Reckitt is outperforming Unilever in using its invested capital to generate NOPAT,

while Unilever seems more effective in generating sales

Dynamics Comments
ROIC Reckitt’s profitability metrics in 2021 were affected by the one-off loss of
EUR 3.8bn from the sale of IFCN China. On 5 June, Reckitt sold its IFCN
business in China (an implied enterprise value of EUR 2.3bn) for net cash
proceeds of around EUR 1.3bn to Primavera Capital Group, a Chinese
31.7% investment firm, while retaining an 8% stake in the business.
25.3%
21.7%
17.2% 16.4% 16.0%
IFCN China represented approximately 6% of revenues in 2020, and had, since
the beginning of 2020, been materially dilutive to the revenue growth and
2019 2020 2021 margins, reflecting increasingly difficult market conditions.

Unilever Reckitt
The transaction was strategically beneficial to Reckitt in that it allow
management to focus on its core operations and will help reduce
ICTO leverage. The proceeds were used to repay commercial paper when it fell due
and provided funds to partially cover the bond repayments due in June 2022.

Reckitt is outperforming Unilever in using its capital to generate NOPAT.

Reckitt’s ROIC has increased in 2021, as NOPAT was offset by lower average
1.3 1.3
invested capital, as a result of the disposal of IFCN China, which has been
1.2
removed from the invested capital from the date of disposal in September 2021.
0.6 0.6
0.5
Unilever’s ICTO is nearly twice the one for Reckitt, demonstrating that Unilever
2019 2020 2021 is more effective in generating sales by using its capital.
Unilever Reckitt
As both companies are based in the same country, effective tax rates are
almost identical.