Reckitt Benckiser Group Plc (LON:RKT) reported underlying revenue of £12.9bn, excluding the sold Chinese Infant Nutrition business (IFCN China). This was up 3.3% on a constant currency, like-for-like basis (LFL) and was ahead of expectations. Performance was driven by improved pricing and sales mix, though volumes also rose slightly.
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Excluding IFCN China, underlying operating profits fell 2.6% to £2.9bn. That was largely due to cost inflation in the region of 11%.
The group’s targeting LFL revenue growth between 1-4% for 2022. Despite CEO Laxman Narasimhan warning of “an unprecedented inflationary environment”, operating margins are expected to grow.
The board has proposed a final dividend of 101.6p.
The shares rose 4.6% following the announcement.
Reckitt's Sales Beat
Matt Britzman, equity analyst at Hargreaves Lansdown:
“Investors have unsurprisingly been a little tentative on Reckitt over the past 18 months, given concerns about unwinding tailwinds seen during the pandemic. A sales beat in today’s full year results has been received warmly by markets, with shares up over 4% in early trading.
The pandemic provided a massive boost to sales of disinfectant products like Dettol and Lysol, and as we emerge from the other side where those products rebase is being carefully watched. So far, it looks like behavioural shifts are sticky as Dettol sales are coming down but stabilising well ahead of pre-pandemic levels and Lysol sales continue to grow.
As we’ve seen across the broader industry, inflation concerns are front and centre and prices will need to flex in the coming year to help offset that. The strong brand presence of much of Reckitt’s range should help it navigate the inclement inflationary environment, with customers likely to stay loyal to tried and trusted products, even if they are forced to tighten their belts elsewhere. The disposal of lower margin areas will certainly help with weathering that storm, and with the underperforming Chinese Infant Child Nutrition business now behind them, the outlook is starting to look brighter.”
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