Reckitt Benckiser’s sales topped forecasts as producer Gaviscon’s price hike offset weaker demand

  • The consumer goods group is known for producing Gaviscon and Lemsip
  • In the three months to September, the firm’s sales rose 7.4% to £3.74bn.
  • Cost pressures have forced home goods sellers to raise prices sharply

Reckitt Benckiser raised its full-year forecast after rising prices helped offset a decline in hygiene products.

The consumer goods company, known for making Gaviscon, Lemsip and Durex condoms, now expects net profit to rise 6 to 8 percent this year, versus a previous estimate of growth of 5 to 8 percent.

In the three months ended September, the firm’s sales rose 7.4 percent to £3.74 billion, well beating analysts’ expectations, despite inflationary pressures creating more challenging market conditions.

Consumer goods: Reckitt Benckiser makes products such as condom maker Durex, cleaning brands Dettol and Lysol and cough medicine Mucinex.

Cost pressures have caused home goods retailers to raise prices sharply, sometimes resulting in lower sales.

Last quarter, Reckitt’s sales fell 4.6 percent, mainly due to the easing of Covid restrictions, softening orders for Lysol and Dettol brand cleaners and disinfectants and Air Wick air freshener.

But overall turnover was still up thanks to higher prices, which contributed an extra 12.5 per cent to revenues, while a weaker pound reportedly helped boost total sales by 14 per cent.

The Slough-based group’s nutrition division posted the biggest growth in revenue, rising by around a quarter on the back of rapid growth in demand for baby formula in the United States.

The largest U.S. formula maker, Abbott Laboratories, was forced to recall some products and temporarily halt production at a facility in February after the bacteria was discovered, leading to widespread shortages across the country.

To try to solve the problem, US health regulators allowed Reckitt to export nutritional formulas from its manufacturing facilities in Mexico and Singapore.

Supply chain: Reckitt Benckiser's United States sales boosted by rising demand for baby formula amid widespread shortages across the country

Supply chain: Reckitt Benckiser’s United States sales boosted by rising demand for baby formula amid widespread shortages across the country

North American sales also benefited from increased demand for Mucinex cough medicine and Finish brand detergents.

Nicandra Durante, the firm’s interim chief executive, said: “Reckitt delivered another quarter of broad-based growth in a challenging market environment as we continue to innovate and improve our market execution.”

Durante recently took over as boss from Laxman Narasimhan, who stepped down after three years at the helm for “personal and family reasons” to become the new head of Starbucks.

During Narasimhan’s tenure, the FTSE 100 company experienced a boom in orders for disinfectants and medicines caused by the pandemic as consumers became much more health conscious.

He also completely reshuffled the executive management team and spearheaded a new strategy by selling several non-core subsidiaries such as the Chinese baby food division, skin care brand E45 and Dermicool.

Although the firm’s share price has dipped below pre-COVID levels, its sales are holding up well amid an increasingly challenging economic environment.

Reckitt Benckiser shares were down 4.7 per cent at £56.86 by late Wednesday morning, making them the second-worst performer on the FTSE 100 index.

Victoria Sholar, Head of Investments at Interactive Investor, said: “As a consumer goods retailer, Reckitt has strong pricing power, making it relatively resilient to the cost-of-living crisis, which is reducing household incomes.

“The biggest risk for Reckitt is that consumers will start to downgrade their branded range, including Dettol, Strepsils and Durex products, for cheaper non-branded alternatives.

“As long as it continues to invest in advertising and marketing and raise prices when necessary, overall revenue should remain flat despite the drop in demand.”