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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 after both its personal care products business and its pharmaceuticals division continued to beat expectations in the third quarter.
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%.
Sales for the pharmaceuticals division grew 41% to GBP140 million with profit up 44% to GBP88 million, driven by Suboxone sales in the U.S.
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, allowing the company to raise its full-year targets.
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 the possibility of 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. Last year's underlying sales growth of 10% compares with an original target of 6%-to-7%. The company raised its revenue and profit growth targets as recently as July.
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. The shares have risen about 20% since the turn of the year as the company continues to shrug off the effects of the global downturn.
Reckitt has consistently outperformed its rivals for years, 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.
The company managed to grow its gross margin 1.2 percentage points to 60% and its operating margin by 1.7 percentage points to 24.5% in the quarter, through the easing of input costs and cost savings. Analysts had expected a rise in the operating margin of 1.1 percentage points.
-By Michael Carolan, Dow Jones Newswires; 44-20-7842-9278; michael.carolan@dowjones.com