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Dettol-maker price hikes help boost sales but warns on inflation

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·2-min read
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The Dettol-maker raised prices by 5.3%Photo: Reuters/Stephen Hird
The Dettol-maker raised prices by 5.3%. Photo: Stephen Hird/Reuters

Consumer goods giant Reckitt Benckiser (RKT.L) has become the latest company to warn on the impact of soaring supply chain costs after hiking prices in the first quarter of 2022.

The price rises echoed those of competitors such as Nestle (NESN.SW), Procter & Gamble (PG) and Unilever (ULVR.L), which have also started to pass the increases in commodity costs to consumers as Russia's invasion of Ukraine pushes energy prices to record highs.

The Dettol, Nurofen painkillers and Air Wick maker raised prices by 5.3%, boosting like-for-like net revenue growth to reach 5.6%, ahead of the 1.5% that analysts had forecast.

"As we look to the balance of the year, the input environment remains highly volatile and unpredictable," chief executive Laxman Narasimhan said. "It has become more adverse since our last market update in February due to the ongoing war in Ukraine."

Reckitt expects full-year like-for-like net revenue growth towards the upper end of its forecast of 1% to 4%.

Sales dropped 2.3% in the first quarter to £3.4bn ($4.3bn).

Read more: Unilever from soaps and shampoos to marmite, brace for a raft of price rises

Its hygiene division declined 9% as sales of its Lysol disinfectant products failed to keep up with a pandemic-driven boom in demand last year. Like-for-like growth in its nutrition division reached 20.4% with strong sales in the US.

Reckitt's health division, which includes brands such as Lemsip, Strepsils and its Durex condom range, rose 20.6% on a like-for-like basis.

The FTSE 100 (^FTSE) group said full-year sales will be at the top end of its guidance, driven by price rises, however warned of an uncertain outlook as inflation hits consumer spending.

Shares in the company were up 0.5% in mid-morning trade on Friday in London.

The company also said cost inflation has increased to percentages in the "high teens". In February, it had said that full-year costs rose by around 11% and it expected expenses to be higher this year.

Despite a challenging operating environment, Narasimhan hailed a strong start to the year in a statement on Friday.

Read more: AstraZeneca shares fall as it warns of COVID vaccine sales slump

"As we look to the balance of the year, the operating environment remains highly unpredictable," he said.

"We are well placed to address these market dynamics through the strength of our brands, our favourable product mix, our productivity programme and the responsible pricing initiatives already undertaken, with scope to take further actions."

Watch: How does inflation affect interest rates?

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