Cillit Bang and Vanish.

Reckitt said the outlook for its drugs division was less certain after it lost its exclusive licence for Suboxone, a heroin substitute. The group expects generic rivals to the drug to emerge and has warned 80 per cent of Suboxone's US profits – which make up 18 per cent of group profits – will be lost following the launch of competition.

Becht said there was no news on generics, but when launched the effect would be seen within weeks. Its less prominent Subutex drug – also a heroin substitute – saw sales fall 60 per cent three months after a generic launch.

The firm, which traces its roots back to 1823, was formed by a merger of Reckitt & Colman and Benckiser in 1999.