- Reckitt Benckiser shares are down more than 11% in afternoon trading in London.
- Its Mead Johnson unit was ordered to pay $60 million to the mother of a premature baby who died of an intestinal disease, after being fed its baby formula.
- More than 400 other lawsuits are pending in the US against Reckitt and competitor Abbott.
Susannah Streeter, head of money and markets, Hargreaves Lansdown:
‘’The $60 million sum includes compensation for the plaintiff Jasmine Watson’s loss and grief and for the pain and suffering of her baby in what is clearly a tragic case. Chance Dean was born prematurely and died of an intestinal disease, after being fed Enfamil baby formula, made by Mead Johnson.
This ruling has come at a bad time for the Reckitt which had already been struggling with falling volumes across its household goods and hygiene ranges. It’s not simply the size of this payout which has caused nervousness, but the fact a long line of other lawsuits are pending, which could mount up to be huge sum for the company.
Based on the size of this fine, the share move is massively overstating the initial impact, which suggests investors are preparing for more to come. Plaintiffs are accusing its division, Mead Johnson, and rival Abbott, of concealing the higher risks of formula for premature infants compared to donor milk. Although nutrition is Reckitt’s smallest division, it’s also been another volume drag, and hitting the headlines for the wrong reasons could also lead to reputational damage. After missing expectations in the fourth-quarter, investors were always going to be highly sensitive to set-backs and this judgement has led to a fresh loss of confidence.’’