Reckitt warns market turbulence could hit plans to sell cleaning products unit

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Consumer goods group Reckitt has warned that market conditions could affect the sale of its Essential Home cleaning products business, after sales in the division fell more than expected. 

The division, which includes brands such as Cillit Bang and Air Wick, had been expected to receive offers of between $4bn and $5bn from private equity bidders.

Last week one firm trimmed its offer to between $3bn and $4bn, the Financial Times previously reported, as uncertainty about tariffs led to a slowdown in dealmaking. 

“We are encouraged by the interest that we have seen in the business . . . although we recognise that market conditions may impact this timeframe,” chief executive Kris Licht told analysts.

Shares in the company fell nearly 5 per cent on Wednesday morning.

London-listed Reckitt said at its quarterly results on Wednesday that it still intended to exit the division by the end of 2025.

Last summer, the company launched a wide-ranging restructuring, including the separation of its infant formula business Mead Johnson and the sale of Essential Home, which has annual revenues of £1.9bn. 

Revenues for the division fell 7 per cent to £482mn in the first quarter, compared with an expected 2 per cent drop. 

Licht said market volatility rather than the division’s performance was hitting the timing of the sale process.

Group like-for-like revenues rose 1.1 per cent, short of the 1.4 per cent forecast by analysts. Revenues for core Reckitt, the portfolio that would remain following the separation of Essential Home and baby milk business Mead Johnson, increased 3.1 per cent, ahead of expectations.

Analysts said the poor performance of the homecare business would probably weigh on its valuation. “This markedly poor performance is only likely to further pressure the attractiveness of the asset to any potential buyers,” wrote Bernstein’s Callum Elliott in a note. “In our view, even the £4bn number that has recently been discussed in the media feels optimistic given these weak current trends,” he added.

Mead Johnson’s revenues fell 0.5 per cent, a lower than expected drop. The company has come under investor pressure to sell the business, which is currently embroiled in a litigation in the US over the safety of one of its premature infant formulas.

The company reaffirmed its outlook for the year of between 2 and 4 per cent revenue growth.