Shares in consumer and household goods giant Reckitt Benckiser (RKT) ticked up 0.8% to £62.56 after the Dettol-to-Durex maker reported a strong start to 2022 and said it expects to deliver full year like-for-like sales growth at the upper end of guidance.
First quarter like-for-like sales grew 5.6% as the Slough-based Strepsils-to-Nurofen maker pushed through a 5.3% price increase, though volume growth was subdued at 0.3% as Lysol disinfectant sales declined against a strong, Covid-inflated comparative.
RECKITT’S STRONG START
In common with consumer goods peers such as Unilever (ULVR) and US-listed Procter & Gamble (PG:NYSE), Reckitt Benckiser has raised product prices in order to offset soaring inflation.
Following a strong start to 2022, the FTSE 100 consumer goods giant insisted it is on track for like-for-like sales growth towards the upper end of its 1% to 4% guidance range.
Despite a ‘highly volatile and unpredictable’ input cost environment which has worsened since the Ukraine conflict, Reckitt Benckiser expects adjusted operating margins will be in line with the prior year and current market expectations.
‘We have a strong portfolio of brands which has enabled us to take pricing responsibly, and we will take further pricing actions as required’, said the company.
While hygiene volume declined 12.8% in the first quarter, this mainly reflected the reduction in Lysol volumes. Brands less sensitive to Covid dynamics did well, however, among them Finish, Air Wick, Harpic and Vanish.
In health, Mucinex and Strepsils benefited from a combination of Omicron and a bumper cold and flu season, Durex performed particularly strongly in China and Reckitt Benckiser also highlighted healthy vitamins, minerals and supplements sales.
Elsewhere in the business, like-for-like nutrition revenue grew by a tasty 20.4% to £557 million.
BROAD-BASED GAINS
Chief executive Laxman Narasimhan commented: ‘We have made a strong start to the year across all our business units and geographies despite a challenging operating environment.
‘As we look to the balance of the year, the operating environment remains highly unpredictable. We are well placed to address these market dynamics through the strength of our brands, our favourable product mix, our productivity program and the responsible pricing initiatives already undertaken, with scope to take further actions.’
THE EXPERT’S VIEW
AJ Bell investment director Russ Mould noted Reckitt Benckiser increased prices significantly less than Unilever in the first quarter of the year - 5.3% against 8.3% - which is ‘a long way behind the increase in input costs. Yet unlike its counterpart it has seen volumes up slightly rather than falling over the same period.
‘The two companies sell branded goods in different areas - health, hygiene and nutrition for Reckitt and Unilever much more focused on branded food items. However, both are reliant on the strength of their brands as they look to contend with squeezed household budgets.
‘The big risk facing both businesses is shoppers trade down to supermarket own-brand or other cheaper rival products and the next 12 months will be a real test of just how durable Reckitt’s brands are.
‘It could also give chief executive Laxman Narasimhan some clues on which of its ranges warrant further investment and which could potentially be ditched as they don’t resonate strongly enough with the public.’
DISCLAIMER: Financial services company AJ Bell referenced in this article owns Shares magazine. The author of this article (James Crux) and the editor (Ian Conway) own shares in AJ Bell.
