Treasury management

The Group’s multinational operations expose it to a variety of financial risks that include the effects of changes in foreign currency exchange rates (foreign exchange risk), market prices, interest rates, credit risks and liquidity. The Group’s financing and financial risk management activities are centralised into Group Treasury to achieve benefits of scale and control.

The Group’s policy is to align interest costs and operating profit of its major currencies in order to provide some protection against the translation exposure on foreign currency profits after tax. The Group may undertake borrowings and other hedging methods in the currencies of the countries where most of its assets are located.

The Group’s objectives for managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders, and to maintain an efficient capital structure to optimise the cost of capital.

The Group monitors net debt (total borrowings less cash and cash equivalents, short-term available for sale financial assets and financing derivative financial instruments) and at 31 December 2020 the Group had net debt of £8,954m (2019: £10,749m).

Our liquidity needs are driven by our ability to generate cash from operations and the level of borrowings (and related levels of headroom), acquisitions, disposals, dividends and any share repurchases, target ratings for our debt and options available to us in the equity and debt markets.

Bank: The Group has committed bilateral and syndicated credit facilities with high-quality international banks. All of these facilities have similar or equivalent terms and conditions and have a financial covenant. Facilities and central cash and investments are considered sufficient to meet the Group’s projected cash requirements.

Commercial paper: We obtain short-term funding from the commercial paper markets and have benefited from the low interest rate environment. Commercial paper issuance is supported by Group’s committed back-up credit facilities which amounted to £5.5bn of undrawn facilities at 31 December 2020.

Bonds: As part of our strategy to maintain financial flexibility, the Group has raised funds in the USD, EUR and GBP bond markets in recent years. In 2017, US$7.75bn of bonds were issued in the USD market to part refinance the Mead Johnson Nutrition acquisition and in 2020, €1.7bn and £500m were issued in EUR and GBP markets to provide ongoing financing for the Group.

Interest rates: The Group has both interest-bearing and non interest-bearing assets and liabilities and the Group monitors its interest expense rate exposure on a regular basis.

Foreign exchange: The Group prepares its financial statements in Sterling but conducts business in many foreign currencies. The Group’s policy is to align interest costs and operating profit of its major currencies in order to provide some protection against the translation exposure on foreign currency profits after tax. The Group may undertake borrowings and other hedging methods in the currencies of the countries where most of its assets are located. For transactions, it is the Group’s policy to monitor and, only where appropriate, hedge its foreign currency transaction exposures. These transaction exposures arise mainly from foreign currency receipts and payments for goods and services, and from the remittance of foreign currency dividends and loans. The local business units enter into forward foreign exchange contracts with Group Treasury to manage these exposures, where practical and allowed by local regulations. Group Treasury manages the Group exposures, and hedges the net position where possible, using spot and forward foreign currency exchange contracts.

Commodities: Due to the nature of its business the Group is exposed to commodity price risk related to the production or packaging of finished goods such as those that are oil-related, and a diverse range of other, raw materials. This risk is, however, managed primarily through medium-term contracts with certain key suppliers.

Commercial paper

Particulars US commercial paper Euro commercial paper
Issuer Reckitt Benckiser Treasury Services PLC  Reckitt Benckiser Treasury Services PLC
Guarantor Reckitt Benckiser Group PLC Reckitt Benckiser Group PLC
Program size USD 8.0 billion EUR 3.0 billion
Dealers

J.P. Morgan Securities LLC

MUFG Securities Americas Inc.

RBC Capital Markets

Citigroup Global Markets Inc.

Mizuho Securities USA Inc.

Merrill Lynch, Pierce, Fenner & Smith Inc.

Bank of America Merrill Lynch

Societe Generale

Citigroup

BNP Paribas

Issuing and Paying Agent Citibank, N.A. Deutsche Bank

Outstanding bonds

Reckitt Benckiser Treasury Services PLC ("RBTS")

Issuer Issue date Currency Coupon (%) Amount (mn) Maturity
RBTS Sep-13 USD 3.625 500 Sep-23
RBTS Jun-17 USD LIBOR + 56bps 750 Jun-22
RBTS Jun-17 USD 2.375 2,500 Jun-22
RBTS Jun-17 USD 2.750 2,000 Jun-24
RBTS Jun-17 USD 3.000 2,500 Jun-27
RBTS May-20 GBP 1.750 500 May-32

Reckitt Benckiser Treasury Services (Nederland) BV ("RBTS(N)")

Issuer Issue Date Currency Coupon (%) Amount (mn) Maturity
RBTS(N) May-20 EUR 0.375 850 May-26
RBTS(N) May-20 EUR 0.750 850 May-30

Mead Johnson Nutrition Company ("MJN")

Issuer Issue date Currency Coupon (%) Amount ($mn) Maturity
MJN Nov-15 USD 4.125 750 Nov-25
MJN Jun-10 USD 5.900 300 Nov-39
MJN May-14 USD 4.600 500 Jun-44

Note: All the above bonds are guaranteed by Reckitt Benckiser Group plc

Credit ratings

Agency Short Term Rating Long Term Rating Long Term Outlook Last Change Date
Moody's P2 A3 Stable 12 March 2021
S&P A2 A- Stable 17 Dec 2020

Contacts

Tom Greene

Group Treasurer +44 (0)1753 217 800

Sandra Moura

Investor Relations +44 (0) 1753 217 800 IR@rb.com

Reckitt

103-105 Bath Road
Slough,
Berkshire, SL1 3UH
United Kingdom