Reckitt Benckiser is moving forward with the sale of its nutrition operations housing the Mead Johnson infant-formula business.
A deal for nutrition and Mead Johnson could potentially materialise this year – fiscal 2025 – with CEO Kris Licht indicating last week that Reckitt has already received some interest from prospective buyers.
The London-listed consumer goods giant is also looking to dispose of its essential home division, leaving Reckitt to focus on its “core” so-called power brands” within the consumer health and hygiene categories.
Licht said in July that nutrition and Mead Johnson were now classified as “non-core”. The Durex and Finish dishwasher cleaning brand owner acquired Mead Johnson in 2017 for $17.9bn. The nutrition division is the smallest revenue earner behind the hygiene and health units.
For the time being, the nutrition and essential home divisions are included in Reckitt’s guidance for like-for-like sales growth of 2-4% across the group in the 2025 financial year.
Licht was pressed for an update on the disposals by analysts last week as he presented the 2024 results to 31 December.
“On the process, I’d love to be able to say more, but I think you understand that where we are in the process doesn’t lend itself for me to be overly specific. What I can say is the overall process is on track and I’m feeling good about it. And that’s about it,” Licht said in response.
The CEO added: “When we have news to share in terms of something concrete, we will, of course, provide full transparency and visibility and share what we think the financial impacts of it is.
“We’re going to do the right thing for Reckitt shareholders and we’re looking at everything under the sun to do that.
“At the same time, as I indicated before, we thought there’d be good interest in these assets, and so far, there is.”
Reckitt delivered 1.4% like-for-like revenue growth across the business groups to £14.2bn ($18.3bn) last year. However, nutrition sales were down 7.3% at £2.15bn, while hygiene was up 4.2% at £6.14bn and health registered a 2.1% increase to £5.88bn.
Following the disposals, Reckitt plans to focus on its “core” portfolio for which guidance in the new year was set at 3-4% in like-for-like terms.
Licht told analysts last week during the Q&A results session: “On the separations, look, we’re working on this at the moment. We’ve made very good progress. I would say the process of setting them up is on track. We are sizing the financial impacts.
“Our guide…assumed that we effectively operate these segments through ’25, just because even if there is a transaction, obviously it takes time for a transaction to close.”
The CEO said he was “confident that nutrition will deliver growth in 2025”.
CFO Shannon Eisenhardt pointed to low single-digit, like-for-like growth in both “essential home and Mead Johnson nutrition in 2025, with both being back-half weighted”, adding the guidance “assumes that we have all three operating segments for the full course of the year”.
The decline in nutrition sales last year was largely attributed to supply-linked volume decreases in North America connected with the tornado that hit Mount Vernon in Indiana last July.
However, not much was said on last week’s analyst call regarding the ongoing litigation in the US related to the alleged health risks to babies from consuming Reckitt’s Enfamil Premature 24 infant formula.
Reckitt faces the prospect of incurring billions of pounds in damages related to the life-threatening necrotizing enterocolitis (NEC) disease, which effects premature babies.
In March 2024, a US court in Illinois awarded $60m in damages to a mother of a baby that died from NEC after being fed Enfamil Premature 24. The judge ruled Mead Johnson was “negligent” because the company failed to warn mothers of the risks from NEC as a result of consuming that type of formula.
Barclays’ analysts wrote in July last year that there could potentially be around 400 other cases pending in the US.
“On Mead Johnson nutrition, the team has responded well to the challenges it has faced in 2024. We continue to defend ourselves against all cases in the ongoing litigation,” Licht said last week.
