(Adds earnings, full-year sales)
LONDON, Feb 19 (Reuters) - British consumer goods group Reckitt Benckiser missed 2017 profit expectations and said tough trading in developed markets and rising commodity costs were set to continue, hitting its shares.
The maker of Durex condoms, Lysol disinfectant and Mucinex cold medicine reported higher fourth-quarter sales on Monday, in line with expectations, and forecast an increase for this year as it looks to move on from a turbulent 2017.
It pointed to an improved performance at its recently acquired Mead Johnson baby formula business, and raised its forecast for cost savings from that deal to around $300 million from the $250 million announced at the time of the acquisition.
However, 2017 earnings at the company, which has struggled with the weakest performance in its history, missed expectations and its profit margins declined, hurt by a tougher pricing environment in developed markets and increased commodity costs.
It forecast both of those issues to continue in the near term.
Reckitt's shares were down 3.5 percent at 0840 GMT, the biggest fall by a European blue-chip stock.
Like-for-like sales rose 2 percent in the fourth quarter, helped by a strong flu season. That was roughly in line with analysts' average estimate for 2.1 percent growth.
Mead Johnson sales rose 3 percent, their second quarter of growth after nine quarters of decline. Reckitt was also less impacted by certain one-time items, such as a failed product launch and a safety scandal in South Korea, which hurt sales in earlier quarters. It was also hurt last year by a cyber attack.
Like-for-like sales were flat for the full year, in line with the company's forecast. Adjusted earnings per share from continuing operations were 316.9 pence, below the 318.9 pence forecast by analysts.
The company's adjusted operating margin fell 70 basis points to 27.1 percent.
For 2018, the company forecast revenue up 13 to 14 percent, with like-for-like sales up 2 to 3 percent. It stood by its medium-term target for "moderate operating margin expansion," despite several things that will impact margins, including costs associated with restructuring its business into two units, which it completed in January, and the integration of Mead Johnson. (Reporting by Martinne Geller; Editing by Jason Neely and Mark Potter)