Reckitt Benckiser
The consumer goods company reported its biggest quarterly sales growth ever, thanks to robust results from its hygiene operations. The hygiene revolution is in full swing as a result of the Covid-19 pandemic, and seems unlikely to turnaround any time soon.
Global pressures, climate change and urbanization are some of the reasons resulting in the need for improved hygiene products and services, with a growing demand for self-care products too.
Reckitt Benckiser is a FTSE100 company headquartered in the UK comprised of three operating divisions: Hygiene, Health, and Nutrition.
The powerful brand portfolio spans 200 countries with names such as Dettol, Iysol, Durex, Airwick, Gaviscon, and Finish.
The major profit drivers in these results were disinfectant products in the Hygiene businesses, the largest division, with like-for–like growth up 19% in the third quarter. Health had like-for–like growth of 12.6%, driven by strong demand for Dettol and Durex. Nutrition, the smallest business unit, showed like-for–like growth of 4.1%, with improved performance from infant formula in the third quarter.
From a group perspective third quarter growth was up 13.3%, whilst sales in new jurisdictions, and product innovation had a positive impact. e-Commerce sales rose by 45% in the third quarter, and is estimated to be 12% of group net revenue. Savings of £300 million were achieved which was ahead expectations, driven by productivity gains. The group profit outlook appears positive with Like-for-like net revenue expected to grow in low double digits versus the previous high single digits, which is part of the strategy of rejuvenating sustainable growth.
An example is that of increased market penetration in the extremely competitive US market, where demand for hygiene products used by households has grown from 45% to 50%.
The adjusted operating profit for the first half of 2020 was up 14.5% compared to that in 2019, with adjusted margins up 90 basis points and Free Cash Flow up 104.7%. This was thanks to tailwinds from Covid-19 accelerating growth in the third quarter, spurred by higher investment, product innovation and expanded footprint.
Reckitt Benckiser has an extensive and powerful range of brands, having all of the ingredients to begin a new era of renewed growth, as reflected in the strong results for the half year to June 2020, and the sustained follow through into the third quarter ended September 2020.
