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Reckitt Benckiser Sales Beat Estimates As Retailers Stock Up

Reckitt Benckiser Group Plc, the maker of Durex condoms and Nurofen painkillers, reported fourth-quarter sales growth that beat analyst estimates as retailers stocked up on cold and flu remedies.

Revenue advanced 7 per cent on a so-called like-for-like basis, beating the 4.4 per cent median estimate of analysts surveyed by Bloomberg. The company also announced estimate- beating full-year profit and forecast further growth in 2016, sending the shares up the most in more than two years.

"These were great results," James Edwardes Jones, an analyst at RBC Capital Markets, said in a note. "If investors are looking for places to hide from the current market volatility they could do worse than RB."

Fourth-quarter growth was led by the consumer-health division, even as fewer people came down with flu,the company said. While there was less demand from consumers for remedies such as Strepsils lozenges, sales of such products to retailers were strong, it said. Reckitt expects the increase in stores’ inventory to reverse in the first half of 2016.

The shares rose as much as 5.6 percent to 6,300 pence in London, the steepest intraday gain since October 2013. They were up 5.5 per cent at 8:06 am.

The company forecast continued sales growth in 2016. Like- for-like net revenue will increase by 4 per cent to 5 per cent, Chief Executive Officer Rakesh Kapoor said in a statement. Operating margins are set to show "moderate" expansion over the medium term, Reckitt Benckiser said, reiterating its previous guidance.

The Slough, England-based company is seeking to expand in healthcare – its fastest-growing business that also includes Mucinex and Gaviscon medicines – as sales of those products outpace demand for food and homecare brands. Kapoor has said he’s keen to make acquisitions in the sector, which is fragmented and likely to consolidate.

"It is possible that there will be aggregation" in the consumer-health industry and RB would review targets if they came up for sale, Kapoor said Monday.

News by Bloomberg, edited by ESM. To subscribe to ESM: The European Supermarket Magazine, click here.

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