Shares in high-flying consumer health and hygiene products goliath Reckitt Benckiser (RB.) reverse 2.7% (200p) to £71.27 as the Durex, Cillit Bang and Gaviscon brand owner's third quarter sales miss consensus estimates.

South Korean sales are sluggish following a humidifier scandal and growth is weakening in markets including Russia and Brazil, forcing Reckitt to downgrade 2016 revenue guidance.

SOUTH KOREAN STRUGGLE

One key takeaway from the Q3 update is disappointing like-for-like revenue growth of 2%. Shy of the 2.8% growth anticipated by consensus, the shortfall reflects the ongoing fallout from a humidifier sanitizer issue in South Korea, a poor performance in Russia as well as a weak uptake of Reckitt's latest Scholl/Amope innovation, 'Wet & Dry Pedi'.

South Korea is proving an uphill struggle in light of confirmation a Reckitt product was responsible for a spate of fatal lung problems in the Asian nation. With the South Korean government investigating the humidifier scandal, Reckitt has not only suffered reputational damage but has also taken a £300m charge for compensation payouts.

POWERMARKETS PROGRESS

Commenting today, CEO Rakesh Kapoor says that 'in an environment where market growth rates have softened, we continue to make good strategic progress in all of our Powermarkets, particularly in India, and in China where we are driving strong development of our e-commerce channels. We also had broad-based growth across our consumer health brands and continued improvement in our Hygiene portfolio.'

Yet with issues in South Korea and Russia hanging over Reckitt, and given the failure of the Scholl innovation, Reckitt downgrades its full year like-for-like sales guidance from 4-5% to 4%, the lower end of the original target for the year.

ANALYSTS' VIEW

Ian Forrest, investment research analyst at The Share Centre, describes the Q3 update as 'a rather mixed picture for investors' and concedes 'the issues reported in South Korea earlier in the year continue to have a negative impact and full year sales guidance was slightly lowered to 4% as a result. However, investors should recognise that the company, which owns brands such as Nurofen, Cillit Bang and Vanish, benefited from the weakness in sterling this year.'

'Although the headline figure missed expectations emerging markets continue to perform well. Subsequently we continue to recommend Reckitt Benckiser as a ‘buy’ as the group has been an excellent and consistent performer over the last 15 years, has good defensive characteristics, is expanding into emerging markets and is focusing more on the health and hygiene businesses where margins are higher.'

Also staying bullish is Liberum Capital, which rates Reckitt as a 'buy' with an £84 target price, enthused by the consumer health powerhouse's 'strategic focus on faster growing, higher margin Health and Hygiene categories'.

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