Reckitt Benckiser boosted by demand for Durex and cold and flu products
Consumer goods group Reckitt Benckiser (RKT.L) found favour with investors on Thursday thanks to a rising demand for its cold and flu products, and strong performance from its intimate wellness brands.
The company reported a boost in sales for its Durex condoms, KY lubricants and Veet hair removal products, as lockdown restrictions were lifted across the country and consumers headed out again.
It said sales in its intimate wellness brands surged by double digits last year, including product launches in China and growth in America.
Strong marketing in India also meant that its condoms were now the second biggest brand in the country.
Reckitt’s over-the-counter cold and flu division, which includes brands such as Strepsils and Lemsip, also saw growth over the period when compared to 2020.
The group's fourth-quarter sales growth beat analysts' estimates as its health division improved, however it missed full-year earnings estimates due to higher raw material and supply chain costs.
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The sale of Dettol cleaning products slumped during 2021 after high sales volumes the year before when the coronavirus pandemic first started. But its hygiene business, which includes Lysol, rose 17.5% in the last three months thanks to strong US demand and the spread of Omicron.
It said it was targeting higher profit margins this year despite costs rising in an “unprecedented” inflationary environment and ongoing uncertainties created by COVID”. It expects like-for-like revenue growth of between 1% and 4% for 2022.
The board has also proposed a final dividend of 101.6p
The stock climbed almost 5% higher to the top of the FTSE 100 (^FTSE) on the back of the bullish update.
“The business is showing positive momentum with 62% of our core category market unit holding or gaining share, underpinned by the investments we have already made,” Laxman Narasimhan, chief executive, said.
“We have a unique portfolio of trusted, market-leading brands in structurally attractive categories with significant headroom for growth. This, combined with our progress to date, gives me the confidence in both our near term and medium-term prospects.
However, performance across the group was dragged down by the weak performance from Chinese Infant Nutrition business (IFCN China), which Reckitt offloaded in September. Underlying revenue came in at £12.9bn, up 3.3% on a constant currency, like-for-like basis.
The company said IFCN China led to a loss of £67m which reflected poor performance throughout the year, and exit costs relating to the disposal.
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Danni Hewson, financial analyst at AJ Bell, said: “Big brand owners are facing an important test given pressures on the cost of living. Consumers may not be able to keep stomaching price increases and so there is a risk they buy less of the popular and more expensive brands and/or trade down to cheaper options. The big brand companies therefore face the risk of having to cut their prices just to maintain sales volumes.
“Part of the expected margin boost for Reckitt comes from a likely shift in the type of products being sold in its health arm…now life is getting back to normal, Reckitt is likely to see stronger sales of higher-margins products to help fight colds and flu.
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