Reckitt sees sales of condoms and flu remedies jump and warns of fresh price spikes amid surging raw material costs
- Reckitt saw a 10% jump in raw material prices in the third quarter
- Shares in the FTSE 100-listed company jumped over 5% this morning
- Company saw revenue rise amid strong sales of flu remedies and condoms
Reckitt Benckiser Group said it had seen a 10 per cent rise in raw material prices across its operations in the third quarter, compared to the eight to nine per cent rise expected.
Chief financial officer Jeff Carr said 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.
‘There will be another round of pricing we will take to offset the inflation,’ chief executive Laxman Narasimhan said.
Shares in the FTSE 100-listed company have jumped sharply today and are currently up 5.6 per cent or 306.30p to 5,777.30p. A year ago the group’s share price was 7,002.00p, meaning it has fallen by around 17 per cent in the past year. The group is the top riser on the FTSE 100 index at present.
Sales: Sales of Durex condoms and cold and flu remedies were strong in the third quarter, Reckitt said
Domestos maker Unilever last week also warned of another round of price hikes to battle fierce inflation.
Reckitt upped its full-year forecast today after enjoying bumper sales during the third quarter.
Higher vaccination rates and improved mobility during the third quarter drove strong demand for cold and flu remedies, and Durex condoms.
The Dettol manufacturer posted over £3billion in net revenues in the three months to September, up 3.3 per cent on a like-for-like basis compared to the same period last year.
The company also boosted its full-year net revenue like-for-like sales growth forecast to between 1 and 3 per cent, but cautioned that growth would be ‘softer’ in the fourth quarter.
Sales of over-the-counter medicines rose more than 20 per cent in the quarter, driven primarily by Mucinex products after a strong cold and flu season saw sales across most of its markets come in at or above 2019 levels, it said.
Reckitt kept its adjusted operating profit margin forecast, excluding IFCN China, for the year in the range of 22.7 per cent to 23.2 per cent.
Revenue: The Dettol manufacturer posted over £3bn in net revenues in the three months to September
Russ Mould, investment director at AJ Bell, said: ‘There’s a lot to like in this morning’s update from Reckitt Benckiser.
‘There is a notable hike in sales forecasts, impressively, every division has outperformed expectations and the company has maintained margin guidance despite the inflationary pressures and supply chain issues which it, like all of its peer group are facing.
‘This is testament both to the strength of its brands which have allowed the company to pass through price increases to its customers and to the ongoing transformation of the businesses under CEO Laxman Narasimhan.’
He added: ‘However, the sale of its troubled Chinese infant formula business along with wider operational efficiencies has helped address Reckitt’s uneven performance.
‘Health and hygiene sales are also proving stickier than expected as it becomes clear we’re going to be living with the virus for longer than some anticipated when successful vaccines were first developed.
‘And increased mixing has also had the inevitable knock-on effect of meaning we need to reach for those cold and flu over-the-counter remedies.’