Reckitt Benckiser outlook hurt by Korean sanitizer issue

LONDON (Reuters) - Consumer goods maker Reckitt Benckiser Group RB.L toned down its full-year sales outlook after second-quarter growth missed estimates due to a scandal over humidifier sanitizers in South Korea.

Products made by Reckitt Benckiser stand on a shelf in a store in Brighton southern England, July 21, 2010. REUTERS/Luke MacGregor

Shares of Reckitt, which makes Durex condoms and Mucinex cold medicine, were 1.6 percent lower at 0741 GMT.

In May, Reckitt apologized and accepted responsibility for its South Korean business having sold humidifier sterilizers that had been linked to deadly lung infections.

Amid the scandal, South Korean retailer Lotte Mart stopped ordering any products from Reckitt, contributing to a sharp decline in the country, which made up about 1.5 percent of group sales and shaved 1 percentage point of growth from overall second-quarter like-for-like sales.

“There is a loss of trust at this point in time between our brands and our business and Korean consumers,” Chief Executive Rakesh Kapoor said, adding that despite intense efforts to win it back, it was still too early to say when the situation will be resolved.

The company is establishing a compensation plan for those affected and booked a one-time charge of 300 million pounds.

In the second quarter, Reckitt’s like-for-like sales rose 4 percent, below analysts’ average estimate of 4.9 percent, according to Liberum analysts.

It said its full-year sales growth would come in at the lower end of its prior 4 to 5 percent forecast. It also forecast “moderate” expansion in its second-half adjusted operating margin.

Reckitt has performed well versus many of its packaged goods peers, as its focus on consumer health has benefited from ageing populations, urbanization and growing interest in general health and wellness.

Yet in the second quarter, its business in Western Europe slowed, hurt by a weaker-than-expected consumer response to its new Scholl Wet & Dry Pedi product.

Due to its global reach, the company said it sees “no tangible impact from uncertainty” regarding the UK’s vote to leave the European Union.

Editing by David Holmes and Adrian Croft