Reckitt Benckiser has lifted annual turnover expectations after rising prices helped offset declining volumes of its hygiene products.
The consumer goods company, known for manufacturing Gaviscon, Lemsip and Durex condoms, now anticipates like-for-like net revenues will expand by 6 to 8 per cent this year, against a prior estimate of 5 to 8 per cent growth.
Over the three months ending September, the firm’s sales increased by 7.4 per cent to £3.74billion, comfortably surpassing analyst expectations despite inflationary pressures creating more difficult market conditions.
Consumer Goods: Reckitt Benckiser manufactures products like condom maker Durex, cleaning brands Dettol and Lysol and cough suppressant medicine Mucinex
Cost pressures have led household goods sellers to impose steep price hikes, which has sometimes resulted in fewer items being sold.
Reckitt saw its sales volumes fall by 4.6 per cent last quarter, mainly due to loosening Covid restrictions softening orders of cleaning and disinfectant brands Lysol and Dettol and air freshener Air Wick.
But overall turnover still grew thanks to higher prices contributing an extra 12.5 per cent of revenues, while on a reported basis, the weaker pound sterling helped boost total sales by 14 per cent.
The Slough-based group’s nutrition division saw the largest expansion in revenue, growing by around a quarter on the back of surging infant formula demand in the United States.
America’s biggest formula maker, Abbott Laboratories, was forced to recall some products and temporarily shut down production at a facility in February following the discovery of bacteria, leading to widespread shortages across the country.
To try and resolve this, US public health regulators allowed Reckitt to export formula supplies from its manufacturing plants in Mexico and Singapore.
Supply chain: Reckitt Benckiser’s sales in the United States were boosted by surging infant formula demand amidst widespread shortages across the country
Trading across North America also benefited from more robust demand for cough suppressant medicine Mucinex and detergent brand Finish.
Nicandro Durante, the firm’s interim chief executive, said: ‘Reckitt delivered another quarter of broad-based growth amidst challenging market conditions, as we continue to innovate and improve on our in-market execution.’
Durante recently took over as boss from Laxman Narasimhan, who left after just three years in charge for ‘personal and family reasons’ and to become the new head of Starbucks.
During Narasimhan’s tenure, the FTSE 100 company experienced a pandemic-induced boom in orders of disinfectants and medicines as consumers became far more health-conscious.
He also completely changed the executive management team and spearheaded a new strategy, selling off several non-core subsidiaries, like its Chinese infant nutrition arm, skincare brand E45 and Dermicool.
Though the firm’s share price has slid back below pre-Covid levels, its sales have held up well against an increasingly difficult economic backdrop.
Reckitt Benckiser shares were down 4.7 per cent to £56.86 during the late morning on Wednesday, making them the second-worst performer on the FTSE 100 Index.
Victoria Scholar, the head of investment at Interactive Investor, said: ‘As a seller of essential items, Reckitt has strong pricing power that makes it relatively resilient to deal with the cost-of-living crisis that is squeezing household incomes.
‘The biggest risk for Reckitt is if consumers start to trade down from its branded range, including Dettol, Strepsils and Durex products, towards unbranded cheaper alternatives instead.
‘So long as it continues to invest in advertising and marketing and raise prices where necessary, then overall revenue should hold up, despite falling demand.’
