Reckitt Benckiser enjoyed better than expected results thanks to demand for its treatments for coughs, colds and flu, following a rise in cases after the lifting of global lockdowns.
The Berkshire-based consumer goods company recorded a “sharp improvement” in demand for its Strepsils, Mucinex and Nurofen after social mixing returned, with sales of over-the-counter medicines rising more than 20% in the three months to September.
That drove like-for-like sales up 3.3% in the quarter, compared with the 0.7% drop analysts had expected. As a result, Reckitt said like-for-like revenue for the full year would be up 1 to 3%, up from earlier estimates of 0 to 2%.
Growth will still be lower than last year, when demand for cleaning products during the pandemic sent sales up almost 12%, driven by the disinfectants Dettol and Lysol.
The easing of lockdown measures has also helped lift sales of Durex condoms, which the company also owns. “Strong growth in intimate wellness continued, up mid-single digits, against a strong comparative which saw social restrictions eased in a number of markets,” the company said.
Reckitt shares were the biggest riser in the FTSE 100 index on Tuesday as investors welcomed the results. The shares were up 6.6% to £58.33, but are still about 25% below a pandemic peak of £77.50 in July 2020.
Like other companies, Reckitt warned of a sharp rise in raw materials costs, which were up 10% in the quarter compared with an 8 to 9% rise it had estimated previously. Jeff Carr, the chief financial officer, said he thought inflation would be up a touch in the fourth quarter and perhaps in the low double digits in 2022.
Russ Mould, the investment director at AJ Bell, said there was a lot to like in Reckitt’s results.
“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,” he said.
“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 chief executive Laxman Narasimhan.
“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.”