Reckitt CEO to leave after eight years capped by setbacks

London

RECKITT Benckiser Group plc chief executive officer Rakesh Kapoor plans to step down after a cyber attack, manufacturing glitches and other woes ended the consumer-products giant's run as an investor favourite.

The maker of Lysol air fresheners and Nurofen painkillers did not name a successor to Mr Kapoor, 60, but said that it has initiated a search that will consider internal and external candidates. The move comes after shareholders punished Reckitt Benckiser for a series of setbacks, cutting the stock price by about one-third from a 2015 peak. The shares were down as much as 2.8 per cent early on Wednesday in London.

Until the problems cropped up, the company under Mr Kapoor was one of the strongest performers in the packaged-goods industry, where owners of big brands have struggled as shoppers seek out fresh alternatives. Mr Kapoor transformed Reckitt with the US$4.2 billion sale of its food business to McCormick & Co and the US$16.6 billion acquisition of infant formula maker Mead Johnson in 2017.

During his term, which began in 2011, the shares have outperformed the European consumer staples sector by 9 per cent, RBC analyst James Edwardes Jones said in a note.

Given that Reckitt has gone into reverse over the last three years, underperforming the sector by 13 per cent, "one could argue on this basis that it is time for a change at the top", the analyst said.

Mr Kapoor is the latest of several consumer-goods titans to retire, after Unilever's Paul Polman yielded his post as CEO following a decade at the helm and coffee giant JAB Holding Co chairman Bart Becht - a former Reckitt Benckiser chief - stepped down earlier this week. Mr Kapoor will have run the company for more than eight years when he leaves.

Even as Reckitt was integrating Mead Johnson, Mr Kapoor split Reckitt into two parts - one focused on health, the other on home care and other brands - in a move that prompted speculation about a possible eventual break-up.

"This seems an unusual juncture for Kapoor to leave," Investec analyst Eddy Hargreaves said. "We would have expected Kapoor to see these initiatives through further."

Mr Kapoor's employment contract with Reckitt Benckiser is open-ended, according to a person familiar with the situation. The CEO said in a statement that the timing was right for a change of leadership as the company implements the next phase of an overhaul aimed at reinvigorating growth.

Mr Kapoor sought to transform the company into a leading health-care player, arguing that sales of over-the-counter medicines and other wellness products would grow in line with rising incomes in countries such as India and China. He doubled the consumer health division, which includes products such as Nurofen painkillers and Durex condoms, to account for just under two-thirds of the company's roster of brands. He also increased the operating margin by more than five percentage points by cutting costs and encouraging the development of new, more expensive products.

Mr Kapoor, who was the UK's third-highest-paid CEO in 2015 with a £25.5 million (S$44.5 million) package, saw his compensation reduced by 43 per cent in 2016 as the company wrestled with another problem - a scandal over the sale of toxic household disinfectants in South Korea.

The events occurred before he became chief, but Mr Kapoor issued a public apology and set aside more than £300 million to compensate victims. His pay was cut again in 2017, to £12.5 million.

In that year, the company failed to deliver quarterly sales growth for the first time since 1999 due to a lack of demand for a newly released electric hard-skin remover. Later in 2017, supply-chain disruptions from the cyber attack shaved about £100 million off revenue and weakened the company's manufacturing output for several quarters. The woes continued last year with a production glitch at an infant formula plant.

In a video uploaded to Reckitt Benckiser's YouTube page on Wednesday, chairman Chris Sinclair said the board supports Mr Kapoor and that his staying on through 2019 is "vitally important to keep the continuity and strategy of the business'.' BLOOMBERG