Reckitt said today that its full-year revenue would now come in higher-than-expected after it posted robust third-quarter figures that were driven by price hikes and stronger demand for its cold and flu remedies.
Against a 15.3% jump in the same period last year, the company’s latest overall like-for-like sales rose 3.3% – beating the 0.7% decline analysts had expected.
This was driven by 3.6% growth in its Health division after a “sharp improvement” in sales of cold and flu medicines that had previously been impacted by Covid-19 restrictions reducing the spread of seasonal illnesses. Reckitt also highlighted that there were lower declines for its Dettol brand and continued “positive momentum” in Intimate Wellness.
The Hygiene division saw like-for-like sales increase 2.9%, with the continued growth of its Finish and Air Wick brands offset by a slight decline in its Lysol disinfectant range against tough comparatives with last year’s spike in demand.
As a result of the improved performance, Reckitt has raised its full-year like-for-like net revenue growth forecast to 1-3% from earlier guidance of 0-2%. However, it cautioned that growth would be “softer” in the fourth quarter.
Meanwhile, Reckitt joined other consumer goods makers in highlighting that it was facing much higher costs, with raw material prices now up around 10% compared to an 8-9% rise it had estimated previously. It cited challenges particularly in areas such as surfactants, paper, and tinplate, alongside higher ocean freight costs.
The group increased prices for its products by 1.7% during the quarter and stated it had actions and productivity plans firmly in place to offset cost inflation. These include another round of price increases.
“We are going to expect that [cost inflation] continues into next year and we are putting plans in place for us to manage the business with that in mind,” said Laxman Narasimhan, Chief Executive.
Chief Financial Officer Jeff Carr added that he expected inflation to be “up a touch” in the fourth quarter and possibly in the low double digits in 2022, but could not estimate when these higher costs would subside.
Reckitt kept its adjusted operating profit margin forecast for the year in the range of 22.7% to 23.2%. “Despite significant cost pressures, the benefits of our pricing actions, mix and productivity programme, mean our margin guidance is unchanged, and we remain confident in our medium-term outlook,” concluded Narasimhan.
