Reckitt Benckiser(RBGLY) - 2019 Q4 - Earnings Call Transcript

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]