Reckitt Benckiser starts strong on demand for Nurofen and Durex
First-quarter numbers from Reckitt Benckiser were better than the market expected, with like-for-like sales from the household goods behemoth up 5% thanks to strong growth from consumer health brands such as Nurofen, Gaviscon and Durex.
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The company was expected to have generated a 4% increase, according to the City consensus, but despite the stronger start to the year Reckitt maintained its full year target of 4% LFL net revenue growth and "nice" margin expansion expectations.
Total sales were reported at £2.22bn, pretty much in line with consensus of £2.23bn, as the FTSE 100 group was hit by a 3% currency headwind and 1% adverse net impact from M&A activity.
"A strong and broad-based performance from our consumer health brands continues to deliver growth and outperformance, aided by a strong flu season," said chief executive Rakesh Kapoor.
Consumer health, which makes up 32% of net revenue, delivered 13% LFL growth despite tough comparatives thanks to "innovation and brand-building initiatives" he added.
Hygiene, up 3%, was strongest in developing markets, driven by Dettol and Harpic penetration programmes, offset by weakness in more developed economies. Home suffered a soft start, down 1%, following last year's launch of a new Air Wick product.
There was broad-based growth across all key geographies, with Europe and North America up 4% LFL and developing markets up 6% LFL as an improving trend in India was slightly balanced by weaker performance from Latin America.
Russia had a strong performance in the quarter, driven by price increases, a strong flu season and softer than expected slowdown in volume growth, though understandably the outlook remains uncertain.
Kapoor added that his new efficiency-and-earnings plan, Project Supercharge, announced in February, had been "fully embraced by the organisation creating a more efficient and effective RB", which is expected to boost margins.
Analysts at broker Shore Capital were unsure whether the rather vague headline LFL growth figure reported of 5% with no decimal place represented "a significant beat at 5.4% or more modest outperformance at 4.5% is not clear...We suggest the latter."
They tweaked down their full year earnings per share forecasts by 1% to 236.7p to reflect currency moves through this first quarter, predicated upon 3.9% LFL growth and 25bp EBIT margin accretion to 25.2%.