Reckitt Benckiser Group plc (OTCPK:RBGPF) Q4 2021 Earnings Conference Call February 17, 2022 4:30 AM ET Company Participants Richard Joyce - Investor Relations Laxman Narasimhan - Chief Executive Officer Jeff Carr - Chief Financial Officer Conference Call Participants Martin Deboo - Jefferies Guillaume Delmas - UBS Jeremy Fialko - HSBC Tom Sykes - Deutsche Bank John Ennis - Goldman Sachs Fulvio Cazzol - Berenberg Alicia Forry - Investec Celine Pannuti - JPMorgan Iain Simpson - Barclays David Hayes - Societe ...

Financial Data and Key Metrics Changes - The company reported a stronger-than-expected start for 2020, with underlying sales trends performing above plan, benefiting from COVID-19 demand tailwinds on key brands [5][6][12] - The operating leverage in the first half was 360 basis points, with full-year guidance of 8% to 10% implying an additional 4% to 6% top line growth in the second half [26][33] - COVID-related incremental charges amounted to approximately £69 million in the first half, impacting margins by around 100 basis points [31][32] Business Line Data and Key Metrics Changes - The company has made significant strides in improving supply chain execution, sales execution, and marketing spend optimization, which have contributed to the acceleration in underlying sales growth [12][14][15] - E-commerce sales expanded rapidly, accounting for 12% of total sales, with gross merchandise value reaching around £1.5 billion in the first half [50][52] - The professional hygiene segment is expected to grow, with brands like Dettol and Lysol being recognized as strong trust marks during the pandemic [19][20] Market Data and Key Metrics Changes - The company has seen strong market share gains, particularly in the U.S. with Lysol gaining over 600 points of share [29] - In India, Dettol achieved the 1 share in soaps for the first time, with high single-digit growth reported [58][59] - The Hong Kong market has been a challenge, negatively impacting overall performance, but mainland China has shown positive growth [22][23] Company Strategy and Development Direction - The company plans to leverage its strong performance in early 2020 by increasing investment spending across various areas, including e-commerce and professional hygiene [6][21] - A new organizational structure was implemented to enhance capabilities and culture, focusing on sustainable growth [17] - The company is cautious about future growth due to uncertainties in public health and economic conditions, emphasizing the need for careful monitoring [51][84] Management's Comments on Operating Environment and Future Outlook - Management highlighted the sustained interest in hygiene and health among consumers, suggesting that these trends will continue beyond the pandemic [6][19] - The company is optimistic about achieving medium-term growth and margin goals but remains cautious due to the uncertain environment [51][84] - The management acknowledged the challenges posed by COVID-19 but expressed confidence in the company's strategic direction and execution capabilities [5][6] Other Important Information - The company has committed to significant investments in 2020, exceeding £500 million, to support growth initiatives [30][33] - The company has focused on SKU rationalization to improve manufacturing efficiency, reducing the number of SKUs significantly during peak demand periods [46][47] - The company has engaged in community support efforts, donating millions of units of hygiene products in response to the pandemic [60] Q&A Session All Questions and Answers Question: Acceleration in underlying sales growth and market share gains - Management acknowledged the benefits from COVID-19 and highlighted six areas of focus that contributed to better execution and sales performance [12][18] Question: Nutrition performance in China - Management reported positive growth in mainland China, offsetting challenges in Hong Kong, and emphasized the importance of local production [22][23][24] Question: Professional business size and margin neutrality - Management indicated that the professional business is being approached cautiously, with long-term contracts established, and noted that it is largely margin-neutral [27][28] Question: Dettol and Lysol sales performance - Management confirmed that Dettol's performance improved significantly in the second quarter, with expectations for continued growth [41][42] Question: E-commerce profitability - Management stated that e-commerce is not dilutive to gross margin and emphasized the importance of managing the mix carefully [52][53] Question: Underlying growth breakdown between Health and Hygiene - Management indicated that Hygiene is performing better than Health, which is improving but at a slower pace [57] Question: 3% to 4% underlying growth calculation - Management explained that the calculation involves multiple analytic models and considers pre-COVID sales trends [63][76] Question: Professional business contribution and visibility - Management noted that there was no contribution from the professional business in the first half, but it is expected to ramp up moving forward [70][71] Question: Mucinex supply chain improvements - Management acknowledged the volatility of Mucinex due to seasonal factors and highlighted ongoing investments to improve supply chain stability [72]

Financial Data and Key Metrics Changes - The company reported a like-for-like growth of 13% in Q1 2020, indicating a strong start to the year despite the challenges posed by Covid-19 [15][19] - The company expects to perform better than originally anticipated for the year, although the outlook remains uncertain due to ongoing Covid-19 challenges [19][20] Business Line Data and Key Metrics Changes - Hygiene and health segments showed consistent growth, with brands like Dettol and Lysol experiencing exceptional and sustained growth due to increased usage and penetration [16][45] - The infant formula and nutrition (IFCN) business declined by 2% on a like-for-like basis, primarily due to a tough comparison with a stronger Q1 in 2019 and ongoing product transitions in China [17][39] - E-commerce sales grew over 50%, with total e-commerce sales exceeding 10% for the first time in Q1 [19] Market Data and Key Metrics Changes - North America saw strong growth driven by increased demand for hygiene products, particularly in March as consumers responded to Covid-19 [18] - Emerging markets experienced mid-single-digit growth overall, with specific challenges in India due to shutdowns and physical dislocations [50] Company Strategy and Development Direction - The company aims for mid-single-digit organic revenue growth and mid-20s margins by 2025, with a focus on executing its transformation strategy [9][20] - The organization is being restructured into three global business units: hygiene, health, and nutrition, with specific strategies for China and e-commerce [11] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the unprecedented challenges posed by Covid-19 but expressed confidence in the company's ability to adapt and respond to changing consumer needs [6][12] - The company is investing in capacity to meet growing demand and is focused on maintaining safety for employees while navigating operational challenges [20][36] Other Important Information - The company launched the RB Fight for Access Fund to support frontline health workers and communities, committing 1% of adjusted operating profit to various initiatives [14] - The company has made significant investments in supply chain agility and capacity to address the increased demand for its products [33][36] Q&A Session All Questions and Answers Question: Understanding growth numbers and new customer engagement - Management noted increased penetration and usage in hygiene categories, particularly for Dettol and Lysol, and emphasized the importance of customer engagement and service improvements [26][27] Question: Guidance on performance and margins - Management indicated that while there are uncertainties, they expect performance to be better than previously communicated, with some positive margin tailwinds from commodity costs and volume leverage [30][48] Question: Supply chain concerns and capital expenditure - Management reassured that supply chain planning has improved significantly, and while there are challenges, they are actively working to ramp up supply and manage investments [35][36] Question: Market share gains and R&D outlook - Management confirmed strong market share performance across various categories, driven by consumer trust in established brands, and emphasized the ongoing importance of R&D for future product development [72][73] Question: Infant nutrition in China and growth outlook - Management acknowledged the challenges in the infant nutrition segment but highlighted encouraging progress in premiumization and e-commerce strategies [74][75]

HEALTH · HYGIENE · HOME REJUVENATING SUSTAINABLE GROWTH 27th February 2020 (o Disclaimer Cautionary note concerning forward-looking statements This presentation contains statements with respect to the financial condition, results of operations and business of RB (the "Group") and certain of the plans and objectives of the Group that are forward-looking statements. Words such as ''intends', 'targets', or the negative of these terms and other similar expressions of future performance or results, and their neg ...

Financial Data and Key Metrics Changes - The company delivered top line growth of 0.8% on a like-for-like basis for the full year 2019, with adjusted EPS growth of 2.8% [6][21] - Operating margins experienced a modest decline, with adjusted operating margin decreasing by 50 basis points for the full year [30][49] - Total adjusted EPS growth was 1.8% in the second half and 2.8% for the full year, with a 3% to 4% headwind expected from currency movements in 2020 [21][49] Business Line Data and Key Metrics Changes - The Hygiene Home business unit reported a 4% growth in Q4 and for the full year, benefiting from strong brand performance [40][41] - The Health business unit faced challenges, with a reported revenue decline of 2.2% in Q4, attributed to supply chain difficulties and increased trade spend [32][34] - Mead Johnson, acquired for $17 billion, showed mixed performance, with strong growth in the U.S. but challenges in China leading to a noncash impairment of goodwill [8][9][22] Market Data and Key Metrics Changes - The competitive environment in China for Mead Johnson has become more challenging, with a decline in market share due to intensified regulation and competition [9][24] - The U.S. market showed strong performance in infant nutrition, while Latin America and ASEAN faced execution challenges [9][10] Company Strategy and Development Direction - The company aims to rejuvenate mid-single-digit growth and deliver superior value through a detailed three-phase plan funded by productivity improvements [55][56] - A commitment to invest around £2 billion over the next three years is outlined, focusing on enhancing productivity and innovation [56][57] - The strategic focus includes leveraging eCommerce and digital capabilities, particularly in developing markets [61][62] Management's Comments on Operating Environment and Future Outlook - Management acknowledged that 2019 performance was unsatisfactory and does not reflect the company's growth ambitions [13] - The CEO emphasized the need for execution improvements and a focus on restoring growth and driving strong earnings [55][70] - The company is committed to addressing supply chain issues and enhancing operational efficiency to improve performance [70][71] Other Important Information - Free cash flow conversion fell to 87%, below the target of 100%, primarily due to exceptional spending on integration and restructuring [45][46] - The company plans to reduce expenditures previously envisaged under the RB 2.0 program, expecting a reduction of around £30 million to £35 million [28] Q&A Session Summary Question: What are the expectations for the Health business moving forward? - Management acknowledged the Health business faced challenges but highlighted opportunities for growth through improved execution and product development [32][34] Question: How does the company plan to address the competitive pressures in China? - The company plans to enhance its operational capabilities and focus on leveraging its strong brand equity to regain market share in China [9][10] Question: What is the outlook for eCommerce growth? - eCommerce is expected to continue growing significantly, with operations in over 40 countries and a growth rate of 30% per year [62]