Despite Anglo-Dutch households good behemoth Reckitt Benckiser maintaining the rate of growth in its top line in the second quarter the reaction to the Cillit Bang maker's interim results has been muted.
"Net revenue growth of 4% [over the half year] was driven by continued excellent performance from Emerging Market Areas and Hygiene Brands such as Dettol, Lysol and Finish," said Rakesh Kapoor, the Chief Executive Officer of Reckitt.
The list of well-known brands in that statement underlines one of the of main attractions of Reckitt as an investment, but the investment community's antennae are ever attuned to possible bumps in the road, and it was the second half of the first paragraph in Kapoor's statement which set alarm bells jangling: "While the consumer and competitive environment in Europe and North America remains challenging, we are doing the right things for the long term by increasing our Brand Equity Investment."
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Southern Europe in the shadeLike-for like (LFL) sales in Europe and North America (ENA) were 1% lower in the first half of 2012 than in the first half of 2011, once exchange rate (FX) fluctuations are factored out; throw FX changes and the effects of acquisitions and disposals into the mix and ENA's LFL sales were down 4% year-on-year.
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That compares very unfavourably with Latin America and Asia-Pacific (LAPAC), which achieved underlying LFL sales growth of 11%, and RUMEA (Russia, Middle East and Africa), which saw underlying LFL sales growth of 9%.
ENA operating profit slidesENA saw the group's market share on a volumes basis improve behind "significant BEI" (brand equity investment - Reckitt loves its initialisms, which frankly are a PITA), but depressed market conditions, especially in Southern Europe, led to a slight decline in the top line, not to mention a 5% year-on-year decline in operating profit to £460m, and a one percentage point decline in the adjusted operating margin.
The subdued nature of markets in Southern Europe cannot have come as a surprise to the market but many of Reckitt's brands are supposed to be virtually recession resistant. The Health brands, however, are subject to the vagaries of viral infections and the like and, unfortunately for Reckitt, people have just not been catching flu and colds as much this year as they did last year.
In the Home category, the market share of Vanish in ENA showed positive momentum, although the market was still down on last year. Within portfolio brands Laundry Detergents and Fabric Softeners in Southern Europe remain weak; hair shirts are in fashion in Southern Europe right now, so there is not much call for fabric softeners ...
