Laxman Narasimhan’s time at Reckitt Benckiser Group PLC (LSE:RKT, ETR:3RB) comes to an end, but where does it leave the company?
The 55-year-old American joined the owner of brands such as Durex, Dettol and Cilit Bang three years ago after being poached from Pepsi, but leaves his position exactly three years after he joined the FTSE 100 firm, unexpectedly and immediately.
On the back of today’s announcement, shares in the consumer goods company fell 4%, a sign that his departure has not been taken as positive by investors.
A look at the share price when he joined, 6,559p, is only a few pennies away from yesterday's close, 6,662p, suggesting (if you did not know better) that his three-year span at the company was rather uneventful and certainly not the "successful rejuvenation" that the company trumpeted.
What did he oversee?
Narasimhan came into the business overtaking predecessor Rakesh Kapoor, who had been in the hot seat for eight years prior.
“Investors had warmed to [Narasimham's] efforts to re-establish positive momentum at the company,” according to Russ Mould, an investment director at AJ Bell.
The end of his predecessor's time at the helm was clouded in chaos and uncertainty, including a failed US$18bn acquisition of Mead Johnson, the legal and reputational fall-out over a humidifier disinfectant sold in South Korea and a high-profile cyber-attack.
As well as putting these issues behind it, and a US$1.4bn fine for a legacy issue, Narasimhan also navigated a tricky and uncertain Covid period that affected all businesses in one way or another - though the company was sitting pretty thanks to its array of cleaning products that were in high demand in the time of 'hands face space' and other pandemic maxims.
Julie Palmer, a corporate partner at restricting firm Begbies Traynor (AIM:BEG), added he “achieved a solid turnaround” after the pandemic.
During his tenure, the group also announced a new strategy “for rejuvenating sustainable growth.”
Part of the strategy included rebuilding a strong earnings model, investing in key capabilities to strengthen product innovation, funding investment through the delivery of an enhanced productivity programme, delivering progressive improvements to top-line growth and managing capital allocation.
It could be fair to say that this aspect was a success so far, with RB seen as besting its fellow Anglo-Dutch rival Unilever in dealing with inflation in the past two years.
Uncertainty, not?
As such, investors' disappointment in his departure is understandable as it puts into doubt the further execution of the plan.
His time may therefore be seen as steadying the ship, putting it back on the right path and setting up for longer-term growth rather than orchestrating a major shake-up.
Investors were also disappointed by the unexpected and rapid departure, as well as the uncertainity he leaves the company in during a transition period, a cost-of-living crisis, and soaring inflation.
“The market does not like this type of unplanned departure,” said Palmer.
“Ideally, they should have had time to plan for a permanent replacement rather than a temporary one.”
“The company normally appoints internally though so it could be the temporary chief executive (Nicando Duarte, former boss of British American Tobacco) will get the role permanently, albeit they do appear to look externally.”
The cloud of uncertainty lingering over Reckitt’s head is likely to stay there until a permanent chief executive is appointed.
According to Maryum Ali, an analyst at debt rating agency CreditSights quoted in the Guardian, a change in leadership puts its “major overhaul” on hold and in doubt.
Duarte, who was a senior independent director at Reckitt and previously CEO of FTSE 100 listed British American Tobacco, would be an internal appointment that, if made permanent, would provide a greater level of certainty than an external hire.
He might well be expected to continue with the group’s current strategy.