Reckitt Benckiser cuts goodwill in year when Nurofen packaging scrutinised

Friday 17th June 2016

Reckitt Benckiser (New Zealand), the local division of the consumer goods business, sliced off more than a third of its goodwill in 2015, a year when its Nurofen painkiller packaging attracted the attention of competition regulators.

The Auckland-based consumer goods distributor cut $51.8 million from goodwill - which represents the premium paid over the fair value of identifiable assets in an acquisition - valuing the intangible asset at $79.4 million as at Dec. 31, according to financial statements lodged with the Companies Office. That impairment charge pushed Reckitt Benckiser into the red last year, reporting a loss of $48.8 million on sales of $127.8 million, compared to a profit of $2.8 million on revenue of $123.3 million in 2014.

The write-down was in a year when Reckitt Benckiser agreed to enforceable undertakings with the Commerce Commission to stop marketing the Nurofen specific pain relief range and said it would try to get the remaining stock off New Zealand shelves by March 23, 2016.

The undertakings were given to "satisfy the commission that there is no need to seek urgent injunctive relief pending the resolution of the commission's investigation", which was launched after the Australian Competition and Consumer Commission won a case against Reckitt Benckiser for misleading consumers with the painkiller's packaging. The ACCC is appealing the A$1.7 million fine imposed as being too small, and New Zealand's Commerce Commission is in the final stages of its investigation on this side of the Tasman.

Reckitt Benckiser declined to comment on the accounts.

The parent company injected $71.9 million of new capital into the New Zealand holding company in June last year, while $121.5 million of related party debt was repaid. That bolstered total equity to $80.7 million as at Dec. 31 from $57.6 million a year earlier, which had been the balance of Reckitt Benckiser NZ's retained earnings.

Last year Reckitt Benckiser sought to buy Johnson & Johnson's K-Y lubricant brand in a global stitch up with its own Durex product. While the deal was cleared in other jurisdictions, New Zealand's regulator turned down the bid, saying it wasn't satisfied such a union wouldn't detract from competition in the supply of personal lubricants to supermarkets and pharmacies.

BusinessDesk.co.nz

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