Reckitt ups sales forecast on price hikes and baby formula

By Richa Naidu

LONDON (Reuters) - Britain's Reckitt Benckiser, maker of Dettol and Lysol cleaning products, on Wednesday raised its full-year revenue forecast after steep price hikes helped it beat second-quarter sales expectations.

The company said quarterly like-for-like revenue rose 11.9% on a constant currency basis, far ahead of the 6.8% growth analysts had expected in a company-supplied poll. Reckitt hiked prices 9.7% in the quarter, while sales volumes were up 2.2%.

Quarterly sales also received a roughly 3.3% boost from sales of its Enfamil baby formula amid a shortage of supplies in the United States, after market leader Abbott Laboratories (NYSE:ABT) recalled dozens of brands in February.

Reckitt, previously the second-biggest player in the $4.8 billion-a-year U.S. baby formula market, has since taken the top spot and now feeds about half of infants in the country.

"We've clearly seen the supply situation help us with regard to overall market share," Chief Executive Laxman Narasimhan said. "We will see some normalization as a competitor comes back online, but we have a business with a brand that's the number one recommended brand."

"The Abbott product withdrawal clearly boosted the numbers and was hard to forecast, but the company also beat consensus in other divisions, like hygiene and health," Bernstein analyst Bruno Monteyne said.

Reckitt shares jumped more than 5% in early trading.

GUIDANCE RAISED

Rival Unilever (LON:ULVR) on Tuesday also raised its full-year sales guidance after beating first-half underlying sales forecasts, as the maker of Dove soap and Knorr stock cubes hiked prices to counter soaring costs.

Reckitt said it now expected like-for-like net revenue growth of 5-8% for 2022, and growth in adjusted operating margins. In April, it had forecast net revenue growth in the upper part of a 1-4% range, and margins in line with last year.

"A lot of key brands like Finish and Vanish are growing at double-digit rates. If you look at health, we've had a great performance in OTC (over-the-counter) across the board, our intimate wellness brand is doing well," Reckitt's head of finance, Jeff Carr, said.

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Reckitt, whose products also include Nurofen painkillers, Durex condoms and Strepsils cough lozenges, is one of many packaged goods companies that have struggled with higher input costs since the start of the COVID-19 pandemic.

Supply chain logjams at major ports and soaring energy costs due to the Ukraine-Russia conflict have only made matters worse, sending the prices of key raw materials like palm oil, pulp and plastic to record highs.