Reckitt's baby formula sales to suffer after tornado damages warehouse

By Richa Naidu and Yadarisa Shabong

(Reuters) -Sales of Reckitt's Mead Johnson baby formula powder are likely to take a short-term hit after a tornado damaged a third-party warehouse in the United States, the British consumer goods company said on Wednesday.

The Mount Vernon warehouse in Indiana, out of action since the tornado struck on July 9, is an important site for the company's Mead Johnson Nutrition business, containing both raw materials and finished products, Reckitt said.

All employees are safe, the company added, saying it had diverted deliveries to other warehouses in the United States.

Some nutrition product varieties are likely to be affected in the short term, a Reckitt spokesperson said.

The company could not estimate when the warehouse would be up and running again, but said it was working as quickly as possible with local authorities and regulators to minimise the disruption.

"We are partnering with customers and suppliers on expedited recovery efforts to minimise disruption by leveraging our global supply chain and managing inventory at our other U.S. warehouses," the spokesperson said.

This is not the first time Reckitt has had to rely on its worldwide supply chain in an emergency, which can take time because of the regulatory hurdles the company needs to clear with the U.S. Food & Drug Administration.

In 2022, during a months-long U.S. shortage of baby formula, Reckitt flew 65 tons of baby formula to Chicago from its plant in Singapore. A few months before, it said it was working with the FDA to increase baby formula supply, including expediting the approval of some products made at a facility in Mexico.

Reckitt said on Wednesday it had comprehensive property damage and business interruption insurance, which it expects will largely offset the impact on earnings.

This marks a third setback for the company this year.

In February, an investigation showed some employees had under-reported liabilities in the Middle East, triggering the biggest one-day drop in Reckitt's shares since December 1999.

A month later, the stock tumbled again after an Illinois jury ordered Reckitt's Mead Johnson unit to pay $60 million to the mother of a premature baby who died of an intestinal disease after allegedly being fed the company’s Enfamil Premature 24 baby formula products.

Reckitt's stock, which was down 0.5% on Wednesday morning, has lost about 21% so far this year.

(Reporting by Yadarisa Shabong in Bengaluru; Editing by Louise Heavens, Mark Potter and Jane Merriman)