Financial Performance - Group net revenue grew 1.4%, in line with guidance of 1% to 3% growth, with Health and Hygiene growing like-for-like net revenue by 4.6% and volume by 2.1% excluding seasonal OTC [7][16] - Adjusted operating profit increased 8.6%, leading to strong EPS growth of 7.9% supported by share buyback and lower tax rate [8][9] - Free cash flow was £2.2 billion, enabling £2.7 billion returned to shareholders, up 75% year-on-year [18][43] Business Line Performance - Hygiene delivered 4.2% like-for-like growth for the year, with strong performance across powerbrands and regions [20][21] - Health achieved 2.1% like-for-like growth, driven by nonseasonal powerbrands and strong growth in China, despite a weak cold and flu season [24][25] - Nutrition saw a decline of 7.3% in like-for-like net revenue due to supply disruption from a tornado, but market share is expected to improve as supply normalizes [29][30] Market Performance - Strong growth in Europe and developing markets, particularly in China where net revenues grew double-digit [8][28] - 55% of top CMUs held or gained market share, up from 47% a year ago, indicating positive market share momentum [21][25] - North American performance was negatively impacted by seasonal OTC, but overall market share gains were noted [8][28] Company Strategy and Industry Competition - The company is focused on a sharpened Core Reckitt business, with intentions to exit Essential Home and Mead Johnson Nutrition by 2025 [10][44] - Investment in innovation and R&D is prioritized, with total CapEx of £500 million to support future growth [6][30] - The Fuel for Growth program aims for a 300 basis point reduction in fixed costs by 2027, enhancing operational efficiency [33][35] Management Commentary on Operating Environment and Future Outlook - Management expressed confidence in the portfolio but acknowledged uncertainties in the macro environment affecting consumer confidence [94][139] - The guidance for 2025 is set at 3% to 4% like-for-like net revenue growth, reflecting current operating conditions [46][139] - The company expects to continue delivering EPS growth and operating margin expansion, despite potential challenges [106][107] Other Important Information - The company has simplified its organizational structure, moving from five to three layers to enhance accountability and decision-making [6][49] - The innovation pipeline remains strong, with new product launches planned across various categories [56][66] - The company is leveraging digital and generative AI to improve operational efficiency and product development [39][75] Q&A Session Summary Question: What is driving the 4% to 5% midterm guide being lower than previously communicated? - Management indicated that the decision reflects a prudent approach considering the uncertain macro environment and consumer confidence [94][96] Question: What are the expectations for gross margins in 2025? - Management does not expect further expansion of gross margins in 2025, with a focus on reinvesting savings into brand equity investment [97][98] Question: Can you clarify the outlook for operating margin and EPS growth? - Management confirmed expectations for operating margins to grow and reiterated a focus on year-on-year EPS growth [106][107] Question: What is the status of the Biofreeze brand and its future? - Management expressed confidence in Biofreeze, citing a strong innovation pipeline and plans for international expansion despite recent category slowdowns [134][136] Question: Are there any expected dis-synergies from the divestiture of Essential Home? - Management indicated that while there may be some costs associated with preparing for the divestiture, significant savings in core operations are expected to offset these impacts [120][127]
Reckitt Benckiser(RBGLY) - 2024 Q4 - Earnings Call Transcript