Reckitt Benckiser, the Durex and Dettol maker, has failed to grow like-for-like sales for the first time in 15 years, fuelling concerns that it is pursuing a £14.3bn takeover of a baby-milk business to bolster growth.
The company recorded flat like-for-like sales for the third quarter, dragged lower by a tough European market, which was hit further by its flop launch of a new Scholl Wet & Dry pedicure product.
Reckitt Benckiser shares were 127p, or 1.8pc, lower at £71.48 in midday trading.
The consumer goods giant said that its takeover of American infant formula company Mead Johnson was "progressing well" and it expected to close the deal by the end of the third quarter. Reckitt Benckiser has announced that it is offloading its food division, which includes French's mustard, to maintain its debt levels.
The food division grew sales by 3pc to £105m during the period. The Telegraph has previously reported that US spices maker McCormick, which made a failed tilt for Premier Foods, is circling the unit as is Ajinomoto of Japan, the world’s largest maker of aspartame.
Reckitt Benckiser posted a 15pc lift in total sales to £2.6bn over the first three months of 2017. A 4pc rise in sales in its developing markets and a 3pc lift in its hygiene division helped, but failed to offset a 4pc slump within its home division and flat health sales.
The company said that it was still on track to record a 3pc lift in like-for-like sales for the full year.
Reckitt Benckiser's health division has been affected by a boycott of products in South Korea following a toxic discinfectant scandal involving its Oxy humidifier sanitiser, which resulted in 93 deaths. The company apologised last year and announced a £300m compensation package, which led to chief executive Rakesh Kapoor having his pay cut by a third to £14m, despite him not being in charge at the time.
"Reckitt has been a very consistent performer over the years and this is the first quarter we can remember where the group has failed to grow its like-for-like sales," said fund manager Charlie Huggins at Hargreaves Lansdown.
"We don’t think for one minute that Reckitt’s brands are losing their fundamental appeal, or that the company has lost its ability to innovate.
"The investment case also depends on Reckitt’s ability to integrate the Mead Johnson acquisition, which is expected to complete at the end of the third quarter. The performance of Mead Johnson’s brands has been disappointing in recent years and this is by far the largest deal that Reckitt Benckiser has done."