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A-Brands

Reckitt Reports Strong Quarter, Raises Full-Year Outlook

Home and personal care firm Reckitt has raised its full-year forecast after reporting higher-than-expected third-quarter sales, driven by price hikes and growth in demand for several of its products.

The group reported 3.3% rise in like-for-like sales for the third quarter, beating the 0.7% decline analysts had expected, according to a company-supplied consensus.

The reported number and estimates excludes sales from its recently completed sale of its infant nutrition business in China.

Performance By Division

Its Hygiene business reported like-for-like growth of 2.9% in the period, driven by continued growth for its Finish and Air Wick brands, while its Health arm reported growth of 3.6%, citing 'sharp improvement in cold and flu sales trends'.

Reckitt's Nutrition business reported like-for-like growth of 3.8%, while its e-commerce business was up 23%.

'Building Blocks'

“In September, we reiterated the building blocks which will see Reckitt return to mid-single digit revenue growth and mid 20’s margins," commented Laxman Narasimhan, Reckitt chief executive. "There is more to be done, but today’s results are testament to our progress, with 3.3% LFL revenue growth building on the 15.3% growth of Q3 2020.

"We’ve delivered growth in each of our three GBUs and in each of our three geographic regions, with a balance of volume and price/mix across the portfolio. Nine of our ten largest brands are up double-digits on a two-year basis."

The company also raised its full-year net revenue like-for-like sales growth forecast to 1% to 3% from flat to up 2% earlier, but cautioned that growth would be 'softer' in the fourth quarter.

Reckitt said it was seeing a 10% rise in raw material prices, compared with an 8% to 9% rise it had estimated previously. It cited challenges particularly in areas such as surfactants, paper and tinplate due to a surge in costs.

However, the FTSE-listed company kept its adjusted operating profit margin forecast, excluding IFCN China, for the year in the range of 22.7% to 23.2%.

The group changed its name from Reckitt Benckiser to 'Reckitt' earlier this year.

Analyst Viewpoint

Commenting on the group's performance, analyst Russ Mould of AJ Bell said, “There’s a lot to like in this morning’s update from Reckitt Benckiser. There is a notable hike in sales forecasts, impressively, every division has outperformed expectations and the company has maintained margin guidance despite the inflationary pressures and supply chain issues which it, like all of its peer group are facing.

“This is testament both to the strength of its brands which have allowed the company to pass through price increases to its customers and to the ongoing transformation of the businesses under CEO Laxman Narasimhan.

“Reckitt’s focus on health and hygiene products meant it was an early pandemic winner but investors turned away from the stock thanks to patchy performance and the perception that sales growth in these categories wouldn’t be sustained. However, the sale of its troubled Chinese infant formula business along with wider operational efficiencies has helped address Reckitt’s uneven performance."


News by Reuters, edited by ESM. For more A-Brands stories, click here. Click subscribe to sign up to ESM: European Supermarket Magazine.

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