Reckitt Benckiser Group PLC (RB.LN) Tuesday delivered market-beating third quarter profit and sales, buoyed by consumer demand for the company's household and personal-care products in developing markets such as Brazil, India and parts of East Asia as trading conditions remain tough in Western Europe and North America.

The U.K.-based company, which makes products such as Airwick air fresheners, Finish dishwasher products and Clearasil spot cream, also set new targets for 2010 as management starts work on integrating its recent GBP2.54 billion acquisition of SSL International PLC.

In the third quarter of 2010, Reckitt Benckiser benefited from an "excellent performance in developing markets" as well as new products such as the Lysol/Dettol no touch hand soap system, Chief Executive Bart Becht said.

Better-than-expected profit margins also helped offset difficult conditions in Western Europe and North America where competition remains fierce.

"The consumer environment overall continues to be challenging, certainly in Western Europe and North America with little to no growth. I don't think there'll be much change from here until the year end," Becht told reporters on a conference call.

Reckitt Benckiser posted a 19% rise in net profit to GBP426 million for the three months ended Sept. 30 from GBP357 million a year earlier, ahead of market expectations of GBP408 million.

Revenue rose 11% to GBP2.11 billion from GBP1.91 billion, ahead of expectations of GBP2.09 billion while operating profit, one of the key figures tracked by U.K. analysts, jumped 21% to GBP564 million in the third quarter from GBP467 million a year earlier, ahead of expectations of GBP539 million. That compares with a 21% rise in operating profit in the second quarter of 2010.

Stripping out the effect of currency movements, profit rose 14% and revenue was up 7%.

Reckitt's gross margin rose 80 basis points in the third quarter to 60.8% and operating margin jumped 220 basis points to 26.7%.

Reckitt's pharmaceuticals business booked a 39% rise in revenue to GBP195 million and a 50% rise in third quarter operating profit as sales of Suboxone, its drug for kicking heroin addiction, remained strong. Suboxone's orphan drug status in the U.S. expired last year in October, and once a generic competitor is launched its sales are expected to plummet.

Developing markets posted a 31% rise in revenue and a 42% rise in operating profit, while revenue in North America & Australia rose 10% to GBP593 million and operating profit was up 25%. In Europe however, operating profit was down 1% and revenue fell 2% to GBP843 million reflecting the tougher economic environment.

For the year ending Dec. 31, Reckitt Benckiser expects net revenue growth of 6% and net income growth of 16% at constant exchange rates and excluding its acquisition of SSL. Changes to exchange rates could add around 2% to the forecasts. Excluding the pharmaceuticals division, the company's full-year guidance of 5% sales growth and a 10% rise in operating profit remains unchanged.

As a result of the better-than-expected third quarter results and continued lack of a generic competitor to Suboxone, Panmure Gordon analyst Graham Jones is raising his full-year earnings per share forecast to 229.2 pence from 215.3 pence.

"Obviously the impact on 2011 estimates will be much more muted if we assume Suboxone generics enter at the start of the year," said Jones, who reiterated his buy rating on the company and 3800 pence target price.

At 1000 GMT, Reckitt Benckiser shares were up 52 pence, or 1.5%, at 3577 pence in a higher London market. The stock has risen 6.6% since January, and 18% over the past 12 months on hopes of improving trading conditions.

-By Lilly Vitorovich, Dow Jones Newswires; 44-0-207 842 9290; lilly.vitorovich@dowjones.com
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