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Reckitt Benckiser shares plunge as it sees £100mln hit to full year revenue after cyber-attack

Last updated: 15:25 06 Jul 2017 BST, First published: 07:33 06 Jul 2017 BST

Reckitt
A cyber-attack disrupted Reckitt’s ability to manufacture and distribute products

Reckitt Benckiser Group plc (LON:RB.) shares took a tumble today after the consumer products group revealed a cyber-attack disrupting the consumer goods company’s operations could cost an estimated £100m in full year revenue leading analysts to chop forecasts and targets for the stock.

The FTSE 100-listed manufacturer of Nurofen, Veet, Dettol and Stepsils said some of its factories were still not in operation following the so-called ‘Petya’ ransomware attack on 27 June but it was working on getting them back up and running.

In late afternoon trading, Reckitt shares were off their earlier lows, but still down 1.6%, or 123p at 7,577p. 

The attack disrupted Reckitt’s ability to manufacture and distribute products to customers in a number of markets across the group, it said.

Revenue in the second quarter is expected to drop 2% on a like-for-like basis, compared to a 4% increase the same period a year ago when it reported net revenue of £2.2bn.

For the full year, the group cut its revenue guidance to like-for-like net revenue growth of 2% from a previous estimate of 3%, following a 3% rise in 2016 to £9.8bn. This would equate to about £100mln in lost revenue. 

Petya ransomware attack hits companies across the globe

The ransomware, which blocked access to computers and demanded US$300 in Bitcoin to release them, hit a number of businesses worldwide including Oreo cookie manufacturer Mondelez International, the shipping group Maersk and the advertising agency WPP.

Reckitt said its revenue was also affected by a new goods and services tax (GST) in India, which resulted in fewer orders from customers in June.

Excluding the impact of the taxes and the cyber-attack, like-for-like revenue in the second quarter is expected to be flat.

“We expect that some of the revenue lost from the second quarter will be recovered in the third quarter. However, the continued production difficulties in some factories mean that we also expect to lose some further revenue permanently,” the company said.

Jefferies downgrades Reckitt to 'hold', Whitman Howard cuts annual forecasts

Jefferies cut its rating on Reckitt to 'hold' from 'buy', saying the anticipated weak second quarter looks set to "kill our bullish thesis on an full year 2017 guidance beat".

The broker said it also had some "minor concerns" of a potential "kitchen-sinking" regarding the company's US$16.7bn takeover of US baby formula maker Mead Johnson Nutrition. The deal was announced in February.

Jefferies said it remains an admirer of the stock but the recent rally no longer leaves sufficient upside for a continued 'buy' rating.

Whitman Howard left its rating at 'buy' but cut its full year organic revenue growth estimate to 2.0% from a previous guidance of between 3.4% and 2.8%. 

On top of the cyber-attack dramas, Reckitt Benckiser’s first half also saw ongoing resistance in South Korea after the sale of a humidifier disinfectant in the nation killed about 100 people and left hundreds with permanent lung damage, Whitman said. It also suffered weak demand for its latest Scholl footcare range. 

Still, Whitman believes Reckitt remains "well placed to enjoy mature market growth in its core product range", particularly in its home and personal care division. 

"Importantly, we continue to argue that Reckitt Benckiser is best placed to be an active consolidator in consumer health," Whitman said.

"In particular, it Is one of the few European large cap FMCG companies which generates superior margins to its US counterparts. Moreover, at 28% its margins way exceed those of most of its consumer health competitors which are embedded into global pharmaceuticals companies.  The path to value creation in our opinion is clear."

 -- Updates share price --

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