Reckitt Benckiser predicts yearly sales at high end of forecasts

Reckitt Benckiser has raised expectations for annual sales after rising prices helped offset declining volumes of its hygiene products.

The consumer goods company, known for manufacturing Gaviscon, Lemsip and Durex condoms, now expects comparable net revenues to grow by 6 to 8 percent this year, against a previous estimate of 5 to 8 percent growth.

In the three months ended September, the company’s turnover rose 7.4 percent to £3.74 billion, well ahead of analysts’ expectations, despite inflationary pressures leading to more difficult market conditions.

Cost pressures have caused sellers of household goods to impose steep price increases, sometimes resulting in fewer items being sold.

Reckitt saw its sales volumes fall 4.6 percent last quarter, mainly due to easing of Covid restrictions, easing orders for detergent and disinfectant brands Lysol and Dettol and air freshener Air Wick.

But overall sales continued to grow thanks to higher prices contributing an additional 12.5 percent of sales, while on a reported basis the weaker British pound helped boost overall sales by 14 percent.

The Slough-based group’s nutrition division saw the largest revenue growth, growing approximately a quarter as a result of rising demand for infant formulas in the United States.

America’s largest formula maker, Abbott Laboratories, was forced to recall a number of products and temporarily halt production at a factory in February after the discovery of bacteria, leading to widespread shortages across the country.

To try and fix this, U.S. public health regulators allowed Reckitt to export formula supplies from its factories in Mexico and Singapore.

North American trade also benefited from increased demand for cough suppressant drugs Mucinex and the detergent brand Finish.

Nicandro Durante, the company’s interim president, said, “Reckitt delivered another quarter of broad growth amid challenging market conditions as we continue to innovate and improve our execution in the marketplace.”

Durante recently took over from Laxman Narasimhan, who after just three years was in charge for “personal and family reasons” and became the new head of Starbucks.

During Narasimhan’s tenure, the FTSE 100 company experienced a pandemic-induced boom in the ordering of disinfectants and medicines as consumers became much more aware of their health.

He also completely changed the executive management team and led a new strategy, selling several non-core subsidiaries such as the Chinese infant nutrition division, skin care brand E45 and Dermicool.

While the company’s stock price has fallen below pre-Covid levels, the sale has held up well against an increasingly difficult economic backdrop.

Reckitt Benckiser shares fell 4.7 percent to £56.86 late Wednesday morning, making them the second-worst performance on the FTSE 100 Index.

Victoria Scholar, head of investment at Interactive Investor, said: “As a seller of essential items, Reckitt has strong pricing power that makes it relatively resilient to address the cost of living crisis that is weighing on household income.

“The biggest risk to Reckitt is if consumers of its branded range, which includes Dettol, Strepsils and Durex products, begin to trade for unbranded, cheaper alternatives.

“As long as it continues to invest in advertising and marketing and raises prices where necessary, overall sales should hold up despite falling demand.”