Reckitt Benckiser sees revenues drop after £100m tornado hit to baby formula

Reckitt Benckiser, the household goods giant, has reported a drop in third-quarter revenues following a £100m blow to sales of Mead Johnson baby formula powder due to tornado damage at a key US warehouse.

The company, which produces brands such as Nurofen and Dettol, revealed a 0.5% decrease in like-for-like net revenues for its third quarter, largely due to a 17.4% slump in sales in its nutrition division as a result of the tornado's impact. The firm stated that the third-quarter performance was affected by approximately £100m of supply-related issues caused by the July tornado, although this was less than initially anticipated.

Chief executive Kris Licht also indicated that the company is rapidly progressing with a restructure, which will inevitably affect staffing levels and organisational structures.

He said: "We are making changes to our organisation. Clearly that will result in staffing level changes and organisational structures will change.We have no significant announcement on that but we’re reviewing our organisation and will continue to do that."

Earlier this year, Mr Licht announced plans to sell off the group’s slower-growing divisions while retaining its "power brands", such as Durex condoms, Gaviscon antacid, Strepsils lozenges and some of its hygiene brands, including Vanish and Dettol.

On Wednesday, the company confirmed it is moving forward with the sale of its essential home products division – including the Cillit Bang range – with "separation work under way" and aims to complete the sale by the end of next year.

Mr Licht stated: "We are moving at pace on the execution of reshaping Reckitt through sharpening our portfolio, simplifying the organisation and improving shareholder returns. Nutrition was impacted by the Mount Vernon tornado in July, which impacted sales to customers in the quarter, but to a lesser extent than we initially expected."

Reckitt outlined plans for coping with the aftermath of the tornado, noting that they managed to offset most of the hit to sales by relocating operations to an alternative warehouse facility in Singapore. The company had previously reported in July that a crucial third-party warehouse located in Mount Vernon, Indiana, experienced "significant damage" following a tornado incident.

They assured everyone at the time that all employees were accounted for and unharmed, however, warned of anticipated short-term sales implications due to the warehouse’s role in the Mead Johnson Nutrition business, producers of infant formula. Amid this restructuring, the group is contemplating various avenues for its baby formula division.

Their progress in this domain, however, is impeded by ongoing US legal challenges concerning their product specially designed for premature infants. The lawsuits number in excess of 1,000 and assert that the cow's milk-based formulas by both Reckitt and competing firm Abbott Laboratories could be linked to necrotising enterocolitis, a severe intestinal condition affecting premature babies.

Both firms, Abbott and Reckitt, firmly reject the purported connection to the illness.