Dettol owner Reckitt Benckiser misses forecasts
- The consumer goods retailer owns the brands of cleaning products Cillit Bang and Dettol
- Like-for-like sales rose 3.4% in the three months ended September
- Sales growth was dampened as demand for infant formula fell in the US
Reckitt Benckiser has announced a £1 billion share buyback programme, despite third quarter revenues falling short of expectations.
The consumer goods retailer, which owns cleaning fluid brands Dettol and Cillit Bang, posted comparable sales growth of 3.4 percent for the three months ended September, below analyst expectations of 3.7 percent.
Sales growth was driven by price increases, partly in response to worsening inflationary pressures, across all core divisions and territories.
Below expectations: Dettol owner Reckitt Benckiser said like-for-like sales rose 3.4 percent in the three months ended September, below analyst expectations of 3.7 percent
However, this was tempered by a decline in demand for infant formula in the US, following a comparative performance last year.
A major US formula manufacturer, Abbott Laboratories, had to temporarily close its Michigan factory in 2022 due to flooding and the discovery of bacteria, causing a nationwide formula shortage in America.
To remedy the problem, Reckitt was cleared by U.S. regulators to ship its formula products from factories in Mexico and Singapore.
Supply issues have since improved, causing the company’s market share to decline and like-for-like sales in its food business to fall 11.9 percent in the third quarter.
This was offset by solid growth in Reckitt’s health and hygiene divisions, where revenues rose 6.7 percent on a combined basis.
Trade in the former segment was boosted by orders for over-the-counter medicines across Europe and emerging markets, while the latter benefited from rising sales of Lysol and Finish cleaning products.
Due to adverse currency movements, the Slough-based group’s reported turnover still fell 3.6 per cent to £3.6 billion.
However, on a year-on-year basis, total sales rose 4 percent to just over £11 billion as price increases offset weaker volumes.
Following the result, Reckitt said a £1 billion share buyback, which will take place over the next 12 months, will begin ‘immediately’.
The company also continues to target comparable net sales growth of 3 to 5 percent this year and adjusted operating margins “slightly above” 2022 levels.
Kris Licht, Reckitt’s newly appointed CEO, said the company was “well positioned to deliver sustainable and industry-leading total shareholder returns” thanks to its solid cash flow levels and balance sheet.
Licht rose to the top position in early October, taking over from Nicandro Durante, who had been interim CEO since September 2022 after former boss Laxman Narasimhan decided to move back to the US.
Danni Hewson, head of financial analysis at AJ Bell, said: ‘Licht has a job to show that Reckitt can continue to thrive in a difficult consumer environment.
‘Having committed to full-year targets, he will be under significant pressure to achieve them when he announces the 2023 results next year.’
Reckitt Benckiser Shares fell 5.3 per cent to £57.38 just before midday, making them the second biggest fallers on the FTSE 100 Index.