UPDATE 4-Reckitt’s European warning takes shine off Q2

* Warns of slower European growth in its markets

* Expects SSL deal to close in Q4 2010

* Q2 net profit 380 mln pounds vs 363.4 mln forecast

* Maintains sales and profit targets for 2010

* Shares down 1.10.9 percent at 33.01 pounds

(Adds graphic, more analyst comment, updates shares)

By David Jones

LONDON, July 26 (BestGrowthStock) – Consumer goods maker Reckitt
Benckiser (RB.L: ) warned of shrinking European growth and posted
its first ever quarter-on-quarter underlying sales dip in the
region, tarnishing forecast-beating second-quarter profit (Read more your timing to make a profit.)s.

Only days after agreeing to buy Durex condom and Scholl
sandal maker SSL, the British group which makes nearly half its
sales in Europe said growth had virtually disappeared in its
markets there.

It was having to raise spending to hold on to market share
as rivals turned up the competitive pressure.

“Six months ago we were seeing 4 percent growth in our
markets in Europe now it is below 1 percent … In Europe there
is now virtually no market growth,” Chief Executive Bart Becht
told a conference call on Monday after results.

Becht added the group had broadly held on to its market
shares in Europe and was down marginally in fabric care for
products such as Vanish, as analysts said rivals like Procter
and Gamble (P&G) (PG.N: ) launched new competitive products.

Reckitt — which also makes Cillit Bang cleaners, Air Wick
airfresheners, Nurofen painkillers and Finish dishwash products
— reported Q2 revenue in Europe slipped 1 percent while
operating profit was unchanged from a similar period last year.

Analysts expect competition to intensify with P&G’s new
Actilift stain remover being rolled out in Europe while the U.S.
giant keeps up the pressure with its Fairy dishwash products and
its recent AmbiPur aircare acquisition.

“We believe that competitive activity will get more
difficult in the second half and now see significant risks to
full-year targets,” said analyst James Edwards Jones at broker
Execution Noble.

Worry over Europe pushed the shares 1.1 percent down to
33.01 pounds by 1129 GMT in a largely flat London stock market
despite overall profits coming in higher than forecast.

“The markets concerns about weaker performance in Europe and
fabric are not going to be alleviated by these results, but
Reckitt is clearly set to deliver, in our view, another year of
double-digit earnings growth,” said analyst Graham Jones at
broker Panmure Gordon.
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Reckitt, which agreed last week to buy SSL (SSL.L: ) for 2.54
billion pounds ($3.9 billion), said if its offer was successful
it hoped to close the deal in the fourth quarter. Becht declined
to comment on the deal while the offer was open.

Analysts said the move will add to Reckitt’s fast growing
health and personal care business which will account for around
one third the group’s revenue.

The group reported second-quarter net profits rose 23
percent to 380 million pounds, ahead of a Reuters I/B/E/S
forecast of 363.4 million and a group consensus of 365 million
while it held its sales and profit targets for 2010.

The group’s full-year 2010 targets are to see a 5 percent
rise in underlying sales and a 10 percent increase in operating
profit after stripping out its high-growth Suboxone
pharmaceuticals unit and taken at constant currency.

Reckitt sets targets for its core business, excluding its
drugs business whose main revenue generator is heroin
substitution drug Suboxone, for which it expects generic
competition to emerge this year and profits to then suffer.

Its half-year dividend rose 16 percent to 50 pence.

Investment

(Editing by Michael Shields and Mike Nesbit)
($1=.6473 pounds)

UPDATE 4-Reckitt’s European warning takes shine off Q2