Yahoo Finance FTSE 100: Dettol maker Reckitt Benckiser share price soars
Consumer goods giant Reckitt Benckiser (RKT.L) soared to the top of the FTSE 100 (^FTSE) on Wednesday after raising its full-year forecast thanks to recent price increases.
The company, which owns brands such as Dettol, Strepsils, and Durex, said sales growth is now expected to be between 5% and 8% this year, up from previous guidance of between 1% and 4%.
It also expects growth in its operating margins.
Revenues rose 8.6% in the first half of the year to £6.9bn ($8.3bn), while it introduced cost cutting measures of £370m that had helped it become a “stronger, more resilient business”.
Quarterly like-for-like revenue rose 11.9% on a constant currency basis, ahead of the 6.8% growth analysts had expected in a company-supplied poll.
Reckitt added that its prices rose by 9.7% during the second quarter, but that volumes still grew by 2.2%, meaning that customers were accepting the price hikes and buying products.
But the group warned that input prices were "unpredictable" and that it expected inflation to remain in the high teens for the full year ahead.
It also received a boost thanks to strong demand for baby formula in the US due to supply chain troubles amongst its rivals.
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Reckitt’s nutrition division, which includes leading baby formula brand Enfamil, saw revenues climb by 40% so far this year.
Shares climbed as much as 5% on the back of the news, hitting their highest level in a year.
“We have built a stronger, more resilient business around our portfolio of trusted brands in growth categories. Despite challenging conditions, we are confident about the rest of the year, we are already delivering sustainable mid-single digit net revenue growth,” Laxman Narasimhan, chief executive, said.
The firm’s core disinfection brands performed as expected, sitting well above pre-pandemic levels, while sales in its health portfolio, which also includes Nurofen painkillers, leaped 24.2%.
Dettol posted revenue growth of 40% compared to pre-pandemic levels during the second quarter. However, sister brand Lysol fell around 30% from its COVID peak as some retailers chose to not re-stock.
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Matt Britzman, equity analyst at Hargreaves Lansdown, said: “Reckitt’s resilient performance so far this year continues to impress. Price hikes were all but guaranteed given the double-digit inflation in certain costs the group’s seeing, but impressively volumes are still growing. That’s testament to the defensive nature of Reckitt’s portfolio, cleaning and hygiene products are hardly going to be the first things left off shopping lists when wallets are stretched.
"Performance from key brands Dettol and Lysol continue to support the argument that increased hygiene awareness is here to stay. Sales may be down from last years astronomical highs, but both products look to be rebasing well ahead of pre-pandemic levels."
He added: "Reckitt’s a more streamlined outfit than it has been in the past, cost savings of £370m delivered over the first half were ahead of expectations and provided a welcome reprieve from higher input costs. The 5.1% rise in early trading tells the story, this was a solid set of results in a tough environment."
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