(Adds comment from the CEO and an analyst)
By Michael Carolan
Of DOW JONES NEWSWIRES
LONDON -(Dow Jones)- Reckitt Benckiser PLC (RB.LN) once again raised its full-year sales and profit targets Tuesday as strong growth in its personal care products business and its pharmaceuticals division offset a flat performance by its household brands.
The company, which has a history of beating market expectations, said its net profit in the three months to Sept. 30 was GBP357 million, up 12% from GBP285 million last year, and ahead of expectations of about GBP340 million. Sales were GBP1.91 billion, up 15%. Stripping out the effect of currency movements, second-quarter sales were up 7%, compared with an 8% rise in the previous three months and ahead of expectations of 6.6%.
"This result was supported by our 17 Powerbrands, behind significant investment in media and marketing and successful new product initiatives," said Chief Executive Bart Becht said in a statement.
The company raised its full-year target for sales growth at constant exchange rates to 6%-7% from previous guidance of 5%-6%. Net profit is now expected to grow between 12% and 13% for the full year, compared with previous expectations of between 10% and 11%.
Sterling's weakness would boost sales growth to between 22% and 23%, it said.
The rise in sales was driven in part by the stellar growth of its heroin-dependency treatment Suboxone. Stripping out the benefit of the group's pharmaceuticals division, Reckitt's sales growth rate drops to just 5%.
Suboxone's exclusivity in the U.S. expired on Oct. 8, leaving it exposed to potential generic competition. However, fears that Suboxone would immediately face generic competition have so far proved unfounded.
Becht told analysts on a conference call that the upgrade to full-year forecasts reflected the belief there would be no generic competition until the end of this year or the start of next year.
The company has warned, however, that up to 80% of revenues and profits at the pharmaceuticals division might be lost to generic competition in 2010, with further erosion thereafter.
The company said Wednesday it is continuing to search for ways to offset the impact of this loss.
The maker of a products such as Lysol, Clearasil, Cillit Bang and Senokot historically uses its quarterly updates to raise its full-year targets. Wednesday's news therefore had no impact on the group's shares. By 1240 GMT, they were down 51 pence, or 1.7%, at 3031 pence.
While the group's headline numbers were at least in line with expectations, there was some concern about the balance of the growth. A strong performance by health and personal care products - which grew sales by 16% - masked disappointing sales elsewhere. Reckitt's fabric care brands declined 4%, while its dishwashing brands dropped 5%. Sales in Europe meanwhile - which accounts for 47% of revenue - were flat in the quarter.
Beck said that while Europe was a challenging market in the third quarter, the company had grown or maintained its market share in its various categories.
Evolution Securities analyst Chas Manso said that with Suboxone facing potential generic competition, there was a "sustainability issue" around the company's growth prospects.
Reckitt has consistently outperformed its rivals, due to its focus on a limited number of leading brands, its lean operations and its industry-leading innovation programs - which attract customers to its brands even when money is tight.
-By Michael Carolan, Dow Jones Newswires; 44-20-7842-9278; michael.carolan@dowjones.com