- Price hikes send Q4 sales 6.2% higher
- Reckitt has ‘continuing momentum’ in 2023
- Targeting ‘sustainable dividend growth’ in future years
Shares in Reckitt Benckiser (RKT) ticked up 0.8% to £58.08 after the consumer goods giant reported a rise in annual revenues with results boosted by price increases and a strong showing from strong health and nutrition product sales.
The FTSE 100 firm also said it is targeting like-for-like net revenue growth of mid-single digits for 2023, excluding the substantial boost to last year’s infant nutrition sales received following a recall by rival Abbott Laboratories (ABT:NYSE) after customers complained of their kids contracting bacterial infections, which allowed Reckitt to fill the gap.
Income investors were pleased as Reckitt raised the annual dividend by 5% to 183.3p and said it aims to deliver ‘sustainable dividend growth in future years’.
Q4 LIKE-FOR-LIKES RISE 6.2%
The Dettol, Nurofen and Strepsils maker’s net revenue rose 9.2% to the best part of £14.5 billion in 2022.
Like-for-like sales growth of 7.6% met expectations with a decline in the hygiene division due to demanding Lysol comparatives offset by strong growth in health and nutrition, supported by a significantly larger Dettol business and strong market share gains for Mucinex and Strepsils.
Fourth quarter like-for-likes firmed 6.2%, although price increases of 12% did result in a 5.8% decline in volumes. Hygiene returned to growth in the quarter thanks to further improved Lysol sales trends, while health saw strong growth in Mucinex, Nurofen, Strepsils and Gaviscon.
The nutrition business also delivered another strong quarter amid strong demand in the US and the continued turnaround in developing markets.
WHAT DID THE CEO SAY?
In terms of the outlook for 2023, Reckitt is targeting like-for-like sales growth in the mid-single digits, stripping out the one-off US nutrition impact, a target which also includes a return to growth in its disinfection products portfolio.
Reckitt also expects 2023 adjusted operating margins to be in line with or slightly above 2022 levels.
CEO Nicandro Durante said Reckitt is now ‘28% larger than we were in 2019. Our healthy balance sheet underpins our financial strength, and we are delighted to grow the dividend in 2022 with the aim to deliver sustainable dividend growth in future years.’
Durante stressed the company enters 2023 with ‘continued growth momentum’ and has ‘a strong innovation pipeline in 2023 which will be supported by increased brand equity investment.’
THE EXPERT’S VIEW
AJ Bell investment director Russ Mould commented: ‘Big brands still count in the nutrition and health market. That’s the clear message underlined by results from Reckitt where these two areas helped it beat expectations.
‘At a time when household budgets are under real pressure, you’d think people would be happy to buy unbranded over-the-counter drugs but products like Nurofen still look to be a winner with consumers.
‘Reckitt has been able to successfully pass on higher costs and this helped make up for lower sales volumes but it is fast approaching a point where it needs to decide if investors can continue to stomach further increases. Short-term gain could easily turn into long-term pain if it means Reckitt loses share to its rivals.
‘This decision will fall to new CEO Nicandro Durante who can at least draw on years of industry experience to help make that call.’
Disclaimer: Financial services company AJ Bell referenced in the article owns Shares magazine. The author of the article (James Crux) and the editor of the article (Martin Gamble) own shares in AJ Bell.
