Reckitt Benckiser sales beat forecast as manufacturer Gaviscon price hikes offset lower demand
- The consumer goods group is known for making Gaviscon and Lemsip
- In the three months to September, the company’s sales rose 7.4% to £3.74 billion.
- Cost pressures have led housewares sellers to impose steep price hikes
Reckitt Benckiser raised its full-year sales forecast after higher prices helped offset lower volumes of its personal care products.
The consumer goods company, known for making condoms Gaviscon, Lemsip and Durex, now expects like-for-like net revenue to grow 6-8% this year, down from an earlier estimate of 5-8% growth.
In the three months to September, the company’s sales rose 7.4% to £3.74bn, comfortably beating analysts’ expectations despite inflationary pressures creating tougher market conditions .
Consumer goods: Reckitt Benckiser makes products like condom maker Durex, cleaning brands Dettol and Lysol, and cough medicine Mucinex
Cost pressures have led sellers of housewares to impose steep price increases, which has sometimes resulted in lower sales of items.
Reckitt saw its sales volumes drop 4.6% in the last quarter, mainly due to the easing of Covid restrictions which eased orders for cleaning and disinfectant brands Lysol and Dettol and air freshener Air Wick.
But overall sales still rose on the back of higher prices, contributing a further 12.5% of revenue, while on a reported basis the weaker British pound helped push up total sales by 14%.
The Slough-based group’s nutrition division saw the biggest increase in revenue, rising by around a quarter thanks to growing demand for infant formula in the United States.
The largest U.S. formula maker, Abbott Laboratories, was forced to recall certain products and temporarily halt production at a factory in February following the discovery of bacteria, leading to widespread shortages across the country.
In an attempt to address this issue, US public health regulators have allowed Reckitt to export infant formula from its manufacturing plants in Mexico and Singapore.
Supply chain: Reckitt Benckiser’s sales in the United States were boosted by increased demand for infant formula amid widespread shortages across the country
Trade in North America also benefited from stronger demand for cough medicine Mucinex and detergent brand Finish.
Nicandro Durante, the company’s interim chief executive, said, “Reckitt delivered another quarter of broad-based growth in challenging market conditions as we continue to innovate and improve our market execution.”
Durante recently took over as CEO from Laxman Narasimhan, who left after just three years at the helm for “personal and family reasons” and to become the new head of Starbucks.
During Narasimhan’s tenure, the FTSE 100 company saw a pandemic-induced boom in orders for disinfectants and medicines as consumers became much more health-conscious.
He also completely changed the executive management team and led a new strategy, selling several non-core subsidiaries, such as its Chinese infant nutrition arm, skincare brand E45 and Dermicool.
Although the company’s share price has fallen back below pre-Covid levels, its sales have held up well in an increasingly difficult economic environment.
Shares of Reckitt Benckiser fell 4.7% to £56.86 late Wednesday morning, making it the second worst performer on the FTSE 100 index.
Victoria Scholar, Head of Investments at Interactive Investor, said: ‘As a seller of essentials, Reckitt has strong pricing power which makes it relatively resilient to weather the cost of living crisis which is compressing revenues Household.
“The biggest risk for Reckitt is that consumers start to abandon its branded line, including Dettol, Strepsils and Durex products, for cheaper unbranded alternatives.
“As long as it continues to invest in advertising and marketing and raise prices where necessary, overall sales should hold up, despite lower demand.”